Sitting of 17 November 1970

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
PRIVATE BUSINESS
  BARRY CORPORATION BILL
  Lords Amendments considered, amended and agreed to.
  CUMBERLAND RIVER AUTHORITY BILL
  As amended, considered; to be read the Third time.
  BRIDGE STREET BAPTIST CHURCH, BANBURY BILL [Lords]
  Read a Second time and committed.
  GLASGOW CORPORATION (WORKS ETC.) ORDER CONFIRMATION BILL
  Considered; to be read the Third tune tomorrow.
ORAL ANSWERS TO QUESTIONS
  AGRICULTURE, FISHERIES AND FOOD

    Dog Licences
    Dr. Glynasked the Minister of Agriculture, Fisheries and Food what proportion of the 7s. 6d. levied on a dog licence is absorbed by administration; and what consideration he has given to the abolition of this tax.
    The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. Anthony Stodart): In England and Wales, slightly over 30 per cent. The arrangements are currently being reviewed.
    Dr. Glyn: Whilst I thank my hon. Friend for that answer, does he appreciate that this tax has not been altered for nearly 100 years and that that 30 per cent. of it—half a crown—is divided between the Post Office, which collects it, the local authority, for whose benefit it is collected, and the police, who try to catch offenders and have to prosecute? Will he consider either increasing the tax to a proper level or abolishing it completely?
    Mr. Stodart: The matter is not solely within the responsibility of my Department, but the reasons which my hon. Friend has given are those which have caused the Government to review the whole matter.

    Home-produced Sugar
    Sir J. Langford-Holtasked the Minister of Agriculture, Fisheries and Food, in view of the fact that as sugar consumption is static and sugar beet yields are rising, whether he will provide that under Commonwealth Sugar Agreements a higher percentage of home-produced sugar shall be used.
    The Minister of Agriculture, Fisheries and Food (Mr. James Prior): The first triennial review of the Commonwealth Sugar Agreement takes place next autumn. My hon. Friend will not expect me to anticipate the outcome.
    Sir J. Langford-Holt: Does my right hon. Friend disagree that in the circumstances in which it is the policy of this Government, as it was of the previous Government, to increase the percentage of food which we grow for ourselves, sugar should not be excluded from this process?
    Mr. Prior: I note what my hon. Friend says. I do not want to be drawn into what may happen in the future at this stage.

    Agricultural Wages
    Sir G. Nabarroasked the Minister of Agriculture, Fisheries and Food, having regard to the autumn supplemental farm price settlement, involving payment of an additional £54 million from Treasury funds, what account was taken of increased and increasing farm wages, now revised upward to £14 16s. per week minimum for agricultural

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    workers; what is his estimate of added costs arising from this last price award; and whether it will be fully taken into account in the March, 1971, farm price review.
    Mr. Prior: The Agricultural Wages Board had not decided on its proposal for a wage increase in England and Wales when the recent price adjustments were made. If the proposals are confirmed their estimated cost—about £26 million in a full year for guaranteed products—will be duly taken into account at the 1971 Annual Review.
    Sir G. Nabarro: Whilst I thank my right hon. Friend for that comforting reply, will he bear in mind that agricultural wages, having regard to the cost of living today and inflationary tendencies, are still far too low, and that farmers cannot earn the additional profitability required of them through extra output unless they pay their farm workers better? Will my right hon. Friend bear that in mind before the next Price Review?
    Mr. Prior: I shall bear all these points in mind, but I must point out to my hon. Friend and the House that the only way in which the lower-paid workers can have better wages is if other workers go without some of their increases. That point must be made.
    Mr. Bishop: I hesitate to ask the Minister, but is he aware of the gross inaccuracy of his hon. Friend's Question, which alleges that £54 million extra will have to be found from the Treasury, when his own review statement claims that there will still be substantial savings on the current estimates as forecast in my right hon. Friend's Budget?
    Mr. Prior: In congratulating the hon. Member for Newark (Mr. Bishop) on his first appearance as an agricultural spokesman, I would tell him that it is true that, as a result of greatly increased world prices, the deficiency payment which the Government will have to find this year will be less. That helped the Government to put back more money into the industry this October. But the fact is that the Government will still have to find the additional money.

    Fowl Pest
    Sir G. Nabarroasked the Minister of Agriculture, Fisheries and Food
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    whether he will make a statement upon losses incurred by recent fowl pest ravages and steps taken to prevent spread and additional outbreaks.
    Mr. Prior: I would refer my hon. Friend to the reply my hon. Friend gave to the hon. Member for Merioneth (Mr. William Edwards) on 3rd November. Since that time the number of outbreaks has risen to 1,606 up to 12th November and the total number of birds on the holdings involved to nearly 12 million. No information is available on the number of these birds which have died from the disease, but there have been serious losses in some flocks, particularly broilers.—[Vol. 805, c. 336–8.]
    Sir G. Nabarro: Having regard to the very virulent character of this pest and the huge losses in Nottinghamshire, Leicestershire, Northamptonshire and now in Worcestershire, including the middle of my constituency, are supplies of Christmas fare, chickens and eggs yet threatened?
    Mr. Prior: I do not believe that Christmas fare, chickens or eggs are seriously affected, but it would be wrong not to realise how serious the situation is and the enormous losses that have been incurred in certain counties. I can only urge the farming community to take every possible precaution to vaccinate to keep the disease down. I am extremely worried about the present position.
    Mr. Cledwyn Hughes: As the right hon. Gentleman said, it is an extremely serious epidemic. What trials are being made with live vaccine, and what results have emerged from those trials? What may also result in terms of higher prices for poultry meat as a result of the epidemic? The price of poultry meat is rising for other reasons as well, as the right hon. Gentleman is aware.
    Mr. Prior: I could not answer the last part of the question, except to say that if there are fewer birds about there will be some increase, but I should not like to quantify that. We are carrying out trials with live vaccine involving about five million birds. It is still too early to give any indication of the success of those trials; the earliest started about 10 days to a fortnight ago. As soon as I have further information I shall give it to the House. I hope that the House will

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    support me in the carrying out of the trials, which involve a change of policy. It is a very serious situation.

    Agricultural Support
    Mr. Pardoeasked the Minister of Agriculture, Fisheries and Food if he will estimate the percentage increase in United Kingdom annual food production which will occur as a result of the recent increases in agricultural support.
    Mr. Anthony Stodart: I regret that this would not be possible with any worthwhile degree of accuracy.
    Mr. Pardoe: But if the Minister has no idea what his injection of cash will do to total farm production, what use is that injection of cash? Does agricultural expansion still remain the policy of the Government? When will the Minister produce the cash to get that expansion?
    Mr. Stodart: Certainly, expansion remains the policy of the Government. That is why, although it was not a review in the ordinary sense but an award to meet an emergency situation, the cash injection was made. The hon. Gentleman has asked for an estimate of increased food production. Increased guarantees are only one factor in raising production. Costs, weather and so on must be taken into account before I could give him a worth-while answer.

    Food Prices
    Mr. Eadieasked the Minister of Agriculture, Fisheries and Food what communications he has received about greater increases in food prices in new towns; and what reply he has sent.
    Mr. Prior: My right hon. Friend the Secretary of State for Scotland has replied to the hon. Member's letter.
    Mr. Eadie: Is the right hon. Gentleman aware that it has been conceded that there is an abnormal increase in prices in new towns? Is he also aware of the argument that this is because the spirit of competition does not prevail, in the new town of Livingston in particular? What do his Government propose to do about this?
    Mr. Prior: I apologise to the hon. Gentleman for the fact that his letter first went to my right hon. Friend the
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    Secretary of State for Scotland, then came to my Department, and then returned to the Secretary of State for Scotland. I have examined the prices in Livingston. In certain cases there is a considerable difference between them and prices in other parts. I think that what will happen—and this is the right thing to happen—is that other businesses will come to Livingston and set up in competition. The fact that prices in Bathgate and Edinburgh, which are quoted in the hon. Gentleman's letter, are much lower is the best indication of that that the hon. Gentleman could have.
    Mr. Eadieasked the Minister of Agriculture, Fisheries and Food what representations he has received from consumer organisations on food prices; and what reply he has sent.
    Mr. Prior: None, Sir.
    Mr. Eadie: Does not the Minister agree that to some extent consumer protection in this country has been abandoned by the abolition of the Consumer Council, and that it is no solution to the problem to set up a Tory-front consumer organisation?
    Mr. Prior: The only organisation that has written, I understand, is one that wrote to my right hon. Friend the Prime Minister, the Scottish Housewives' Association, which wrote about the price of food if we entered the Common Market. As for other consumer organisations, the best judge of the right price to pay for any article is the housewife or consumer who buys it.
    Mr. Cledwyn Hughes: Is the right hon. Gentleman aware that the Government's decision to abolish the Consumer Council is a most serious matter and has been received with considerable regret throughout the country?
    Sir G. Nabarro: Rubbish!
    Mr. Cledwyn Hughes: Would the right hon. Gentleman now consider discussing the matter again with his colleagues in the Government with a view to taking a new attitude, because there is no doubt that the Consumer Council gave excellent advice and protected the consumer in a very real way from firms which were tending to take advantage of the housewife?
    Mr. Prior: Matters concerning the Consumer Council are for my right hon. Friend and not for me. [Interruption.] I would certainly not dream of consulting my colleagues about the future of the now defunct Consumer Council, because I believe that competition is the right answer.
    Mrs. Doris Fisherasked the Minister of Agriculture, Fisheries and Food what is his estimate of the number of grocery food items that have increased in price from 1st August, 1970 until 30th September, 1970.
    Mr. Prior: I do not make such estimates.
    Mrs. Fisher: Is the right hon. Gentleman aware that any housewife could furnish him with this list and that every housewife in Great Britain could tell him that competition is not keeping prices down?
    Mr. Prior: What every housewife in Britain could also tell the House is that while we pay ourselves 14 per cent. more for doing only 3 per cent. more work—[Interruption.]—we shall have inflation, and we had better realise what that means and does.
    Mr. Cledwyn Hughes: Is the right hon. Gentleman aware that he has given a totally unsatisfactory reply to this Question? In view of the total failure of his policy of competition to stabilise food prices, will he now consider reviving the early warning system so that he at least can scrutinise the claims for increased prices which are being made and so that his officials may look at them to see whether or not they are justified? Would he give the House an undertaking that the question of decimalisation will be looked at very carefully; and may we have an assurance that when it takes place there will not be a levelling up of food prices but, rather, a levelling down?
    Mr. Prior: I am always amazed by the ability of hon. Gentlemen opposite to forget their past so quickly. [Interruption.] Have they forgotten already that they are responsible for the fastest inflation that this country has had since the war? In their last two years in office food prices and the cost of living index went up by over 6 per cent. How can the right hon.
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    Gentleman ask me at this stage to introduce a prices and incomes board which, when he was in office, had no effect whatever?
    Mr. David Stoddart: The answer suggests that the Minister obviously does not know what is going on with prices, so how will the Prime Minister honour his election promise to act directly on prices—at a stroke?
    Mr. Prior: It would be a great condemnation of hon. Members opposite if they thought that I did not know what was happening to prices. The Government and my right hon. Friend the Prime Minister will honour his election pledges—which was something that never happened when the Opposition were in power.
    Mr. Cledwyn Hughes: The Minister says that he knows what is happening about prices. Can he tell the House by what percentage they have gone up since 18th June?
    Mr. Prior: To the last available date, according to the food index, food prices have fallen by just under 1 per cent. But, of course, hon. Gentlemen opposite only believe bad news; they never believe good news.
    Mr. Bob Brownasked the Minister of Agriculture, Fisheries and Food what estimate he has made of the increase in food prices resulting from Her Majesty's Government's recently announced financial measures.
    Mr. Prior: The extent of any increase would depend on a number of factors but is likely to be relatively small.
    Mr. Brown: Will the Minister confirm that he is on record as wanting higher prices for the consumer? Is he aware that in spite of the cheap publicity-seeking comment of the carpet-bagger from Kidderminster—
    Sir G. Nabarro rose—
    Mr. Speaker: Order.
    Sir G. Nabarro: On a point of order. Your predecessor ruled in 1956, Sir, when I was the hon. Member for Kidderminster—I am at present the hon. Member for Worcestershire, South—that the term "carpet-bagger" was opprobious and unparliamentary, and had to be withdrawn. Will you now cause the hon. Gentleman to withdraw it?
    Mr. Speaker: I hesitate to disagree with my predecessor. The term "carpetbagger" is not a complimentary term, but it is not unparliamentary. Mr. Brown.
    Mr. Brown rose—
    Sir G. Nabarro: Further to that point of order. As the Member for Kidderminster is not at present in the House, will you cause this comment to be withdrawn?
    Mr. Speaker: If the hon. Member for Newcastle-upon-Tyne, West (Mr. Bob Brown) calls the hon. Member for Worcestershire, South the hon. Member for Kidderminster, that is an error.
    Hon. Members: Withdraw.
    Mr. Speaker: A lot of Members have a lot of Questions on the Order Paper. Mr. Brown?
    Mr. Brown: I can only bow to your advice, Mr. Speaker. In spite of the cheap comments of the ex-carpet-bagger, there will be many people in the northeast of England who will not be able to afford the staple foods required for a family, let alone the "boozer". Is the Minister aware that this might have extremely detrimental effects upon the funds of the Tory Party, bearing in mind the contribution of the brewers?
    Mr. Prior: The hon. Gentleman should not abuse Question Time by asking such a ridiculous question and by making such a nonsensical statement.

    School and Welfare Milk
    Mr. Ashtonasked the Minister of Agriculture, Fisheries and Food what percentage reduction he expects in milk production due to the abolition of school milk for children between seven and 11 years of age.
    Mr. Brownasked the Minister of Agriculture, Fisheries and Food what estimate he has made of the increase in milk prices which will result from the reduction in milk sales following the withdrawal of school and welfare milk; and what effect this will have in terms of increasing unemployment in the field of production and distribution.
    Mr. McManusasked the Minister of Agriculture, Fisheries and Food what
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    estimate he has made of the effect of the school milk charges introduced by the Government on small milk producers in Northern Ireland; and what steps are envisaged to compensate financial loss by these producers.
    Mr. Anthony Stodart: The changes announced in the School and Welfare Milk Schemes apply to Great Britain. Whether similar changes should be made in Northern Ireland is being discussed with the Government there.
    These changes do not affect producers' prices or the retail price of milk in the current year, and will be only one of a number of factors affecting these prices in future. It is not, therefore, possible to relate these changes to the future level of, or employment in, milk production. Any effect on employment in the field of distribution is likely to be very small.
    Mr. Ashton: Is the hon. Gentleman saying that this decision was taken by the Chancellor of the Exchequer without any regard to the farming community and without any estimates having been prepared? Are we to expect the small farmer with a small herd to be classed as a "lame duck" from now on, with no markets for his products? May we have a proper answer to this Question and some quickly prepared estimates?
    Mr. Stodart: There were consultations. The effects on the production side of the industry should not be exaggerated.
    Mr. Bob Brown: Is the hon. Gentleman aware that this despicable measure will hit hardest at those, in, for example, the North-East, who are least able to look after themselves, despite the reintroduction of the poor law in the form of the family income supplement? Is he aware that this must have an adverse effect on employment prospects in an already hard hit area such as the North-East?
    Mr. Stodart: I do not accept the premise behind the last part of that supplementary question. There will be no foreseeable reduction in the employment in production and only a minimal one, if any, in distribution.
    To answer the first part, what is being done in regard to welfare milk includes continuing it free for large families, bringing it to many of those who do not get

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    it now and to the needy, something which the Labour Party never thought of.
    Sir G. Nabarro: Would my hon. Friend give advice to all those concerned, including the farming community, that they should encourage a policy of spending less in the boozer and more on the kids?
    Hon. Members: Shame.
    Mr. Stodart: I think that my hon. Friend will have successfully caught tomorrow's headlines.
    Mr. Buchan: The hon. Gentleman should have rebutted that intervention from his hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) more forcefully. It is a disgraceful insult to the working-class people of this country that such a remark should go unrebuked.
    When the hon. Gentleman says that this will have no real effect on the farming community, is he aware that for many of the smaller dairy farmers in Scotland half of their income may be dependent on the supply of school milk?
    Mr. Stodart: I did not say it it would have no real effect. I said that it should not be exaggerated.

    European Economic Community
    Sir A. Meyerasked the Minister of Agriculture, Fisheries and Food what study his Department is making into the relative efficiency of the distribution system for agricultural produce in the United Kingdom as compared with the European Economic Community.
    Mr. Anthony Stodart: Within the E.E.C., distribution varies so greatly by product and country that general studies would be less informative than those made by trade associations and firms.
    Sir A. Meyer: Would my hon. Friend agree that, by and large, British distribution is very much more efficient than that on the Continent, that this efficiency is growing and will continue to improve even if we gain entry into the Common Market? Does not this make nonsense of many of the alarmist comparisons that are made about food costs between this country and the E.E.C.?
    Mr. Stodart: I subscribe generally to those remarks of my hon. Friend. I wish, however, to repeat how difficult it
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    is to make an across-the-board comparison in this matter. Nevertheless, I would have thought that food distribution here was extremely competitive and efficient but that perhaps it was held back by things like the provisions of the Transport Act and selective employment tax.
    Mr. Strang: Is the hon. Gentleman aware that the Meat and Livestock Commission will have an important rôle to play in improving the distribution of meat products? May we have an assurance that this organisation will not be sacrified in the present scourge of all bodies that do not make a profit?
    Mr. Stodart: I suggest that the hon. Gentleman tables a Question on that matter.
    Sir A. Meyerasked the Minister of Agriculture, Fisheries and Food whether it remains Government policy to press for the continuance of a procedure of national annual review in the European Economic Community in the event of British membership.
    Mr. Prior: The Community has already agreed in the current negotiations that as a member we should still be able to hold our own annual review of agriculture in the United Kingdom.
    Mr. Wallasked the Minister of Agriculture, Fisheries and Food what discussions he has had regarding the effect of the new European Economic Community fisheries policy on the British industry.
    Mr. Prior: As my right hon. Friend the Secretary of State for Scotland said on 4th November, terms of entry are a matter for negotiation between the United Kingdom and the Community, and my right hon. Friends and I are well aware of the anxieties of the fishing industry. We are taking them into account in the negotiations.
    Mr. Wall: Now that the E.E.C. has made up its mind on a definite fisheries policy, may I ask my right hon. Friend whether he is aware that the inshore industry is particularly anxious over certain aspects of this policy? Will he undertake to have discussions with certain sections of the industry before any decision is made about entering the Community?
    Mr. Prior: We are in constant discussions with sections of the industry. I will bear in mind the point my hon. Friend has made about the inshore industry. We have, of course, reserved our position on the common fisheries policy, and that is where the Government stand at the moment.
    Mr. James Johnson: Is the right hon. Gentleman aware that this is the fourth occasion on which a question of this type has been put to the Government and the fourth occasion on which he or his colleagues have hedged on the matter? Would he now be good enough to tell the House categorically that we have made no concessions and that the Six did not at Luxembourg a month ago commit us to a policy which we must accept whatever we think about it? In other words, will the right hon. Gentleman give a firm undertaking that we are not committed to the policy of the Six in this matter?
    Mr. Prior: Until we join we are not committed to anything [HON. MEMBERS: "Until?"]—if we join—[HON. MEMBERS: "If?"] Until and if we join the Common Market we are not committed to any step. However, what we are concerned with doing at present is to reserve our position and tell the Common Market what is acceptable and what is unacceptable. As things stand at the moment, the Common Market has entered upon a common fisheries policy, certain parts of which are not satisfactory to us and to other countries. This will be the subject of further discussions.
    Mr. W. H. K. Baker: Will my right hon. Friend make it abundantly clear to the E.E.C. that the implications of this policy are utterly unacceptable to the inshore fishing industry?
    Mr. Prior: I have noted my hon. Friend's remarks.
    Mr. McNamara: The Minister said that we are reserving our position. What position are we reserving? What have we decided is acceptable and what is unacceptable? May we know so that we may have an idea of where we are going?
    Mr. Prior: Not at this stage.
    Sir R. Russellasked the Minister of Agriculture, Fisheries and Food how
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    the productivity of dairy farming in Great Britain compares with that of New Zealand, Australia and the countries of the European Economic Community, according to information available to him from international sources.
    Mr. Anthony Stodart: A good deal of statistical data on the dairying industries in the particular countries has been published. Unfortunately, however, information which would enable inter-country comparisons to be made of overall levels of productivity in the dairy sectors is not available.
    Sir R. Russell: Does my hon. Friend agree that on the whole New Zealand has the most efficient dairy producing industry in the world? Will he ask his right hon. Friend to take no action which will reduce our purchases of dairy produce from New Zealand but, on the other hand, to encourage it?
    Mr. Stodart: I agree with my hon. Friend that, thanks to several favourable climatic conditions, larger herds and so on, New Zealand has an extremely efficient dairy-producing industry. My right hon. Friend is aware of the New Zealand dependence on the United Kingdom market and the need for special arrangements to prevent serious damage to the New Zealand economy.
    Mr. Moyle: In view of that reply, will the Minister give an undertaking to the House that Her Majesty's Government will press on with the re-negotiation of the trade agreement with New Zealand, so that British people can continue to take advantage of New Zealand agricultural imports?
    Mr. Stodart: This is a slightly different question, but I think that the trade agreement runs until 1972.

    Cereals (Import Prices)
    Mr. Bruce-Gardyneasked the Minister of Agriculture, Fisheries and Food how soon he now intends to introduce higher minimum import prices for cereals.
    Mr. Anthony Stodart: As soon as possible after completion of the necessary negotiations with our overseas suppliers.
    Mr. Bruce-Gardyne: Would my hon. Friend bear in mind that whereas import

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    levies offer the prospect of revenue to the Treasury with no comparable charge on the balance of payments, minimum prices offer no direct revenue to the Treasury but weigh directly and precisely on the balance of payments? In view of this, will he make it his policy to move over wherever and whenever possible from minimum import prices to import levies?
    Mr. Stodart: There are, at present, certain agreements which do not have very long to run, and it is in connection with these that the negotiations are taking place.
    Mr. W. Baxter: What would be the cost to the whisky industry should there be an increase in the price of cereals coming to this country?
    Mr. Stodart: There has, of course, already been an increase in the price of barley. Whether or not I should say this I do not know, but perhaps my acquaintance with this gorgeous liquid is not as close as the hon. Member's; and I must inform him that I do not know the answer to his supplementary question.
    Mr. W. Baxter: On a point of order, Mr. Speaker. Is it not the responsibility of Ministers to know the answers to the problems that confront them in their Ministries?
    Mr. Speaker: That is a question which no Speaker has ever answered.

    Brucellosis-free Breeding Cattle
    Mr. Farrasked the Minister of Agriculture, Fisheries and Food if he is aware of the reservoir of brucellosis-free breeding cattle which exists in the Republic of Eire; and if he will seek to use this supply to speed up eradication here.
    Mr. Anthony Stodart: Yes. We have just made special arrangements to enable accredited animals from brucellosis-free counties in the Irish Republic to be imported without special isolation and subject only to pre-export test and normal veterinary safeguards in transit.
    Mr. Farr: In view of the valuable reservoir of brucellosis-free breeding cattle which exists in the Republic, may I take this opportunity to thank my hon.
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    Friend for that sensible arrangement which he has made?
    Mr. Stodart: I thank my hon. Friend for making so kind a suggestion to me. Although the contribution from the Irish Republic may not be very large, it could be extremely useful.

    Narcotic Baits
    Mr. Farrasked the Minister of Agriculture, Fisheries and Food if his economy cuts will include the cessation of official experiments in the laying of narcotic baits in the countryside.
    Mr. Anthony Stodart: My Department is not carrying out any such experiments.
    Mr. Farr: While thanking my hon. Friend for that answer, may I ask him to agree that one of the more useless experiments carried out by the last Administration was that of destroying pigeons by poisoning at a cost of about 30s. per pigeon killed?
    Mr. Stodart: I would not like to say that there is absoluately no place whatever for this type of experiment. Farmers may carry it out if they are licensed by my Department to do so, and it can have its uses in an attack on a considerable pest.

    Coastal Fishing (Nylon Monophilament Nets)
    Mr. Charles Morrisonasked the Minister of Agriculture, Fisheries and Food what steps he is taking to control the use of nylon monophilament by coastal netsmen.
    Mr. Prior: Fishing by coastal netsmen is already strictly regulated, but I am considering whether any further measures are necessary.
    Mr. Morrison: I thank my right hon. Friend for that reply. Is he aware that there is evidence that a high proportion of fish which escape from this type of netting are severely damaged, and will he consider taking action under the Sea Fish (Conservation) Act, 1967?
    Mr. Prior: We are receiving reports of damage to fish as a result of this net, and we are seeing whether we can do something about it. Fish outside 12 miles

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    are covered by the International Convention, but within 12 miles it is within our jurisdiction to do what we think is right.

    Eggs
    Mr. Peter Millsasked the Minister of Agriculture, Fisheries and Food, in view of the serious position of many egg producers, if he will take steps as soon as possible to allow the export of eggs and a further increase in the minimum import price of eggs.
    Mr. Anthony Stodart: Exports of eggs are at present restricted by an international understanding, and my right hon. Friend is in touch with the Governments concerned with a view to ending the restriction. The minimum import prices will be reviewed with overseas suppliers early next year, but imports are now at a very low level and do not present a threat to the market.
    Mr. Mills: Will the Minister bear in mind that the egg industry is in a bad state and anything that can be done to help will be appreciated, particularly in the export of eggs and further reducing the import of eggs?
    Mr. Stodart: I agree with my hon. Friend that there is a strong case for ending the ban on the export of eggs as conditions now are quite different from those in 1957 when the ban was imposed. Discussions are going on in this connection.
    Mr. Mackie: I remember the hon. Gentleman's remarks when he was on this side of the House about the import of eggs. What level of import does he consider would affect the home market?
    Mr. Stodart: That is a very hypothetical question.

    Tractor Safety Cabs
    Mr. Peter Millsasked the Minister of Agriculture, Fisheries and Food whether his attention has been drawn to the difficulties experienced by farmers in fitting new tractors with safety cabs of their own choice; and if he will make a statement.
    Mr. Anthony Stodart: Yes, Sir. The safety of those who drive tractors is of paramount importance. I have discussed this matter with the tractor manufacturers,
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    who feel unable to accept the view of my right hon. Friend and myself that an authorised dealer should be permitted to fit any cab which has satisfied the standards of safety required by my Department. My right hon. Friend proposes, therefore, to examine the regulations with a view to maintaining the competition which has existed in the supply of tractor cabs to date.
    Mr. Mills: I thank the Minister for his reply. Does he not agree that this is a mean, nasty racket by many tractor manufacturers, and will he take steps to see that a farmer is able to purchase a plain tractor and add to it an approved tractor cab?
    Mr. Stodart: The manufacturers quite sincerely look at the safety requirements very responsibly. They think that what they are doing is in the interest of safety. As all safety cabs have passed extremely stringent tests, we do not think that their attitude justifies the restriction of competition, and this view I have conveyed to them.

  LIMITATION ACT, 1963
  Mr. Skinnerasked the Attorney-General if he is aware that abolition of the requirement for leave under the Limitation Act, 1963 was excluded from the Law Commission's terms of reference; and if he will include this amendment in legislation to amend the Act.
  Mr. Frank Allaunasked the Attorney-General if he is aware that abolition of the requirement for leave under the Limitation Act, 1963 was excluded from the Law Commission's terms of reference; and if he will now ensure that this reform is nevertheless included in early legislation to amend the Act.
  The Attorney-General (Sir Peter Rawlinson): I would refer the hon. Members to the answer I gave on 5th November. I have now received the Law Commission's advice. It has advised that the 12-month period under the Act should be extended to three years. The Government have accepted this advice.—[Vol. 805, c. 432.]
  Mr. Allaun: I thank the Attorney-General most warmly for that helpful reply, which will be of great importance

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  to miners and other industrial workers throughout the country.
  The Attorney-General: I share with the hon. Gentleman his view that this will be a considerable help, not only to the people he has mentioned but also generally, and I am glad that the Law Commission has been able to recommend in this sense.
  Mr. S. C. Silkin: I agree entirely with what my hon. Friend has said, but will the Attorney-General consider making this reform retrospective; otherwise many people might be excluded?
  The Attorney-General: That was not under consideration by the Law Commission. We have to consider it. All I can say is that the Government have accepted what the Law Commission advised in a complicated matter.

  CONSUMER COUNCIL'S REPORT "JUSTICE OUT OF REACH"
  Mr. Goldingasked the Attorney-General what steps he intends to take to strengthen consumer protection following the publication of the Consumer Council's Report, "Justice out of Reach".
  Mr. Carter-Jonesasked the Attorney-General if he will consider the implementation of the recommendations of the document, "Justice out of Reach", a copy of which has been sent to him, with particular regard to tour operators and their dissatisfied customers; and if he will make a statement.
  The Attorney-General: My noble friend the Lord Chancellor has considered the report. There are a number of objections to its proposals, but my noble Friend is concerned to improve the procedure in county courts with a view to enabling small claims to be more easily litigated with or without professional representation. He hopes to bring forward his own proposals to this end.
  Mr. Golding: Is the Attorney-General aware that legal fees are too often out of all proportion to the sums at issue for justice to be within reach of many consumers, and that there is a need for tribunals to investigate complaints? Will
  1028
  his noble Friend consider further representations from consumers on this whole issue?
  The Attorney-General: My noble Friend proposes to call a representative conference of judges, registrars and clerks to explore the simplification of procedure and increased informality. It is sometimes a fallacy to believe that because a claim is small the issue of fact or law involved is necessarily easy.
  Mr. Carter-Jones: I thank the right hon. and learned Gentleman for part of his answer. I acknowledge that tour operators frequently give value for money, but does not the right hon. and learned Gentleman agree, in view of the number of complaints received by hon. Members on both sides of the House, that this would be a first-class way of resolving this problem without the offending parties being put to great expense?
  The Attorney-General: As I understand, one of the main causes of complaint about tour operators is the exemption clauses which are incorporated into their contracts. No improvement in procedure would change the substantive law. As the hon. Gentleman probably recollects, the Law Commission is considering whether there should be control of such exemption or exclusion clauses.
  Mr. Money: With regard to the second part of my right hon. and learned Friend's answer, is he aware that there is widespread unhappiness about the activities of tour operators this summer in connection with the Passion Play at Oberammergau?
  The Attorney-General: I appreciate what my hon. Friend has said. There may be changes of substantive law which will be of more assistance than changes in procedure.
  Mr. S. C. Silkin: Does the right hon. and learned Gentleman agree that this is an admirable piece of work of the Consumer Council and that it is a great shame that the Consumer Council is being destroyed?
  The Attorney-General: There are a number of objections to the proposal, but its abolition is not a matter for me.

  COUNTY COURT JUDGES (APPOINTMENT OF SOLICITORS)
  Mr. Clinton Davisasked the Attorney-General whether he will take steps to enable solicitors to be appointed as county court judges.
  The Attorney-General: No, Sir. County court judges as such will be abolished by the Bill which was introduced by the Government on 10th November to implement the recommendations of the Royal Commission on Assizes and Quarter Sessions. The hon. Gentleman will see that the Bill replaces county court judges and other judicial offices by a new Circuit Bench for which only barristers of not less than 10 years' standing will be eligible.
  Mr. Clinton Davis: Is it not a gratuitous insult to the solicitors' profession that the right hon. and learned Gentleman should implicitly take the view that no solicitors are fitted to occupy this judicial rôle? Is he not aware that the Beeching Commission recommended that the monopoly enjoyed for so long by the Bar in this respect should not be perpetuated?
  The Attorney-General: The hon. Gentleman obviously is rehearsing some of the arguments that no doubt he will put before the House when we come to debate the Bill which has its Second Reading in another place on Thursday, 19th November. What he should appreciate is that appointments to the Circuit Bench, like the County Court Bench, will be taken from persons with wider experience of litigation, law and evidence than those who practise only in the county courts.
  Mr. Awdry: Does my right hon. and learned Friend realise that there is a strong feeling on both sides of the House on this matter? Does he not agree that there are some solicitors in the country who are worthy of being circuit judges.
  The Attorney-General: I do not wish to anticipate the debate, but I foresee that discussion will arise over this particular provision. The Royal Commission recommendation was only by a majority and was tentative in the sense that it was inclined to this view. Doubtless the House
  1030
  will enjoy the opportunity to debate this matter when we come to deal with the Bill.
  Mr. Thorpe: But speaking as a non-practising member of the Bar, and remembering the times when the right hon. and learned Gentleman was my opponent before a learned registrar who was a solicitor and who gave us great satisfaction in according judgment in my favour, may we know a little more about why our brother solicitors should be regarded as second-class citizens?
  The Attorney-General: I confess I do not recollect the incident. It is only the victories that stand firmest in my mind. It is certainly not a matter of solicitors being regarded as second-class citizens, but generally a solicitor's practice is different from that of a barrister. Whereas the barrister engages in litigation and continues to do so all his professional life, it is usually the case that a solicitor perhaps starts off by doing some litigation and then usually graduates to the more lucrative and important rôle of senior partner, who never leaves his office.

  AFRICA (PRIME MINISTER'S VISIT)
  Mr. Barnesasked the Prime Minister what plans he has to visit Africa in advance of the Commonwealth Prime Ministers' Conference.
  The Prime Minister (Mr. Edward Heath): None, Sir, but the invitations I have received lead me to hope to do so at a later stage.
  Mr. Barnes: Would not the Prime Minister agree that the issue of arms to South Africa can look very different in Whitehall or New York compared with areas of Africa which are most affected? Does he not think that he might go on a long trip, leaving quite soon and winding up in Singapore in January? Would he not enjoy it?
  The Prime Minister: I have always believed that one can learn a great deal from discussing matters on the spot, but I have had the opportunity of talking to the Prime Ministers or Foreign Ministers of almost all the African countries of the Commonwealth in the last few weeks and have heard their views at first hand.

  1031
  As for my making a journey before the Commonwealth Conference, as I have already undertaken to go to Cyprus, Pakistan, India and Malaysia before that conference it is not possible to fit in the African countries as well.

  SOUTH AFRICA (ARMS SUPPLY)
  Mr. John Fraserasked the Prime Minister if he will publish as a White Paper the record of his meetings with various deputations on the issue of arms for South Africa.
  The Prime Minister: No, Sir.
  Mr. Fraser: Has it not become apparent from the Prime Minister's meetings with deputations that it is "as much in Britain's interest", using his own words, that we should not sell arms to South Africa in terms of both the stability of the Commonwealth and our reputation for idealism throughout the world in observing the conventions of the United Nations?
  The Prime Minister: That is an aspect which must be considered in reaching a decision, but it is not an argument for publishing a record of what were announced beforehand as being confidental discussions.
  Mr. Lane: In maintaining this admirable, patient and thorough approach to the problem, will my right hon. Friend continue to allow ample time to secure both the maximum strategic benefit and the maximum Commonwealth understanding?
  The Prime Minister: It has been our purpose throughout these discussions, as it has been the object of the leaders of the Commonwealth, that there should be maximum understanding about this problem.

  PRICES
  Mr. John Fraserasked the Prime Minister what is his practice in dealing with letters addressed to him on the subject of price increases.
  The Prime Minister: A reply is sent, Sir.
  Mr. Fraser: Has the Prime Minister in his reply been able to mention one
  1032
  single item in the housewife's basket which has acted directly to reduce prices, or is he now adopting the stance of last night and saying that the reduction of the increase in prices at a stroke will take years, not months?
  The Prime Minister: As the letters which I have sent seem to have been accepted, it has not been necessary for me to deal with that in reply.
  Mr. Bagier: I appreciate the Prime Minister's difficulties up to a point, but could he invite his right hon. Friend the Minister of Agriculture to go shopping with his wife and try to justify in a practical sense the statement he made that prices had fallen? Would he not then ask his right hon. Friend to find out whether the word "competition" means in effect competition as to who puts prices up quickest?
  The Prime Minister: As the hon. Gentleman has heard my right hon. Friend dealing with this matter, perhaps he had better arrange it outside himself.
  Mr. Roy Jenkins: Did the Prime Minister in replying to these letters deal with the point at a stroke? If so, did he do so more convincingly than he did in his reply to my right hon. Friend the Leader of the Opposition?
  The Prime Minister: The right hon. Gentleman will have to do rather better than that if he is permanently to occupy the place of his right hon. Friend the Leader of the Opposition.
  Mr. Roy Jenkins: That, of course, is the easiest possible reply for the Prime Minister to make. I saw his eye and his mind preparing it as soon as he saw that my right hon. Friend was not present. But would he none the less, as I asked him about this matter last week, answer the question rather than make a comment about it?
  The Prime Minister: I am glad the right hon. Gentleman recognises that the easiest thing to say is how inadequate he is.
  Mr. Hordern: Is it not strange that the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) has the nerve to talk about inflation since he personally as Chancellor of the Exchequer was responsible for the largest increase in the

  1033
  money supply of any period in the three months before the election.
  The Prime Minister: Yes, sir. It takes quite a nerve.
  Mr. Roy Jenkins: Before the right hon. Gentleman discusses money supply, perhaps he will answer the previous question I put to him because it is neither adequate nor appropriate for him three times to decline to answer a question. Will he now say what he meant on 16th June by the phrase "at a stroke"?
  The Prime Minister: The right hon. Gentleman has already raised this matter in debate and has had an answer. He knows the answer perfectly well.
  Mr. Thorpe: Since I am not deputising for my Leader, would the Prime Minister answer the interesting question how in his, no doubt, voluminous correspondence he explains the phrase "at a stroke"?
  The Prime Minister: Those who write to me, if they raise this point—very few of the letters I have seen have done so—recognise that the control of, or at least the grip on, nationalised industry prices, which was part of what I was dealing with, is in hand with coal and Post Office charges. Where we find that a proposal put forward by a nationalised industry is not justified we shall not allow it.
  Mr. William Hamiltonasked the Prime Minister what steps he has taken to improve co-ordination between those Government Departments concerned with price increases in the public sector; and what have been the results to date.
  The Prime Minister: Close consultation, so that proposed major price increases in the public sector are allowed only when the case is proven.
  Mr. Hamilton: Is the right hon. Gentleman aware that the Government have had no significant influence on public sector prices since June, and will he explain exactly what his policy is on these matters? Is he to allow another coal price increase following the miner's pay claim? If not, how does he propose that the National Coal Board should finance its capital investment programme? Will he stop giving these boring, unimaginative homilies in the Guildhall and elsewhere and get off his backside and do something about prices?
  The Prime Minister: Where there are inflationary wage increases, then either this must be reflected in prices or there must be subsidies. The Government are not prepared to increase subsidies for the nationalised industries, and, therefore, the hon. Gentleman should urge those in the unions not to support inflationary wage increases.
  Mr. Michael Foot: Does not the Prime Minister agree that there have been some prices in the private sector, such as fuel and oil prices, which have increased faster than have prices in the public sector? Would he say who is responsible for co-ordinating action about these price increases, or whether this is another category under his own personal firm grip?
  The Prime Minister: The Question concerns price increases in the public sector.
  Mr. Michael Foot: Since the right hon. Gentleman is not prepared to answer the question now, would he say whether he will answer it next week if it is put on the Order Paper as opposed to other questions that he has dodged throughout the whole of this exchange?
  The Prime Minister: In fairness to other right hon. and hon. Gentlemen in this House, I propose to confine myself to Questions on the Order Paper. If the hon. Gentleman puts down a Question, he will receive the usual courteous answer.

  CHILD POVERTY
  Mr. Ashleyasked the Prime Minister what representations he has received from the Child Poverty Group; and what reply he has sent.
  The Prime Minister: I have received two letters from the Child Poverty Action Group. They have been acknowledged and my right hon. Friend the Secretary of State for Social Services is replying in detail to the proposals on my behalf.
  Mr. Ashley: Does the Prime Minister intend to keep the promise he made before the General Election to the Child Poverty Action Group to increase family allowances. If he does not, would he write to it and apologise for having, no doubt, inadvertently misled it?
  The Prime Minister: I make absolutely no apology for introducing a scheme to deal with family poverty which is better than that which was discussed between the late lain Macleod and myself and the Child Poverty Action Group.
  Mrs. Shirley Williams: Does the Prime Minister take an equally cynical view of the pledge he made in respect to child poverty and family allowances as he does in regard to the speech he made about dealing with prices at a stroke? Is it beyond his imagination to consider how he could spend £30 million on family poverty—for instance, by restoring primary school milk?
  The Prime Minister: The hon. Lady knows, because she has heard the detailed speech by my right hon. Friend the Secretary of State for Social Services, that what we are doing through family income supplement amounts to a greater sum than could have been achieved under a 10s. increase in family allowances as was originally proposed by Mr. Macleod and myself.
  Mr. Marten: Was it not this same Child Poverty Action Group which complained that under a Labour Government the poor were getting poorer? If so, what right has it to start complaining about it now?
  The Prime Minister: I think it is unfair to the previous Government to say that it was a complaint. It was a statement of fact.

  ECONOMIC GROWTH (MINISTERIAL REPONSIBILITY)
  Mr. Barnettasked the Prime Minister which Minister is responsible for improving the rate of economic growth.
  The Prime Minister: My right hon. Friend the Chancellor of the Exchequer has overall responsibility for the Government's economic policy.
  Mr. Barnett: As the Chancellor of the Exchequer obviously has failed to do anything at all about growth—or would the Prime Minister disagree with the O.E.C.D. Report that in 1971 we shall have the lowest growth and the highest inflation—what does the Prime Minister intend to do about the situation? Would he confirm that he does
  1036
  not intend in any circumstances to introduce a wage squeeze?
  The Prime Minister: I have already made plain on many occasions our views on this matter. As the right hon. Gentleman the present Shadow Chancellor of the Exchequer had abandoned any question of freeze or incomes policy and had also abandoned any attempt to reform industrial relations, I would imagine that the hon. Gentleman himself would have seen no point in that course. In regard to the earlier part of his question about dealing with inflation, we have on many occasions made clear the policy of Her Majesty's Government, and within the long-term objectives towards which we are working in cutting Government expenditure, in reducing taxation and in reforming industrial relations we shall also use the other monetary and fiscal techniques which the Chancellor of the Exchequer has at his command when it is appropriate to do so.
  Mr. Roy Jenkins: Will the right hon. Gentleman tell us what proposals he now has to deal with the accelerating inflation which has clearly got worse since he took office—[HON. MEMBERS: "No."]—certainly—both absolutely and relatively to other countries? Will he also tell us whether he accepts that it is clear that, despite what he chose to say when the May trade figures were published, the balance of payments is secure for this year and for a large part of next year, which gives him elbow room which no other incoming Prime Minister and Government have inherited since the war?
  The Prime Minister: As the former Chancellor of the Exchequer knows well, in the months prior to the General Election we pointed out the trend in the balance of payments, and what we pointed out has been proved absolutely right. We also inherited nearly £1,500 million of overseas debt and, in addition, a rising wage inflation which was encouraged by the right hon. Gentleman's right hon. Friend the Leader of the Opposition and was stoked up by his own abandonment of monetary control policies during the three months prior to the General Election.
  Mr. Roy Jenkins: If the right hon. Gentleman's words about the trend have any meaning, it must be that the balance

  1037
  of payments was deteriorating and would continue to deteriorate. Does the right hon. Gentleman now take the view that the balance of payments surplus on current account for this year will be less than £400 million or that it may be more? If he accepts that it will be £400 million, what possible reason has he for saying that there was a continuing downward trend? If the right hon. Gentleman wishes to take any credit for it, will he outline any single measure which the Government have taken relating to the balance of payments since they took office?
  The Prime Minister: The former Chancellor of the Exchequer never for a moment questioned what was happening to the trend as far as 1970, 1971 and 1972 were concerned, not in the least. The right hon. Gentleman told the House and the country that he would not be able to maintain the same level on current account balance, let alone overall balance. Of course, that has been recognised. In the short time that we have been in office we have made cuts in Government expenditure and a reduction in taxation—[Interruption.] Right hon. and hon. Gentlemen may complain, because they were never capable of doing it themselves, but it is what the country wants and that is what it is getting.
  Mr. Roy Jenkins: Will the right hon. Gentleman set a new practice so far as his Premiership is concerned by answering one question directly at the moment? The outcome on current account for 1969 was plus £400 million. The right hon. Gentleman now says that it is clear—he claims that I made it clear, which I did not, but he claims that he acts on this—that the outcome would be worse than for 1970. Will he now tell us clearly—we are nearly at the end of the year—whether the Government's expectation is that the outcome for 1970 on current account will be better or worse than for 1969?
  The Prime Minister: When 1970 is finished the figures will be published and the right hon. Gentleman will see for himself.
  Sir T. Beamish: Since the United Kingdom had the lowest growth rate in the whole of free Europe during the five and a half years when the Labour Party
  1038
  was in power, is it not rather touching that right hon. and hon. Gentlemen opposite should expect my right hon. Friend to clear up the mess in five months?
  Mr. Barnett: On a point of order—
  Mr. Kaufman: On a point of order—
  Mr. Speaker: Order. Mr. Barnett, to raise a point of order. One of the rules of the House is that when Mr. Speaker is on his feet hon. Members give way. Mr. Barnett.
  Mr. Barnett: In view of the unsatisfactory and evasive nature of that reply, I beg leave to give notice that I will raise the matter at the earliest possible moment.
  Mr. Speaker: Order. Notice should be given in the conventional way. Mr. Kaufman, to raise a point of order.

QUESTIONS TO MINISTERS
Mr. Kaufman: On a point of order. As a new Member, I raise this point with some diffidence, but it is a matter which has caused concern both to myself and to my hon. Friends on this side, and perhaps to hon. Gentlemen opposite.
During the Summer Recess I put down a Question to the Secretary of State for Employment and Productivity which was, because of its nature, transferred to the Attorney-General. That was Question No. 30 on the Order Paper today. Question No. 28 was reached. Had it not been for the exhibitionistic pantomime put on by the hon. Member for Worcestershire, South (Sir G. Nabarro), contrary to your request, Mr. Speaker, that hon. Members should not raise points of order during Question Time, I should have been able to raise on the Floor of the House a question of direct personal importance to one of my constituents. I have now been prevented from doing that. May I therefore ask you, Mr. Speaker, whether in future we may have some protection from this kind of action and that, if points of order of an irrelevant nature are raised during Question Time, we may have some injury time in order that Questions which would have been reached can be reached?
Mr. Speaker: I know that I am the referee, but I have always discouraged

1039
the idea of injury time. The hon. Member has raised a good point. I have emphasised again and again from the Chair that if a point of order is raised during Question Time it occupies time. We have had a graphic description from the hon. Member how his Question, which has been on the Order Paper a long time, was not reached. But hon. Members have the right to raise what they think are points or order and I must hear them before I can judge. However, it is a good rule that, unless the point of order is immediate, it should be raised after Question Time. Then an hon. Member who has been taking great pains to get a Question on the Order Paper and is anxious to get it in gets it in.
Mr. Ashton: On a point of order. We have had Questions on farming, and many hon. Members who have raised Questions have had vested interests. Could you, Mr. Speaker, in your wisdom tell us when is a suitable time for hon. Members with vested interests in farming to declare their interests to the House before asking Questions?
Mr. Speaker: Factually, no question of declaration of interest arises at Question Time. This is one of the old rules of the House.
Secondly, an hon. Member may have a financial interest in some matter which is discussed by the House. If he shares that interest with another group, not only of Members but of citizens, and it is a matter of public policy, then he is entitled to speak about it.
Mr. Raphael Tuck: Further to the point of order raised by my hon. and diffident Friend the Member for Manchester, Ardwick (Mr. Kaufman). Would it be possible, so as to ensure that Questions to the Attorney-General are reached, for those Questions to be marked from No. 15 onwards instead of No. 25?
Mr. Speaker: This is a matter for the usual channels. I follow the Order Paper. I do not invent; I simply follow. This matter should be raised with the Leader of the House and with right hon. and hon. Gentlemen on the hon. Member's side of the House.

PUBLIC SERVICE PENSIONS
The Parliamentary Secretary to the Civil Service Department (Mr. David Howell): With permission, I wish to make a statement about public service pensions.
It has long been felt that the arrangements for reviewing public service pensions are inadequate and in need of radical reform. As the House knows, during the passage of the Pensions (Increase) Act, 1969, commitments were entered into by both the then Government and Opposition to review the change in the purchasing power of the pensions covered by the Act as at 1st April, 1971. The present Government will honour this undertaking and will set in train such a review next April to establish the appropriate level of increases down to that date for every type of relevant public service pension. We will carry this review through as quickly as possible, aiming to pay the increases with effect from 1st September following. Thereafter, biennial reviews will take place with a view to making increases, if appropriate, in September every other year.
To provide for these new arrangements for increasing public service pensions and to improve both the machinery and the basis for calculating increases, a Bill will be introduced this Session. Full details must await publication of the Bill, but it will include three main features. First, provision will be made to maintain the purchasing power of public service pensions by a system of biennial reviews. The first of these will be for the period 1st April, 1969 to 1st April, 1971.
Secondly, because the increases awarded under previous Acts have been uneven in their effect, many pensions will require a once-for-all increase to bring them up to an equitable base-line from which the biennial reviews can start. All pensions which began before 1st April, 1969, will need to be examined for this purpose, and not merely those which began before 1956. The Bill will provide for this. Thirdly, power will be sought to enable us to reduce, within the lifetime of this Parliament, the minimum age at which pensions may be increased.
The Armed Forces will not be covered by the Bill but my right hon. and noble Friend the Secretary of State for Defence

1041
will be making similar provision for them by Prerogative Instruments.
Mr. Sheldon: While I welcome the statement of the hon. Gentleman, which in the main continues the previous commitment of the former Administration, may I ask him to clear up one or two points? First, he says that the pensions will require a once-for-all increase to bring them up to an equitable base-line. This is rather a lesser commitment than that of the previous Government, who said that pensions would be increased to recover their original purchasing power as of 1st April, 1969. Second, what Civil Service staff associations were consulted? Was it over the whole range, or was it just one or two of them? Third, what provision has been made for increasing the pensions for widows, a matter which the previous Government were examining?
Mr. Howell: On the first point, I think, with respect, that the hon. Gentleman is wrong about this being a lesser commitment. The aim here is to restore the original purchasing power of all pensions before 1st April, 1969, so in that respect it is the same; but this proposed Bill has the additional element of the undertaking to reduce the qualifying age to 55, so that is over and above what was provided by the previous Government. On the second point, there was consultation over a wide range. I will tell the hon. Gentleman the precise nature of it if he cares to write to me, but I do not have it with me at the moment. On the third point, about widows, was he referring just to the police or to the whole question of widows of public service pensioners? [Interruption.] This will be covered, but the hon. Gentleman should await the details of the Bill to see exactly how.
Mr. Boyd-Carpenter: Can my hon. Friend clarify a little further what he said about the equitable base-line? Does that mean bringing up the level of the pensions of those who retired many years ago to the level appropriate to those who retired in a later year? If so, in what year?
Mr. Howell: Special measures will be necessary in relation to the pensions of the very old. As to the rest, certainly from 1946 onwards, it means bringing up the pension to the equitable base-line which will enable the original purchasing power
1042
to be restored for all pensions up to 1969. I hope that that is clear.
Mr. O'Malley: May I press the hon. Gentleman a little further on the widowhood provisions? Since there is considerable dissatisfaction at the inadequacy of the fraction of widowhood cover provided, is it generally the Government's intention to increase that fraction for public service pensioners in future? Second, on the pre-1956 pensioners, do the Government envisage any further use of the escalator principle used in previous public service pensions increase Bills to give, if necessary, some of those 1956 pensions rather more than inflation-proofing?
Mr. Howell: On the widows question, I must ask the hon. Member to await the details of the Bill. The Government have considered this, obviously, but the full details will appear in the Bill. On the escalator principle and the pre-1956 pensions, in a sense that question is bypassed by the proposals in the Bill. What we are proposing is that all pensions up to 1969 should be brought up to original purchasing power and not just those pre-1956 up to the 1956 levels—so it does not really arise.
Mr. Ridsdale: Is my hon. Friend aware how welcome his statement will be? Would he try to speed up the help to be given to the older pensioners, the pre-1956 pensioners? Is he aware how ungenerous the trade unions, particularly the Transport and General Workers' Union, are being to their pensioners who retired before 1955? Indeed, the hypocrisy of union leaders is such that those who are pleading for a pension increase are treating their pre-1956 pensioners in a disgraceful way, as I have heard from correspondents.
Mr. Howell: On the first point, everything possible is being done administratively to get the money into the hands of the pensioners, but I am afraid that 1st September is the earliest date and I cannot promise any improvement on that timetable. On the second point, it is not really for me to comment.
Mr. Edward Short: Would the hon. Gentleman see that our own retired colleagues from this House, retired Members of Parliament, are included in this category of public service pensioners?
Mr. Howell: That is a question of which I should want further notice. It is not for me. If the right hon. Gentleman would write to me, I will provide all the details on that.
Mr. Jennings: Is my hon. Friend aware that the ideal way to settle this public service pensions problem is to bring pensions to present-day parity? However, he will be aware from previous debates that this has been found impossible by both sides of the House? Is he further aware that the Conservative Party in the past tried to fix a certain parity, say at the 1956 figure? Have they now any such year in mind in advance of 1956? Did my hon. Friend really mean that 1969 was the year that they have in mind?
Mr. Howell: On my hon. Friend's first point, it is not impossible, but it is prohibitively expensive for the taxpayer. It also raises administrative difficulties, but I would be the first to concede that the major obstacle is the enormous cost. I am sorry, but I have forgotten the second point.
Mr. Jennings: I said that the previous Tory policies suggested 1956 as a year of parity. Does my hon. Friend now have 1969 in mind?
Mr. Howell: As I said, the aim is that all pensions up to 1st April, 1969, should be restored to their original purchasing power. This, in effect, my hon. Friend will recognise, is a more effective and better deal than that originally proposed in the Conservative manifesto.
Mr. Palmer: Am I right in understanding that this statement means that no public service pension can be increased until 1st September next year? If so, is that not rather a long delay, especially in view of the rapidly increasing cost of living?
Mr. Howell: Of course, we should all like to see these things done sooner, but Governments of both parties have recognised that we cannot move until the review is complete. That cannot begin until the two years are up, and it takes a minimum of six months—even that is pushing it—to deliver the goods by 1st September.
Mr. Longden: I warmly welcome my hon. Friend's statement, but can he tell
1044
us more about the special arrangements, especially in the Armed Services, for those who retired long before 1946.
Mr. Howell: I can tell my hon. Friend that there will be special arrangements, but I must ask him to await the Bill for details.
Mr. Arthur Lewis: The Minister mentioned the review body and gave the date of 1st April, 1969. Will he point out to that body that since then the top paid civil servants and the chairmen of the nationalised boards have had increases which will amount to 43 per cent. by January of next year? Will he also point out that their tax will be recouped from next April? Will he further suggest that a 43 per cent. increase is given to these pensioners and will he tell the Prime Minister who talks of 10 per cent. or 14 per cent. as inflationary that 43 per cent. is a little more inflationary?
Mr. Howell: I am aware of the hon. Member's strong feelings on these matters. He has, however, raised issues wider than those contained in the statement.
Mr. Bruce-Gardyne: Can my hon. Friend tell us whether he has formed any estimate of the cost of these proposals to public funds? Can he say how it is that a special principle now seems to be applied to public sector pensions which does not apply to those in the private sector? What is the equity basis of this?
Mr. Howell: The cost will be about £50 million for the first year. I cannot give the precise figure because it depends upon the cost of living index which is the basis for the calculation. That figure, incidentally, is taken fully into account in the expenditure projections of the Chancellor. The second point about pensions policy is a matter for my right hon. Friend the Secretary of State for Social Services and I must leave it to him.
Mr. Golding: Will the hon. Gentleman tell us, when he is reviewing public service pensions, if he will meet the claim of Civil Service and other pensioners for all service to count? Is he aware that great hardship is caused to many public service pensioners because long years of so-called unestablished service are not counted, even though these men have had continuous employment for many years and consequently their pensions suffer?
Mr. Howell: I am aware of feelings on this matter and am grateful to the hon. Member for putting this point. I must ask him to await the Bill for details.
Mr. Tilney: Will Her Majesty's overseas civil servants be covered by the statement?
Mr. Howell: Overseas pensioners will be affected, but again I must ask my hon. Friend to await the Bill for details.
Mr. Raphael Tuck: Further to the point raised by my right hon. Friend for Newcastle-upon-Tyne, Central (Mr. Edward Short), is there any reason whatever why former Members of Parliament should not also be included in these proposals as many of them, particularly on this side of the House, have no independent means of their own?
Mr. Howell: As I said, I must ask the hon. Member to await publication of the Bill. The question of remuneration and pensions for Members of this House is a matter for my right hon. Friend the Lord President.
Mr. J. T. Price: While not wishing to discuss the merits of the statement, may I ask when we may expect a similar statement dealing with the 7 million old-age pensioners who will be given false hopes by this announcement and will think that they are in the pipeline? Could we have some information, before September, 1971, that something substantial is to be done for those suffering the worst from this spate of inflation?
Mr. Howell: I cannot give that information. This is a start and I hope that the hon. Member welcomes the statement. The matter of further pension reform is a question for my right hon. Friend the Secretary of State for Social Services.
Sir R. Cary: In view of the question put to my hon. Friend about Members' pensions under the Members' contributory pension fund, will he bear in mind that it was based on a separate review six years ago carried out by the Lawrence Committee and really has nothing to do with the Bill he is talking about? To improve these pensions we can repeat the exercise carried out by the Lawrence Committee.
Mr. Howell: As my hon. Friend says, that is a separate matter.
Mr. Robert Hughes: Can the hon. Gentleman elaborate on the difference between parity and restoring purchasing power? Can he also tell us why it is necessary to wait until April for the review body to start work? Can he not press his right hon. Friend at the Ministry of Social Services to recommend something for ordinary existing pensioners?
Mr. Howell: As the hon. Member will know, full parity means bringing all pensions up to present-day purchasing power. What we are talking about is bringing pensions up to their original purchasing power, which is a different and a much less expensive thing. As to starting in April, the former Government and the present one have made clear that it is only at the end of the biennial period starting 1st April, 1969, that the review can begin. Only at that point will we know exactly how much the cost of living index has risen in that year so that calculations can be made. Arrangements will then be pushed ahead as fast as possible.
Mr. Lipton: Will the hon. Gentleman be good enough to say whether the same time-table will operate for Forces' pensions as for public service pensions? Will the increases be made simultaneously?
Mr. Howell: I must leave that to my right hon. and noble Friend the Secretary of State for Defence, who will be saying something on this.
Sir T. Beamish: Is my hon. Friend aware, bearing in mind the record of the party opposite of how refreshing it is to have a Government in power which keeps promises?
Mr. Dalyell: Is it within the recollection of the hon. Gentleman that many of his hon. Friends chastised the previous Administration for not introducing annual reviews? Might not this be an occasion to introduce the concept of an annual rather than a biennial review?
Mr. Howell: The hon. Member will recall that both sides of the House were clearly committed—and this was put by my hon. Friend the Member for Wan-stead and Woodford (Mr. Patrick Jenkin) when speaking from the Opposition Front Bench—to a biennial review taking place as from 1st April, 1971. This was the

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view of both sides. It is the only way that makes sense, and this is the way we will proceed.

WELSH AFFAIRS
Ordered,
That the matter of the effects of the Chancellor of the Exchequer's Statement on Public Expenditure on 27th October, 1970 on the Welsh economy, being a matter relating exclusively to Wales and Monmouthshire, be referred to the Welsh Grand Committee for their consideration.—[Mr. Pym.]

ORDERS OF THE DAY

  INCOME AND CORPORATION TAXES BILL
  Considered in Committee.
  [Sir ROBERT GRANT-FERRIS in the Chair]
  3.58 p.m.
  Mr. John Fraser: On a point of order. Can you give me some guidance on the reason as to why Amendment No. 2 has not been selected for debate? It seems extraordinary that the incidence of taxation on various sections on the community cannot be debated in detail. I understand that there are inhibitions on giving the reason for refusing Amendments. There has, however, been a very short period of time between the Second Reading of the Bill and Committee stage. In addition, I understand that Report stage will be taken tomorrow which means there has been very little time to get Amendments in order and to reserve one's position for Report if one is ruled out of order in Committee.
  The Chairman: In the first place I must inform the hon. Gentleman that the Amendment in question is out of order. Mercifully I do not have to give any reasons. Secondly, there will not be a Report stage of the Bill unless Amendments are passed.

  INCOME AND CORPORATION TAXES BILL
    Clause 1

      CHARGE OF INCOME TAX FOR 1971–72
      Mr. John Pardoe: I beg to move Amendment No. 1, in page 1, line 13, leave out '38·75' and insert '25'.
      I am grateful for the fact that the only two Amendments which have been selected are those standing in my name. I must say that I am somewhat surprised to find that for the first time in my memory of this place, which may not go back very far, on a Bill which has anything to do with income tax the hon. Member for Worcestershire, South (Sir G. Nabarro) has not seen fit to table an Amendment to reduce income tax.
      Sir Gerald Nabarro: The hon. Gentleman is a little presumptuous. He should await my speech which will follow shortly—if I catch your eye, Sir Robert.
      Mr. Pardoe: I would never presume to imagine that the hon. Gentleman could not speak on the subject. He could hardly be contained. I was naturally surprised that he had not tabled an Amendment. Perhaps it has something to do with the fact that there has been a change of Government.
      It is impossible in my view to make the kind of budget judgment that the Chancellor made in reducing income tax by 6d. more than six months before the Budget. I have yet to read one single economist in any worthy journal who would disagree with this statement. The Chancellor has received a notoriously bad Press on this point. Since it is impossible for him I see no reason why I should not join in.
      My Amendment would reduce the rate of income tax which the Chancellor has seen fit to reduce from next April to 38·75 per cent. to no less than 25 per cent. This may seem a considerable decrease. The Chancellor no doubt thought, and his party by its claim obviously agree with him, that he was being exceptionally generous to the hard-pressed taxpayers in taking 6d. off income tax. In doing so he was giving back £315 million in the first year and £350 million, according to his estimates, in a full year. He could have done far more.
      The whole purpose of this Amendment is to question why he did not. I have not taken the figure of 25 per cent. out of a bran tub. The fact is that he could have made this reduction to 25 per cent., to 5s. in the pound at the standard rate, and still have had a surplus as between Exchequer revenue and Exchequer expenditure. The question I am asking is why he did not do so. This raises the whole question of the quite incredible Budget surplus which we have been carrying over the last few years. If we go back to 1964–65 we see that we were carrying a Budget surplus on current account of £444 million. In the financial year ending 1969 we carried a Budget surplus of £2,444 million. It is something of a coincidence that it was exactly £2,000 million more than in the financial year 1964–65.
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      It is now estimated that this year we shall have a Budget surplus of £2,600 million, unless the Treasury has come up with a different estimate in the last few days. This is many times over an all-time high for ourselves. Those words, "many times over an all-time high for ourselves" are not mine. They come from the eminent economist Sir Roy Harrod writing in The Guardian on 2nd November. He went on to say:
      "…or for any other country in the world."
      If one looks at the figures this is absolutely true. The question I am asking in this Amendment, which would at a stroke virtually wipe out the Budget surplus, just about bringing us into surplus—unless the Treasury can again recalculate my figures—is: how did we get to this extraordinary surplus and should we have such a surplus round our necks? It was done by the former Government primarily to overcome the crisis in our balance of payments. The theory was that if we taxed, taxed and taxed again we would drive sufficient of the expenditure off the products on the home market and therefore would force our products out into the export markets.
      Some of us had grave reservations about whether this was the right thing to do, whether it was necessary to overcome a balance of payments problem by such deflationary measures. Many of us argued at the time—I myself certainly did—that it would have been far better to have gone for the floating exchange rate, albeit with certain pegs both sides. Nevertheless, whether one believes that this was the right course to follow, as the then Chancellor of the Exchequer did, it clearly has worked. The balance of payments figures we have seen only in the last few days and the figures mentioned at Question Time this afternoon indicate that even in this year we shall have a very substantial balance of payments surplus on our hands.
      How long are we to maintain this massive surplus of tax over expenditure? Are we to maintain it for ever? What reasons do the Treasury adduce for not reducing income tax to 5s. in the pound?
      I do not say that this is the only way in which we could have reduced the Budget surplus. We could have made a start by the Government honouring their

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      promise to get rid of, for instance, selective employment tax. You name the tax, the Tories promised to get rid of it.
      What is the surplus used for? I am at a slight disadvantage here, in that on Thursday of last week I tabled some rather detailed Questions to the Chancellor of the Exchequer for Written Answer yesterday and three days, part of the intervening period being the weekend, have not elapsed. So I have not yet received those Answers.
      Mr. Edmund Dell: Surely the hon. Gentleman realises that the present practice of the Treasury is to postpone Answers to such Questions until after any debate on the substantive matter has taken place.
      Mr. Pardoe: I think that that must be the case, because when I telephoned the Treasury this morning I was informed that, unfortunately, I could not expect the Answers until tomorrow. How very convenient. Nevertheless, I have no doubt that the Financial Secretary will be able to fill in the gaps in my argument should I be down on figures.
      First, this money is being used to a great extent to finance the nationalised industries. This was a decision which was made by the Conservative Government, I think in 1958—that the nationalised industries should be able to extract their capital needs from the money that we as taxpayers were paying. The great disadvantage of doing it in this way is that the nationalised industries do not have to compete in the market place for their capital. Therefore their raising of capital is not subject to supply and demand, the normal laws of the market place; it comes out of the taxpayer's pocket and the nationalised industries can make decisions about capital expenditure and many of them can directly compete with private industry, which must raise its capital by entirely different means.
      The electricity industry is an example. Electricity boards throughout the country are directly competing with the aid of the taxpayer's money. The difference between my Amendment and the Chancellor's figure would enable the electricity boards throughout the country to compete with private retailers, private wholesalers and private electrical contractors, and to compete on unfavourable terms.
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      I do not believe that we can justify this huge surplus—I emphasise that it is a quite unparalleled surplus, not only in our history, but in the history of the western world—on the ground of balance of payments. The Chancellor knows that he will have a comfortable balance this year and next year.
      I suppose that the only justification for not accepting my Amendment, or for not wiping out the surplus at a stroke, is the effect that it would have on the general level of prices—the theory that it would accelerate inflation, indeed that it is possible to accelerate the present rate of inflation.
      I want to point out some fallacies to answer this objection which I imagine the Financial Secretary will put forward. In the past Keynesian economics have undoubtedly worked. The idea was that one could somehow reduce inflation, stem price rises, by lowering the level of demand by either monetary or fiscal means—by extracting money out of the taxpayer's pocket, £2,500 million more than the Government need to run the country.
      Up to 1965 many of us would probably agree that this in fact worked. There was the famous Phillips curve which showed, roughly speaking, with certain kinks on the way, admittedly, and certain reservations to be hedged around, that there could be stability of prices provided that an unemployment level of about 2·4 per cent. was maintained. It was a somewhat cynical argument, and I would not wish to go along with it. Nevertheless, from a purely mathematical and economic point of view broadly speaking it worked.
      In the last five years this theory seems to have totally broken down. It cannot any longer be assumed that deflationary measures will curb prices. It is very difficult to know exactly how this has happened. If the Treasury is arguing, as I believe that it will argue, that to accept my Amendment, and thereby virtually to wipe out its surplus, would increase prices, it must say how it believes that that would work, because undoubtedly the whole theory has broken down in the last five years, possibly because trade union power enables trade unions to get wage increases anyway without having to consider the general level of taxation.
      Since 1965 we have had high unemployment, high rises in prices, a low growth

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      rate, and very high increases in taxation. So the Phillips curve no longer operates—or, if it operates, it operates at a very much higher level of unemployment than 2·4 per cent. and a level which I believe that no one in the House of Commons, of whatever political complexion he may be, would regard as politically acceptable. Indeed, it would probably be a level which the country would certainly not regard as politically acceptable.
      Therefore, perhaps Keynesian economics can no longer be relied on to control inflation by reducing demand. If the Financial Secretary does not agree, will he say what level of demand—what level of unemployment—would be required to make this work?
      I do not want to make much more of this case, because I am setting out in as brief a detail as I can the broad aspect of my case. The case that I am deploying is not that I necessarily believe that a reduction in income tax is the best way of wiping out the surplus. However, I believe that there was scope to reduce the income tax by this amount and I believe that the Chancellor needs to answer us as to why he was unable to do it.
      When the Conservative Government came to power it was generally assumed—a large number of inspired leaks in the Press showed that this would happen—that they would reverse the policies pursued by the Labour Government and try to defeat deflation by cutting rather than by raising taxation and that they would go for an expansion in the economy.
      In fact, it is now clear, as a result of the fact that the 6d. off income tax and the other reductions just balance, that there will be no major tax cuts, no monetary relaxation in the near future, and that there may even be some additional squeezes. Yet on the evidence of the last five years this has been totally futile.
      In final support of my case I quote from the National Institute Economic Review of August. I know that the Institute's reviews have a way of being overtaken by events and that August may seem a rather long way off in economic history. Nevertheless, I believe that this passage from the Review cannot be gainsaid.
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      It is the Institute's central argument and it is my central argument:
      "Reflation in 1970 would surely make the balance of payments surplus next year smaller to a significant extent than it would otherwise be. The argument for it is simply that the balance of payments surplus allows some room to move and the offset would be a gain in output and the prevention of further rises in unemployment."
      This is the key phrase:
      "Reflation is unlikely to have any significant effect on the rate of inflation one way or the other."
      Does the Financial Secretary accept that opinion, or does he argue that, by accepting my Amendment or any other Amendment that might have the same net effect—namely, wiping out the surplus—he would be running grave inflationary risks?
      I believe that there is no way round the problem of inflation other than by acting directly on the wage push inflation which we have. I do not for one moment believe that the Government can do this simply by standing up to strikes, which on past records no Conservative Government will do, anyway, even if they ought to do so. I believe that the Government can do this only by changing the tax system so that it acts directly on rising costs, which is a very sophisticated and complicated procedure, or by indulging in a new incomes policy.
      However the Government do it, I do not believe that they can any longer argue that the result of my Amendment, whatever other social results it might have—I should have thought that it would be eminently desirable for a Conservative Government to reduce the rate of taxation to 5s. in the pound; I hope that the hon. Member for Worcestershire, South will back me in this when he rises—would be reflation.
      [Miss HARVIE ANDERSON in the Chair]
      4.15 p.m.
      Sir G. Nabarro: The hon. Member for Cornwall, North (Mr. Pardoe) was a trifle presumptuous in his opening sentence when he alluded to the fact that I had not set down an originating Amendment to reduce the standard rate of income tax by a margin larger than that decided upon by my right hon. and hon. Friends at the Treasury.

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      The facts are clear and are well known in the Committee on the Finance Bill during all of the last five years. In 1966, 1967, 1968, and again in 1969, there were originating Amendments of mine which sought to reduce the standard rate of income tax, always coupled to a reduction in the surtax rate. All of these I first moved in 1966, and they were then unsupported by my Front Opposition Bench, but in the later years they were warmly supported by my right hon. and hon. Friends. The only difference between us was as to the amount by which the standard rate of income tax and the rates of surtax should be reduced.
      I dislike the Amendment and will vote against it. It would be silly to suggest that we could afford in the present state of our finances, for a variety of reasons, to reduce direct taxation by an amount which I believe would cost between £900 million and £1,000 million. The standard rate of income tax reduced by 6d. costs £315 million in the first year and £350 million in a full year. If the standard rate were reduced from 8s. 3d. to 5s. it would so warp the whole of the current expenditure on consumer goods, and notably on consumer durables, if unaccompanied by a reduction in the levels of indirect taxation, as to make any worth while calculation of the total cost to the Treasury impossible.
      Britain has never reduced income tax by more than a few pence at a time, for the very clear reason that it distorts the whole of the economy in the year of reduction by an amount which would make far too great an impact on the pattern of consumer expenditure generally. I believe that 6d. in the pound off the standard rate, which the Treasury have proposed this year, is about the right margin of reduction for the first year of a Conservative Government. It is only a sweetener and a tonic, nothing more. It is making progress towards the levels which I have always advocated from the Opposition benches and which I will repeat: in a full Parliament, a reduction in the standard rate of income tax to 6s. 8d. in the pound and a reduction of the top level of surtax to no more than 6s. 8d. in the pound. The two should together ensure that no salary or wage earner, however much he earns, will ever be liable to assessment to direct
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      taxation at a level greater total than £2 for tax out of the last £3 he earns, or 13s. 4d. in the pound as a total. That compares with the American total of 14s. in the pound, which the Americans express as 70 cents out of the last dollar that a man earns.
      A man should always be able to retain £1 out of the last £3 he earns. Sixpence off the standard rate of income tax, as proposed in the Bill, is reasonable progress, in the Government's first year, towards that target. I would not propose any more, but I hope that it is indeed only a sweetener and that in successive years we shall embrace the principle of taxing earning less and taxing spending more and giving consumers absolute choice as to how they spend their net take-home pay.
      At Question Time earlier there was a cacophony from the Opposition benches, with shouts of "Shame", because I said that a Minister, a colleague of mine, should support a policy designed "to spend less in the boozer and spend more on the kids". I prefer milk to beer. I am proud of that fact, and I unbutton my jacket to display my waistline—in the interests of my farmer constituents as well. That allusion was lost on hon. Gentlemen opposite. The consumer should always be allowed to judge for himself how he spends his take-home pay. I want the take-home pay, the net income, to be as large as possible. I should always support a policy of taxing earnings less and taxing spendings more, and the Bill makes progress towards that.
      To overplay the hand, as the hon. Member for Cornwall, North wants to do in this particular manner of sweeping income tax down from 8s. 3d. in the pound to 5s. in the pound, which would be a reduction of 3s. 3d. in the pound and a rate of reduction 6½ times as great as the generous proposition of my right hon. Friend, seems to me cloud cuckoo-land and utterly unreasonable in the face of generous treatment by the Treasury Ministers.
      As regards the second part of the hon. Gentleman's speech, like most Liberal speeches, there is a grain of truth in what the hon. Gentleman expounded. Since 1945 we have grown up with these wretched policies of trying to cover the below-the-line expenditure in every

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      Budget by taxation surpluses. That is what the hon. Gentleman was denoting in all that he said. I sympathise with him a great deal, because it is placing an enormous burden on taxpayers. But has he stopped to consider what would be the effect of what he now proposes? If the Liberals had the power, which they will never have, to carry through the kind of policy which he was enunciating, if all the nationalised industries had to go to the market every year and raise a sum varying between £1,000 million and £2,000 million, according to circumstances year by year and the value of the currency, the rates which they would have to pay would be competitive. A public company with a London stockmarket quotation in the blue-chip category recently had to pay 10½ per cent. for Debentures, 1992–1993, and there are many examples of this kind. It follows that the nationalised industries, if without Treasury guarantee would have to pay a similar interest rate.
      The Financial Secretary to the Treasury (Mr. Patrick Jenkin): Or more.
      Sir G. Nabarro: Or more. I am glad to have my hon. Friend the Financial Secretary to the Treasury correct me. I am under-stating the case deliberately. As always, I understate because I do not wish to be accused of exaggeration. But this is a serious argument. If a blue-chip company has to pay 10½ per cent. for debentures, it follows that a nationalised industry would pay as much, if not more. Their interest rates on borrowing today are very much less than that. I think I should be out of order if I went through the whole gamut and delineated what the nationalised industries are paying. But they are paying about two-thirds of that market rate, as an average. They are heavily subsidised through the Treasury in their capital structure.
      An Hon. Member: Through us.
      Sir G. Nabarro: I agree. It is a method of keeping prices down for basic services such as electricity, gas, coal, airlines, and a whole string of industries. It may be logically and morally wrong. But I hesitate to go as far as the hon. Gentleman the Member for Cornwall, North when he said so sweepingly that all the nationalised industries should raise their money on the open market, and presumably he meant straight away. The
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      immediate effect of that would be a very large increase in the price of electricity, gas, coal, transport, road building and many goods and services which are today conducted directly and indirectly, by nationalised industries.
      I agree that the amount of the Treasury surplus on taxation account ought to be reduced year by year by a Conservative Government and that a part of the capital requirements of nationalised industries could be raised on the open market. The airlines are one good example. Even on a Swissair basis, as the Swiss raise their money for capital requirements for their national airline, so we could raise our money for B.E.A. and B.O.A.C. on similar lines. But the huge requirements of the electricity boards, the gas boards and the coal industry would be manifestly impossible to raise on the open market without creating consumer inflation of an order that none of us would contemplate.
      In the limited context of this Amendment, it would be injurious to good order to go wider afield pending the further debate on Clause stand part, in which I hope many of us will participate. But I believe that 6d. in the pound is the correct amount of reduction. I hope that the 21 million taxpayers of this country will note that a Conservative Government did all this in the fourth parliamentary sitting week of office, between 2nd July and 27th October. The Government have seized the earliest opportunity to put into effect their twin policy of a reduction in public expenditure accompanied by a reduction in taxation.
      I commend to the Financial Secretary for the Treasury the swift reaction of the Financial Times on the morning of 28th October, the day after my right hon. Friend the Chancellor of the Exchequer's statement. The Financial Times gave an unallowed and unqualified statement of approval for the method by which this exercise had been carried out. The words of its first leader are worth repeating to the Committee:
      "The Government was committed to reducing the growth of public expenditure as a pre-condition of lowering taxation, and it has succeeded in doing precisely that. Large savings in expenditure cannot be made without major changes in policy and the directions in which the Conservatives were anxious to change policy were well known; Mr. Barber's package is very much what was expected and is none the worse for it. He has found economies in several different ways."

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      4.30 p.m.
      The important thing is that the best financial organ of the Press fully expected what was coming. It immediately stated, on the day after the mini-budget, that that was exactly what the Conservatives fought the General Election on, and they implemented those Election promises immediately they were returned.
      It is true that I sit for a constituency with a large Conservative majority and very little manufacturing industry, but I did not confine my election campaign to South Worcestershire. I spoke in many of the most heavily industrialised areas of the country further afield, and the policy that I advocated throughout was, first, a reduction in public expenditure right across the board; second, freedom for the consumer to spend the largest possible measure of take-home pay as he chose—in other words, my caption today, "Spend less in the boozer, and more on the kids" and I am proud of it; it is good advice to all those who are not so temperant as I am—and, third, the immediate measure brought in by my right hon. Friend the Chancellor of the Exchequer to reduce direct taxation consonant with the reduction in public expenditure.
      All that, I say is good honest policy. It is exactly what the Tories promised at the General Election, and I am proud to speak from this seat below the Gangway today and most warmly congratulate my right hon. and hon. Friends the Treasury Ministers. I call on them to reject absolutely the fiscal extravagance of the isolated Member of the Liberal Party.
      Mr. John Fraser: I should like to follow the hon. Member for Worcestershire, South (Sir G. Nabarro) on this question of the interpretation of remarks made during the General Election campaign about what kind of tax reductions would be achieved and how they would affect people. There are two views that can be taken. One can take the view put forward in the revenue law review in The New Law Journal, a matter which might bring tears to the eyes of some people when one considers the operation of the present rate of income tax.
      I give two tear-jerking examples that must have reverberated throughout the
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      industrial centres of the North. Dealing with high rates of taxation, the first reads:
      "Mr. X had an investment income of £40,000;"—
      poor Mr. X!—
      "the only allowable deduction for surtax purposes was £3,000 interest"
      which he paid on a loan for the purchase of his house.
      The second example reads:
      "Mr. D is a gentleman of leisure with an investment income of £4,000 per annum. He is married with one child …
      That is one view of the tear-jerking, difficult situation in which some people find themselves with a high rate of standard income tax of 41·25 per cent., and clearly they want a reduction. Those are the people who support the Conservative Party in the measures proposed in the Bill, in the same way as the shareholders of a public company support the directors by proxy votes.
      But there is another view. It is the view of the people to whom the hon. Member for Worcestershire, South spoke during the election. They are the people who, when told that there was to be reduction in the rate of income tax, imagined that that would make a substantial difference to the amount of tax that they paid on their overtime earnings. It was the view of the investor that was mostly endorsed by the Conservative Party, not the view of the working man.
      Let us consider the reduction proposed in the Bill. This is a reduction in the standard rate of income tax of 2·5 new pence, or 2½ per cent. for a person with unearned or investment income, and a reduction of 1·5 per cent. or 1½, new pence for a person who works for his living.
      What was suggested during the election campaign in terms of reducing income tax was that the tax on someone's overtime earnings was to be very much less. The result of the proposal in the Bill will be that the person on unearned income will be comparatively better off, and there will not be a substantial difference in the amount of money that a person gets on his overtime. That is what the Clause achieves, and the Amendment moved by the hon. Member for Cornwall, North (Mr. Pardoe) would make it even worse. It would make the discrepancies much

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      worse than they are even under the Conservative proposals.
      If one is to have some kind of incentive, if one really accepts that within the limited context of the Bill tax reliefs are to be given away, surely the way to do it is to give relief to those who work for a living? Let me give one example of how this operates in my constituency. A week or two ago I appeared before the rent officer. Three years ago the executor of a deceased owner of 100 houses in my constituency sought, quite properly, to increase his rents under the Rent Act by £2 a week, thus giving him an increase in his unearned income of £10,000 a year. He recently went back to the rent officer to ask for an increase of 15s. a week, which would add £3,900 a year to his income.
      I cannot support a Bill which provides an extra £3,000 to people for, if I may use the expression, sitting on their arses and doing nothing, which provides very little benefit for those who pay no tax at all, and which provides no benefit for those who have to pay that rent increase. I cannot support that kind of measure, and it is for that reason that I cannot support the Amendment, either.
      I must not spend too much time talking about the Amendment which I should like to have had selected, but which has not been chosen for debate. My view is that if we are to change the standard rate of income tax it should be brought down for those who work for their living. At the moment the difference between the treatment of those who live on unearned income or investment income and those who have to work long hours, under arduous conditions, is not great enough. There is still not the incentive for a man to work, compared with the incentive to invest.
      It is worth looking at some of the comparisons in the tables provided by the Treasury to show the effect of this reduction in the standard rate of income tax. Let us consider, first, a single man with an earned income of £1,000 a year. He will be better off by £11·32. With an unearned income of £1,000 he will be £16·87 better off. There is therefore no great incentive there for someone to work harder.
      A married couple, with no children, and an earned income of £2,000 a year
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      will be £27·26 better off by this reduction. If they have two children over 11, they will not be quite so well off. They will get £22·56 extra a year. If they have unearned income of £2,000 a year, they will get an extra £38·37 a year. Again there is no switch of incentive to those who have to work for a living. One can take example after example. Married couples get only a few shillings, or nothing at all, from this proposal. The single man with an unearned income of £10,000 a year gets an extra £242.
      For those reasons I cannot support either the Amendment or the general proposition that there should be an across the board cut in taxation, without taking account of the differences between those who work for a living and those who do not, and the professed need for incentives for those who work overtime. They have been shabbily disillusioned by the events of the past few weeks.
      Mr. Julian Ridsdale: I cannot support the Amendment, but the hon. Member for Cornwall, North (Mr. Pardoe) has done a service in at least underlining a very good Liberal principle, that money should fructify in the pockets of the people rather than in the coffers of the State. He possibly moved the Amendment with his tongue in his cheek because, owing to wage inflation and demand, until we have been able to encourage saving far more we could not increase demand to the extent that the Amendment would increase it.
      We must apply our minds to the matter far more and not dismiss it lightly, like my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro), when he said that it would put a heavy cost burden on the nationalised industries if they were forced to go to the market for their capital. There is more than a grain of wisdom in the point of the hon. Member for Cornwall, North that as far as possible the nationalised industries should go to the market for capital. But it follows that for them to do that there must be some capital there, and until we can reduce taxation it will not be there.
      I am sure that the Government will make further reductions in taxation, but hand in hand with them must go measures to encourage saving. I welcome the Government's measures, but I hope that in

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      the next Budget they will be very positive in making further reductions to encourage savings, and will bring investment and earned income on to a par, or even encourage investment income more than earned income. The country's need is to get more investment in manufacturing industry, which can be done only by saving and by encouraging investment from overseas. That is the way to help the pensioner.
      Therefore, whilst I shall naturally go into the Lobby against the Amendment, because it is unreal, I sympathise with the hon. Gentleman's ideals. He has done the House a service in moving the Amendment. I hope that by the time the Government have gone their full course we shall have had reasonable and big reductions in personal taxation, and that we shall encourage saving. The key reductions in taxation must be to encourage personal savings.
      Mr. Robert Sheldon: The hon. Member for Cornwall, North (Mr. Pardoe) pointed out the omission from the Amendments to this year's Finance Bill; he said that the hon. Member for Worcestershire, South (Sir G. Nabarro) had not put down his customary Amendment to reduce income tax by his customary 3d. or 6d.
      Another Amendment that is lacking is the one that my hon. Friend the Member for Heywood and Royton (Mr. Barnett), now elevated to the Opposition Front Bench, and I used to put down calling for a differentiation between the rates of income tax on earned income and on unearned income. One of the things that we hope will eventually come about is a reorganisation of the income tax structure so that that reform, among many others, is carried out. It has always struck me as very peculiar that whereas most people in private life or industry take great care to make their charges appear less, in income tax we do the reverse. We tell the people of this country that they are paying 8s. 3d. in the pound when they are paying only 6s. 5d. If it had been the other way round, it would be nearer to the kind of practice frequently seen on the fringes of the commercial world, but what we are doing is absurd. If the argument about incentives and disincentives has any meaning, we should put right the misapprehension of those less-sophisticated
      1064
      members of the taxpaying public who really feel that they are paying more than they are. That Amendment was an omission, but I hope that the point is still made even without it.
      4.45 p.m.
      My hon. Friend the Member for Norwood (Mr. John Fraser) pointed out the regressive nature of the income tax changes. It is scandalous that those with high incomes obtain greater benefit than those with average incomes, and those with unearned incomes obtain the greatest benefit of all. The Minister for Trade and Industry has said that he is trying to do many things for what he called the wealth creators. I should not like to put too narrow a definition on that phrase. We have wealth creators at all levels of our society. If the right hon. Gentleman really means that he will help the wealth creators in the higher income class, which is what I think he meant, I fail to understand why those with unearned income at all levels have done better out of these measures than those with earned incomes at the same high levels.
      The Amendment would make the position much worse, because surtax is the slab on the top, and as the rates are brought down so that proportion of that surtax slab appears more important. If we brought down the rates to 25 per cent. the surtax payers would get far the greater proportional benefit.
      But we do not need to go too closely into the consequences of the Amendment. Its effect on wage claims would be absurd. The hopes of getting anything like a final settlement at levels of inflation that might be acceptable to us would have gone for a long time to come. Its fairness is obviously questionable. So I regard it as an Amendment put down simply for the purpose of discussion, and I will treat it so.
      An Hon. Member: It is a Liberal luxury.
      Mr. Raymond Gower: The hon. Member for Ashton-under-Lyne (Mr. Sheldon) is putting forward a very strange theory, that if we increase tax rates we are liable to have increased difficulty with wage claims and that if we reduce them we are also likely to have increased difficulty with wage claims. Therefore,

      1065
      whether we put taxes up or down, according to the hon. Gentleman some sort of wages stability is then more difficult.
      Mr. Sheldon: No. The whole point lies in the manner in which it is done. If tax rates are reduced so that all will benefit in one form or another, that is non-discriminatory. When a measure is introduced as a result of which certain sections of the community do very much better than certain others, we are bound to find the difficulties to which these measures will lead.
      The point I return to is that also made by the hon. Member for Cornwall, North in talking about the Phillips curve. I prefer to call it the inflation-unemployment relationship, which is perhaps a little easier for most people to understand. It used to be thought that if one increased unemployment one reduced inflation. It was becoming quite a precise system of measurement between the one and the other. The difficulty is that we must adjust to quite new circumstances. I do not think that economists have fully grasped the importance of what has been happening over the past few years.
      I see economic laws falling into two broad categories—one where the relationships are fixed by the very nature of money, or whatever it might be, and the other where relationships depend on people's attitudes. It is the latter kind that is now the most important. The idea that most people can be frightened into not going in for wage increases is trying to return to the situation in the pre-war years. This is what it is all about. Why did unemployment go hand in hand with little inflation? Because the people were cowed. As the threat of depression came near to them they reacted in the same way as they had done in the past. They increased their savings, saving for the rainy days to come. They did not put in their wage claims because they were more frightened of the sack than of an inadequate wage. That was the situation that had existed for hundreds and hundreds of years. It came to an end in 1940.
      Those people who started their working life at about the age of 15 are 45 today, and far the greater part of the working population have not had that fear of
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      large-scale unemployment. Instead, they have had the expectation of improvements in their standard of living year by year.
      The importance of this is that they will not be frightened by any talk of unemployment in the future. They will not react in the same way. Therefore, the deflationary measures that the Government may take will not have the same effect upon wages now and in the future as they did 10 or 15 years ago when those memories were much stronger than they are today. As a result, a whole host of such relationships, which were the stock-in-trade of the economists and the Treasury, will have to be rewritten and revised.
      The whole of our standard rate debates will eventually have to come to an end. The very existence of a standard rate is an anachronism. The standard rate is the greatest barrier to tax reform. What we need is a progressive rate of taxation from those who just come into the tax category to those at the highest levels. We try to get the curve by means of a fixed rate and to adjust it by means of allowances and so on. When we talk about the standard rate we are really trying to fit a fixed rate into what is a variable percentage of income deducted for taxation. We are trying to fit a square peg into a round hole. The time is coming when we must reform this. We must accept that the idea of a standard rate producing that curve is something of the past. We must work it on a new basis of a variable percentage. Then, and only then, will a Chancellor be able to say, "There are certain people we want to benefit and there are certain others who might be asked to pay a little more." He will be able to adjust those rates which he wants to increase and reduce those which he wants to reduce. That is a reform which I hope the Financial Secretary will bear in mind because of the flexibility he can eventually obtain, together with the ending of some of the anomalies that crop up every time we play around with the standard rate just because it is the easiest, and frequently the only, way in which we can obtain a quick reaction to events.
      In the past many Governments have come to office with imagination and little wealth. That was the problem of the

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      great reforms of the past, reforms that were never really carried through because the money was not available. Imagination was strong, but wealth was weak. The present Government are the first in recent decades to have had the means with which to carry out a number of schemes of reform. One of the saddest aspects is that so far they have lacked the imagination. Faced with having for the first time for many years no balance of payments problems, they could have made an attempt to get to the root of some of our problems to start the expansion that Macleod talked about and other Ministers used to talk about. Instead, they have shown their lack of imagination by concentrating on the most dreary, lack-lustre ideas that they had in the past—reducing public expenditure and reducing income tax. Their lack of imagination is shown up in their application of these old remedies.
      [Mr. GURDEN in the Chair.]
      Sir Harry Legge-Bourke: I apologise to the hon. Member for Cornwall, North (Mr. Pardoe) for being unavoidably absent for most of his observations. However, his Amendment is reasonably easy to understand and I wish at the outset to warn him, although I have not had the advantage of hearing his arguments, that it is always easy to outbid the Government of the day when one does not have responsibility for conducting the affairs of the nation.
      The hon. Gentleman wants to reduce direct taxation still further, and I have every sympathy with his aim. We must first establish that we have in office a Government who desire and intend to reduce direct taxation. The degree to which it can be done is another matter. At least we now have, after 11 years, a Government who are seeking to reduce direct taxation, and this is quite something.
      Mr. Pardoe: The hon. Gentleman is now making a theological pronouncement to the effect that one can have salvation by intention.
      Sir H. Legge-Bourke: We must first get the intention facing in the right direction. Then we can ensure that the intention is put into operation. We must
      1068
      not overdo it and I fear that the hon. Gentleman's Amendment would overdo it in such a way that we should reverse the principles contained in the Government's present intention on direct taxation.
      I congratulate my right hon. Friend the Chancellor of the Exchequer on his 27th October statement and, for the first time in 11 years, on ensuring that we shall have a reduction in the standard rate of income tax. This is a major achievement. Although it is easy to make a distinction between one form of income and another, there is no quicker way of bringing home to the electorate the intentions of the Government than by ensuring that everybody is to some extent a beneficiary of the Government's declared policy.
      The direct form of taxation is obviously a blunt instrument. However, I particularly take issue with the hon. Member for Norwood (Mr. John Fraser) who talked about unearned income. As our thoughts on this subject have progressed, we have been trying to be somewhat more sophisticated than merely lumping all investment income together and calling it "unearned" income.
      We must recognise that income derived from investment is often derived from savings gathered during one's working life; put away perhaps in the form of an investment for retirement. Often this represents the financial sum of the effort made by people who have been prepared to stint themselves to a considerable extent throughout their working lives.
      I prefer to use the phrase "investment income" rather than "unearned income", although I accept the argument of the hon. Member for Norwood that some people inherit their money or do not have to work hard for it or otherwise derive their income purely from investment. However, a great deal of investment is capital derived through hard work, often by people who have served the nation outside the country and who have stinted themselves to put a little by so that when they retire they have a decent income on which to live in addition to any pension rights that they may have.
      Mr. John Fraser: Does the hon. Gentleman concede that those who put money by in the way he has described are often helped by the considerable tax benefits

      1069
      resulting from insurance policies, self-employed annuities and so on? When they draw this money during their retirement they are receiving money which, in any event, has earned income tax relief.
      Sir H. Legge-Bourke: There are many refinements to this argument. Nevertheless, it is too easy to lump all unearned income together under one heading without supposing that effort has been expended to gain the capital which provides the income.
      I am looking forward to the day when there will be a greater equalisation of taxation on investment and earnings. Up to now the distinction has been far too great and has too frequently been based on the assumption that no work has gone into providing the capital that has been earning the interest.
      5.0 p.m.
      I regret that the hon. Member for Ashton-under-Lyne (Mr. Sheldon) is no longer in his place. I wanted him to know that I appreciate that the Labour Party is at last beginning to learn something about this financial issue. I recall how in my earlier years in this place I kept hearing the Labour doctrine that there was some virtue in direct as distinct from indirect taxation.
      The hon. Gentleman seemed to be making it clear that hon. Gentlemen opposite are moving in the direction of my hon. Friends in recognising that there may be a case for shifting away from the direct taxation of earnings to ensure that people have a bigger say in how they spend their money before the State takes it from them.
      This is the philosophy underlying Conservative policies to which I am fully committed and which were enunciated during the last election. It seems obvious to me that we should leave more of people's earnings in their pockets so that they may decide how to spend their money—recognising, at the same time, that they may be paying an indirect form of taxation, value-added or whatever kind it may be. At least they are then able to choose how to spend their own cash.
      I am convinced that there is no single element of taxation that is more bitterly resented by the working population than direct taxation on earnings, and particularly earnings derived from overtime.
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      At least in the Chancellor's statement of 27th October we had, for the first time in a long time, the clearly-declared intention of reducing direct taxation.
      This will be one of the cardinal features of a complex policy which will, I am sure, be designed to increase the individual's sense of responsibility, the reward he gets from his labours and earnings and his capacity to save. These are fundamental to any solution of the biggest problem that we have, which is inflation. I am convinced that the Chancellor is right, having inherited a Budget which he did not devise, in not overdoing it. However, it is clearly his intention to aim at a substantial reduction in direct taxation and I hope that this reduction next year will cost between £40 million and £50 million. This would be a move very much in the right direction. I congratulate my right hon. Friend on what he has achieved so far and I hope that the Amendment will be resisted because it would overstrain the economy, particularly in our first year in office.
      Mr. Sydney Bidwell: There is a considerable element of truth in what the hon. and gallant Member for the Isle of Ely (Sir H. Legge-Bourke) said about workers resenting paying a high proportion of their overtime earnings in income tax. Every Government have found it difficult to divorce one form of earnings from another, be they overtime, bonus payments or straightforward wages and salaries.
      It would be an utter impossibility successfully to carry out such an exercise because of the variations in earnings which exist, including the variations in overtime. There are many earnings opportunities and often it is hard to tell what is overtime and what is not. It is, therefore, rather pointless to introduce a matter of that kind into a debate like this.
      When hon. Gentlemen opposite extol the virtues of the mini-budget, they should fully appreciate what 6d. off the standard rate means to ordinary workers who are not surtax payers and who do not live on investments. I am talking about the majority of those I represent, who may have a few building society shares or a bit of money in the Post Office, but most of them save for Christmas and a damned good holiday once

      1071
      a year. That usually represents the sum total of their savings. Only when they rise to a higher income bracket are they able to save in the longer term. There is, therefore, a wide chasm between the various categories of earners and savers and this must always be borne in mind when we discuss what something off the standard rate of income tax means.
      I agree with the hon. and gallant Member for the Isle of Ely that many workers are beginning to rethink this problem. They are, however, rethinking it not for the reasons he adduces but because they are realising to the full how an equal reduction in the standard rate benefits the surtax payer far more than it benefits the ordinary worker. It must be a gigantic reduction if the ordinary worker is to benefit to any extent.
      In any event, I urge hon. Gentlemen opposite to remember that many of the people about whom I am speaking have attended lectures at the National Council of Labour Colleges and elsewhere and know something about the effects of inflation. They are not interested in illusory wage increases. They are struggling to sustain their standard of living and, if possible, to improve it. They want the nation to think in terms of expanding the economy because they feel that only by that means will the standard of living of the ordinary people be increased.
      It is not possible to think narrowly in a debate of this kind in the way that the hon. Member for Cornwall, North (Mr. Pardoe) did in proposing what is a simple Amendment. He wants to reduce the standard rate and so release a considerable amount of purchasing power by that means. If the Government considerably increased the social wage—and the Labour Governments of 1945 and 1951 increased it considerably—who knows what psychological effects that might have in a free society in terms of—
      The Temporary ChairmanOrder. I am not calling the hon. Member to order because he has said something that is out of order but because this might be an opportune moment to mention that as this debate has gone rather wider than the Amendment under discussion, I agree with my predecessor in the Chair that perhaps the discussion which has occurred will be sufficient to cover the Motion,
      1072
      That the Clause stand part of the Bill, when that Motion is put. In other words, I hope that it will not be necessary for that Motion to be debated, though I agree that we can see what happens when we reach that stage.
      Mr. Bidwell: For a moment I thought that you were calling me to order, Mr. Gurden. It seems that, on the contrary, you are commending my line of reasoning.
      Many ordinary working people have learned a great deal from the minibudget, and I am referring to people other than those whom the hon. Member for Worcester had in mind—
      Sir G. Nabarro rose—
      Mr. Bidwell: I keep calling the hon. Gentleman "the hon. Member for Worcester" when his constituency is, of course, Worcestershire, South. I always think of Worcester sauce when I think of him.
      Sir G. Nabarro: The hon. Gentleman must get it right. Worcester sauce comes from the city of Worcester. I represent the parliamentary constituency of Worcestershire, South. I hope that in future he will get it right instead of being in a permanent muddle.
      Mr. Bidwell: While I agree that the whole question of the party division arises on this issue, it is obvious that a great deal of new thinking is taking place among ordinary people about the social wage. Many of them—I am referring to those at the ordinary working class level—have not valued this in the way in which it has always been valued by people of my generation and those rather older than me. We recall what life was like before the Welfare State came into being.
      Those without this knowledge cannot know what it is like to pay for ambulances, doctors' visits and prescription charges on the scale now proposed by the Government. They are beginning to have new thoughts about this, and I mention it only to strike a note of warning to the Government not to go too far with the policies they have been pursuing up to now.
      The reduction in the standard rate of income tax has been made possible by pinching the primary school milk, and

      1073
      taxing the sick by imposing a waiting period of three days. The money is not coming from a growth in the wealth of the nation. This is an example of doctrinaire Toryism which has little to do with the state of the nation.
      The hon. Member for Cornwall, North was a little worried about budgetary surpluses. I share his worry, but I do not reach this conclusions. Like my hon. Friend the Member for Ashton-under-Lyme (Mr. Sheldon), I look forward to the day when the standard rate of income tax is graduated so that people who have hitherto not paid income tax are not suddenly plunged into paying 8s. 3d. in the £. This can be done when there is that progressive movement of the economy which Britain so desperately requires.
      If the hon. Member for Cornwall, North is so worried about this, I can think of dozens of ways of spending the surplus which will not have a damaging inflationary effect. I think immediately of old-age pensions and child allowances. Old-age pensions are an urgent matter. We should not talk about an increase a year or two years hence but of an immediate increase on the basic rate. The Financial Secretary might refer to figures which will show that this is too costly—
      The Temporary Chairman: Order. The comments being made are even outside what I said earlier about engaging in what could be a debate on the Question, That the Clause stand part of the Bill.
      Mr. Bidwell: I take note of what you say, Mr. Gurden, but the introductory speech, which you did not hear, laboured the subject of budget surpluses and this was used as an argument for the Amendment.
      I am grateful to the hon. Gentleman for proposing the Amendment. In my constituency there are many poorly paid workers, some of whom have come from the Commonwealth. They work quite hard for low pay, and they would be delighted if they could earn incomes on which they would have to pay more tax.
      5.15 p.m.
      Mr. Raymond Gower: There is a good deal in what the hon. Member for Southall (Mr. Bidwell) said about the virtues of caring for the persons he
      1074
      described in his closing sentences, but for many years successive Chancellors of the Exchequer have imposed extra taxation, including extra direct taxation. Whereas it may be true that there has been a modest increase in what the hon. Gentleman described as the "social wage", increased taxation has not led to a dramatic increase in productivity or to a marked increase in savings. It is all very well for successive Chancellors of the Exchequer to preach the virtues of thrift and harder work, but a tax system which discourages those virtues inevitably leads to failure. It would be folly to suggest that the Government's new approach is an open sesame to a system which is certain of success, but there is a greater chance of success with the new approach than there would be if we continued along the lines which have proved to be ineffective.
      The psychological aspect of this may be of great importance. The hon. Member for Cornwall, North (Mr. Pardoe) wanted to go a step further in the reduction of the standard rate, but he will agree that it is a matter of judgment for the Government and the Chancellor of the Exchequer whether so much can be done at once. I do not object to the principles which he enunciated, and I feel that our approach is an earnest of our intention to move in that direction.
      This modest reduction in direct taxation is a notice of greater reward for those who study for extra qualifications. It is a notice to those who practise thrift that there will be a greater reward for them. It is a notice to those who work overtime that at the end of the day they will retain a little more money. This is a modest move in the right direction which, although we must not over-estimate its importance, could be of great importance psychologically.
      Mr. John Golding: I rise to speak on the subject of incentives to manual workers. I am not qualified to speak of incentives to business men or to those who can save but I can say something about incentives to workers to work longer or harder. I query the assumption that a reduction in tax will increase the incentive for working overtime. There is a great mythology that a reduction in tax rates will increase the willingness of men to work overtime. Every trade union official

      1075
      knows that the problem is not to get men to work overtime but to prevent them from working extremely long hours.
      The hours of work in bakeries, of which there are many in Newcastle-under-Lyme, are very long. The report of the National Board for Prices and Incomes showed that men had to work for very long hours, and often on their rest days, to earn a wage equivalent to the average wage. Pottery workers are working on average six hours a week overtime. I could go on to describe the overtime working among bus conductors and bus drivers. From industry to industry one finds long hours of work and men working on rest days.
      A comprehensive study on overtime working was done by a review body for the Donovan Commission. This demonstrated that, far from overtime being an advantage to industry, it was a disadvantage. I look forward to the report on this subject to be published in a few weeks time by the N.B.P.I. I am convinced that the N.B.P.I. will arrive at the same conclusion, that overtime working in British industry is undesirable. It is undesirable for the men who have to work for such long hours away from their homes. The accident rate increases and the men suffer greater occupational ill-health. It is easy to see why it is a disadvantage for the men.
      Many employers oppose overtime grabbing. They know that it is an inefficient way to run industry. If a man can earn overtime his natural inclination is not to work so hard during the day. Men resort to the practice of creating overtime by working slowly in the afternoon so that they can work "policy" overtime at night or at the weekend.
      We should be doing a far greater service to industry, both to management and men, by pointing out that the hours worked in this country are far in excess of those worked in most countries in Europe and by directing our attention to reducing the working week and making sure that the hours worked are more productive than by trying to extend them. Frankly, I do not think any reduction in tax rates will increase the hours worked in overtime.
      On the question of people working harder, it is somewhat ironic to me when industry is trying to get rid of piecework
      1076
      that we in this House are talking in terms of a reduction in the standard rate of tax as an incentive to work harder. What is happening in industry generally is a growing recognition that there is no direct way to reward the individual worker for effort.
      Looking at most situations in industry, I believe that the worker cannot earn more by working harder. Perhaps there are some situations involving piecework where he can, although many employers are trying to get rid of piecework because they realise that it leads to a situation in factories in which the organisation of work is less efficient than under a system of measured day-work or similar systems.
      It is not helpful to an employer to try to persuade workers to work harder under a piecework system. But if there is not that incentive, then there is no incentive at all for workpeople to work harder in the present industrial situation. This fact is being overlooked by those who talk in terms of tax incentives. They are thinking of the situation in which the business man finds himself whereby because of increased effort he can increase his earnings.
      The single point I wish to make is that the majority of manual workers can find no way under the present system in which to increase their earnings. The only possible way in which these tax reductions can affect the earnings of manual workers is for the employer to do what he should have done a long time ago and that is to tackle the problem of organising production. The only way to increase productivity is not by men working longer or harder, but by an improvement in the whole system of industrial organisation. I do not support the Amendment.
      5.30 p.m.
      Mr. A. E. Cooper: It is very agreeable to catch the Temporary Chairman's eye this afternoon after an absence from the House of 4½ years. My hon. Friend the Member for Barry (Mr. Gower) and others have talked about giving reward to workers or to people who will benefit as a result of these reductions. But we must not overlook that this is not a reward. It is simply that the Government of the day are allowing us to keep more of the money we have earned.

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      The truth is that the working population, whether it works by its hands or its brains, must by its efforts provide the wherewithal to educate our children, to pay pensions and so on. It is important that this category of people, who comprise about half the population, should have sufficient incentives to enable them to make a greater effort for more productivity to enable us to produce goods at a price at which they will sell readily in world markets. This is the way to provide the social services that we all wish to see developed.
      There is no doubt that if industry is incompetent, if there is a large measure of unemployment, and if we are unable to sell our goods abroad, none of these social services will be possible. It is therefore vital to put all workers in a situation in which they are able to earn adequate rewards for their efforts to make our nation efficient.
      My right hon. Friend the Chancellor of the Exchequer is making a move towards simplifying the entire tax structure. I should like to put forward some ideas which I first put forward in the columns of The Times some years ago.
      Mr. Sheldon: The hon. Gentleman says that his right hon. Friend is making moves towards simplifying the tax system. Could he say what those moves are?
      The Temporary Chairman: I hope that he will not pursue that point too far since I cannot find it in Clause 1 of the Bill.
      Mr. Cooper: They are moves over a whole Parliament, not just things which should be done at one moment of time. There have been announcements from the Treasury Bench that such moves are in train.
      I should like to see two things happen: first, the complete abolition of surtax, and second that both earned income and unearned income should be regarded as the same thing. It has always seemed anomalous to me that savings, pensions, and so forth, which are rewards for work done, should be in a different category from earned income. They are moneys which are chosen to be retained until such time as we wish to use them in the future. I feel that there should be one simple system of earned income to
      1078
      cover all moneys, whether pensions, savings or anything else.
      In an effort to get rid of surtax, which in relation to the total Budget is a very small sum of money indeed and probably costs a very great deal to recover, I wish to see the first £1,500 of income tax-free. In that figure I should like to see retained all the allowances that are payable at present; there would be no further allowances beyond that £1,500. From then on we could move up in steps of about £500 until we get to a situation where the top level of taxation is 15s. in the £. There would be no such thing as a standard rate. I believe that this would provide a sensible and simple way of reforming the tax system and would provide the necessary incentives.
      I hope that hon. Members opposite will not be surprised when I say that there are a large number of working men in industry whose weekly wage takes them into the range of £2,000 a year, and beyond. That applies to many of them. They will benefit considerably from these tax reliefs. Obviously, the Government cannot do everything at once, but I have been amused today to hear speeches by hon. Members opposite instancing lack of growth in the economy, the high level of taxation, and so forth. We must remember that the present Government has been in power for only four months. The lack of growth has been as a result of the policies pursued by the Labour Government over the past six years, and the high level of taxation is that which was imposed by the Labour Government. It does not lie in the mouths of hon. Members opposite to tell us to reduce taxation and to achieve growth. I feel that the policies which are being pursued by the Conservative Government are the right policies.
      Mr. William Hamilton: I am not an expert on income tax, but it seems to me that a great deal of nonsense is talked about the relationship between incentives and reduced rates of tax. Such evidence as I have from my personal experience points in the opposite direction. Just after the war when I was in the teaching profession my rate of pay was low and my taxation fairly high and I had an incentive to teach at evening classes for four or five nights a week.

      1079
      That is an argument in the opposite direction.
      A look at the tax tables shows the folly and stupidity of the argument of right hon. and hon. Gentlemen opposite that the bigger the tax concession the harder a man works. The hon. Member for Ilford, East (Mr. Cooper) put the average earnings of a worker at £20 to £30 a week. Perhaps a number of workers in the South-East and in the Midlands are in that category, but certainly not very many in Scotland. It can be seen from the tax tables that a married man with two children earning £1,500 a year, who does not get any of the free school meals for his children, will receive a tax concession of roughly £12 a year. What kind of incentive is that to him? By the time he has paid the prescription charges for his family and all the other charges for school milk, school meals, and so on, he will be worse off.
      When the Prime Minister, in that boring speech at the Guildhall last night, spoke about creating one nation and giving people incentives, he was not talking about people earning £30 a week, who are the people who will miss out in the deal. The reaction of ordinary workers to the Chancellor's package is quite different from that which right hon. and hon. Gentlemen opposite would have us believe. The ordinary worker is outraged by the inequity of the package because the average worker knows that he will be worse off.
      When the Prime Minister and the Chancellor of the Exchequer mention incentives, they mean incentives for the man earning £20,000 a year. For example, the Prime Minister himself, as can be seen from the income tax tables, with a salary of £14,000 a year, receives a tax concession of about £300. The Prime Minister in these concessions is giving himself £6 a week. Does he intend to increase his productivity in this House or by attendances at Downing Street? Does he intend to make an extra speech each year at Guildhall? Perhaps we may be told what extra productivity the country will get from him. This is the kind of nonsense we hear from the Conservative benches.
      The incentive to the £25,000 a year man is some £500 a year, or £10 a week,
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      and the incentive to the ordinary working man is a kick in the teeth. That is the difference between the people at the lower and higher ends of the scale. Of course the Tory Party can say, "This is what we were elected for. We were elected to reduce direct taxation; we were elected to reduce public expenditure". But right hon. and hon. Gentlemen did not spell out at the election that the most inequitable way of reducing direct taxation is a cut in the standard rate, as these tables demonstrate beyond argument.
      When my right hon. Friend the Member for Birmingham, Stechford (Mr. Roy Jenkins) as Chancellor of the Exchequer introduced his Budget last April, he reduced direct taxation not by reducing the standard rate but by increasing allowances. This was and is the fairest way of reducing direct taxation if that is what we want. For the hon. Member for Cornwall, North (Mr. Pardoe) to suggest reducing it even further is to compound the injustice, the inequity, of the proposal. I do not know whether the hon. Gentleman realised that. He could not have read the tables before putting down his Amendment or he would not have put it down.
      Mr. Cooper: The hon. Gentleman talked about the man earning £25,000 a year and the man earning £1,500 a year. Will he tell the Committee what proportion of his income the man earning £25,000 a year pays in tax and surtax and what proportion is paid by the man earning £30 a week?
      Mr. Hamilton: The figures are in the tables.
      Mr. Cooper: Will the hon. Gentleman tell the Committee?
      Mr. Hamilton: The hon. Gentleman ought to have acquainted himself with these figures. If he wishes to take part in the debate he must inform himself properly before talking all the nonsense that he talked this afternoon.
      My point concerns the average skilled man—the skilled engineer, the skilled miner. Many skilled miners in my constituency take home less than £15 a week. The Chancellor of the Exchequer said that the £20-a-week man with two kids under 11 years of age benefits under the Bill.

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      I direct the attention of the Financial Secretary to the Answers given to two identical Questions. One Question asked by me on 10th November was answered by the Chief Secretary. The other Question was asked by my hon. Friend the Member for Manchester, Gorton (Mr. Marks) of the Department of Education and Science on 12th November. We got completely different figures. The Department of Education and Science assumed that the rent payable by the family on £1,000 a year would be £2 4s. 6d. and rates 14s. 6d., a total of £2 19s. 0d. But the Chief Secretary to the Treasury gave a figure of £3 6s. for rent and rates—a difference of 7s. The Department of Education and Science assumed that tax and National Insurance would be £2 15s. 10d., but the Treasury assumed that it would be £2 5s.—a difference of 10s. 10d. So we get a conflict between the Answers from two Departments to identical Questions concerning the £1,000-a-year man with two kids.
      Based on those figures it is said that the man will break even. But above those figures every man on average earnings with two kids loses out on the whole package. That is no incentive. It creates a sense of social injustice. It divides the nation. This will make the trade unions more bloody-minded. If the Government give this kind of concession to the man earning between £25,000 and £100,000 a year and give nothing to the fellow on £30 a week, the country will be worse off. What kind of reaction do the Government think that they will get from the man earning £30 a week with that kind of social inequity?
      Right hon. and hon. Gentlemen opposite cannot understand the minds of the ordinary working man and woman. They should visit the industrial parts of the country to see how many millions are still struggling to make ends meet.
      The Government say that they are taking 6d. off the standard rate. The £20-a-week man—there are many in my constituency earning less—is getting a tax concession of £3 a year—about 1s. a week. The Government suggest that he will work harder in consequence.
      Mr. Peter Rees: As the hon. Gentleman thinks that a cut in the standard rate is immoral, will he tell us whether he approved of the Amendments in the
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      1969 Finance Act which carried people up to the standard rate much more quickly, because they removed some of the intermediate steps? Did the hon. Gentleman regard those Amendments as immoral?
      5.45 p.m.
      Mr. Hamilton: We are not discussing the 1969 Act. It would be out of order to pursue that matter. We are discussing a proposed reduction of 6d. in the standard rate. I am pointing out that if that is to be a reduction in direct taxation, the Conservative Party can legitimately say that this what it was elected to do. But there are several ways of reducing direct taxation. This is the most inequitable way of doing it. The ordinary man is inteligent enough to know that it is most unfair and unjust, particularly since it is associated with a package of cuts.
      When we talk about a cut in direct taxation, we must remember that room has been made for it by swingeing increases in charges for social services. We are having an increased means-tested Welfare State to give these massive so-called incentives to the better-off sections of our community. This proposal will serve to divide the nation far more than anything which has been done since the war. This is the most reactionary Government that we have had since 1945, and those who voted for it and those who abstained are now beginning to see the error of their ways.
      Dr. David Owen: I rise to make a brief speech on a small Clause which I believe carries with it severe issues of principle.
      The Chancellor of the Exchequer, three-quarters or half-way through the tax year, has made a Budget judgment. We must examine the whole package as a whole. I ask the Committee to consider what I believe is the most serious issue: the facts on which presumably the Chancellor made this judgment.
      The first issue arises from the recent so-called cuts in public expenditure. This matter has been raised outside the House by many distinguished commentators, some with recent experience of the Treasury and of the way in which we present public expenditure figures. It is a tragedy that, having over the last few years progressively moved towards a lucid

      1083
      description of public expenditure so that all hon. Members may take part in the discussion on a basis of fact, we should have a public expenditure review in the manner in which the Chancellor sought to present the figures.
      One need not be as experienced as Mr. Wynn Godley, but anybody who has read his analysis of public expenditure—I know more about defence expenditure figures—can raise fundamental questions on the whole basis on which the Budget judgment was based, on the room for manoeuvre in the years ahead, and on whether one can make a judgment on the basis of these figures.
      The Chancellor has taken the extraordinary step of announcing a reduction in income tax six months before it is due to take place. This is almost without precedent, and it is at a time when all economic commentators are looking at the parameters of the economy with increasing doubt and are increasingly unable to predict the future trends.
      Why did the Chancellor make this judgment? He made a good deal of the fact that he was bringing this tax change into effect to coincide with the increased charges which he was introducing throughout the health and social welfare field. It seemed that this would be intended to offset these charges. But this way of changing the tax is almost deliberately designed not to offset the impact of the charges on those with low incomes.
      Behind this strategy and these decisions lies a fundamental principle. Over the last few years, we were rightly moving towards merging the tax system with the social benefits system. We were increasingly beginning to realise that one could not consider taxation in one small compartment answerable only to the Inland Revenue, leaving aside benefits, whether social security or local authority benefits. The important thing was seeing the total effect.
      My major indictment of the Chancellor is that he has sought to make this change in the most inequitable way. He has gone back on the movement together of the taxation and benefits systems and has deliberately stepped right back to an age of division. Much has happened in the earlier debates, with the arguments about tax allowances and the claw-back
      1084
      and the eventual room for claw-back. The Chancellor did not consider seriously using the taxation system and trying to modify it to allow claw-back of family allowances.
      If he were using the room which he felt, on his judgment—I have said that it is highly questionable whether he should have made the judgment at this stage, particularly on the evidence before him—there was for manoeuvre, so that he could help those on low incomes, I find extraordinary that he should have sought to do it in this way.
      There are ways in which one could have extended claw-back and used family allowances to channel aid where it was most needed. Examples are partially tax-free family allowances, the question of adjusting personal allowances to be married into claw-back, and the whole extension of child tax allowance and the introduction of claw-back. Any of these three would have given room for manoeuvre on claw-back on family allowances, which I admit was needed if aid were to be put where it was most needed.
      This is what concerns me—the reduction of the use of the tax system to channel aid to people so that it can affect everyone. The arguments against means-tested allowances and benefits are not, as hon. Gentlemen opposite seem to think, doctrinal: they are purely technical. One cannot get that high degree of uptake in using means-tested benefits that presumably hon. Members on both sides wish. It is only through the tax system that one can ensure that benefit will be given to those who most need it.
      My indictment of the Chancellor is that he has not considered this with an open mind. I agree that it would have meant some changes, but particularly when he was making his judgment six months ahead, it would have been easier to announce these changes now and made them operative in April. This is my major criticism. We are now seeing all the ill effects of going back to the principle whereby the Inland Revenue and the taxation system stand alone outside the benefits system. We are introducing a means-tested benefit system for the man in full employment and going back to the principle which many of us felt was long since gone—over two centuries ago. We are taking one of the most retrograde steps in overall taxation which has been taken for centuries.

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      This is not just a small measure. Everyone in the House wants taxation reductions, but the question is what penalty you pay for them. It is how one makes them and how they affect people that counts. If one increases charges indiscriminately for everyone in society, one must, particularly if one makes great play with both taking effect in April, so adapt the tax system that it gives the maximum help to those with lowest incomes. This is what this miserable Bill fails to do. This is the central argument, and this is why we have to discuss the family income supplement.
      This miserable Bill stems from the Chancellor's inability to marry the taxation system with the benefits system, and rather to go back to the old system of dividing the two—at the very moment when, over the last few years, we were beginning to merge them and the Inland Revenue was at last beginning to realise that it could not stand out as a bastion, taking into account only tax changes, without looking at the whole picture.
      In consequence, we are giving a supplement to those on low wages, which will have a bad effect on those areas like mine, in the West Country, with a high percentage of people on low wages. For the first time ever, they will now be given a supplement while in full-time work. The long-term consequences of this action, although I can see arguments for it in the short term, will be with us for decades. The movement towards encouraging employers to pay a basic wage and towards a minimum wage will be held back because of this miserable Chancellor, who has failed to comprehend the extent to which small tax changes can be changes of principle and can make a very damaging assault not just on individual poverty but on the whole way in which we were moving in trying to eradicate poverty in our midst.
      We must expect from the Chancellor in the presentation of the facts on which his judgment is based a far higher degree of honesty and competence than we have had over the last few weeks. This is my most serious allegation. The right hon. Gentleman holds high office, which the House respects, but the House expects from him an honest interpretation of the facts. It expects him to present the expenditure figures particularly honestly, because the only way in which the House
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      can discuss the real choices on priorities which face any Government and Chancellor is to have the facts presented honestly. This was not done in the public expenditure review; there must be many officials hiding their faces in shame that that miserable document should have been produced in that way.
      I do not have the range of knowledge to know in detail how much those figures have been corrupted, but in defence expenditure, this is one of the most dishonest displays that I have ever seen. The Bill will divide the nation. It is inequitable. It is making a judgment six months before it should be made. It is distributing something unfairly, and in the long term it will damage the structure of our attempts to ease poverty: it deserves to be rejected.
      6.0 p.m.
      Mr. Dick Taverne: I want to avoid covering the same ground as that which I covered last Friday on the Second Reading. I should explain to the hon. Member for Cornwall, North (Mr. Pardoe) why there have been no Amendments moved by the Official Opposition. It would be easy to improve this Bill if we intended to cut taxation. There are many aspects of the tax system which were attacked by my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) and others. We on this side of the House think that the worst aspects of the present income tax system is the low threshold. If there is a case for cutting taxation, it is a case for raising the threshold as a top priority and that is the kind of Amendment we would have moved.
      As we have made clear, we oppose the whole package, we oppose the public expenditure cuts and the charges. Therefore, we oppose the income tax cuts which are the object of the operation. It would be inconsistent for us to seek a better way of bringing about income tax cuts to which we are in any event opposed.
      Since the Second Reading there have been some developments. I hope that the Financial Secretary will have a chance to explain some points which badly need explanation. Over the week-end the Government had a very critical Press. It is very hard to find a friend of theirs among any of the economic commentators here or abroad. The Financial Times on

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      Saturday, in a somewhat extreme article, extreme in the prescription it put forward not necessarily in its analysis, said that if there were no incomes policy the only measure was one of serious deflation with all the terrible consequences which that entailed. The Observer, the Sunday Times, the Sunday Telegraph and today's The Times have all, in their different ways and with different degrees of urgency, some of them feeling very urgent indeed in their representations, pressed for a policy to deal with the immediate problem.
      Last night we had the Guildhall speech of the Prime Minister. This was a much-heralded speech; heralded by rather different trumpet calls at different stages. First, we had the call which announced that here was to be a dramatic statement, the Prime Minister was to undo the harmful effects which it was clearly felt at No. 10 had occurred after his television broadcast. I was struck by the similarity with King Lear but as the cartoon in The Guardian made the point, I will not pursue it. Then the briefing changed. It told the Press that there was no need for any dramatic announcement at the Guildhall speech, that there was no need for the Prime Minister to say anything new and, indeed, he did not.
      He made it clear, as far as he makes things clear, that all the Government intend to do seems to be what is contained in this Bill, apart from nonintervention in industry. He said there was a new incomes policy but all that it seems to amount to is a redistribution from the poor towards the rich. He said, or seemed to imply, that that alone would change the climate, change the attitude of the nation. It is a long-term policy as he said it has nothing to contribute to the short term. This might be described as a policy of fiddling with the tax rates while Rome burns.
      I say to the Government that this is not good enough. We have a situation in which wage claims are rising. To start with it was, as my hon. Friend the Member for Ashton-under-Lyne pointed out, a matter of raising expectations but it has clearly become something more than that and, in some ways, something more serious than that. It is now a kind of defence mechanism whereby people are afraid of being left behind. In this short-term
      1088
      situation, we shall get no help from this Clause. The majority will find them-selves worse off. There will be no help from this proclaimed doctrine of freedom of choice because it is nonsense when someone cannot choose to spend less money on food since food prices are going up, and since, in due course, the average industrial earner will not be able to have the choice of paying less rent as council house rents go up.
      What I would like to ask the Financial Secretary is: does he confirm that this Bill, the public expenditure cuts and charges and the shortfall which have been presented as cuts are the whole answer which the Government have to the present situation? Or can he reassure us, as the Prime Minister did not last night, that this is not the whole answer and that they will not sit back and allow increasing inflation to engulf us?
      There are some particular questions arising out of this Clause. The Treasury in Economic Trends seem to confirm that the balance of the income tax cuts on the one hand and the public expenditure custs, the charges and the shortfall on the other hand, have a neutral effect on demand as the Government see it; that the corporation tax cuts are not included in the balance but they do not regard them as having much effect. We can come to that on the next Clause. If this is so clearly the effect on demand of the tax cuts, much depends on what kind of increase in earnings the Government see coming about by April. If the increase in earnings gathers pace, there will be more revenue coming in and the cuts will have less effect by way of increasing demand. If earnings slow down, if there is to be more moderation, it will have the reverse effect.
      What were the calculations of the Treasury based upon when it came to this estimate that the overall demand effect is neutral? It is a crucial question because the effect of the package on the economy depends on the earnings rise. What can we expect? Does the Financial Secretary take a more optimistic view of a moderating rise and is that, perhaps a justification of a lack of policy to deal with the present situation? If the Government cannot even say that, then it is a case of total defeatism, total abrogation of their responsibilities. We are faced with this accelerating inflation which has

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      increased since June, when the comparative position of Britain has become worse.
      There is a serious threat to the future of the whole country. I warn the Government that if they have no policy for the short term and persist in this attitude, it can only mean that the eventual remedy will be more difficult and they will then have to throw in everything, including the kitchen sink. It can only mean that the longer they wait, the more unpleasant the consequences will be for us all.
      [Miss HARVIE ANDERSON in the Chair]
      Mr. Patrick Jenkin: The debate has been on a somewhat narrow but startling Amendment moved by the hon. Member for Cornwall, North (Mr. Pardoe). It has, reasonably enough, ranged widely and the Chairman indicated that we would include in the debate on the Amendment the debate on the Clause as a whole and that he would not feel disposed to allow any debate when we come to the Clause stand part. Before I come to the substance of the hon. Member's Amendment, I must make a brief reply to the very sharp and intemperate remarks of the hon. Member for Plymouth. Sutton (Dr. David Owen).
      I do not know whether he realised what he was saying, but the burden of his accusation, when he talked about members of my right hon. Friend's Department hanging their heads in shame, is that he is suggesting that my right hon. Friend somehow managed to achieve the suborning of officials and their agreement that figures should be put to this House and to the country which they knew to be untrue. If the hon. Member has said this, I utterly refute it and I believe that he is demeaning himself by making such allegations.
      Mr. William Hamilton: That is precisely the accusation that the present Chancellor made against the previous Chancellor.
      Mr. Jenkin: I was talking about the allegation by the hon. Member for Plymouth, Sutton. I hope that he will take an early opportunity of making clear that that is not what he meant, that he was not accusing officials of the dishonest presentation of figures. My right hon. Friend is
      1090
      well able to take care of himself. The figures in the White Paper were entirely honest. When he talked about the limited presentation of figures, I repeat what has been said, the normal five year forecast of public expenditure will be produced to the House and no doubt debated in the usual way.
      Turning to the Amendment of the hon. Member for Cornwall, North, he will not be surprised when I say that I will advise hon. Members to reject it. My hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) estimated the cost of reducing the standard rate of income tax to 25 per cent. as between £900 million and £1,000 million. I fear that I must disabuse him. The advice which I have had as to the effect of the Amendment is that it would be to reduce the yield of income tax by £1,735 million in the first year and £1,925 million in a full year. Of all hon. Members who have sat on the Liberal benches the hon. Member for Cornwall, North must be the most expensive. It may be that he will withdraw the Amendment before it is put to the vote. The hon. Gentleman advanced an ingenious but, I thought, unconvincing argument, that somehow this would not be inflationary, that the whole sum could be found out of the Budget surplus which the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) budgetted for at the beginning of the year and that therefore this could be well comprehended within the policy of the Government.
      He, however, recognised that he had somehow to lift from the public purse the obligations of providing capital for investment in the public section. He mentioned the nationalised industries but he must recognise that he would have to go much further than that. He suggested that they should be funded by an appeal to the market. He will know that the National Loans Fund forecast for the current year shows that £1,544 million was estimated as the advance from the National Loans Fund to the nationalised industries and local authorities, public corporations and even lending within central government. Even if the whole of that were to be found from the market it would not be sufficient to reduce the tax by anything like he wishes.

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      In the short term it would be quite impracticable. My hon. Friend the Member for Harwich (Mr. Ridsdale) and my hon. and gallant Friend the Member for the Isle of Ely (Sir H. Legge-Bourke) made the point forcibly that to the extent that we can increase the savings ratio, to the extent that people can be persuaded to save more of their income, then we will be able to make further progress in reducing taxes. It would be optimistic and irresponsible to imagine that this can be done in the short term and to the extent of this Amendment or anything like it. If we were to accept it, it would lead to massive increases in the level of demand and pile enormous demand inflation on top of what is already, and a number of hon. Members have adverted to this, a serious wage-cost inflation.
      This is not the occasion for an elaborate exposition of budgetary policy. I can say that the changes announced in the whole of the package put before the House on 27th October were intended as the hon. and learned Member for Lincoln (Mr. Taverne) has said, to have a broadly neutral effect. My right hon. Friend stands firmly by that assessment. The hon. and learned Member said that that was all very well but what assumptions does that make about the growth in the level of earnings over the next few months. Speaking as a former Treasury Minister he must know that I cannot answer that question. No recent Chancellor has ever included among the published forecasts any forecasts of the growth in the level of earnings and I certainly do not intend to break that tradition tonight.
      The package is intended to be broadly neutral. I know that it has been challenged by Mr. Wynn Godley and one or two others but the Treasury remains firmly of the view that this is the case and that my right hon. Friend has perfectly properly reserved his Budget judgment and reserved complete freedom for that Budget judgment next April.
      6.15 p.m.
      I turn to the rather wider debate. The case against the reduction of 6d. which the Clause will effect was made in traditional Socialist terms—none the worse for that—by the hon. Member for Norwood
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      (Mr. John Fraser) and for Ashton-under-Lyne (Mr. Sheldon) and in tones to which we have now become accustomed by the hon. Member for Fife, West (Mr. William Hamilton), who expressed himself on this matter perhaps rather more shrilly than did his hon. Friends.
      The attack on the Clause and on the reduction of 6d. is based on two propositions—first, that it is unfair that a bigger tax reduction should go to those who have investment income than to those who have earned income; and, second, that it is unfair that a bigger tax reduction should go to those who have larger incomes than to those who have smaller incomes.
      I am glad to have the assent of the hon. Member for Fife, West to that statement, which I made in rather less colour-full language than his own, but none the less that was the burden of his complaint. Added to that complaint was the contention that this was happening simultaneously with the removal of certain subsidies which affect all but the poorest of the population.
      As to the point about earned and investment income, it must be recognised that when tax rates rise, and so long as there is a differential, a bigger increase will be borne by those with investment income than by those with earned income. Correspondingly, when tax rates fall the opposite must be true. I do not see how anybody can expect it to be any other way. Exactly the same applies to the higher incomes as to the lower incomes. When the standard rate of income tax rose, the increases borne by people at the top of the income scale were much greater than the increases borne by people at the bottom of the incomes scale. When the rates fall again, the opposite is true.
      I will repeat one point which both my hon. Friend the Chief Secretary and I made on Second Reading. If that is not accepted and it is to be argued by hon. Members opposite that there never must be a tax reduction—[An HON. MEMBER: "No."] I am glad to hear that. Perhaps I need not waste my time by going into this. The hon. Member for Fife, West is very quick and sees the point. He recognises that if he argues that there must never be a tax reduction that means more to the higher income people than it does to the lower income

      1093
      people, the standard rate of income tax would never be reduced.
      As the hon. Gentleman and others argue, it would have been possible to have raised the threshold. However, that would have done nothing for the marginal rate of income tax.
      What my right hon. Friend can justly say is that he is cutting the marginal rate of income tax on overtime and on all earnings and on all savings income for every taxpayer in the country. That is a prize which is worth having. The marginal rate of income tax on earnings has been cut from 32 per cent. to 30 per cent., which represents a reduction of 6 per cent. in the weight of tax on every extra pound earned by everybody who pays income tax.
      If the argument is that that makes it very unfair as to the difference between those at the top end of the scale and those at the bottom, I will quote one more figure. Taking the dividing line at about £2,000 a year—after all, this is the salary of Members of Parliament leaving out of account the expense allowance—more of the total yield of personal tax is paid by those above the level than by those below the level. That proportion is the same after the reduction of 6d. as before. Yet more than half the full year cost of reducing the tax by 6d. of £350 million goes to those below the £2,000 a year level. [Interruption.] Of course there are more of them. The ratio is about five to one.
      The argument has been advanced that the benefit goes largely or very substantially to those at the top of the scale. I argue that more than half of the benefit goes to those earning less than £2,000.
      Mr. Sheldon: True equality demands that the benefit should also be shared in the proportion of five to one.
      Mr. Jenkin: I have dealt with that argument—it is totally unreal. The hon. Member for Fife, West was quick to see the point. He shook his head at once when I presented the argument starkly.
      Mr. William Hamilton: The Financial Secretary must not assume that I am agreeing with him in anything he says.
      Mr. Jenkin: The hon. Gentleman was quick enough to recognise, as the hon. and learned Member for Lincoln was not
      1094
      on Friday, that the logic of his argument was that the standard rate of tax would never be reduced. The hon. Member for Fife, West was quick and shook his head, saying, "That is not right". I am glad that he recognises that.
      I have now dealt with the argument that more than half the benefit of this cut should go to people earning less than £2,000 a year, even though a minority—one-fifth of taxpayers—over that level continue to pay more than half the total level of tax.
      The hon. and learned Member for Lincoln told us that he opposed the whole package, including the Bill. It was slightly surprising—I do not intend this to be provocative tonight—that on Friday the Bill was given an unopposed Second Reading—I think rightly, because right hon. and hon. Members opposite know full well that if they got back they would not put back the sixpence.
      Mr. Taverne: The Financial Secretary is being unrealistic. We opposed the whole package, and we made this clear. This does not mean to say that we intend to follow the obstructive tactics that the hon. Gentleman and his colleagues followed of voting against every detail.
      Mr. Jenkin: The hon. and learned Gentleman may have convinced himself, but as the Bill is perhaps one of the central points of the package I doubt whether he seriously regards it as something which he should not have voted against.
      Sir G. Nabarro: Has it escaped the attention of my hon. Friend that, despite the protestations of the hon. and learned Member for Lincoln (Mr. Taverne) that the Labour Party would not think of putting the 6d. back on, the very first thing that the Labour Government did in 1966 was to raise the standard rate of tax from 7s. 9d. to 8s. 3d.—in other words, they put it back?
      Mr. Jenkin: Indeed. I am grateful to my hon. Friend. They did so, and that was after the right hon. Member for Huyton (Mr. Harold Wilson) had assured the electorate that his programme could be carried out without any general increase in taxation, whereas my right hon. Friend the Prime Minister declared to the

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      country that ours was a Government who would reduce taxation. Clause 1 fulfils that pledge and will reduce taxation. I hope that when the Question is put we shall reject the Amendment and support the Clause reducing the standard rate of income tax by 6d.
      Mr. Pardoe: I will reply briefly to one or two of the excessive points which have been made during the course of the debate, particularly to some of those who replied to the speech I made in introducing the Amendment but who were not here to hear it.
      The hon. Member for Worcestershire, South (Sir G. Nabarro) seemed to be saying that it was right to subsidise the interest rates of the public sector, and in particular of the nationalised industries, as that kept their prices down. Presumably, it would follow that it would either be good to subsidise the interest rates of the private sector so that we could keep its prices down, or alternatively bring the whole of the private sector into public ownership, in which case it could all have subsidised interest rates. The hon. Gentleman's argument does not hold up.
      Sir G. Nabarro: The hon. Gentleman perverts what I said. I said that it was utterly impossible for a sum of between £1,000 million and £2,000 million to be raised on the open market and that only certain parts of nationalised industries could go to the market for their money, very selectively.
      Mr. Pardoe: I do not think that the hon. Gentleman has argued his way out of the conflict he has got himself into. I will leave it there.
      There are two other points to which I wish to reply apart from that point. One was raised by several hon. Members on this side, first by the hon. Member for Norwood (Mr. John Fraser). He overestimated the effect of the rates of direct taxation on social justice. This overestimation of the results of the rates of direct taxation on social justice was common to most of the speeches which were made from this side, except for my own.
      I ask hon. Members to consider that, because of the regressive nature of purchase tax and duties, particularly the tobacco duty, it does not make very
      1096
      much difference what is done to income tax, because the poor are already paying a much higher proportion of their income in taxation than are the middle class or the upper class. The lower 15 per cent. of income groups pay substantially more than one-third of their incomes in total taxation, because much of it goes in the tobacco duty.
      I ask hon. Members to consider the remarkable thesis put forward by Professor Merrett of Sheffield University which shows that it would be possible to replace all the taxes—income tax and all the other taxes, except for surtax, corporation tax and death duty—by a 30 per cent. overall flat rate sales tax across the board and still leave the poorer sections of the community better off in terms of the proportion of their income paid in tax.
      Therefore, the argument which has come from these benches of the Labour Party—indeed, I myself have until fairly recently accepted it—that somehow there is something in common between direct taxes and social justice does not stand up.
      Robin Marris, reviewing Professor Merrett's proposals in the New Statesman on 30th December, 1966, said:
      "Professor Merrett has made a very radical suggestion indeed. It flies in the face of Socialist orthodoxy, but I am forced to confess that, despite my lifelong assumptions, I find it difficult to disagree with him."
      It is in fact possible to reduce income tax in this way and in the way proposed in my Amendment and still not work adversely upon social justice.
      In the Amendment I have not been mainly concerned with incentives. One or two hon. Members opposite took up the question of incentives and one or two hon. Members replied from this side. In moving the Amendment I did not mention incentives, because they are far too difficult to measure in relation to income tax. I have been concerned with the question of the surplus.
      The hon. Member for Worcestershire, South said that the cost of my proposal was £1,900 million. I am able to multiply £350 million by six, but unfortunately the hon. Member for Worcestershire, South is not. I, too, arrived at the figure of approximately £1,900 million. However, it would still leave a surplus of £700 million.

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      If the Financial Secretary questions, as he did, where would the money come from for the nationalised industries and where would all the local authorities, the Health Service and everyone else, find their money, the answer is that a £700 million surplus would still be twice the surplus that we had in 1967–68, about the same as we had in 1966–67, and much higher than any surplus we had in the years 1958–59 and 1964–65. Where did all the nationalised industries and the rest of the public sector find their money when there was not a surplus on the current account of £2,600 million, which is what we have today?
      6.30 p.m.
      I do not for one moment intend to press the Amendment to a vote, simply because if there were a Liberal Government and I was Chancellor of the Exchequer I would not necessarily think in terms of giving back the surplus only in this way. Unfortunately, the Bill is somewhat limited as to ways in which I could give it back. I have, therefore, to concentrate on the two sources open to me in the Bill. And so indeed it is somewhat limiting to have to do it in this way. But I find absolutely despairing the common front which we have had from the spokesmen from the two Front Benches, who, after all, presumably for the foreseeable future, will have the future of the British economy in their hands. Heaven help us.
      The common front which has been shown by the two hon. Gentlemen is that they support the age-old arguments in favour of deflation. They are not prepared to break into the open seas. They are not prepared to follow the policy which the Conservative Party, under the direction of the late kin Macleod, when they were in opposition, said that they would follow, that they would take risks and encourage growth in the economy by giving back a large part of those surpluses into the purchasing power to stimulate demand. Indeed, that whole policy of growth, in both parties, is dead today. I find that absolutely tragic.
      Amendment, by leave, withdrawn.
      The CHAIRMAN, being of the opinion that the principle of the Clause and any matters arising thereon had been adequately discussed in the course of debate on the Amendment proposed
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      thereto, forthwith put the Question, pursuant to Standing Order No. 47 (Debate on Clause or Schedule standing part), That the Clause stand part of the Bill.
      Question agreed to.
      Clause 1 ordered to stand part of the Bill.
      Clause 2 ordered to stand part of the Bill.

    Clause 3

      CORPORATION TAX FOR FINANCIAL YEAR 1969
      Mr. Pardoe: I beg to move Amendment No. 3, in page 2, line 6, leave out '42·5' and insert '40'.
      I shall be brief. In this Amendment I am endeavouring further to reduce the rate of corporation tax. I should state at the outset that I am not pinning my colours to any particular set of figures, although in the Amendment I am asking for a further reduction of 2½ per cent.
      I want merely to question the Government on the philosophy of the reduction they are making. Presumably the Government are asking for an increase in investment. We all know that this is what is desperately needed if we are to obtain economic growth. The creation of fixed capital in this country is appallingly low and has been so over far too long a period, and far behind our major industrial competitors. I hope, therefore, that the Government's intention in reducing corporation tax is to increase and encourage investments.
      I do not want to get involved in any way in an argument about exactly how best to encourage investment, in the terms of whether it should be investment allowances or investment grants. Obviously this would be without the terms in the specific Amendment. But I have before me the report of the Confederation of British Industry Industrial Trends Survey, No. 39, of October, 1970. The survey makes clear that the outlook for investment is still very gloomy and depressing. For instance, it says:
      "The outlook for authorisations of capital expenditure on plant and machinery has worsened since June, while that for authorisations of buildings has remained unchanged. For 1971 a decrease in manufacturing investments is indicated."

      1099
      The Confederation of British Industries' survey goes on:
      "The implication for policy is that there should be greater incentives for investment."
      It also says that perhaps the best of these incentives would be a reduction in corporation tax. I merely want to ask the Financial Secretary to tell us how he believes the new rate of corporation tax will affect the overall level of investments, and whether he thinks that it will overcome the gloom which the Confederation of British Industry found in its latest survey.
      Obviously this, I hope, will be a means of getting investment. If it is, I suspect that there will have to be a much more substantial reduction in the level of corporation tax in order to overcome this gloom, because undoubtedly the major factor weighing against industrial investment is not a question of whether we have tax allowances or grants but, frankly, whether we have those investment incentives at all.
      Business men will only invest if they have a confident climate in which to do so. If one follows the path of upward industrial investment over the last 20 years, one can clearly see a strict relationship between the level of investments and the level of demand in the economy. When we have a booming economy, with booming consumption and demand, then business men have felt that they were able to look forward to a period of profitability and they have been prepared to invest.
      Obviously interest rates affect investment, too. One would hope that one could get some international agreement on this matter. I hope the Government will make efforts to that end, to lower the disincentive to investment.
      At this stage, it seems primarily that the Government are putting all their money on the idea that if they can reduce the impact of taxation on industry through corporation tax, we shall leave industry with a little more to invest. It is unfortunate that we should have a level of corporation tax across the whole range of profits. It would seem far better that we should not only reduce it, as I have proposed in this Amendment, as a better incentive, but also that we should have a much lower rate of tax on companies
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      with small profits. I think that the growth of the economy will never come from the giant industries but that it will inevitably come from the small entrepreneurs starting in business and getting growth in the early years. These are the people who need incentive and a lower rate of tax.
      Even if the Government cannot accept my proposed lower rate of corporation tax across the board, it may well be that they will consider giving a lower rate of corporation tax to companies with lower turnovers and smaller profits.
      Mr. Dell: The hon. Member for Cornwall, North (Mr. Pardoe) said that the main influence on investment is the expectation of profitable demand, and that that has a greater influence than systems of investment incentives. I entirely agree with him in that. It is nevertheless interesting that the Government have decided to introduce a system of investment incentives, though one different from the system which existed under the previous Government. I agree with the hon. Member for Cornwall, North that this is not an appropriate occasion to discuss the merits or demerits of the two systems, and I do not intend to do so. On the other hand, we have a Government which have proclaimed their interest in scientific management. No doubt they will therefore be very careful to assess the effects of the various measures which they take.
      The Government have an alternative. They could have reduced company taxation by a greater amount and eliminated any system of investment incentives at all. This would have been an alternative and one for which many of the Financial Secretary's hon. Friends, when they were on the Opposition back benches, used to argue. Nevertheless, the interesting thing is that the Government have not just reduced corporation tax but have introduced a system of investment incentives. I should like the Financial Secretary to tell the Committee how the Government intend to assess the effect of the system of investment incentives which they have introduced. We have a government of scientific management and they should, presumably, be working to set up a system for assessing the effects.
      After the previous Government had been operating the system of investment

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      grants for about two years, the Board of Trade began an assessment, in so far as this was possible, of the effectiveness of investment grants. The assessment was not completed, although I was glad to hear, in answer to a question of mine to the Parliamentary Secretary for the Department of Trade and Industry, that as much as possible of the results of that assessment will be published. I should like the Financial Secretary to tell the Committee what work the Government are doing along these lines.
      The first thing to notice is that what they are engaged in is a process of social engineering, which I suppose is quite contrary to their philosophy. It would have been in accordance with their philosophy simply to have reduced the level of company taxation, but by introducing a system of investment incentives they have presumably attempted to achieve certain specific effects. For example, they want to provide cash specifically for investment. They want to direct cash specifically into investment, so they encourage companies to put money into investment, as a result of which they will get a reduction in taxation.
      Then, presumably, they want to help capital-intensive industries, because this is the effect of the system that they have introduced. It used to be held as a serious accusation against the investment grant system that it assisted capital intensive industries. Their system does exactly the same thing and presumably it does exactly the same thing because that is the result they wish to achieve.
      How will the Government assess the effect of their proposals on capital-intensive industries? They say that they want to help the development areas. This is another argument for having a system of incentives. One can differentiate that system in the direction of development areas and achieve effects there. I ask the Government to tell us how they propose to assess these matters and these effects. I ask them how they intend to introduce their principles of scientific management into this matter, because the first factor of which one becomes aware is that there will be a serious reduction in the amount of information about all this that will be available.
      A short time ago I ask the Chancellor of the Exchequer whether there would
      1102
      be published the sort of analysis of investment allowances and tax allowances under the new system that was published in respect of investment grants. The reply was that the cost of so doing would be unacceptably high, and therefore it would not be done. The Financial Secretary will remember the extensive information that used to be published about investment grants. I hope that we shall have a further report for the year up to 31st March, 1970. I hope that we shall have a detailed analysis of expenditure in particular industries, because it will help us to assess the effectiveness of that sort of investment incentive. This kind of information is not to be available in respect of investment allowances. What system are the Government setting up to achieve control over their system of investment allowances?
      We have been assured that differentials for the development areas will not be reduced, but the statement that they will not be reduced has not been supported by any calculations presented to the House or to the public. It is very curious that no such calculations have been presented. One would have expected such calculations to be brought before the House. I suppose that one reason why they have not been presented is that the Treasury does not want to tie itself to particular estimates which might be shot down. If that is a reason, I do not think that it is an honourable one. I think that the Treasury should present the estimates upon which this statement has been based.
      Another reason why the Treasury has not given us this information is that the statement depends, to a considerable extent, apparently, upon what happens to grants and loans under the Local Employment Acts, and this the Treasury cannot say because the Prime Minister said in the House a short time ago that "one never knows". If one never knows, how does one make the claim that the differential is being preserved?
      I ask the Financial Secretary to tell us how the Government propose to assess the effect of combining a reduction in corporation tax with investment allowances in producing the results, the social engineering results which they apparently want to achieve. How will the Government find out whether they are doing what they want to

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      do? What information will be available? What will they tell the House? Is it just going to be the surprising deficiency of information associated with the Chancellor's most recent pronouncements, or will it be more? Will we have information along the lines that we had for investment grants. What sort of information will the Treasury consider is worth the cost of producing it? What is the Treasury going to do about providing estimates of the likely effect of its decisions on particular industries which have a major impact on the country's export results, and economic results generally?
      6.45 p.m.
      Let us consider a few of the vital industries that will be affected by the decisions which the Treasury has made. Let us consider the motor car industry. From reading the Press one realises that in recent months—and during last year—the motor car industry has not been notable for the profits that it has made, and therefore it will not have many profits against which to offset its capital expenditure. Presumably the Treasury has made some estimate of the effect of all this on the motor car industry, which is the major exporter in the country? It is, presumably, going to be affected. Presumably the Treasury has estimated the effects, and presumably it can tell us what they will be?
      The chemical industry is a highly capital intensive one. If one can believe recent reports in the Press, the Chemical Industry Association has been making representations to the Government about transitional arrangements. There have been reports of intentions to cut capital expenditure in the chemical industry. On Saturday morning we had in The Times an article about I.C.I. and its intention to cut its capital expenditure. Here is a possible effect of the decision which the Government have made. Presumably the Government have made an estimate of the effects that it will have, and presumably they can tell us about them and thereby encourage us to be less discouraged by the initial reaction of industries to this total package which, as far as one can see, has been to revise downwards their investment intentions, rather than, as was clearly necessary, to revise them upwards.
      Let us consider the shipping industry, which has been most outspoken in its
      1104
      reactions to the Government's decision. I remember a year ago the shipping industry telling us how its recent expansion and the recovery of its position in world shipping was due exclusively to the initiative and vigour of those gentlemen who ran the industry. More recently we have seen the industry attribute this just a little to the existence of the investment grant system. The industry is really worried that it will lose that system. What is the Treasury's estimate of what will happen to the shipping industry? What will happen to the expansion of earnings from shipping, which are an important contribution to our invisible earnings?
      I put those questions to the Treasury in an entirely non-partisan spirit and in an attempt further to establish the Government's skill in scientific management which we know they are trying to develop. The Financial Secretary will realise that our appreciation of the Government's success in the development of methods of scientific management will depend to some extent on his ability to answer those questions.
      Mr. Joel Barnett: It will come as no surprise to the hon. Member for Cornwall, North (Mr. Pardoe) that I disagree with his argument as much as I disagree with the Government's argument for reducing the rate of corporation tax in the context of this year's economic situation. I hope that this will become clear when I refer later to some of his remarks.
      I hope that on this occasion the Financial Secretary will do my right hon. Friend the Member for Birkenhead (Mr. Dell) the courtesy of replying to the important points that he has made. Similar points have been made frequently during debates in the House over the last few weeks, and questions have been put to Ministers time and again, but those questions have been evaded and we have had no answers whatsoever on this vital issue of the estimate of the effect which the Government's policies will have on investments. I hope that on this occasion the Financial Secretary will reply to the points that have been made. If the Government have done nothing, let them at least say so.
      On one point I agree with the hon. Member for Cornwall, North. The important aspect of this Clause and, indeed, of the whole Government package,

      1105
      is its effect on demand. Much the most important part of the package is what will be its effect, and therefore what will be the effect on investment.
      The impression has been given that the effect of the package as a whole will be neutral on demand. This is not quite what the Chancellor of the Exchequer said on 27th October. He then said:
      "The reduction in income tax and the reduction in public expenditure, taken together, will, therefore, be broadly neutral in their effect on demand in 1971–72."—[OFFICIAL REPORT, 27th October, 1970; Vol. 805, c. 51.]
      He did not refer to corporation tax at that time. However, realising that he had again, perhaps not deliberately, misled the House, he corrected that, or attempted to correct it, in the debate on 4th November when he said:
      "It was in the light of the assessment which I have just given to the House and because I wanted to preserve my freedom of action next April that I was prepared to bring in legislation now to reduce direct taxation to an extent which, taken together with the reduction in public expenditure, would be broadly neutral. …"
      In other words, he was now taking together both income tax and corporation tax.
      However, realising that he had confused the situation, he went on to say about corporation tax:
      "… after allowing both for the time that normally elapses before investment decisions can be translated into production and for the effects of corporate borrowing"—
      an interesting phrase—
      "the demand effect of the proposal concerning corporation tax during the financial year will be small, both absolutely and in relation to the effect of the reduction in income tax."—[OFFICIAL REPORT, 4th November, 1970; Vol. 805, c. 1089–90.]
      I shall be interested to hear exactly what the Chancellor meant by that statement.
      It seems to be the practice of the Chancellor to confuse both himself and the House, and on this occasion what he had in mind was far from clear. Is he telling us that there is so little effect on demand by a £60 million cut in corporation tax followed by a £90 million cut in corporation tax in the following year, which will be taken into account by companies whose years end after 5th April, 1970, a total of £150 million, that it will be meaningless?
      1106
      I understand that the normal effect of corporation tax is about 20 per cent. The Chancellor may consider that to be a very small amount, but his whole judgment of whether the package is neutral on demand has been seriously questioned by many commentators, not least by a very senior former Treasury official, Mr. Wynn Godley. The Government owe it to hon. Members to answer this serious criticism of the effect of the package on demand.
      It may be that the Government are being coy because they feel that once they show the makeup of the various parts of the package, it may be so open to criticism that it will be seen for the nonsense that perhaps it is, but if that is not the reason, why do they not tell us? After all, we have been told time after time that we now have an open style of government. Why can they not extend the open style of government to let hon. Members know how it is that the Chancellor disagrees on such a serious matter with so many serious commentators?
      If we do not get this answer and explanation, we can only assume that the Chancellor's calculation, as with so many others which he has made in the past, will not stand scrutiny. We cannot believe that he can imagine that he will somehow delude foreign observers into believing that the effect on demand is neutral simply because he happens to say so. The least he can do is to tell us just how he arrives at this conclusion.
      The major and most interesting comment about the cut in corporation tax is that it does nothing for the great majority of companies. There were precisely 514,826 companies on the register in 1969 and only 255,000 pay any tax. According to the 1970 Report of the Commissioners of Inland Revenue, out of those, 133,000 pay corporation tax on profits of less than £100 and 64,000 had nil profits anyway. One assumes that many did not submit returns; one has to judge from the total of companies on the register. It is clear that for the majority of close companies, about which the Conservatives said so much in the last Parliament, the corporation tax cut will do nothing. It will be interesting to know exactly what the Government have in mind to help close companies.
      Let us deal with the minority of companies which the cuts in corporation tax

      1107
      will help. What will be the effect on the efficient part of that minority? It is said that those with profits, those able to stand on their own feet, will get enormous benefit from this £60 million reduction. I do not know, but there was an interesting article in the November issue of the Director which threw a little doubt on whether it was true that the cut in corporation tax would have a tremendous effect on the efficient directors. I quote one or two relevant extracts:
      "… nearly half the directors ignore tax when assessing the attractiveness of new investment …"
      This does not seem to coincide with what the Government have been saying about efficient companies and how those companies will be able to recognise the true benefit if they use the discounted cash flow system, for example.
      If they do, and, according to this report, not many do, this cut will certainly not be their main or only criterion in measuring the return which they are likely to get from their investment. Even if it were, they would be interested in the answer to two Questions put by my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) on 4th November showing that those efficient companies using the discounted cash flow system under the old arrangement, with corporation tax at 45 per cent., and the old investment grants, on every £100 of investment outside the development areas would get £39 of relief and £52 inside the development areas, whereas under the Government's new system the comparable figures are £32 and £36.
      Therefore, efficient directors assessing the likely yield from a given piece of investment will be able to see that they need a much higher yield under the present arrangement than under the investment incentive system of the previous Government. So we will get a further inflationary boost, because companies will decide to carry on with the investment and increase their prices in order to get the yield which they would have had under the old system, or they will cut back on their investment. But whichever way they decide to do it, one thing is clear—the Government's policies certainly will not be beneficial to investment in this country.
      1108
      7.0 p.m.
      What is the effect on that part of the minority of companies which the Government would describe as inefficient, those which cannot stand on their own feet, which have no profits, companies like Rolls-Royce, companies in the development areas where in the first year or two all too frequently there are, understandably, no profits and so no benefits? There is nothing for those companies in the Government's policies. There is nothing for the majority of companies, and very little for the minority which are using what is said to be the most efficient method of investment analysis.
      So whichever way we look at it, there is nothing in the Government's policies to help in any way in the vital matter of investment. There is not one jot of evidence that a cut in corporation tax of 2½ per cent., or even the 5 per cent. suggested by the Liberal Party, would go any way to help increase the appallingly low level of growth which seems likely this year and next year if the O.E.C.D. is anything to go by. There is nothing to help in these vital fields. There is nothing to help the close companies, nothing to help the efficient companies, nothing to help the progressive but loss-making companies in development areas.
      After five months in charge of the Government of this country, a country with serious economic problems, as the late Iain Macleod described them, it speaks volumes for this Government that we are now discussing what is at best an irrelevant Clause in an irrelevant Bill. If the Prime Minister's speech at the Mansion House means anything, it is that the Government are abdicating economic responsibility and leaving it to the people. If they have the idea that the problems will somehow go away, if they have a pious hope that they will somehow solve themselves, we can tell the Government that they certainly will not, and the Clause will not do anything to help.
      Mr. Patrick Jenkin: I have some sympathy for the Opposition in the position in which they find themselves, because this Government, then the Opposition, went to the country on a programme which included cutting public expenditure and reducing taxation. The Opposition are faced with the embarrassing position of having to try to find

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      something on which to attack us, because we have succeeded within five months of taking office in doing just that.
      The hon. Member for Cornwall, North (Mr. Pardoe), whose Amendment we are discussing, is in a very honourable tradition. Looking through previous corporation tax debates, I find that Mr. Peter Bessell and Mr. Richard Wainwright—neither of them, sadly, now with us—then moved Amendments to reduce corporation tax, as I myself have done. The difference is that this time we are doing it in the Bill. We are achieving a 2½ percentage points cut, which represents a reduction of just over 5 per cent. in the tax. The hon. Gentleman's Amendment would reduce that by a further 2½ percentage points. Clearly, there is something to be said in favour of his proposal, but I cannot advise the House to accept it.
      We must look at the corporation tax cut in the Bill as part of the balanced judgment which my right hon. Friend the Chancellor felt it necessary to make when he was considering his policy for investment grants, tax allowances, and, indeed, the whole package which he announced on 27th October. The Government were committed to ending the system of investment grants, which was obviously warmly espoused by hon. Members opposite for reasons which we can all understand. We were committed to ending it, because we regarded it as wasteful. Huge sums of public money were being spent to try to encourage investment, and even after four or five years hon. Members opposite never produced any of the figures along the lines of those that the right hon. Member for Birkenhead (Mr. Dell) suggested I should now produce, estimates of the effect of investment grants. As my right hon. Friend the Chancellor has said, investment in the four years the grants were in force was somewhat lower than in the previous four years, when a different system had applied.
      Mr. Dell: The hon. Gentleman says that we did not produce estimates of the effect of the investment grants system. We were engaged in a study of it which began at the beginning of 1969, about two years after the system came into effect. All that I asked him is what sort of assessment he will make of the effect of his system.
      Mr. Jenkin: The right hon. Gentleman is anticipating what I shall say. My case is that the grants did not produce the results which right hon. and hon. Gentlemen opposite expected. We feel that they were ineffective and that the expenditure was misdirected, not least because they were not profit-related. I simply cannot believe that it is in the interests of this country that 40 per cent., as it is in the development areas, of the capital cost of major projects should never have to produce any return. That is the effect of an investment grant, which by its very nature is not related to the profitability of a particular investment. That is our case against the grants, and why they went.
      We have replaced them by a new and greatly simplified system of tax allowances, based on free depreciation in the development areas and accelerated depreciation outside, with a simplified form of annual allowances. This has been accompanied, as the Bill provides, by a 2½ percentage point reduction in the rate of corporation tax. This is a balanced package. It achieves what we mean to achieve, which is to improve in the medium term the liquidity of companies, many of which have complained that their tight cash position is one of the restraints on their investment programme. The figures are set out in the investment incentive White Paper of £60 million this year and £90 million next year.
      The hon. Member for Heywood and Royton (Mr. Barnett), by a piece of sophisticated logical juggling, managed to convince himself, even if he did not convince anyone else, that the cut in the corporation tax does not help close companies. Perhaps he meant to say that it does not help all close companies.
      Mr. Barnett: The hon. Gentleman must listen. I said that it did not help the majority of close companies. Would he deny that?
      Mr. Jenkin: The hon. Gentleman knows that he is playing with figures. A company may not pay corporation tax because, for instance, it is a small family company in which the whole of the profits come out in directors' remuneration. That covers a large number of companies. The hon. Gentleman was one of the foremost pressing, with us, on

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      the Government which he nominally supported to get rid of the limits on directors' remuneration which the previous Government imposed. That is why some close companies do not pay corporation tax. All that do—and some of them are very large—will be helped. Many tens of thousands will be helped by the cut in the corporation tax, as they will be helped by the Government's decision not to reopen the shortfall assessments or agreements that have been reached on distributions. On a strict matter of logic, we might have done this on a reduction of the rate of corporation tax on the ground that they may have more distributable profits. That, too, will help close companies. There are many tens of thousands of close companies which will very much welcome this easing of the tax burden upon them.
      The hon. Gentleman also mentioned the study by the Director, and quoted the article about it. I imagine that he has read the article. Does he realise that the sample was of about 83 companies, which represents such a minute fraction of the total number of companies which operate in this country that I am surprised that an hon. Member as intelligent as the hon. Gentleman put as much weight on it as he did?
      Mr. Barnett: It was a sample.
      Mr. Jenkin: I should want to know exactly how the sample was found. These were people who answered a questionnaire, which is a self-selected sample.
      I come to the questions asked by the right hon. Member for Birkenhead. The hon. Member for Heywood and Royton asked one or two as well. I understand very well the anxieties of the right hon. Gentleman about some of the points he raised. First, he asked how we intend to assess the effect of the change of investment assistance. As I am sure he appreciates, because in the previous Government he was involved in this at an earlier stage, this is a matter for my right hon. Friend the Secretary of State for Trade and Industry, which Department is concerned overall, as was the Ministry of Technology before it, with assessing the effect of the Government's various Measures on investment by manufacturing and other industries.
      Mr. Dell: Surely the hon. Gentleman is under a misapprehension here? It was a matter for the Board of Trade and subsequently the Ministry of Technology in the previous Government, because there was a system of investment grants administered by those Departments. Here we shall have a system of tax allowances administered by the Inland Revenue. Therefore, it is the responsibility of the Chancellor. The Chancellor is responsible for telling us what justification he has for the very large sums of money which will be given in tax allowances as investment incentives.
      Mr. Jenkin: That was not the right hon. Gentleman's question which I was answering. He asked us how we intend to assess the effect. I say with the greatest respect to him, because he knows a great deal about this from his own experience, that that is not a matter for the Inland Revenue. He knows that. It is a matter for the sponsoring Department for industry, the Department of my right hon. Friend the Secretary of State for Trade and Industry.
      Mr. Barnett: Is the hon. Gentleman saying, then, that the Treasury does not know what the effect of its investment incentives will be?
      Mr. Jenkin: On the contrary, I am saying that this is a decision of the Government. It has been taken by the Government and all the Departments concerned have contributed. The right hon. Gentleman's question about how the effect will be assessed is a matter for my right Friend, and I do not intend to be drawn on it this evening because it is not one which is open to me to answer.
      The right hon. Gentleman asked whether as much information on investment allowances would be produced as has hitherto been produced on investment grants. We shall consider this. Of course, a lot of information on investment allowances is given in the statistics produced by the Inland Revenue. The right hon. Gentleman knows that last year, for the first time, the Inland Revenue produced an entirely separate volume of statistics containing a number of entirely new charts and tables of interest to those who study these things. We shall certainly consider the right hon. Gentleman's suggestion as to how far we should go in producing further statistics on investment

      1113
      allowances. I hope that he will take that as sincerely intended.
      The right hon. Gentleman also asked something that he has asked two or three times before about the differential between the development areas and the rest of the country. He asked me to support, with figures if possible, the assertion of my right hon. Friend the Chancellor that the package as a whole broadly maintained the existing differential. I am sorry that he has not been satisfied with the answers which my hon. Friend the Minister of State, in particular, gave him in reply to his question, and felt it necessary to launch into the columns of the Press on the matter. Perhaps I may just refer to his letter to The Times Business News. It had a sting in the tail which was not wholly deserved, suggesting that my hon. Friend the Minister of State and I had forgotten all we had ever learnt about discounted cash flow techniques and so on. I assure him emphatically that that is not the case. We are very well aware of the importance of these methods of calculation in the right place. Indeed, we are impressed by the degree of sophistication and awareness by both the Inland Revenue and the Treasury in this complex field. Perhaps the right hon. Gentleman will feel that his gibe was undeserved.
      I come to the question of the regional differential and the cost of the existing differential element in the investment grant. Perhaps I should apologise for addressing the House in a dark brown voice. I have a cold and I trust that hon. Members will forgive any inconvenience that this is causing.
      The cost of this element paid to the development areas in 1969–70 was about £100 million, and it is expected that it will be a little higher in 1970–71. Of course, the net value to industry is somewhat lower, about £80 million, because the annual writing down allowances on capital expenditure are given net of grant. But for the grant, firms would receive higher annual allowances. We estimate that the cost to the Exchequer of the regional differential incentive in 1972–73 will be about £90 million, made up in part of the residual differential grant payments and, in part, of the additional cost of free depreciation over the national rates of allowance.
      1114
      Obviously, as the grant is phased out that figure of differential will, to that extent, decline, but this will be matched by the growth of additional expenditure—which my right hon. Friend told the House would be up to £25 million extra by 1974–75—under the Local Employment Acts. These figures taken together—the decline as the grants are phased out, the maintenance of the margin of investment allowances and the growth of expenditure in respect of the Local Employment Acts—in my submission fully justify our assertion that the balance of advantage for the development areas will be broadly maintained.
      Mr. Sheldon: Does that assume the same level of investment throughout the years concerned?
      Mr. Jenkin: No. The investment is, of course, assumed to rise, for the purpose of argument, broadly in line with recent trends. This would seem to be a perfectly proper assessment, bearing in mind the fact that industry will be less burdened both with corporation tax and tax on distributed profits as a result of the cut in income tax. We anticipate, therefore, that investment will begin to rise.
      I was then asked about the effect of the change on the liquidity of companies. Hon. Members will realise that what one is talking about is the liquid assets of companies available for investment. It would not be right to apply discounted cash flow to these assets because one is talking about cash that is available. Here there is very little difference between the two systems.
      If one looks at the first three years, one sees that in the case of an asset qualifying for a 40 per cent. grant, the variation was between 49·8 per cent. and 54·8 per cent. An asset qualifying for free depreciation at the corporation tax rate of 42½ per cent. would get 42·5 per cent. With a grant of only 20 per cent., again, the figures varied—the variation would depend on the amount of the writing down allowance—between 33·1 per cent. and 39·7 per cent.
      Under the new system it is 32·9 per cent. In the case of an asset which did not qualify for grant, it varied between 29·7 per cent. and 31·8 per cent. The figure under the new system is 32·9 per

      1115
      cent. Although if one looks at a particular asset there may have been in the case of the development areas some reduction in the minimum liquid cash amount available, one must have regard to the effects of a 2½ per cent. cut in corporation tax on the rest of a company's profits.
      If the right hon. Gentleman says, "What about a company that does not make any profits?", then the answer is, "Let it become efficient and it will then be able to benefit from the allowances and from the reduced rate of corporation tax being paid."
      If hon. Gentlemen opposite are arguing that we should continue to make substantial payments out of public funds to companies whether or not they make profits, then we on this side of the House do not agree. We feel that the system needed a change and, as part of that change, a 2½ per cent. cut in the rate of corporation tax was, we believe, appropriate.
      I hope that the hon. Member for Cornwall, North will not press the Amendment. If he does press it, I trust that my hon. Friends will reject it. Equally, I hope that my hon. Friends will support the Clause, if necessary on a Division.
      Mr. Pardoe: In view of the Financial Secretary's remarks, I beg to ask leave to withdraw the Amendment.
      Amendment, by leave, withdrawn.
      Clause 3 ordered to stand part of the Bill.
      Clause 4 ordered to stand part of the Bill.
      Bill reported, without Amendment.
      Motion made, and Question, That the Bill be now read the Third time, put forthwith pursuant to Standing Order No. 55 (Third Reading), and agreed to.
      Bill accordingly read the Third time and passed.

  FAMILY INCOME SUPPLEMENTS BILL
  Considered in Committee.
  [Sir ROBERT GRANT-FERRIS in the Chair]
  7.21 p.m.
  Mrs. Shirley Williams: On a point of order. I wish to seek your guidance, Sir Robert, and in doing so I want at the outset to make it clear that I accept completely the decision of the Chair in regard to the selection of Amendments. I raise this point of order because we are in some difficulty in respect of the first group of Amendments selected, and I seek your guidance in an effort to overcome this difficulty.
  You have not seen fit to call Amendment No. 1, Sir Robert, in which we suggest that the word "include" should be replaced by the phrase "consist of". This followed from the remarks of the right hon. Gentleman the Secretary of State for Social Services when, on Second Reading, he referred to the fact that we would have to define carefully in Committee, and in the subsequent regulations, exactly what was included in a family. I was advised that the word "include" was rather broader than the phrase "consist of".
  Would it be possible for me to move Amendment No. 1, which stands in my name and that of some of my hon. Friends, in a way which would assume that the phrase "consist of" does not mean an exclusive list of those who are members of a family but may be taken to mean those others in the Bill as it now stands?
  The Chairman: I do not think that there will be any difficulty about that.
  Mr. S. C. Silkin: Further to that point of order. I, too, speak with the greatest respect to the Chair and I fully understand that it is not the province of an hon. Member to question the selection of Amendments. Anything I say is, therefore, intended simply to help you and the Committee, Sir Robert, in this matter.
  Clause 1 sets out to define what is meant by "a family". Indeed, unless one has a family the Bill does not bite. The Measure therefore naturally starts

  1117
  with a definition of what a family is and that definition in the Bill as it stands consists of three elements, which are cumulative and which are set out in subsection (1) (a), (b) and (c).
  My hon. Friends will wish at the appropriate stage to move an Amendment which, if accepted, will have the effect of leaving out altogether one of those three cumulative elements. If the words remain as they are, with "consist of" left in, the effect of the acceptance of that Amendment, as we understand it, will be that, for the purposes of the Bill, a family will consist of only two of the three elements, which is either the man or the woman referred to in subsection (1)(a) and the child or children referred to in subsection (1)(c). That is not the intention, however, of any of our Amendments. On the contrary, our intention is to widen rather than narrow the definition of a family and we see no way of accomplishing that other than by removing the words "consist of", which specify precisely what a family should be, and substitute some such word as" include which is, of course, much wider.
  The Chairman: I am obliged to the hon. and learned Gentleman for those comments. I do not think he need have any great difficulty about this. I am sure that we will manage to find what the hon. Lady the Member for Hitchin (Mrs. Shirley Williams) has to say in this matter in order, and I hope that we can now move on to discuss the first group of Amendments.
  Mr. Brian O'Malley: Further to the point of order that has been raised, and I promise to be brief because I appreciate that the Committee is anxious to make progress with the Bill.
  As is usual when Amendments are selected—and I make no complaint about the selection of Amendments—both in the Chamber and in Committee upstairs, a number of Amendments are grouped together. It has been the practice on some occasions for Mr. Speaker, when we have been in the House, or for you, Sir Robert, as Chairman of Ways and Means, to be willing to accept separate Divisions on secondary Amendments which are under consideration, and on the paper which has been placed in the Lobby for the convenience of hon. Members
  1118
  there is usually a star against those Amendments on which it is agreed there may be separate Divisions.
  My hon. Friends and I are in some difficulty, particularly in relation to two of the groups of Amendments which have been selected, in that we would like very strongly to be able to vote on certain Amendments which will be secondary in the group under discussion. Could you give some guidance on this, Sir Robert?
  The Chairman: I have not considered what Amendments on which I would or would not allow Divisions, whatever may appear on the door, as it were. I am always happy to meet the convenience and wishes of hon. Members. If separate Divisions are required, I will be prepared to allow that, though we do not want to have an enormous number of Divisions from among those Amendments which are grouped together because that would be wasteful of the time of the Committee. I think that I will be able to meet the wishes of the hon. Member when the time comes.
  [Sir MYER GALPERN in the Chair]

  FAMILY INCOME SUPPLEMENTS BILL
    Clause 1

      FAMILY INCOME SUPPLEMENT
      7.30 p.m.
      Mrs. Shirley Williams: I beg to move, Amendment No. 2, in page 1, line 7, leave out 'single'.
      The Temporary Chairman: With this Amendment we can take the following Amendments:
      No. 6, in page 1, line 9, leave out paragraph (b).
      No. 9, in page 1, line 16, leave out 'paragraphs' and insert 'paragraph'.
      No. 64, in Clause 17, page 7, line 21, leave out from 'Act' to end of line 24.
      Mrs. Williams: The purpose of this group of Amendments is to explore precisely what the Government have in mind in the way in which the Bill defines "family". The fundamental purpose is to try to express the concept of a family in a way which will as far as possible meet the practical shape of families with low incomes which are in considerable need and which the Bill is intended to help.

      1119
      On Second Reading the right hon. Gentleman the Secretary of State for Social Services said:
      "A household is one with children. A grandmother living with a son who himself has children would not be within the scope of the Bill. The son with children might be. I think that that is the position, but I would like to reserve judgment on it. We shall have to define carefully in Committee and in subsequent regulations exactly who is included."—[OFFICIAL REPORT, 10th November, 1970: Vol. 806, c. 224.]
      The right hon. Gentleman will appreciate that it is both one of the duties and one of the purposes of the Opposition to try to establish as many facts as they can while the Bill is passing through Committee and Report stages instead of leaving them to regulations. We therefore wish, with the right hon. Gentleman's co-operation—which I am sure we shall get—to try to find out at each stage precisely what the Government have in mind. Some of the Amendments have been put down because we genuinely believe that they will improve the Bill, little affection as we have for the Bill.
      I turn first to the first part of Clause 1 which deals with which members of a household a family shall consist of. For this purpose I will take the Chairman's guidance that the words "consist of" need not be exclusive of all other possible members of the family. Clause 1(1)(a) reads:
      "one man or single woman engaged, and normally engaged, in remunerative full-time work;"
      The effect of the Amendment would be to remove the word "single", so that a woman who was the main breadwinner of the household would be entitled, even if she were living with her husband or with some other man as her husband, to receive family income supplement.
      I will later go into the details why we think this is important and relevant to modern conditions. Before doing so, I will explore the reasons behind the Government's thought in wishing to define the woman in paragraph (b) as being either the wife or a woman living as a wife with the head of the household. This brings me to a point which was raised in Second Reading—as we call it in shorthand, "the grandmother Clause". We have in mind here impoverished families consisting of many children where female relatives may be called in to
      1120
      become part of the family and may take the main responsibility for the upbringing of the children. A man who is widowed or deserted by his wife will frequently bring another female relative into the household to bring up his children.
      I appreciate that there is no separate allowance for the wife, and that, therefore, the grandmother replacing the wife or mother would not herself be entitled to a special allowance. But the point which we are concerned to make is that the responsibility for the children in such a family—and such families are by no means uncommon—rests with both the man and the other female relative, his mother, sister, aunt or whoever it may be. In addition, this female relative may in certain circumstances become for the purposes of the Bill and for the maintenance of the children the head of the household. We are anxious not to draw the definitions as narrowly as the Bill does.
      The right hon. Gentleman will know that the word "nan" or "nanny" means something different among families who are not rich enough to employ someone in that capacity. It usually means grandmother, because the grandmother is an integral part of the family.
      I refer to Clause 8(2) simply because it is germane to our understanding of the words "consist of". Clause 8(2), which states the requirements to be taken into account for payment of family income supplement, uses the phrase:
      "any person included in the family".
      Although there may be no intended distinction here, we are a little concerned whether Clause 8(2) goes wider than Clause 1(1) in respect of those it includes in the family. We therefore ask for a de facto definition of "family" instead of the narrow definition in the Bill.
      My next point, which is of considerable concern to us on this side of the Committee, is about the woman who is in practice the head of the household—by "in practice" I mean in terms of her income—even though she may be living with her husband. We have in mind a man who is unable to go out to work and who may not be able to draw full sickness or unemployment benefit—for instance, a man with a recurring illness such as asthma—where it may be in the interests of the family that the wife rather

      1121
      than the husband should go out to work. We have in mind also a father who, owing to a disability, may get a small disability pension—perhaps in respect of an industrial disease—but who in practice will be able to earn less than his wife should she go out to work in his place.
      We do not believe that the Government would wish to produce a major disincentive to a wife going out to work if she would prefer her family to be sustained by her earnings rather than by supplementary benefit. If that is the choice the wife makes, we wish to explore further the restrictive meaning of Clause 1(1)(a) which, as defined in paragraph (b), makes it quite clear that where a woman is married and living with her husband he must be regarded in all situations as the breadwinner, so that the wife cannot draw a family income supplement.
      Another situation is that in which a man for a substantial period has been unable to obtain employment—that is not an unfamiliar situation in part of the North-East and Scotland—and in which his wife might well be able to get employment. In some parts of the country where basic industries are running down, collieries and steel mills, which are largely employers of men, are replaced all too frequently, and perhaps unfortunately, by industries which employ female rather than male labour. This is a situation of which we are likely to see more rather than less in the future.
      If it is true to say that this country does 10 years later what the United States does—I hope that that is not true—then the example I am about to give will become a still more familiar situation This is where the husband is a student and where his parents' income in sufficiently high for him not to be entitled to more than a basic grant of £50 a year, but where his parents fail to pay their share of the student grant. In that situation, the wife is frequently the main breadwinner and the husband cannot draw supplementary benefit because it is no responsibility of the Commission that the parents fail on their side of the commitment to pay the grant. Nevertheless, this type of family, where there are often children nowadays, will be excluded from the Bill even though the wife might herself be endeavouring to keep her family
      1122
      by working up to 30 or more hours a week.
      I remind the right hon. Gentleman of what the Chancellor of the Exchequer said when he originally described the Family Income Supplements Bill, on 27th October:
      "This will be additional to existing family benefits, and will be paid to poor families with children where the wage earner is in full-time work, using a simple test of income."—[OFFICIAL REPORT, 27th October, 1970; Vol. 805, c. 45.]
      I repeat the words "the wage earner". From our point of view that would have been a more satisfactory definition than the one which appears in the Bill.
      We now have, because of the kindness of the then Government, the Supplementary Benefit Code which is the handbook of guidance to supplementary benefit officers. One case specifically raised in the handbook is that of a woman who is living with a man as his common law wife where the man refuses to maintain the children or some of them because he believes they are not his children. This is a sufficiently frequent situation for the supplementary benefit handbook to deal with it as a category of cases, although, fortunately, not a very common category. I am not clear from Clause 1(1) whether, if a man is living as husband with a woman and refuses to maintain the children, the wife is entitled to make a claim for those children and to draw family income supplements on the basis of the man's wage. If the man were working and living with her, it is by no means clear that she would under the present rules be entitled to draw supplementary benefit.
      Will the right hon. Gentleman say a little more about the point raised in Second Reading about grandparents, not themselves retired, who are standing in loco parentis to grandchildren? Would grandparents having responsibility for the children be entitled to draw family income supplement, as the children would be their responsibility and not the responsibility of their parents? It frequently happens that a young unmarried mother will place her child or children in the care of her parents. In some cases it will be even believed in the neighbourhood that the children are the children of her parents. It is important that we should establish in that situation whether the grandparents have the right to call

      1123
      upon the Bill, since they may be in receipt of a very small income.
      The Secretary of State for Social Services (Sir Keith Joseph): Will the hon. Lady guide me on that hypothesis? Is she suggesting that where the children are placed with the grandparents, the mother of the children is not living in the same household but elsewhere?
      Mrs. Williams: I think the right hon. Gentleman at an earlier stage dealt with the hypothesis that the mother was living with her parents. No, I am taking this a stage further to an all-too-common situation in which the grandparents have to step in as parents in respect of their daughter's children. The ease of definition is crucial here. It is most painful for a young unmarried mother to make her personal situation clear in filling in forms and then for it to become known what is the true situation.
      Amendment No. 9 eliminates Clause 1(1)(b). The purpose of eliminating this paragraph was to deal with the widening of the definition of female dependants. I hope that the right hon. Gentleman in his reply to these Amendments will recognise that this was our intention. It was not our intention in removing paragraph (b) to exclude the wife as well as all other female relatives from benefit.
      7.45 p.m.
      I come to the final Amendment, No. 64, which removes the definition of "single woman" used in the Bill. If we were to knock out the word "single", this definition would no longer be required. The definition is wide, unless the right hon. Gentleman has some particular limitation in mind, since it reads:
      "'single woman' means any woman other than one who is a member of the same household as a man to whom she is married or with whom she is living as his wife."
      Perhaps only a lawyer could understand why the word "single" is so used. I suppose that, in common parlance, "single" is often used of a spinster or unmarried woman. Therefore, we suggest the removal of this definition because we want to widen the whole concept of the female member of the family.
      I should like to raise one matter which is not related to this last Amendment and that is the question of cohabitation. The Bill deals with a woman married
      1124
      to the head of the household or a woman who lives with him as his wife. I wonder whether the right hon. Gentleman has considered the extremely difficult case law that has been built up by the Supplementary Benefits Commission about what constitutes a common law marriage or a common law wife. It would be helpful if he could say a little more about whether he is to base the definition of a woman who is living with a man as his wife while not married to him on the same sort of criteria as those used by the Commission. These criteria are many and vary from sharing an income to sharing a bed, and it would be helpful if we could have some idea of what the right hon. Gentleman has in mind.
      Sir K. Joseph: I am grateful that I did not have to submit to immediate written examination in regard to all the hon. Lady's technical but justified questions. First, I would make clear that the Government have no intention whatever of taking merely technical objections. If there are any technical objections to inhibit any Amendment that should be made on merit, then the Government will undertake to introduce the necessary facilitating Amendment at a later stage in the Bill. The Opposition need have no fear that we shall take merely technical Amendments to stop anything of substance.
      Before considering the hon. Lady's questions, we need to bear in mind the purpose of this limited piece of legislation. It is to help a family that is not entitled to supplementary benefit to improve its income where its income at the moment is below supplementary benefit level. Therefore, I shall be answering the hon. Lady, and perhaps a number of other hon. Members during the discussion, on a number of occasions with the answer that in the particular hypothesis mentioned the family or household will be entitled to draw supplementary benefit which, ipso facto, will be better than family income supplement.
      I will now go through the postulates of the hon. Lady and try to explain the position in regard to each. The first hypothesis was that the woman is the main breadwinner of the family. She may be in this situation for a number of reasons, either because there is no male vacancy for the man or because the man is recurrently ill and cannot maintain

      1125
      a job, or because the man is sick, or because he is disabled. For any one of these reasons, the family is entitled to supplementary benefit. Where the man is not in work, his family and household are entitled to supplementary benefit. If the woman living with him, or the woman who is his wife, is contributing income from earnings, or from gifts from her own family, or from any other source of income to the household, then, under the Supplementary Benefit Rules, only £2 of that income is disregarded.
      Hon. Members may criticise the amount of the disregard, but that is not central to the question we are now considering. Therefore, on the first hypothesis put by the hon. Lady, the answer is, as I warned it would be on a number of occasions, that the particular family where the woman is the wage earner is entitled to supplementary benefit. We can imagine a situation in which the woman was earning so well that it was worth the while of the household not to apply for supplementary benefit, but we are not in the realms of earnings in dealing with the families covered by the Bill.
      The hon. Lady went on to a sub-hypothesis, namely, where the wife or woman was earning because the man was not well enough to earn adequately. Here we have to look at two alternatives: either the man is not earning adequately because, for one reason or another, he is not working full time and, in that case, the family is entitled to supplementary benefit; or he is working full time for such low earnings that he is entitled to family income supplement. I think that I have covered all the alternatives under that hypothesis.
      Mrs. Shirley Williams: The right hon. Gentleman is being very helpful, but before he moves on may I put this hypothesis? Let us take the case of a woman whose husband is, to some extent, mentally handicapped and the only kind of work he can do is unskilled—
      Sir K. Joseph: Full time?
      Mrs. Williams: Full time. Let us take it that he could earn only £9 a week in his occupation and that the woman could earn £12 at a similar occupation. Because of the limitation of £3, if the family consisted
      1126
      of several children it might well be better off if the woman went out to work, earned £12 and was able to claim the full amount of £3—the whole amount to which she was entitled—rather than that the man should go out to work for £9 a week and so be able to claim £5 but, because of the limitation, would only be entitled to £3. There are tens of thousands of people who are to some extent mentally handicapped and limited in the jobs which they can do. A number are bound to be married to a woman who might be able to earn more.
      Sir K. Joseph: I think I must take time to look at that example, and I will look at it. But in the length and breadth of the country I do not think that there are many men, whatever their defects of nature, who are in what is called full-time work earning that order of gross income. I will look at the matter and, if there is a case, I will see whether anything can be done about it.
      The hon. Lady put a group of hypotheses connected with the presence of a grandmother or a Nan of some sort in the household. It might be a sister or aunt who is taking the place of the woman or mother in bringing up the children. We have to assume one of two alternatives: either that the replacement woman—the Nan—has an income or that she has not. If she has an income, then her income has to be taken into account in measuring family income against the make-up level. Therefore, although the hon. Lady does not mean to harm the family by taking account of that income, it would be reducing the chance of that family to qualify for family income supplement. But if the Nan does not have an income and the man is doing the earning, then the family is entitled to family income supplement. If the man is not doing the earning, then the household is entitled to supplementary benefit. So that in that group of hypotheses there has not been shown to be any need for change.
      To clear up any doubt, if we contemplate a household in which a Nan has children of her own and joins up her household with that of the father and his children, we might well get a situation in which the same household contained two families, each entitled on its own to family income supplement. I think that I am on sound ground there.

      1127
      Now we come to the much harder cases. I have only covered the easy ones the hon. Lady put to me. She asked me what would happen if a common law wife were living with a man who disowned care of the wife's children because he believed they were not his. The hon. Lady can be completely comforted that the Bill meets the point because Clause 1(1)(c) provides that family income supplement is payable to a family where the children are the responsibility of either the father or the mother. Therefore, that particular case is covered by the drafting of the Bill.
      I was then asked by the hon. Lady what would happen if the mother, as must often happen, placed her child or children with her parents and did not reside in the household. We then have to take three different hypotheses. One is that the parents have income of their own, in which case with or without the help of the mother—who has presumably deposited the children so that she may earn—they are assumed to be able to look after the children, or that they do not have income, or enough income, in which case they are entitled to supplementary benefit—
      Mrs. Shirley Williams: May I raise the point whether they are working and have a low income?
      Sir K. Joseph: Then they are not entitled to supplementary benefit because they are working full time. They are not entitled to family income supplement because they are not the parents. There the hon. Lady scores 15—love, and I will take the case away and look at it. Indeed, I undertake to look at it and, if necessary, I will put down an Amendment. If I find her case is not covered, I do not undertake necessarily to amend the Bill because we have to assume that the mother will have freed her hands in order to earn by placing the children with her parents. We may have to assume, because of considerations which have to be taken into account, that it would be right to let the mother contribute to the household. But I undertake to look at that alternative and either to account to the House for why I have not put down an Amendment, or to put down an Amendment.
      Mr. Kevin McNamara: We are grateful for what
      1128
      the right hon. Gentleman has said, but there is one other alternative, and that is where the child is deposited with the grandparents and the mother leaves the child and no more is heard of her. This could be a real cause of trouble.
      8.0 p.m.
      Sir K. Joseph: That is no problem if the grandparents are not working. Either they have income over and above supplementary benefit level or they are entitled to supplementary benefit. It is only if they are earning that a problem arises. I think that that case is outside the purpose, as conceived, of the Family Income Supplements Bill. However, I will look into it.
      I now come to the most difficult of the cases put forward by the hon. Member for Hitchin—the student. I shall have to look at this point, too. Normally, my reaction would be that the student will not be within the purposes of the Bill, because a child, within the purposes of the Bill is up to the age of 16 or over that age if still in secondary school full-time. But "student" implies that the child is over that age. However, to make sure that I am not missing a point, I will also look into that case.
      Mrs. Shirley Williams: I should like to make the position a little clearer. I was not raising the point about the student as a child. I was concerned about the adult student who may have children and, because of the present arrangements of the student grant system, cannot draw supplementary benefit, but may not be in receipt of the grant which he is meant to have because it assumes a parental contribution which is not paid. This is not an attempt to split hairs. Many thousands of people come into this category. It therefore raises again the question of the earning wife.
      Sir K. Joseph: I cannot undertake to do more than look at it. I know that the hon. Lady is not trying to split hairs. I cannot give an undertaking that, when I say I will look at something, there will be an Amendment. However, I will either put down an Amendment or account to the House for not putting down an Amendment.
      For these reasons, I do not think that the hon. Lady, for all her care in probing different alternatives, has made out a

      1129
      case for a change in drafting of the Bill. I shall certainly look at the points which I have not wholly satisfactorily been able to answer. I hope that the hon. Lady has got some satisfaction from what I have said.
      I am advised that Amendment No. 8 meets the case of the earning grandparent where the mother is outside the household.
      Mrs. Williams: That is our Amendment.
      Sir K. Joseph: If that Amendment is called, I shall be able to advise the Committee that, subject to one or two points, it is wise to accept it. Therefore, I can reassure the Committee on the earning grandparent hypothesis.
      Mrs. Williams: In the light of what the right hon. Gentleman has said, I beg to ask leave to withdraw the Amendment. However, I do so on the understanding that the right hon. Gentleman will look into the points which we have raised and will endeavour to meet them, if he feels it is possible to do so, by Amendments on Report.
      Amendment, by leave, withdrawn.
      Mr. O'Malley: I beg to move Amendment No. 3, in page 1, line 8, leave out 'full-time'.
      The Temporary Chairman (Sir Myer Galpern): With this Amendment I suggest that it will be convenient to take Amendment No. 4 in, page 1, line 8, after 'work', insert:
      'or, where it can be proved that no full-time work is possible, part-time work';
      Amendment No. 5, in page 1, line 8, after 'work', insert 'such as to provide the substantial support of the family'; and Amendment No. 50, in Clause 11, page 4, line 20, leave out 'full-time'.
      Mr. O'Malley: I am sure that the Secretary of State will be pleased to hear that I do not think that he will be faced with the complex type of problems raised on the previous Amendment by my hon. Friend the Member for Hitchin (Mrs. Shirley Williams).
      As the Bill stands, a man or a single woman is entitled to claim the family income supplement only if he or she is
      "in remunerative full-time work".
      1130
      This is largely put down as a probing Amendment to inquire into the thinking of the Government on the interpretation of the words
      "in remunerative full-time work".
      We were given an explanation how the Government intended to interpret those words in a Written Answer on Friday, 13th November, when the Secretary of State said:
      "The general rule I propose is that a person will be treated as being in remunerative full-time work if he normally works for 30 hours or more per week."—[OFFICIAL REPORT, 13th November, 1970; Vol. 806, c. 284.]
      This gives some of the information for which we would otherwise have been asking during the debate on this Amendment. But a number of further questions arise which I should like to put to the right hon. Gentleman.
      First, I should like to consider carefully what was said in that Answer. I do not want to split hairs, but obviously we would like to be clear about the explanation given in that reply. The right hon. Gentleman began,
      "The general rule I propose".
      Will he tell us what kind of exceptions from that general rule he is already envisaging in regulations?
      The right hon. Gentleman goes on,
      "… I propose … that a person will be treated as being in remunerative full-time work if he normally works for 30 hours or more per week."
      Presumably that applies whether it is a man or a woman. In the face of that general definition one has to inquire about three types of person.
      First, casual workers. The right hon. Gentleman gave some extra information in Written Answers to Questions, again on Friday 13th November, where he explains that in the vast majority of cases one will be taking into account average earnings of persons either over five weeks or two months. The right hon. Gentleman then says something about casual earnings and seasonal work. It would be helpful if he could tell us more about the Government's thinking on that aspect.
      Secondly, what is the position of the woman who takes in work? I realise that the number of women who are either willing to become, or forced into becoming, for example, seamstresses in their

      1131
      own homes is much lower than would be found 20 years ago, and particularly half a century ago. Nevertheless, there must be a number of women in that position whose working hours will vary according to the amount of work which is brought in on individual orders or requests. How will the 30 hours definition affect them?
      Thirdly, what about the man or woman, the head of a household, who does not receive a wage for a number of hours per week, but draws his or her income from fees—for example, an actor or, for that matter, a widowed actress? The right hon. Gentleman laughs. This is one of the troubles of bringing in a Bill of this kind. We are bound to get this kind of complication. There could be cases of people working probably for 30 or more hours per week for part of the year, but who, during the period on which the assessment will be made, will have been working substantially less than 30 hours per week, and yet, despite that, may have an income in tens of pounds—the kind of income of people who will be affected by the Bill.
      I said that the Amendment was primarily intended as a probing Amendment, but there was an additional reason. We and the right hon. Gentleman are anxious to keep the scheme as flexible as possible in the interests of the claimants. We should be concerned particularly, because of this definition, with the position of a widow, perhaps the only adult in the house, with a number of children. If it is possible, such women should be given a choice of the source of their income from the State.
      Under the Bill, a woman working for 20–25 hours a week with an income of £8 10s. and with children is entitled to supplementary benefit. We would not want the Amendment to produce a situation in which we would be denying a woman the more generous benefit which she can receive at present from the Supplementary Benefits Commission. If one takes into account the views of some outside organisations and our own experience in our advice bureaux in our constituencies, one realises that there are women who should, and are entitled to, apply for supplementary benefit, but who refuse to do so. One case which springs to my mind is that of one of my constituents, an unmarried mother, who was
      1132
      quite unwilling to go to the local D.H.S.S. office. She did not want anyone to know about her position. Yet all she could do was part time work.
      The F.I.S. is singularly a means-tested benefit, and some individuals would have the same objections to applying for it as they do about supplementary benefit. But there is one substantial difference—that the F.I.S. is to be a payment from a central department rather than one from a local authority.
      I would not want to make too much of this. There is nothing between us here. We recognise that some people will not apply for supplementary benefit. If we can do something for them under this kind of Bill, obviously we want to do it. So the Amendment could help some people like the unmarried mother I mentioned, who might be prepared to accept an option different to supplementary benefit—the family income supplement—if it were open to them.
      There is a question of inducement or disincentive to work either more or less than the stipulated number of hours. Since the level of supplementary benefits, with all their disregards, is higher than the income provided under the Bill, there is every inducement for the woman who, for example, is at present working over 30 hours a week, to reduce them to 25 or even 20 hours. There is always a danger of collusive reduction of hours.
      The Amendment would provide more flexibility in administration. We would not be tied to the 30-hour rule, which would mean that there would be options open to these women. Of course one option is better than the other, but it does not necessarily mean that, because of the nature of the options, women would not be prepared to accept one rather than the other, even though, in many circumstances, it would be less attractive.
      8.15 p.m.
      Therefore, I put forward the Amendment with no hard views about it. We should try to look at some of the problems raised by the scheme to see how we can help the people who can be helped and who presently will not be helped. I have also raised a number of general questions, but the important thing is that, wherever we can give an option, particularly when it affects the inclination

      1133
      of women in circumstances that I have described to work or not to work, or to work one number of hours rather than another, flexibility must be considered. If the Amendment does not do it, we should consider making it more flexible than it appears to be under the 30-hour rule, to give the most help to the people we are all concerned to help.
      Mr. Charles Loughlin rose—
      Mr. J. R. Kinsey rose—
      The Temporary Chairman: Mr. Loughlin. Sorry—Mr. Kinsey.
      Mr. Kinsey: My right hon. Friend is being very generous in the way that he led us into the debate and answered the first set of Amendments. In my maiden speech, I asked that consideration be given to widows or people in business left in this position. Going out to business is just as much work. I know that this would put a strain on my right hon. Friend in the matter of interpretation, but if he could at least consider it, I should be obliged. This is as much work as what the hon. Member for Rotherham (Mr. O'Malley) said about people who take in work. Clarification here would be very helpful.
      Mr. Loughlin: Mine was rather a facetious remark, and followed naturally upon what my hon. Friend the Member for Rotherham (Mr. O'Malley) said and a couple of smiles that the Secretary of State and I exchanged. I know that he was only too eager to deal with the examples which my hon. Friend put to him and I thought of one which is bound to floor him on the question of part-time work. I thought of a struggling artist who was doing nude studies and could afford to hire the girl for only 29 hours a week. Would he come into the definition of full-time work?
      The Temporary Chairman: I apologise to the hon. Gentleman if his remark misfired, but I do not think that we should go into the question of nudes here this evening.
      Mr. Hugh D. Brown: That may be a bit more interesting, but we have a job of work to do tonight. Could I ask the right hon. Gentleman to give us some greater detail?
      1134
      I have read his Written Answer in c. 284 about 30 hours but that does not satisfy me. On Second Reading I gave an example of the generous and sympathetic treatment extended by the S.B.C. at the moment. This applies when anything less than full-time work is regarded as part-time work. If someone is in a job for which the working hours would normally be 40 hours and it by collusion, and there is nothing wrong with that, the figure is reduced to 30 hours a week, that is accepted as part time employment.
      Assuming a man or woman was accepted by the S.B.C. as being in part-time work but was doing more than 30 hours a week would they still be given the favourable treatment which they would get from the S.B.C. because £2 of their earnings could be disregarded? They would be better off than under this miserable Bill. Will they get the choice or will there be further regulations imposed on the S.B.C. to create a limiting effect?
      Mr. O'Malley: My hon. Friend will wish to bear in mind, and perhaps the Secretary of State would note, that in the Supplementary Benefits Commission handbook published a few months ago by the previous Government, in paragraph 2 under "Exclusions From Benefit (Persons In Full Time Work)" we are told:
      "A person is considered to be in remunerative full time work if he works the recognised week in his trade or employment."
      This is the definition given in the handbook and it gives emphasis to the question of my hon. Friend.
      Mr. Brown: This is a most important part of the Bill. We certainly want to get it clear. It seems that there is a possibility of the Secretary of State having to give a directive to the S.B.C. about whether a person should have a choice. Can an individual elect for a particular category under which he shall be treated? I want a categoric assurance about that.
      I am extremely worried about how people will get precise information about this. Will there be a central office for assessment? What about advice and information? It is not so much the question of adjudication because that has always been remote, but rather a matter of the availability of staff to advise an applicant whether he would be better taking advantage of one procedure or

      1135
      the other. There will be the possibility of many more staff being required. I hope that the right hon. Gentleman will say whether offices will remain open for at least one evening to give advice.
      Mr. McNamara: When we are talking about self-employed people the definition of remunerative full time employment comes in. I am thinking of share fishermen, window cleaners, persons who take in typing and so on. How will this fit into the 30 hours?
      Sir K. Joseph: I am grateful to the hon. Member for Rotherham (Mr. O'Malley) and other hon. Members who have spoken. I will try to answer the points which they raised. Hon. Members will sympathise with the intention of the Government to keep this scheme as simple as possible and my answers will have that purpose in mind. I was asked whether my reply to the Question published in HANSARD on Friday in terms of the general test I envisage, that anything over 30 hours a week would be intended as full time for the purposes of the Bill, implied that there were exceptions in my mind. The answer is that I have it in my mind at present that there will be no exceptions but I am very open to considering exceptions if during the debate or the next few months exceptions are shown to be necessary.
      The second question relates to the degree of sharpness of the 30-hour rule. The Government desire that this shall be a very sharp division, and that those who work for 30 hours or more in a week shall be considered to be in full-time work and therefore entitled to family income supplement while those who work for less than 30 hours a week should not be entitled to the supplement but should be entitled to supplementary benefit.
      That leads me to the third question put by the hon. Member for Rotherham and the hon. Member for Glasgow, Provan (Mr. Hugh D. Brown) about those who are hovering just above or below. The supplementary benefit treatment is much better than the family income supplement treatment. This is because there are disregards, rent is paid—and for various other reasons. Despite that there may be people who, because they want to work, for psychological reasons, the company or any other reason that
      1136
      seems good to them, would rather have family income supplement than supplementary benefit.
      It is our intention that individuals shall be able to exercise their choice by adjusting their hours. It is our intention, by means of a leaflet in the first place and by means of advice if the leaflet does not suffice, to advise people what is in their best interests. The result may be that a woman who is now doing 32 hours a week may be advised to do three or four hours a week fewer and so become entitled to supplementary benefit. On the other hand, someone working for fewer than 30 hours a week may be advised to try to work, if it is available, for longer to become entitled to family income supplement. The answer to the hon. Member for Provan is that advice will be available at any of the social security offices.
      My hon. Friend the Member for Birmingham, Perry Barr (Mr. Kinsey) asked about widows. Widows are in themselves eligible, but such is the benefit available to those widows bringing up children that the family concerned will rarely be eligible for the family income supplement. They are eligible if their family income is less than the make-up level.
      Mr. Kinsey: What if that income is from a business rather than a job?
      Sir K. Joseph: That leads me to the next point, the difficult complex of people ranging from window cleaners to actors, painters or anyone in private business, including the woman mentioned by the hon. Member for Rotherham who takes in work in her own home. These people are in business; in one form or another they are private entrepreneurs. We shall need, as the Supplementary Benefits Commission needs, to define how to measure their income. There will need to be a separate set of regulations for people in private business on their own account.
      Mr. Peter Archer: Is it also proposed that there shall be regulations defining how the time spent by these people is to be measured? Is a lady who takes in washing to mark off on a sheet every half-hour she spends before returning to cooking the lunch?
      Sir K. Joseph: I may have misled the House slightly in what I said. The test is not employment as such but work. If

      1137
      someone like the window cleaner is at work on his own account for more than 30 hours a week, then he will be entitled to family income supplement. There are some forms of work the earnings from which take the form of profits rather than wages. Those forms of work where there is expenditure laid out before a person can get anything for himself from the receipts are in the form of a business and will be covered by regulations.
      8.30 p.m.
      Mr. McNamara: The right hon. Gentleman will appreciate that this is a very difficult line he is now trying to draw between, for example, a window cleaner and a person who takes in typing or washing and measures profit against loss. How do we measure time in this context? For example, I would imagine that a window cleaner in Lerwick in winter has very little opportunity to pursue his trade but more opportunity than most people during the summer. These are problems for these people who want to preserve their independence but who by doing so are putting themselves in a very precarious position financially.
      Sir K. Joseph: We must not be too daunted, because all these problems have been successfully surmounted by the Supplementary Benefits Commission, which must make some assessment of household income for people not in full-time work. The Commission—not referred to in the Bill—is our agent and we shall seek its advice on the definition of earnings or about the business element for the purposes of working the Bill.
      Mr. S. C. Silkin: Is the right hon. Gentleman saying, then, that the expression "remunerative full-time work" will be defined in different ways for different classes of people? If he is saying that, that was not how I read the regulation-making power in Clause 11. I may be wrong, but I thought that that was intended to prescribe a single test of what was meant by "remunerative full-time work". Can the right hon. Gentleman help on this?
      Sir K. Joseph:: I do not think that I have grasped the question. Perhaps the hon. and learned Gentleman will put it to me again. I do not see the problem.
      Mr. Silkin: I am sorry that I have not made myself clear, but I am sure
      1138
      that it is my fault. As I understood what the right hon. Gentleman was saying, it was that he would be taking account of the fact that different people have different systems of earning their money—the window cleaner being one, the artist being another, and the person doing what one might call an ordinary job in excess of 30 hours a week being a third, and that he would cater for all these different situations. I was asking the right hon. Gentleman how he proposed to cater for these different situations within the scope of the Bill as it stands; because, as I read it, it looks as though there is to be, and can be, only a single definition of "remunerative full-time work".
      Sir K. Joseph:: I am grateful to the hon. and learned Gentleman. The short answer to his question lies in Amendment No. 68, by which I shall propose:
      "Regulations may make different provision for different classes of case and otherwise for different circumstances."
      I will seek to answer the last of the questions put to me. The hon. Member for Kingston upon Hull, North (Mr. McNamara) raised a question about hours. Normally we shall rely upon a statement both for hours and earnings from the claimant. Only where we have reason to fear abuse shall we check on that statement.
      I understand that these are probing Amendments and are intended to test the effectiveness of the full-time work requirement. I hope that I have been able to satisfy the Committee that there is no grey area here, that more than 30 hours work a week will qualify a family that is eligible because its income is below the make-up level to family income supplement and that less than 30 hours remunerative work a week will qualify a family for supplementary benefit.
      Mr. Loughlin: I took these to be probing Amendments which were of no great consequence until my hon. Friend the Member for Glasgow, Provan (Mr. Hugh D. Brown) raised the question of the definition of the amount of work necessary to be done by anybody to get supplementary benefits. I had a clear idea that it was 36 hours a week, but it appears from the definition quoted by my hon. Friend the Member for Rotherham (Mr. O'Malley) that it is a much looser definition.

      1139
      If the right hon. Gentleman introduces a definition of 30 hours a week, he will exclude a substantial number of people who are at present working more than 30 hours and receiving supplementary benefit, which is far more beneficial to them than will be the family income supplement. I do not know whether the right hon. Gentleman has considered this. If we are thinking in terms of improving the lot of the very poor, it is important not to include in the Bill a definition that worsens their lot, because some people may be excluded from Supplementary Benefits Commission benefits because of such a definition. Will the Secretary of State examine this question closely, lest in putting in the 30 hours definition in the Bill and the Regulations he excludes some people from supplementary benefits and thereby disadvantages them?
      Sir K. Joseph:: The Supplementary Benefits Commission has a certain flexibility because, as the hon. Member for Rotherham made clear, the test of full-time work or lack of full-time work is a question of the practice of each individual trade. There are two parallel and inter-acting tests. There is full-time or not full-time, according to the practice of the trade and there is the 30-hour rule. Some families may receive supplementary benefit, although the wage earner is working more than 30 hours a week, because it is the practice of the trade to expect many more hours per week to qualify for full-time.
      So there is a desirable flexibility here which I know that the hon. Gentleman would be the last to wish to disturb. A family will be able to choose supplementary benefit for family income supplement according to which suits it best. And there will be advice available.
      I return to the original purpose of the group of Amendments in the name of the hon. Member for Rotherham. He was trying to test the validity of the full-time work test. I hope that he will be satisfied that we have put into the Bill a test, or we propose through regulations to put in a test, which ties in well with the real-life needs of the families whom we are trying to help, by giving them their supplementary benefit alternative, while leaving a desirable flexibility. In these circumstances I hope that
      1140
      the hon. Gentleman will not press that group of Amendments.
      Mr. O'Malley: I am grateful to the right hon. Gentleman for the information which he has given and for the explanations he made. He said that he would look at the question of any exceptions, and that if it should prove necessary, at this time or in the coming months, he would certainly act on the matter. Secondly, the right hon. Gentleman explained that a separate set of regulations would be necessary for what I should call peculiar categories of persons. He said that they would all be treated as though they were in business, and what one would be looking at would be profits rather than gross weekly earnings. All kinds of difficulties can arise there. It may be that the right hon. Gentleman will not be able to deal with it even as simply as that. He talks about people being in business. Some of the people in the kind of category we are envisaging could well be on contract of service rather than contract for services.
      The right hon. Gentleman, in the rather friendly way in which he sometimes begins, smiled and said that the Government wanted to keep the Bill as simple as possible and he was sure that he had the sympathy of the Committee. I can assure him most warmly that he does not have the sympathy of this side of the Committee. If public money is being disbursed, be it through the social security or the tax system, if the degree of simplicity some believe desirable is achieved, simplicity itself is apt to produce many inequities between one person and another, and between one group and another. This is the Government's difficulty with the Bill. Increasingly and remorselessly, as the new scheme begins to operate, any Government operating it will find themselves pressed into changes leading to increasing complication. That is one of the great disadvantages of the scheme.
      I should like to make two other comments on the remarks of the right hon. Gentleman. First, he made it clear that if anyone were working for over 30 hours a week there would be an F.I.S. entitlement. He said that there would be no grey area. There is one question which I do not think the right hon. Gentleman answered. If he did I missed it, and I apologise.

      1141
      Let us take a case such as that envisaged by my hon. Friend the Member for Glasgow, Provan (Mr. Hugh D. Brown), where quite legitimately under the rules of the Supplementary Benefits Commission a person is working for, say, 34 or 35 hours a week and the family unit is receiving supplementary benefit. There will then be an entitlement to F.I.S. What I think the right hon. Gentleman has not made plain is whether in those circumstances the individual family will have the option to remain on supplementary benefit if it is more advantageous. May we have an assurance from the right hon. Gentleman that anything that is not part-time, for supplementary benefit purposes, will be treated as full-time for F.I.S. purposes?
      Sir K. Joseph:: Yes, indeed, but the hon. Gentleman will agree that it is scarcely conceivable that F.I.S. will be more financially attractive.
      Mr. O'Malley: Yes, certainly. It was from the other point of view that I was primarily concerned. I do not want to see people put off supplementary benefit when under the existing rules of the Supplementary Benefits Commission they could remain on it.
      Can the right hon. Gentleman assure us that when a man starts work after a long period out of work, he will not be told "You are not normally in full-time work", even if it is clear that he intends to continue in work?
      8.45 p.m.
      The right hon. Gentleman said that people would have a choice. The choice would be that of adjusting their hours of work. The right hon. Gentleman said—and this is a comment on the scheme, but I shall go no further than noting it—that people would be advised by the Government, "You should not work these hours. You should work less." That conies rather curiously from a party with a history of the kind of comments that used to be made to me about scrounging and people who did not want to work when I used to answer Questions from that Dispatch Box.
      In view of the assurances which the right hon. Gentleman has given so far, and bearing in mind the weaknesses inherent in the scheme—
      Sir K. Joseph:: I think that the hon. Gentleman is coming to the end of what he wants to say. Before he does that, I want to deal with the inference that he just drew. It is true that my Department might advise a household to reduce its hours of work by two or three, or something of that order, to qualify for supplementary benefit. The sort of household that I have in mind—and I think that the Committee will be sympathetic to this view—is where a woman is struggling desperately to bring up children by her own work. She is having a hard time of it, and does not realise that supplementary benefits would enable her to bring up those children better. In those circumstances, I am sure that hon. Members on both sides of the Committee would wish that woman to be given proper advice. That is the sort of case that I had in mind, and I am grateful to the hon. Gentleman for giving way and enabling me to explain it to the Committee.
      Mr. O'Malley: I am sure that there is no difference between the two sides of the Committee when it comes to a case such as that but, without enlarging on the matter, because we have taken a long time over these Amendments, I think that it goes further than that.
      There is one question which the right hon. Gentleman has not answered. In view of the assurances and the information that the right hon. Gentleman has given the Committee, I shall, on receipt of a satisfactory answer to that question, ask the leave of the Committee to withdraw the Amendment.
      Mr. Hugh D. Brown: Whether he appreciates it or not, the right hon. Gentleman is getting into difficulties, and we are beginning to see the folly of the usual channels having decided to take the Bill in a Committee of the whole House. Everyone is apologising for detaining the Committee. In Committee upstairs we have no such inhibitions.
      The right hon. Gentleman must be specific about what he means. He referred to the freedom of choice. He will have to issue regulations, and there will be a code of instructions to the staff telling them how claimants should be dealt with. Will there be advice about the

      1143
      rights of claimants, and about the best way of dealing with their financial circumstances? Or will the regulations apply only to the type of woman to whom the right hon. Gentleman referred; to someone who is in financial difficulties?
      Is the right hon. Gentleman saying that this advice will be extended to people in whole-time work under the normal circumstances that apply today? I have in mind the low-paid wage earner. Will it be the Department's intention to say to such a man, "You would be better off in part-time work and receiving supplementary benefits"? The right hon. Gentleman must be specific about this, otherwise he will run into difficulties.
      The right hon. Gentleman has not told us whether local staff will be available to give guidance on the many detailed questions that will be asked. Has that been taken into account in his reckoning of the staff that will be needed?
      Mr. McNamara: My hon. Friend the Member for Glasgow, Provan (Mr. Hugh D. Brown) is referring to a most important matter. There is added to it the equally important question of how the wage stop would operate in this situation. Where is the wage stop to come into operation when a person who has been working goes on to supplementary benefit? The F.I.S. is meant to meet the problem of people with low incomes, but what happens when the wage stop operates? This is one of the difficulties into which the right hon. Gentleman has brought himself by introducing such a scheme.
      Sir K. Joseph:: The Committee should be reminded of the minute number of very seriously poor families with whom we are dealing. The total number of families estimated by my Department to be eligible for family income supplement, on last April's earning figures—and the number will be very different by the time the Bill comes into operation—is 110,000. This number is made up of people who are struggling to bring up children and who have very low incomes. No one in the Committee or in the country would grudge them advice enabling them to increase the income with which to bring up their children. If they are on the borderline between part-time and full-time work, of course my Department will
      1144
      help them to increase their income by making the right choice.
      Many of them have the strongest motivation to work because, as we know, they are in work despite their full earnings being less than they could get out of work if they could, as, alas, some people manage to do, contrive to appear unemployed or sick. These people are highly motivated. In most cases we do not have to worry about their motivation. They are proving in the clearest possible way their desire to work. If it is a question of enabling them to receive more from supplementary benefit by abating their work for two hours a week, who in the Committee would grudge them?
      We are dealing with the poorest of the poor and, mercifully, a very small number. Although we are seeking power by regulation to alter the make-up level, because of the movement of earnings and prices in the meanwhile, when the Bill comes into operation there may be substantially fewer still in this position. I give the House the categorical assurance that advice will be given to this very small number.
      I was asked by the hon. Member for Rotherham what would happen if a person who in the past had been doing part-time work, after a period out of employment, took on a full-time job and claimed family income supplement. The hon. Gentleman asked whether his part-time past would inhibit his full-time present.
      Mr. O'Malley: I was asking not only about the man who had started full-time work after a long period of part-time work, but about the man who started work after a long period out of work altogether.
      Sir K. Joseph:: The test will be the number of hours he works and whether those hours exceed 30, or, if there is a practice of the trade laving down what is full-time work, exceed that trade test. That is all that the Supplementary Benefits Commission, under the regulations which we propose, will look at. It will look at the immediate past and the present, not the distant past.
      Mr. O'Malley: I think that we can clear up this point. It appears to me that there is no difficulty. Let us assume that a man has been unemployed for a considerable time and has been in receipt

      1145
      of supplementary benefit. He then attains a full-time job. Presumably, if he is to look after his interests and follow the advertisements by the Ministry, on the first day he starts full-time work he will be entitled to go to the Commission's office and put in an immediate claim for family income supplement, even though he did not have a record of full-time work during the previous assessment period. If that were not the case, the right hon. Gentleman will see that the man could be on a very low income for live or six weeks and by the time the payment was made he could have gone a couple of months without receiving any F.I.S.
      Sir K. Joseph:: The man will not be able to get it on the first day he takes a full-time job. He will probably have had to work for a week to give evidence of the hours of work in that job. But he would not have to wait for many weeks unless there were a question of the evidence of the hours of work. If they fluctuate from week to week, so that one week he works 50 hours but the next he works five, to take an extreme example, he will need evidence of a series of weeks. If he were in full-time work which produced less than the make-up level, he would be able to go to the office after one or two weeks and show evidence of his earnings and hours of work and qualify for FIS.
      The hon. Gentleman looks sceptically at me. We shall need evidence of the earnings and of the hours of work, and there will need to be enough evidence from the individual claimant. Only if the claimant for any reason arouses suspicion shall we check on his earnings or his hours of work.
      I must correct one misapprehension which I may have caused the House. I have talked of families having a choice between supplementary benefit and family income supplement where the hours of work hover around the full-time test level. I must make it plain that a male wage-earner is not entitled to supplementary benefit if he is doing part-time work unless there is no full-time work available. I take it that that is common ground on both sides of the Committee. The choice of supplementary benefit or family income supplement will be pre-eminently for the single woman bringing up children. For her F.I.S. will normally be needed, but not
      1146
      for the male wage-earner, though there may be the exceptional case, where there is no full-time work available, where it may also be suitable for him.
      I hope that I have answered the hon. Gentleman's question.
      Mr. O'Malley: We have had a fairly useful discussion. I beg to ask leave to withdraw the Amendment.
      Amendment, by leave, withdrawn.
      9.0 p.m.
      Mr. Peter Archer: I beg to move Amendment No. 7, in page 1, line 10, leave out
      'to whom he is married or who lives with him as his wife' and insert 'who relies upon him wholly or partly for her support'.
      The Amendment raises a problem akin to those raised by my hon. Friend the Member for Hitchin (Mrs. Shirley Williams) on the first Amendment. I should say at once that I am grateful to the Secretary of State for his very clear exposition of the position there. Certainly, he succeeded in dispelling some of the anxieties in my mind.
      The Amendment relates to an anxiety which affects perhaps only a limited number of people, but it raises an important question of principle. The right hon. Gentleman mentioned various situations when replying on the first Amendment. This Amendment concerns the situation of the man in full-time employment with a woman living with him—if I might use those words neutrally and platonically—who either has no income or is earning less than the amount he would receive in respect of her under the Bill.
      I see at once that whatever happens in that situation the family as such is not deprived of provision under the Bill. The danger is that it will be deprived of a payment in respect of that woman in certain circumstances, and that is why I question the right hon. Gentleman on the precise meaning he attaches to the words in the Clause
      "to whom he is married or who lives with him as his wife"
      Two quite separate problems are raised by those words. My first reaction when I read them was that as the right hon. Gentleman had chosen a framework which rests squarely on the concept of subsistence that concept brought with it,

      1147
      as it inevitably does, the doctrine of the deserving poor, a doctrine with a very long ancestry. It means, as I understand it, that for the poor the penalty for immorality is deprivation: what the rich do is their own business; what the poor do is the business of their betters.
      I am not sure even now that my first reaction was wholly inaccurate. I am still puzzled about what exactly the phrase
      "as his wife"
      entails. Certainly the right hon. Gentleman appears to have been rather more broadminded than some of his predecessors. Apparently, the family is not required to show its marriage lines. The couple do not need to have attended before a priest.
      But we wonder whether the insurance officer is not invited to exercise his ingenuity. Our apprehensions are not entirely set at rest by the rather conflicting criteria which, as my hon. Friend the Member for Hitchin said, have been applied in the converse situation where it is a woman who has applied previously for supplementary benefit and the question has arisen as to whether they are cohabiting.
      Presumably these words impart some sort of stable union. One assumes that the woman will not be included in the family in the first week in which she begins to live at the address. One wonders whether she is expected to assume the name of the man with whom she is living. If she insists on retaining her own name, can she be said to be living with him as his wife?
      The first purpose of the Amendment, therefore, is to ensure that, as far as possible, the right hon. Gentleman is not setting up as a judge of morality. In my submission, he seems to have raised two converse problems at the same time, because one is further concerned with the situation where there is no question of a woman living as a man's wife; for example, the grandmother situation.
      Perhaps a lady has come to live under the same roof purely to help look after the children and does not want sexual relations with the man. She may not wish to use his name but prefer to refer to herself as his housekeeper, because that is what she actually is. As I understand
      1148
      it, there is a danger that she will be told that she is not included in the family because she is not living in sin.
      I understood that the right hon. Gentleman responded earlier to the effect that there is no real problem here because she could apply for supplementary benefit, and certainly in many instances she would be entitled to do so. However, one wonders what will be the position if, for example, she is in employment but is earning less than a family would receive under the Bill in respect of her presence in the house.
      A more serious situation is that referred to by my hon. Friend the Member for Kingston upon Hull, North (Mr. McNamara)—of a lady who, for some reason, just does not want to apply for supplementary benefit and who regards it as a humiliation to do so. In these circumstances it seems that the family will be subjected to two quite separate series of means tests. One can imagine a situation where the lady concerned would rather be provided for under the Bill than make a separate application for supplementary benefit, even if, financially, that means a little sacrifice.
      The right hon. Gentleman said that, as far as possible, his intention is to give people a choice as to which of these provisions shall apply to them. It seems that the only way a lady in this position could exercise that choice is to begin to have illicit sexual relations with the man when previously she had no intention of doing so.
      One is reluctant to see the right hon. Gentleman turn himself into a judge of morality. One is even more reluctant to see him offering a positive bonus for immorality. Would it not be better, for the purposes of the Bill, to eliminate the words which it is sought to delete and to substitute the words in the Amendment?
      Mr. Albert Booth: I support the Amendment which was so ably moved by my hon. Friend the Member for Rowley Regis and Tipton (Mr. Peter Archer). I not only endorse his remarks but stress that the Amendment could have a somewhat wider application when one considers the many different types of people who could be affected by this provision.

      1149
      As the Measure is called the Family Income Supplements Bill, it is of crucial importance that the definition of a family, for the purposes of the supplement, is not only clear to lawyers but is crystal-clear to those who will be directly affected by it. We have had experience of the reluctance of people to claim entitlement and I therefore appeal to the Minister to remove any possible doubt that might exist in people's minds about their entitlement to this benefit.
      It seems that as "a family" is defined in the Bill as it stands, there could be doubt in the case of a union comprising a father, his children and the man's mother; in other words, the case where the grandmother comes in to look after the children—a desirable development, one might think. The Minister will readily concede that she may be below pensionable age. She could be well able to look after the children and thereby perform a valuable rôle, not only for the children's upbringing but in enabling the man to pursue his work and not have to stay at home to look after his children and draw extra benefit from the State.
      The grandmother who performs this rôle should not feel that she is in any way inhibiting any claim that the family might have to this supplement. It is important, therefore, that she feels that she is of complete benefit to the family and is in no way detrimental to it.
      The Amendment is of the utmost importance in the context of defining "a family" because there can be many instances of women being a part of the family in a social sense, so enabling the family to remain a viable unit. I will not weary the Committee by detailing examples of this. Hon. Members will readily call to mind cases where children might have to be taken into care unless arrangements of this kind are made.
      Let us remember all the time that, in the vast majority of cases, the man is unable to pay the market wage for a woman to come in to look after his children. I hope, therefore, that the Amendment will be accepted.
      Sir K. Joseph:: I hope that I shall not be marked out of 100 for this examination. I shall try to pass this latest set of tests.
      I can reassure the hon. Member for Rowley Regis and Tipton (Mr. Peter
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      Archer). The inwardness of the Bill on this issue can be seen from Clause 2. The make-up level—that is, £15 for the family with one child and £2 more for each additional child—does not vary whether there is one parent or two parents. Whether or not the man comes within paragraphs (a) and (b) of subsection (1) makes no difference to the makeup level.
      If the woman is a sister or a mother with no money of her own she is entitled to supplementary benefit if she has no earnings and there is no job available. If she is eligible for work she must get work if it is available. But if she has no work because it is not available she is entitled to supplementary benefit. If she does not seek work in order to look after the children of the household she is treated financially as if she were the woman—and here I refer to subsection (1)(b)—to whom the father
      "is married or who lives with him as his wife"
      because the make-up level under Clause 2(1) is identical whether there is one parent or two parents.
      I hope that I have shown that there is no need for the Amendment because whether or not the woman helping the man to look after the children is living with him as his wife or is his wife, or is living with him but not as his wife, the family income supplement will be the same.
      Mrs. Shirley Williams: I should like to take up two points with the right hon. Gentleman. First, he frequently uses the term "the make-up level". That can be very misleading, because it is not the make-up level which is half the difference between the prescribed amendment and the income of the family. I urge the right hon. Gentleman not to use the phrase "make-up level".
      Sir K. Joseph:: The hon. Lady is quite right. I shall substitute for "make-up level" the phrase "the prescribed amount". It is the prescribed amount which is the same whether one parent or two parents are concerned with the children.
      Mrs. Williams: Secondly, if what the right hon. Gentleman says is true—and I accept that it is—none of us can understand why the Government have attempted in subsection (1)(b) to interpret

      1151
      "woman" as being a wife or a person living with a man as his wife. If I am a mother living with my son, and if I have no other income, two problems arise. First, I do not believe that I am covered because of the way in which the Bill is drafted, and, secondly, I can be put in an embarrassing position if I am not married to the man but am living with him as housekeeper in total celibacy. This will be basic to a misunderstanding of the Bill by the people whom the right hon. Gentleman is trying to help.
      I am also concerned about the woman who would not, and should not for the good and welfare of the family, seek a job as under the supplementary benefit provisions it would be said that she must if she is not of pensionable age and is not ill, but should be permitted to live with the family and look after the children at a considerable saving to the State in terms of the cost of the care. I should like the right hon. Gentleman to deal with those points.
      9.15 p.m.
      Mr. Kinsey: If we accept the Amendment, are we not in danger of worsening the position? As the Bill stands these people can be regarded as two families. If, as is suggested, they are one part of the family, they could be in a worse position.
      Mr. Peter Archer: I suspect that I must have been more than usually incoherent in introducing the Amendment. I realise the difficulty of the right hon. Gentleman who is trying to deal with several matters substantially at the same time, but the explanation which he has given is one I conceded when I introduced the Amendment.
      We fully understand that the lady concerned, if she places herself in that position, will probably be entitled to apply for supplementary benefit, but there are two difficulties which my hon. Friend the Member for Hitchin (Mrs. Shirley Williams) has just repeated. There is the additional difficulty which cannot be emphasised too much, that this family will now be subjected to two separate series of means tests, which is for them a real privation. It means, too, that the lady concerned, who otherwise would remain entirely clear of what she might regard as an embarrassing inquiry, has to submit to a separate inquiry and answer questions
      1152
      about how much the man allows her, what she contributes and what financial arrangements pass between them. If the purpose is to provide for a family, how much better to allow the means of the family to be inquired into once, in one inquiry. Will the right hon. Gentleman direct his mind to this situation?
      Sir K. Joseph:: Yes, I have been persuaded that there is something to look at here in the drafting, but I hope hon. Members have been persuaded that, in substance, the family income supplement goes to the household where there is one parent or one parent plus a substitute parent.
      What I have to look at is the point made by hon. Members that there may be a discouragement to a household where there is not a common law wife or wife to regard itself as eligible for family income supplement. I suspect that there is no substance to deal with, but a presentational point in the drafting. I will look again at this, subject to the condition which I made earlier, that I undertake either to account for no Amendment or to put down an Amendment. With that undertaking I hope that hon. Members will be satisfied.
      Mr. Booth: I am grateful for the undertaking that has been given and for what appears to be a realisation that the drafting of the Bill could defeat what has been explained as the purpose of the Bill.
      May I put one clear case to the Minister just to emphasise the point? A grandmother who is looking after the children of her son who is a widower may have no claim to unemployment benefit because she does not seek employment and regards herself as fully employed in looking after her son's house and children. Neither has she any claim to supplementary benefit because she is held to be a dependant of her son. This is by no means a rare case. Many women aged between 50 and 55 have no pension entitlement and do not claim unemployment or supplementary benefit.
      Sir K. Joseph:: I think I can satisfy the hon. Gentleman and modify something which I said earlier. If a grandmother, a sister or a relative comes into a household to enable a man to go on working by helping to look after his children, she would be entitled to claim

      1153
      supplementary benefit, because the Supplementary Benefits Commission would not in such circumstances insist on her registering for work. It all depends upon the position of the man.
      If he can continue at work only because of the help of a sister, mother or cousin in looking after his children, the Supplementary Benefits Commission would not insist upon that substitute mother registering for outside work, and she would therefore be entitled to supplementary benefit. It is to that extent important to exclude her from the family as defined by the Bill, otherwise her supplementary benefit must be taken into account in measuring the family income and we thus would diminish the family income supplement going to the family.
      We are in fairly complicated waters, and I believe the Committee would be wise to let me look at the matter in the light of what has been said.
      Mr. Peter Archer: I am grateful for the right hon. Gentleman's undertaking. I believe that he has grasped our points and we his. I beg to ask leave to withdraw the Amendment.
      Amendment, by leave, withdrawn.
      Mr. Joel Barnett: I beg to move Amendment No. 8, in line 13, to leave out 'have to be' and insert 'are'.
      The Temporary Chairman (Sir Myer Galpern): I suggest that with Amendment No. 8 it would be convenient to take Amendment No. 51, in Clause 11, page 4, line 22, to leave out 'having, or as not having, to provide' and insert 'providing', and Government Amendment No. 67.
      Mr. Barnett: Yes, Sir Myer. I hope that the Government will be prepared to accept Amendment No. 8 because the Under-Secretary of State for Health and Social Security on 10th November, in column 327 of HANSARD, made clear that this Amendment, though perhaps its wording its not exactly right, seeks to do precisely what the Government seek to do. It cannot be the Government's wish to have a situation in which a child who is being cared for should be excluded. Therefore, since the Government have down Amendment 67 on this matter it
      1154
      would appear to indicate that they would be prepared to accept Amendment 8.
      Sir K. Joseph:: I do not want to give the hon. Member for Heywood and Royton (Mr. Barnett) the impression that every time he comes to the Box on a social security Bill his Amendment will at once be accepted, but since this is a useful Amendment the Government would advise the Committee to accept it. It meets the case made earlier in which a mother arranges to leave one of her children with, for instance, its grandparents. The grandparents would then be providing for the children and should be entitled to family income supplement if they qualify in other ways. The consequential Amendment by the Opposition, Amendment 51, fails for purely technical reasons, and I hope that it will be withdrawn. Government Amendment No. 67 carries out the consequential job and will be moved later.
      Amendment agreed to.
      Question proposed, That Clause 1, as amended, stand part of the Bill.
      Mr. S. C. Silkin: I make no apology for saying a few words on the Question, That the Clause stand part, despite the fact that we have had a series of useful and important debates on the various Amendments. This is a fundamental Clause in the Bill. It is the definition of the family around which the whole thing centres.
      In the course of the debate a number of points have emerged which ought to be brought out. The first point of principle, upon which the Committee ought to be clear, concerns the observations made on a number of occasions by the right hon. Gentleman—I agree that he modified them on one or two occasions as well—when he said that it would be a matter of choice for a family which may fall within the provisions of the Bill whether what I might call the breadwinner should work less and take advantage of supplementary benefit or should work more hours and take advantage of the provisions of the Bill. I use the word "he". It may be "she". However, in certain cases it may be "he".
      I accept that there is the kind of case, to which the right hon. Gentleman drew the attention of the Committee, of the

      1155
      woman who should be at home looking after her children rather than going out to work. That is a point about which we on this side feel very strongly. But, leaving that kind of case aside, it sounds an odd philosophy coming from the benches opposite that people should be in a position to choose whether they should get more money for working less or get less money for working more. If that is the philosophy behind the Bill, it should be made absolutely clear so that the public has no doubt about it.
      Because of the way in which those who drafted the Clause set about their work and, indeed, probably because of the difficulties that they had in trying to bring the Clause within the series of situations which they envisage, there are all kinds of misnomers and terms which do not mean what they say. The debate has concentrated on several of these points. For example, the single woman, who is an essential element in sub-paragraph 1(a), is defined later
      "… any woman other than one who is a member of the same household as a man to whom she is married or with whom she is living as his wife."
      No ordinary person would say that that is the proper meaning of "single woman". It seems that the term has been used to fit into the drafting of the Clause, notwithstanding that it means something quite different.
      Again, in the same part of the Clause, we have the expression "full-time work". We now know from what the right hon. Gentleman told us that "full-time work" does not necessarily mean full-time work. Indeed, it can mean something substantially less than full-time work. Having regard to the examples which my hon. Friends have brought to the attention of the right hon. Gentleman, he tells us that there will be different regulations governing different cases and that in some of those cases "full-time work" may mean nothing like what one would regard as full-time work.
      9.30 p.m.
      The wording in paragraph (b) has attracted a good deal of criticism. Since we are trying to cater for the situation of the wage earner, the bread winner, who is a substantial supporter of his family, why does the Clause use
      1156
      totally different language? I am not seeking to make technical or semantic points, but if the right hon. Gentleman, when he considers the Clause again, as he has promised, could try to see that words mean what they say and not something different, it will not only be much easier for the ordinary man and even the lawyer to understand: it will also be an encouragement and avoid a disincentive to people to take advantage of the Bill who might otherwise feel that they could not possibly qualify.
      The right hon. Gentleman has more than once referred to the fact that, in a single household, there may be more than one family. That may be so, but what might be regarded as two families could exist in what ordinary people would understand as a single family. This could happen if the sister were working or on supplementary benefit and was spending part of her time looking after the children, while the wife or the woman who lives with a man as his wife is spending part of her time looking after the children. From one point of view, the sister could be considered a separate family, but to the ordinary person, she would be part of the family as a whole. I should like wording which makes it clear how this division into more than one family within the same household will be accomplished.
      My hon. Friend the Member for Rowley Regis and Tipton (Mr. Peter Archer) mentioned the expression
      "… married or who lives with him as his wife".
      A person may be married and living in the same household yet not living with the man as his wife, and a person who is not married may live with a man as his wife, while a woman who has been living with him as his wife might be so no longer although still a part of the same household.
      All of these are situations met in practice and it seems that the wording of the Clause, no doubt because of the haste with which this matter has clearly been dealt, does not clearly cater for all these distinctions. I hope that when the right hon. Gentleman gives his further attention to it he will look carefully at all these points and if necessary come back with a complete redraft of the Clause, rather than tinkering around with parts of it.
      Mr. Ronald King Murray: I should like to echo the remarks of my hon. and learned Friend the Member for Dulwich (Mr. S. C. Silkin) and to add one or two comments in the same vein. We have departed far from the ordinary English meaning of the word "family" If we look at Clause 17 where "child" and "family" are defined we see that a child is defined in terms which do not imply or connote any relationship whatever to the person defined in subsection (1)(a). Equally, "family" is defined as having the meaning assigned to it by Clause 1(1). That does not imply or connote any relationship between the persons concerned. We are far from the ordinary meaning of "family".
      I should like to throw out a suggestion to the right hon. Gentleman and I put it no higher than that, because the implications would have to be worked out in much more detail than I have been able to do. I would suggest that the word "household" should be substituted for the word "family". That might meet some of the difficulties. It would give the added advantage that instead of calling it F.I.S. we could call it H.I.S. I am grateful to the Government for their alacrity in accepting the Amendment relating to the words "have to be provided for". Had that Amendment not been accepted I should have pressed very strongly upon the Committee that the wording of the Clause did not take account of the difference between Scots law and English law.
      The Temporary Chairman: Order. Despite the fact that that strikes a chord in my heart, I must draw the attention of the hon. and learned Member to the fact that we have accepted that Amendment.
      Mr. Murray: Yes, I was merely welcoming it.
      Sir K. Joseph:: I ought to offer to learn by heart the entire debate that has taken place so that I may cogitate upon the statements I made and later slightly modified during this interesting discussion. I have undertaken to look at all the points made to see whether there is any lesson for us in the drafting of the Clause before the next stage of the Bill. I asked hon. Members to recognise that one of the advantages of the Bill will be that if we are successful, as we are determined
      1158
      to be, in reaching the vast majority of the families on very low earnings, then we shall for the first time know very much more about them than we do now.
      The only comfort I can give to hon. Members after this debate is that every alternative that has been put forward, and an infinite number more, is already known to the Supplementary Benefits Commission through handling its normal work load. It will not find it nearly as daunting as some of us to decide in which category an individual family comes.
      I have to answer one or two points raised by the hon. and learned Member for Dulwich (Mr. S. C. Silkin) who teased me, understandably, with making a virtue of the flexibility that will in some circumstances allow a family to choose between family income supplement and supplementary benefit. I should have qualified rather more what I said. Let me put it once again to hon. Members. There will be individual families, or to adopt the suggestion of the hon. and learned Member for Edinburgh Leith (Mr. Murray), households, where a single person, generally a single woman but sometimes a man on his own, is struggling to bring up children and is perhaps, misguidedly, in full-time work when it might be better for those children if in these rare cases the number of hours were reduced and supplementary benefit drawn.
      That is the sort of flexibility we want, to protect the children of those low-earning households. I am therefore introducing this at a late stage to help the man very occasionally entirely on his own, without a sister, mother, friend, wife or common law wife to bring up the children. If in the other case put by the hon. and learned Gentleman a sister, or some other relative with children of her own, were to join the man's household and that person were to work, then there would be two families in the household entitled to family income supplement. There are an infinite number of possibilities, many raised in the debate, and I have undertaken to look at them. I have given two particularly firm commitments on two of the points raised and I hope that with this assurance the Committee will accept that Clause.
      Question put and agreed to.
      Clause 1, as amended, ordered to stand part of the Bill.

    Clause 2

      PRESCRIBED AMOUNT
      Mr. John Pardoe: I beg to move Amendment No. 11, in page 1, leave out lines 23 to 25 and insert:
      an amount equal to half the officially determined national average wage plus 30 per cent. of this amount for each child'.
      The Chairman: Order. With this Amendment we can discuss the following Amendments:
      No. 12, in page 1, line 23, leave out £15' and insert:
      'an amount equal to 65 per cent. of national average wages as officially published';
      No. 14, in page 1, line 24, leave out £15 plus £2 for each additional child' and insert:
      an amount equal to 65 per cent. of national average wages as officially published plus an amount equal to 10 per cent. of national average wages for each additional child'.
      Mr. Pardoe: This Amendment seeks to remove the specific reference to the figure of £15 in the Bill and the reference to £2. It seeks not only to increase those figures, which I will show by calculation it does, but also two specific things. First, it would relate the basic amount to be paid under the Bill for the married couple to half the average national wage, in other words, giving a straight definition of what we regard in our society as the poverty line.
      We have various poverty lines written into various pieces of social legislation—I suppose that the supplementary benefit scale is in many ways the most convenient—but it seems to me that it would be better if at the outset we settled the amount for the married couple who are to benefit under it. I realise that no married couple without children will do so, but let us start with the basic unit. Let us accept that the poverty line is half the average national wage. I go on then to add,
      "plus 30 per cent. of this amount for each child",
      that amount being half the average national wage.
      9.45 p.m.
      The Secretary of State said on Second Reading that the figures were already out of date, and, obviously, we face the problem
      1160
      of inflation. We shall have constantly to up-date whatever figure is written into the Bill if the Government's version is followed and the figure is set at £15, £16 or whatever it may be. We shall have the same problem such as we have had in public service pensions, national insurance pensions and so on of having to bring in a Bill every two years or having Regulations enabling the Secretary of State to increase the figure, with all the accompanying argument about whether we are Increasing it by the right amount, whether we should increase it merely according to the rise in the most of living or in accordance with the average rise in wages, and so on. In my view, in trying to define a level below which people should not be allowed to sink in our Welfare State, we should do far better to relate it to wage levels than to the cost of living.
      My proposal, therefore, which would come in at the start, would incorporate as the basic line in respect of the married couple half the officially determined national average wage, and this would overcome the problem of continuing erosion by inflation. Also, it would give a clear definition of what is meant by the word "poverty" in this context.
      I come now to the second point, the factor of 30 per cent. which I seek to apply in respect of each child. This is a more controversial proposal. I developed it at some length on Second Reading, which, perhaps, was not the best time to do so, for one cannot on such an occasion expect a detailed reply from the Minister, but I hope now to engage the right hon. Gentleman in some thinking about the relationship between the cost of a child and the income of a married couple.
      It is an extraordinary fact that, over the years, we have never really argued this question in the House. I do not remember any debate on social security legislation in the last four years in which we have tried to define the cost of a child in our social legislation.
      For the presentation of my argument, I shall take £25 as the basic unit, the national average wage. I realise that it is slightly less than that at the moment, although any figure of that kind would make most of my constituents green at the gills with envy since we do not have that kind of money down in the far

      1161
      South-West. However, I take £25 as a round figure—it will soon be there, even if it is not yet—and half of that is £12 10s. The addition of 30 per cent. for the first child adds £3 15s., giving a total for a married couple and one child of £16 5s. instead of the figure of £15 which the Government have written into the Bill.
      I do not know what new figure the Secretary of State had in mind when he said that the figure was already out of date. He may be thinking in terms of £15 10s. or, perhaps, even about £16. In any case, I hope that he will not decide the figure until we almost come to the Royal Assent, for it will be bound to be out of date, and the later the figure chosen the better will it be for the poor people who are to benefit.
      They will not receive all this amount in any case. Even under the Government's proposal, they will receive only half of the difference between what they earn and £15. For example, a family with one child earning £13 a week would receive £1, that is, half the difference between £13 and £15, making them up to £14 a week. Under my scheme, for such a family with one child the actual target would be £16 5s., so on £13 a week the shortfall would be £3 5s. Half of that would be £1 12s. 6d., so they would end with an income of £14 12s. 6d. That is still, I believe, not far above any level which any right hon. or hon. Member could call a poverty line. It is by no means over-generous, and it will not cost a vast sum of money. Indeed, I greatly doubt that £16 5s. as the limit will be all that different from the level which the Government will eventually have to set.
      I come now to the proportion of income for a child, the 30 per cent. which I have chosen. At present, in our supplementary benefit scale, we reckon the additional money given for a child to be £1 16s., which is roughly 21 per cent. of the amount allocated for a married couple, namely, £8 10s. That figure has remained more or less constant over a long period. It depends a little on the age of the child, but, to take the case of a child aged under 11, we find that in our supplementary benefit scales the ratio was 21·5 per cent. in 1968, and it has remained approximately at that level.
      Why has it remained at that level? There is nothing to say that 21 per cent.
      1162
      of the income of a married couple is needed for a child, or that the cost of a child is 21 per cent. more than the income which we regard as required to keep a married couple at a reasonable standard of life. I do not want to deploy again the points I made during the Second Reading. I want to mention one or two figures from my speech on that occasion. I am indebted to Christopher Bagley, of the Institute of Psychiatry in London, for his report, "The Cost Of A Child", which was prepared with the aid of a grant from the Joseph Rowntree Memorial Trust. Taking England alone, he showed that in 1942 Lord Beveridge reckoned that the additional allocation over and above the income of the married couple which should be given for a child in our social security scales was, roughly speaking, 31 per cent. That was for a male aged seven. Hon. Members will be pleased to hear that the figure was the same for a female aged five.
      This figure has changed over the years and various people have arrived at different ratios. But it is extraordinary that back in 1942 Lord Beveridge—I think he must have been Sir William then—was saying that one needed to think in terms of the cost of a child as being 31 per cent. of that of the mother and father.
      If one looks abroad one finds even more extraordinary comparisons. For instance, in New York in 1966 the figure was 41 per cent. In Pennsylvania in 1955 the figure was 31 per cent. These are figures for children under 11. They rise substantially for children over 11. In Japan at present the figure is 40 per cent., as it is in West Germany.
      What I am trying to do in the Bill is to get back to Beveridge. Naturally, I go back to a great historic Liberal, but that is not the only reason why the figure is right. It is a reasonable figure to take in view of the foreign experience. After all, what has made the great Japanese civilisation come to the view that it costs 40 per cent. of one's income to bring up a child?
      We are in the business of income maintenance, after all. That is what social security is all about today, dealing not with primary poverty but secondary poverty. That is the philosophy behind it. We have to ensure that there is some relationship which is satisfactory in our

      1163
      society between the cost of bringing up a child and the income of the married couple. I hope that the Minister will either seek to justify the figure of 21 per cent. or at least say that the Government have some sympathy with the advocates of an increase in the percentage. It is high time that we debated this strange gap in our social security legislation.
      To sum up, £15 may or may not be the correct level. I do not think it will be by the time the Bill becomes law next August, and the following year it undoubtedly will not be. It will then have to be changed perhaps every two years, involving the business of parliamentary legislation, and so on, which will waste parliamentary time. It would be very much better on this score if we tied it to the national average wage and made it clear that we had a definite ratio for each child. I have said 30 per cent. for each child, but I shall not nail myself to any mast about the figure of 30 per cent. for every child. It may well be that one would either start with a lower figure and go up or, more likely, start with 30 per cent. and perhaps come down as the size of the family increases. If one takes the large family of, say, six children, my figure would produce an amount of money which was appreciably greater than the Government's calculation.
      It is in a family of six children that the Government want to put the money, because in the family income surveys it is in these families that we find a great deal of poverty—I know that there are families with one child that are living in poverty—but as we go up the scale, with more and more children, the Government's scheme will not provide anything like as much money for the family as would my scheme. I accept that the cost to the Exchequer will be greater, but it will be focused on the problems of the large family.
      I think that the ratio of 30 per cent. is intellectually, politically and socially justified. I do not think that the Government can justify an additional £2 for each child in political, social or economic terms.
      Mr. Michael Meacher: I support the argument so ably put forward by the hon. Member for Cornwall,
      1164
      North (Mr. Pardoe). I rise to confirm his arguments and to put forward some of my own in support of a very slightly different Amendment.
      The central aim behind both Amendments is to ensure that the value of the supplement is fully maintained in relation to the constant rise in earnings. Even in a normal year—and I submit that at this juncture in economic policy to gaze back at a slightly normal year is a slightly heady experience—the rise in the value of gross weekly earnings may well be in the region of 5 per cent. to 7 per cent. a year, and it would be an ironic quirk if the device used to supplement the earnings of the lowest-paid were geared to a system which would virtually guarantee that the rise in the value supplementation was constantly trailing behind the upward thrust of market forces acting on the level of ordinary earnings.
      My chief witness in support of the need for the Admendment is the Secretary of State himself. In introducing the Bill on Second Reading, he replied to my question about whether the Government would commit themselves at this stage to increasing the supplement in line with average earnings. The right hon Gentleman said:
      "Already the earnings on which we have based our figures in the Bill are sharply out of date.
      The answer to his question is that I think it highly likely that the make-up level will have to be looked at again before the Bill comes into effect."—[OFFICIAL REPORT, 13th November. 1970; Vol. 806, c. 229.]
      The right hon. Gentleman therefore presumably accepts the need for a constant upward revision of the amount of supplementation, and the question, therefore, is whether the technique in the Bill is necessarily the most appropriate method to achieve this end. For the reasons which I shall give, I doubt whether that is so.
      First, historical experience does not lend much credence to any verbal commitment of the Conservative Party to maintain the value of an important noncontributory benefit since, when hon. Gentlemen opposite were last in power, the value of an even more important noncontributory benefit aimed at the remedying of family poverty—and I refer to family allowances—was allowed to lapse drastically. The value of the benefit for

      1165
      a family with three children at its inception in 1946 represented about 8 per cent. of average industrial earnings. After 1956 its value was not increased throughout the whole of the next eight years, and by 1964 its value had declined to about 5 per cent. of average national earnings.
      In view of that wretched fate for family allowances, and despite the absence in increasing family allowances and of any of the distorting disincentives which will inevitably accompany any major development of F.I.S., what really copper-bottomed guarantee can the Government offer that F.I.S. will not go the same way? What definite assurance will the Government give about the regularity of reviews and about the time intervals between them? Even if the Government were to engage in regular two-yearly reviews, which is the normal habit for most insurance benefits, there remains the delicate question of the amount by which F.I.S. would be raised taking into account, presumably, such moving indices as the rise in prices, the advance in average wages—
      It being Ten o'clock, The CHAIRMAN left the Chair to report Progress and ask leave to sit again.
      Committee report Progress.

  BUSINESS OF THE HOUSE
  Ordered,
  That the Proceedings on the Family Income Supplements Bill may be entered upon and proceeded with at this day's Sitting at any hour, though opposed.—[Mr. Fortescue.]

  FAMILY INCOME SUPPLEMENTS BILL
  Again considered in Committee.
  Question again proposed, That the Amendment be made.
  Mr. Meacher: I was making the point that there still remains the delicate question of the amount by which F.I.S. will be raised, taking into account such indices, presumably, as the rise in prices, the advance in earnings, and improvements in disposable per capita income.
  It is a great temptation to any Government to preserve to themselves the timing of increases and the announcement of the size of any new offer of official generosity,
  1166
  since a growing proliferation of benefits and nicely timed statements of largesse for all, or for certain sensitive sections of the electorate at least, puts into the hands of any Government potent pre-electoral persuasion which it might not be best for Governments to possess.
  The interests of the poor are not necessarily identical with the interests of the Government and it would be wrong to vest in the hands of any Government this delicate responsibility for protecting the poor against the over excessive rigours of an inflationary environment. There is far too much painful experience already that Governments will all too readily take advantage, when there are no constraints of economic pressure, of the lack of articulation, or the lack of adequate organisation, among the poor, to initiate deflationary measures at precisely that point of the community where such measures can least be borne. The only proper way in which to avoid these pressures is by establishing a definite published ratio of F.I.S. to average earnings. Once this is done, the future of the matter is taken outside the cockpit of politics, and the more the temptation to score petty advantages is reduced, the better.
  But there is a further crucial reason for taking the fixing of the making-up level out of the sphere of politics. It is that any major development of F.I.S. must inevitably involve the Government in a virtual open-ended commitment almost indefinitely to increase public expenditure to shore up very low wages. Is this what the Government really intend? If so how will the huge problem of disincentives be handled? I am well aware that in winding up the Second Reading debate the Under-Secretary declared:
  "Speenhamland started … in a very small way. We intend to keep this small."—[OFFICIAL REPORT, 10th November, 1970; Vol. 806, c. 333.]
  This is partly corroborated by the reply which I received a fortnight ago to a Parliamentary Question about the cost to the national wages bill of restoring partly or substantially the former differentials between skilled workers and low-paid workers following the introduction of the scheme. The Minister of State at the Department of Employment and Productivity replied:
  "I would not expect the family income supplement scheme to have any effect on the

  1167
  national wages bill."—[OFFICIAL REPORT, 6th November, 1970; Vol. 805, c. 466.]
  Be that as it may, the Government cannot have it both ways. Either the F.I.S. will be increased by significant amounts at regular intervals, in which case the demoralising Speenhamland effect on incentives will be grossly aggravated, or F.I.S., while being occasionally reviewed, will be only very marginally improved, in which case the charge stands that it will not prevent the poor from being made much worse off as a direct result of other parts of the total public expenditure package simultaneously introduced. Either way the poor will lose.
  Faced with this logical dilemma, the Government will, I believe, be sorely tempted to keep F.I.S. at the relative level of the pittance it already is. Therefore, I ask them to save their credibility over the Bill by tying the supplement to a moving standard of living index, which alone will honourably exculpate them from any possible future suspicions that they have marked out the very low paid for prime attention as helpless pawns in any struggle against inflation.
  There are at least five other distinct reasons, to each of which I attach considerable importance, for requiring a cost-of-living-or standard-of-living-based relativity in determining the make-up level. I shall spell out each separately, but briefly.
  The first concerns the wage-stop. I fully accept that it is one of the very few agreeable features of the Bill that a certain number of claimants now subject to this notorious restriction on their so-called entitlement to supplementary allowances will have this infringement of their rights considerably eased. But, however many or however few are assisted here, the number will rapidly decline unless F.I.S. is pegged to a realistic index of the movement of earnings. The Government have already made a lot out of this diminution of the wage-stop, and very justifiably. I appeal to them to carry through the meaningfulness of the improvement by ensuring through the Amendment, as no haphazard or unpredictable review can ever achieve, that this much-vaunted object of the Bill is not uselessly dissipated in the sands of inflation.
  1168
  My second further reason for the Amendment concerns the smoothness in the process which it envisages. It may well be argued by the Government that the point just made about maintaining the mitigation of a wage stop could equally well be met by regular reviews and deliberate increases in F.I.S. from time to time. I doubt that this will occur as generously as might be promised, for the reasons I have given. But leaving that aside, increases in F.I.S. made at intervals, even if biennial, like most insurance benefits, would still be only haphazardly related to the needs of those assisted.
  Increases brought about by Government dictat must in the nature of the case involve a step-like pattern which at the outset would maximally improve the standard of living of claimants, who would then have to watch helplessly as inflation gradually but inexorably eroded their advantage until at some notional point within the interval their standard of living lost its gain relative to the standard of the rest of the community and they began to approach or even pass the point where they would be worse off relatively, and even possibly in absolute terms, than at the time of the previous rise in benefit. That is a desperate situation only too familiar in the case of retirement pensions. I believe that all the emotion and righteous anger generated by the issue on both sides of the Committee about the inadequacy of even a biennial review at times of rapid inflation are great enough and damaging enough to justify making every effort to avoid this unsatisfactory and unjust situation in the case of an entirely new benefit.
  Will the Government, therefore, make clear whether the Bill is intended to be closely related to the needs of the potential claimants? If so, will they accept that only a fixed, guaranteed relationship with earnings or prices, or an amalgam of the two can achieve that end?
  The Amendment offers the Government the opportunity to begin the desperately-needed synchronisation of benefit levels for the whole multitude of different means-tested benefits. If we include, as we must, the vast diffusion of discretionary local authority benefits, the whole bureaucratic apparatus of means-testing, involving in Britain today over 3,000 means tests, of which 1,500 are unique

  1169
  and not precisely reproduced anywhere else in the system, we see that it is an utter and fantastic muddle.
  The party opposite has always prided itself on its management capabilities, and "rationalisation" has always been a vogue word with it. Here is an excellent opportunity to exercise those talents. I very much hope that the Government will seize the initiative by establishing a relative pegging system for this benefit, which could serve as a prototype for similiar treatment of other benefits. But rationalisation and the imprint of strategy, desperately needed though they are in the social services, are not the only advantages of accepting the Amendment and extending its logic into adjacent fields. Another major advantage is that it would establish at least the beginnings of a framework in which the standard of living of the various categories of persons accepted to be living in poverty could, because they would be immediately accessible to precise measurement, he progressively raised as an essential ingredient in any overall strategy to eliminate poverty in Britain.
  I do not want to raise the stakes too high, but there can be no doubt that the principle behind the Amendment is exceedingly important and has the widest ramifications. To this extent, and bearing in mind the essential principle, whilst it would diminish the full effectiveness of the Amendment to relate F.I.S. to a price index rather than publish average manual earnings, such a move would still be compatible with the underlying design of the Amendment and still mark a very definite improvement. Will not the Government accept this at the very least as a minimal concession to protect the interests of the very poor? In a year when prices are only too likely to rise by 7 or 8 per cent. or more, surely it would be very unreasonable to do otherwise?
  It is significant that the Secretary of State has already had to admit that the figures on which the Bill is based are already sharply out of date. I suspect, though I do not know, that the figures were based on the Family Income Survey of 1968. It is not enough for the right hon. Gentleman to say, as he has, that the make-up level will have to be reviewed before August, 1971. If we go on as we started, it is clear that the damage wrought by savage inflation is
  1170
  far too great to leave it to the palpable charity of government to rescue those who are helplessly ensnared in the inflationary spiral.
  What makes the situation particularly disturbing is the apparent complacency—I am bound to use that word in relation to the right hon. Gentleman—of the Secretary of State when he tries to appease us with the sweeping statement that as things are, earnings are definitely rising, even for most of the very poor. Surely he must be aware that the two recent sensational reports by Incomes Data Services Limited pointed to an utterly different conclusion. They showed that for the poorest workers wage increases were not only at a significantly lower level in size but that the intervals between them were significantly greater.
  Not only that. They showed that for workers covered by 30 of the 53 wage councils concerned, wages had risen less over the recent period than the rise in prices. In other words, the poorest workers are not only increasingly falling behind in their standard of living compared with the rest of the community, but their standard of living is dropping in real terms.
  I submit that this appalling state of affairs in the wage market makes it all the more vital that any wage supplement is enabled to maintain its full value and that this can be properly done only by the Government accepting the Amendment. And having stated the case for the Amendment, I will make a few exploratory probes at some of the possible objections.
  10.15 p.m.
  It may be said that when translated into absolute figures, the percentages given produce amounts slightly higher than those at present written into the Bill. I accept this, but it is not a serious objection. Clearly, the percentages could be reduced, though this would destroy the nicely rounded figures and give a rather unfortunate impression of pernickety exactitude over what is supposed to be a generous Measure. But the obvious need to review the rates of supplementary benefit scales so soon after they were last increased, in view of the sharply accentuating pace of inflation, means that the figures given in the Amendment are anything but high.

  1171
  However, I have no doubt that a much more substantial objection is likely to be that the Amendment carries with it certain inflationary implications. There are several ways of rebutting this objection, and I will give a few.
  First, if the market is defective as a protector of low wages, as it patently is, do the Government intend to pick out the very low paid, because of their helplessness and lack of power in retaliating, as the one section of the community which should be penalised? If low-paid manual workers are not put on a more dynamic escalator, such as the Amendment would provide, than any at present within their reach, it will be seen, and rightly so, that they are being selected to bear the brunt in the forefront of the Government's economic policy.
  Secondly, I refute the objection on the grounds that the inflationary consequences of implementing the Amendment, bearing in mind the tiny amount of Government expenditure involved, cannot be argued to be more than miniscule. Again, it would be the discriminatory collusion of the one-eyed to stare disapprovingly at an incomes rise for a few very low-paid workers, while turning a comparatively blind eye to some substantial price rises in both the public and private sectors which ripple devastatingly through the entire economy.
  Thirdly, I would counter against the objection of inflation the fact that what is sauce for the gander is sauce for the goose. If the Government can afford to give away, as they are doing, £330 million in tax relief for the well off, it is scarcely beyond argument that they can afford to give away a minute amount of far less than £10 million to the very poor.
  I therefore conclude that the objection about inflation is really in no sense at all sustainable, and in view of the insubstantialness of the counter arguments against the Amendment, but more particularly in view of the several solid and vitally important advantages to be derived from its acceptance, as I have outlined, I urge the Government to take this step and so transform the Bill from a relatively minor measure of alleviation into a piece of major legislation by acepting the Amendment.
  The Under-Secretary of State for Health and Social Security (Mr. Paul Dean): The hon. Member for Cornwall, North (Mr. Pardoe) appealed to us when moving the Amendment to go back to Beveridge. That was an unusual rôle for him. He is usually urging us to go forward with Pardoe.
  Mr. Pardoe: It is the same thing.
  Mr. Dean: I will leave that matter there.
  The hon. Gentleman was proposing, and the hon. Member for Oldham, West (Mr. Meacher) supported him, that there should be an automatic index for this supplement rather than what is proposed in the Bill. This undoubtedly has superficial attractions. The hon. Member for Cornwall, North urged that as there are automatic indices for a number of other social service benefits, there is no reason why an index should not apply in this case. As I say, this is admittedly a superficially attractive proposition.
  Having said that, I wish to make it clear that some real difficulties are involved. For example, we are introducing an entirely new benefit. To put it immediately on to an automatic index basis would be to accept a great deal in that one would, unless one got the automatic index right from the start, find it not as easy to change it as by the regulation provisions in the Bill. Thus, one of the big disadvantages to taking the step proposed by the Amendment is that there would be less flexibility to make changes in the actual figures than there would be under the proposals now in the Bill. This is an important argument against the Amendment, particularly when, as now, we are introducing a completely new benefit.
  That is, however, not the only argument against it. Other difficulties would arise in practice and I will give a few examples of what the effect of the Amendments would be; and the two Amendments are similar, although the figures in them are slightly different. The Amendments would mean that, if wages rose faster than prices, a higher supplement would be paid although the family's living standards had risen, but if prices rose faster than wages the real value of the supplement would fall when real

  1173
  wages were also falling. The hon. Gentleman may say that it is highly unlikely that the latter situation would exist, and I accept this, but it illustrates my point that the more we write in an automatic index at this stage the less likely we are to be able to make changes if unforeseen circumstances arise.
  The main difficulty of this approach is in the actual figures suggested by the hon. Members for Cornwall, North and Oldham, West. I will give the Committee an indication of what the effect would be but, before doing so, I remind the Committee that in selecting the figures that are in the Bill the Government had in mind three main factors; first, the level of earnings, secondly, the supplementary benefit level and, thirdly, the tax threshold.
  The effect of these proposals on the tax threshold and the normal supplementary benefit requirements I will illustrate by giving a few figures. In the case of Amendment 11, for the one child family the proposed make-up level would be £16 2s., which compares with the tax threshold level of £14 7s. and the supplementary benefit level of £14 6s. In other words, the proposed make-up level even for the one child family would be higher than both the tax threshold and the supplementary benefit level. That gap widens as the number of children grows. This is partly because of the 30 per cent. which is included in the Amendment.
  For the two children family the proposed make-up level would be £19 16s., whereas the tax threshold level is £16 3s. and the supplementary benefit level is also £16 3s. Going to the extreme of a six children family, the proposed make-up level would be £34 12s., the tax threshold level £23 7s. and the supplementary benefit level £23 12s. The hon. Gentleman will see from those figures the substantial double disincentive effect which his proposal would have.
  Mr. Pardoe: Without making the obvious point that it might have been better to use the £350 million which the Government gave away to raise the threshold of tax and thereby solve the problem, may I ask the Minister to tell us exactly what figures he is taking for rent in the figures he has quoted for the threshold of supplementary benefit?
  Mr. Dean: I am taking the figures we took in the Bill. The figures I have given show clearly that the Amendments would have a substantial disincentive effect, particularly on families having a substantial number of children. The figures in every case are above, and in many cases, well above, the tax threshold and the normal supplementary benefit requirements for similar families. These are the main disincentive effects which would operate to a substantial degree in this area.
  Mr. Timothy Raison: I am not clear whether my hon. Friend in using the term make-up level is talking about the prescribed amount or the amount after the 50 per cent. has been knocked off.
  Mr. Dean: I am talking about the make-up levels proposed in the Amendment.
  Mr. Raison: I am sorry, but I am still not clear. There is a difference between the prescribed amount, which is what I take to be the make-up level, and what is received—which is only half the difference between income and the prescribed amount.
  Mr. Dean: I am sorry, I misunderstood my hon. Friend's point. I am taking the prescribed amounts, which are the figures the hon. Gentleman has used.
  I turn to some of the other points which have been mentioned. The hon Member for Cornwall, North mentioned the Bagley thesis and we shall give close examination to this matter in the studies we are now conducting on the whole question of poverty, particularly family poverty. This study is concerned with relativities rather than with absolute amounts, and it is not clear whether the studies in this thesis would help his argument or not. We must await further studies to see whether that is so.
  The hon. Gentleman then referred to the 30 per cent. figure and asked why we had selected £2. The short answer is that it is the average rate based on supplementary benefits for children under the scale. We took that amount because we wished in the Bill to take the simplest possible figures and to make the simplest possible approach.
  As my right hon. Friend said on Second Reading, there is power in subsection (2)

  1175
  to substitute different figures. My right hon. Friend intends to look at these figures in the light of the three indices I have mentioned, and in particular in the light of the tax thresholds and the level of earnings. I hope the Committee will feel that, although there are certain superficial attractions in the approach suggested, we are more likely to achieve the immediate objective that we have in mind and to maintain flexibility by adopting the proposals in the Bill rather than the Amendments.
  Mr. Meacher: The objections put forward by the hon. Gentleman against the Amendment were not particularly strong. They were on three main grounds. The first was that if a pegging system were adopted at the outset it would not be possible to change the figures largely because it was a different arrangement. This seems to be a defensive argument and does not seem to show a great deal of confidence in the desirability of extending the new benefit. I find this approach disappointing.
  1176
  Secondly, the argument was used that if any unforeseen changes occurred, such as prices rising faster than earnings, this would produce problems In the first place, it would be possible to change the percentages while preserving the principle of a pegging system. It is possible to get round the point by saying that in some situations there could be an amalgam between price rises and increases in earnings to safeguard the situation.
  Thirdly, it was said that make-up levels might be above the supplementary benefit line and above the tax threshold. Although I admit that this is the case, we need to press the point since this does not provide a real objection to the Amendment. There could be other means of raising the tax threshold. This is not an argument against the use of a pegging system for family income supplement or for any other benefit.
  Mr. Pardoe: In view of the interesting discussion which has taken place, I beg to ask leave to withdraw the Amendment.
  Amendment, by leave, withdrawn.
  10.30 p.m.
  Mrs. Shirley Williams: I beg to move, Amendment No. 13, in page 1, line 23, leave out '15' and insert '£16'.
  I understand that it is convenient to take at the same time the following Amendments:
  No. 15, in page 1, line 24, leave out '£15 plus £2' and insert '£16 plus £1.50'.
  No. 16, in page 1, line 24, leave out:
  '£2 for each additional child'
  and insert:
  '£1 8s. for each additional child under the age of five years, £1 13s. for each additional child between the ages of five and 10 years, £2 1s. for each additional child between the ages of 11 and 12 years and £2 4s. for each additional child between the ages of 13 and 15 years'.
  No. 17, in page 1, line 25, at end insert:
  'and
  (c) the amount by which the rent or rent and rates (as the case may be) paid or payable for the accommodation of the said family exceeds £3 per week, so however that such amount shall not exceed £2 or such higher amount as in the circumstances of the case may be approved by the Supplementary Benefits Commission'.
  In speaking to this group of Amendments I am conscious that we on this side of the Committee have preferred an acceptance of the Amendments moved by my hon. Friend the Member for Oldham, West (Mr. Meacher) and the hon. Member for Cornwall, North (Mr. Pardoe). There is no doubt that when the Under-Secretary spoke about the hon. Member for Cornwall, North, in effect, going forward to Beveridge, he was not so far from the point, because in the present cycle of history it would without doubt be going forward to go back to Beveridge.
  Because we took the view that it was unlikely that the Government would at this stage be willing to accept a complete re-casting of the Bill in the form put forward by those two hon. Members, we are suggesting a more modest Amendment which we believe puts before the Government the direct choice of moving a little closer towards the original pledge to spend £30 million on family poverty than the amount that they are at present contemplating spending. Many people took that pledge to mean that £30 million would be spent on those in poverty, not
  1178
  that the Government were committed to a particular scheme. Certainly the Prime Minister, in reply to a Question put to him this afternoon by my hon. Friend the Member for Stoke-on-Trent, South (Mr. Ashley), on which I asked a supplementary question, made it clear that he was committed to this scheme. But we suggest that he can spend £30 million on poor families in the way that we propose and will put forward in other Amendments.
  The purpose of this group of Amendments is to deal with two particular weaknesses in the Bill, which the right hon. Gentleman and his colleagues have directly admitted. The first concerns the level of the prescribed income. I should like to hear out what was said by the hon. Member for Aylesbury (Mr. Raison). We must get the term "prescribed income" used in Committee, not "makeup level", because everybody will think that they will get £15 if they are a one-child family. We do not want to start people off with a set of illusions.
  The right hon. Gentleman has admitted that he regards these levels as being likely to be amended. The phrase that he used on Second Reading was:
  "Already the earnings on which we have based our figures in the Bill are sharply out of date."
  So the first purpose of the Amendment is to bring those prescribed income levels up to date and, in particular, to allow for the fact that the Government will have to increase supplementary benefit next November, just as the previous Government increased it this November, to keep faith with the usual assumption that people on supplementary benefit shall be enabled to keep abreast of increases in the cost of living.
  The other end or purpose of this group of Amendments is to deal with the major anomaly in the Bill that nothing is done to recognise the fact that many poor families pay exceptionally high rents.
  With his usual frankness, the right hon. Gentleman specifically agreed that this was a weakness of the scheme when, on 10th November, he said:
  "People who pay large rents are not helped by the Bill."—[OFFICIAL REPORT, 10th Nov. 1970; Vol. 806, c. 227–229.]
  The right hon. Gentleman will appreciate that among the poor there are many

  1179
  who pay exceptionally high rents. Therefore, we commend these Amendments to him.
  The purpose behind Amendments Nos. 13 and 15 is to establish, as far as possible, that the prescribed income and the poverty line, as set by supplementary benefit, are one and the same. It is not easy to do this, because the Supplementary Benefits Commission has wide discretionary powers to give special payments in respect of heating, clothing, and certain other needs. We are attempting to reflect what the supplementary benefit will be next November, allowing for the probable increase in the cost of living assesed by many commentators as being between 6 and 8 per cent.
  There is another purpose which is crucial to us. The right hon. Gentleman made it clear on Second Reading that he had not ruled out the possibility of increases in family allowances. We welcome this. However, as the F.I.S. Bill is drafted, no increases in allowances would benefit those covered by the Bill. They would simply lead to further deductions from basic income. The poorest would not be affected by an increase in family allowances on any basis, such as partial claw-back, partial tax regarding family allowances and so on, unless an Amendment like this is passed linking a disregard of family allowances with the amount in the Bill for each child and to establish the prescribed income level.
  This means that any future increase in family allowances would be paid across the board to these families because we are reducing the amount of prescribed income to leave room for family allowances. This is why we set our figure at £16 for the one-child family but reduced the amount for further children from the present £2 to £1 10s. The present family allowance is 18s. for a second child and £1 for the third and subsequent children. This means that, taking present family allowances, the figure would be £ 1 10s. for the first child, £2 8s. for the second and £2 10s. for subsequent children, broadly in line with the supplementary benefit figures, although not so carefully refined from the point of view of ages. It strikes broadly around the middle.
  We are trying to establish a single poverty line. It is important to do this for simplicity and so that we do not see
  1180
  the beginning of the erosion of the line established by the S.B.C. We recognise that the Government have a problem about disincentives and need to taper off the amount given to families. The right hon. Gentleman will appreciate that this tapering needs to be between F.I.S. and other means-tested benefits such as school meals. It does not arise between F.I.S. and supplementary benefit for the reasons he gave on the Clause dealing with women earners choosing between F.I.S. and S.B.C. There is no question of poverty lines overlapping as between F.I.S. and S.B.C., since no one can claim both.
  Let me tell the right hon. Gentleman what we suspect will happen in the next 15 months. The Chancellor has clearly recognised the effects of inflation by increasing the income limits for means-tested national benefits, such as prescription charges and school meals, by 30s. As we know, this was done at the point at which the public statement of the Chancellor was discussed. We know that, at the beginning of October, means-tested benefit orders were being laid which did not include a 30s. increase, and that, by the end of October, there was the Chancellor's statement of the all-round 30s. increase.
  It is reasonable to suppose that supplementary benefit levels will probably rise in line with the increase. If they do not, there will be an unacceptable position. In consequence, supplementary benefits will reflect higher fuel and food prices and higher rents, which are bound to occur as a result of Government policy. On that basis we assume at least a £1 increase in supplementary benefits and possibly more by 1971. Therefore our figures are, broadly speaking, right to allow for that further increase.
  If the right hon. Gentleman does not feel able to increase the income levels even before the scheme comes in, he knows better than I do that the effect will be that many people earning less than supplementary benefit will not be covered by the scheme. They will not get F.I.S. nor will they be able to draw supplementary benefits because they will be at work.
  As an example, at present a family with one child will be entitled to draw F.I.S. if the man's earnings are less than £15 a week although the amount will be small unless his earnings are no

  1181
  more than £12 a week. They will otherwise be of the order of only a few shillings because he gets only 50 per cent of the difference. The point is that the man on F.I.S. is paying heavily for going to work. A man with one child earning £15 a week will be paying 4s. a week income tax, 22s. a week National Insurance and, on the most conservative assumption, perhaps 5s. a week for travel. That is almost certain to be much higher.
  This means that his net income, after stoppages which he cannot prevent because he is working, will be £13 9s. The present level for supplementary benefit is £13 5s. Hon. Gentlemen will discover at every point that the difference between net income after stoppages of a man who is just on the prescribed income level for F.I.S. and that of the man on supplementary benefit grows further apart, and the larger his family is, the greater the gap will become.
  I am still thinking about November, 1970, supplementary benefit rates and August, 1971 F.I.S. rates. I make no assumption about the increase in supplementary benefits. If they are increased, as they should be, to take account of higher prices, by £1 or 30s. for a married couple between November 1970 and November 1971, this Bill will not even deal with many families getting well below supplementary benefit level.
  The other factor, the joker in the pack, is the question of rent. This is why we are trying to deal with the situation. The national difference between supplementary benefit and family income supplement prescribed levels widens the moment there is a rent higher than £2 19s., which is the present supplementary benefit standard assumption and the assumption in the Bill. How many families can hon. Gentlemen opposite think of whose rent is more than £2 19s.? I can think of very many, some in council houses and some in private accommodation, some in furnished accommodation. There are thousands of poor families whose rent is above that level. Yet the effect of the fair rent procedure being extended to council houses, as the Secretary of State for the Environment has said it will be shortly, and the effect of the gradual withdrawal of subsidies, however slowly it starts, will be to make this figure of £2 19s. look even less realistic than it is now.
  Sir K. Joseph:: The whole idea of the arrangement proposed by my right hon. Friend is to see that rent allowances are available to those who are poor, whether they live in public or private housing, except for the relatively small furnished sector.
  Mrs. Williams: I should not have given way to the right hon. Gentleman because I was coming to that point. Both the fair rents procedure and the beginning of the rearrangement about subsidies, which is obviously linked with it, are likely to commence before the new scheme can come in.
  10.45 p.m.
  The Minister said that it would be at least 18 months to two years before the scheme could come in. I therefore want to press my Amendment on the ground that this is an attempt to cover a gap of at least a year—and I am giving this the most favourable possible connotation—between the commencement of the F.I.S. scheme and the commencement of any housing scheme that will benefit people in this group.
  The right hon. Gentleman's concern should, I think, be greater than mine, because he is concerned about the Bill not being seen to be a mockery when it starts. We, the Opposition, are not so concerned about that. From the right hon. Gentleman's point of view we are generously offering him an Amendment which will cover a situation which will give rise to anomalies and injustices with which he will find it exceedingly difficult to cope.
  I hope that we can get from the right hon. Gentleman some sort of assurance about the levels at which the provisions in the Bill will commence. In the last three months—that is to say July, August and September—according to official figures, there has been an increase in the cost of living of 1·1 per cent. This assumes about 4½ per cent. over a 12-month period if nothing gets worse. We have had an increase in fares of 3s. in the pound in the London area, which makes my assumption about working expenses look extremely modest.
  I do not want to embarrass the right hon. Gentleman, but I must say that it is not beyond the bounds of possibility that some time between August, 1971, and August, 1972, there will be an increase in

  1183
  employees' contributions for National Insurance purposes, which will mean a further deduction before we reach the figure for net income from prescribed income, so that the gap will be even wider between F.I.S. supplement and supplementary benefit supplement.
  In the light of all that, I suspect that the right hon. Gentleman's figures are, to put it conservatively, at least £1 out, or to put it pessimistically, more like 30s. out, and I urge him to consider accepting the Amendments, bearing in mind that one of them attempts to deal with the serious anomalies about rents which will dog the Bill for the first two years that it is in operation.
  The Chairman: Order. I remind the Committee that with this Amendment we are discussing Amendments Nos. 15, 16 and 17.
  Mr. McNamara: I shall be brief, because time is getting on, and some of the points made by my hon. Friend the Member for Oldham, West (Mr. Meacher) have been answered by the Under-Secretary of State.
  When I put down my Amendment I made an error in the scales. It refers to the scales in operation a fortnight ago, and not to those in operation now, but that is of little significance, because the right hon. Gentleman has admitted that he has been working on figures which are two years old.
  The purpose of my Amendment is to try to bring a little consistency and equity into the system of allowances. Earlier my hon. Friend referred to the number of means tests that are available. Yesterday I telephoned around the various departments in my locality and asked whether, without putting themselves out, they could forward to me at the House the various types of means tests that are applied in respect of school meals, rent and rate rebates, and so on. I gather that at least 14 different types of means tests can be applied without difficulty in the City of Hull. That was just scratching the surface, for these are many more.
  I do not know what the tests do to those who apply for benefit, but, by God, they frighten me, to paraphrase the noble Duke. The scheme introduces another means test. I should like to know why
  1184
  the Government cannot use a commonly accepted means test, that used by the Supplementary Benefits Commission.
  In choosing the figure of £2 for children of all ages right through the scale, the Government have been completely arbitrary and have failed to recognise that the demands of children as they grow increase rather than diminish, that after parents have got over the initial expense of the first child—and on this occasion a benefit is provided in respect of the first child—expenses become greater as children grow, as they become school children and then teenagers. The Supplementary Benefits Commission recognises that by its escalating scale of benefits.
  Because of the lateness of the hour, my speech, which I had timed to last one-and-a-half hours, I have kept briefly to two points. I know that there are many comments which may be made about the Amendments and I was prepared to meet them, but I have confined myself to asking why the Government have not used an existing means test and why they have not used an escalating scale rising with increasing age of children rather than a fixed sum.
  Mr. Michael Barnes: A few more words need to be said about Amendment No. 17 which seeks to do something about rent. A scheme of this kind, prescribing amounts up to which benefits are paid, cannot possibly function effectively unless it takes account of rent levels. In big cities such as London it is possible for families with good wages to be living in poverty because of the rent. This is particularly so with families which have recently moved to London, or with couples who have recently married. They are not able to buy their homes because they do not have the money to do so, and they have not yet accumulated sufficient points to be rehoused by the local authorities. If there are children, such families are pushed into substandard accommodation, unhealthy, damp basements and so on, or into accommodation which is too expensive for their income, and in those circumstances rent may be a major factor in causing poverty.
  This can be the case even with families with average wages when there are three or four children. It is possible in London for such a family to be paying £8 or £9

  1185
  a week for a private flat, or about one-third of its income. The rent and fuel bills have to be paid and it is expenditure on children's clothing and children's food which has to be cut, where the economies have to be made.
  I have referred to families on an average wage, but the Bill will do nothing for such families, because they will be earning too much. The scope of the Bill is such that a family with four children will need to earn only £18 a week, excluding family allowances, before it is taken out of the scheme.
  Earlier, the Secretary of State spoke of his scheme as helping the poorest of the poor—"and, mercifully", he said, "they are few". They are few because the Bill sets its sights so incredibly and so pathetically low. In fact, there are millions living in poverty who will continue to live in poverty and not be covered by the Bill at all. I am glad that we have now reached a point of major disagreement. It is about time such a point was reached. There has been a good deal of attempt earlier in the debate to modify and improve the Bill, and it seems to me that some of my hon. Friends feel that, if a Bill pays some money to some families who need it badly, that is a reason for not voting against it. But I believe that the Bill, with its miserable benefits under the present Clause, is not in the long-term interests of the poor. It will be looked upon in future years as a retrograde step in our social security legislation.
  The right hon. Gentleman and my hon. Friend the Member for Hitchin (Mrs. Shirley Williams) referred to the rent rebate scheme announced by the Secretary of State for the Environment which is to be introduced in two or three years. It will not cover families living in furnished accommodation. What estimate has the right hon. Gentleman of the numbers who will qualify for help who are living in furnished accommodation at present? I suspect that the figure is much larger than many people realise.
  There is a tendency for hon. Members opposite to think that furnished accommodation is not the permanent home, that the people living there must be just passing through, in some sense, passing through London, or moving between jobs. In fact, for many people, particularly in
  1186
  the big cities furnished accommodation is their permanent home. The irony is that in many cases such furnished accommodation may not be furnished and would not meet the legal test of what is a furnished flat. Landlords let it as furnished or partly furnished in order to get round the Rent Acts.
  Unless rents are taken into account in a scheme like this, it will be absolutely useless. It is essential that, in the two or three years before the comprehensive rent rebate scheme comes in, something be done not only for tenants of private unfurnished accommodation but for tenants of furnished accommodation, too. Furnished accomodation now is the worst buy on the market for people with low incomes. Shelter did a survey recently which showed that for people living in furnished accommodation with incomes of up to £20 a week it was not uncommon for the rent to be as high as half the family income in some cases, and in no case less than a quarter.
  I am glad that we have now, towards the end of today's debate, reached a point of major disagreement. The miserable benefits built into this scheme, with no provision to tie them to average earnings, as my hon. Friend the Member for Oldham, West (Mr. Meacher) wanted, and its failure to make adequate provision for the amount of rent which people have to pay, will make it a useless scheme.
  11.0 p.m.
  The Under-Secretary of State for Health and Social Security (Mr. Paul Dean): By moving the Amendment to increase the prescribed amount, the hon. Member for Hitchin (Mrs. Williams) is asking us to do what there is already power in the Bill to do by regulation when we have more up-to-date figures. There is very little difference between us on this. I do not dispute that the figures which she suggested may be right. But rather than write in figures now which may or may not be right in the light of the latest possible information, surely it is much better to use the power in regulations when we have the most up-to-date information on earnings and tax thresholds. I argue, not that the hon. Lady's figures may not be right, but merely that it would be better to wait until we have more up-to-date information.

  1187
  The hon. Member for Kingston-upon-Hull, North (Mr. McNamara) has taken out-of-date supplementary benefit figures in speaking to his Amendment with regard to different levels for children of different ages. As a result, his proposal would be less generous than the average £2 figure in the prescribed amount in the Bill. I am sure that he does not intend that.
  Mr. McNamara: I am sorry that I did not command the complete attention of the Committee, because I made that specific point. But I thought that if my figures were only two weeks old and the figures the Secretary of State used to introduce the Bill were two years old he could not complain. If the hon. Gentleman will accept the principle of my Amendment, I am willing to withdraw it and we can talk about appropriate figures on Report.
  Mr. Dean: I was going on to say that even if the hon. Gentleman had had up-to-date figures, although in some cases families would admittedly be better off, in others they would be worse off. I do not think that that is the effect that he wants.
  The main part of the debate has centred on the point made in the speeches about rents. My right hon. Friend has admitted right from the beginning that in order to have the simplest possible scheme, which can be put into operation at the earliest possible moment, we have taken an average figure; we have taken for the prescribed amount an average housing cost of £2 10s. a week. There are some below that and some above. We have never attempted to disguise from the Committee, and we do not do so now, that there will be some families whose rent costs are higher than that. This is the significance of the scheme which my right hon. Friend the Secretary of State for the Environment announced the other week. To try to introduce such a scheme into this Bill would enormously complicate the operation. It would certainly make it impossible to keep to the date of operation of
  the scheme for which we are aiming—next August. That would be a serious disadvantage.
  It comes a little ill from hon. Members opposite to criticise us in this regard when this is the first time that any Government have tackled this problem, particularly with regard to families in poverty. Many of them are living in privately-owned accommodation. It comes very ill from hon. Gentlemen opposite to criticise us because there are still some months to go before a scheme which will go a long way to solving this problem is introduced. My right hon. Friend the Secretary of State for the Environment has produced the scheme extremely fast in the lifetime of this Government. It will deal with this problem. To try to deal with it in the Bill would not be appropriate. That would make it immensely more complicated and threaten the starting date of next August, which I believe both sides of the Committee wish to see effective.
  Mr. McNamara: Despite the fact that the Under-Secretary did not listen to what I said—he answered neither my point concerning a sliding scale nor my question about the reason for a new means test—and because, if I persisted, I might spoil voting arrangements later, I beg to ask leave to withdraw my Amendment.
  The Chairman: The hon. Member's Amendment is not yet before the Committee.
  Mrs. Shirley Williams: May I make it quite clear that while the Under-Secretary may feel that both the Family Income Supplements Bill and his right hon. Friend's proposals for rents solve the problem, it is the view of this side of the Committee that they would solve it in totally the wrong way. I must, therefore, advise my right hon. and hon. Friends to vote against the Government on this occasion.
  Question put, That the Amendment be made:—
  The Committee divided: Ayes 126, Noes 161.

  Division No. 23.]

  AYES

  [11.6 p.m.

  Allaun, Frank (Salford, E.)

  Ashton, Joe

  Barnett, Joel

  Archer, Peter (Rowley Regis)

  Atkinson, Norman

  Baxter, William

  Armstrong, Ernest

  Barnes, Michael

  Beaney, Alan

  Bennett, James (Glasgow, Bridgeton)

  Hughes, Roy (Newport)

  Palmer, Arthur

  Booth, Albert

  Hunter, Adam

  Pardoe, John

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

  Jenkins, Hugh (Putney)

  Pavitt, Laurence

  Buchan, Norman

  John, Brynmor

  Pendry, Tom

  Carmichael, Neil

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

  Pentland, Norman

  Clark, David (Colne Valley)

  Johnson, Walter (Derby, S.)

  Perry, Ernest G. (Battersea, S.)

  Cocks, Michael (Bristol, S.)

  Jones, Barry (Flint, E.)

  Prescott, John

  Cohen, Stanley

  Jones, T. Alec (Rhondda, W.)

  Rees, Merlyn (Leeds, S.)

  Concannon, J. D.

  Kaufman, Gerald

  Rhodes, Geoffrey

  Cunningham, George (Islington, S. W.)

  Kerr, Russell

  Roberts, Rt. Hn. Goronwy (C'n'von)

  Dalyell, Tam

  Kinnock, Neil

  Roderick, Caerwyn E.

  Davies, G. Elfed (Rhondda, E.)

  Lambie, David

  Roper, John

  Davies, Ifor (Gower)

  Lawson, George

  Ross, Rt. Hn. William (Kilmarnock)

  Deakins, Eric

  Leadbitter, Ted

  Sheldon, Robert (Ashton-under-Lyne)

  Dempsey, James

  Lestor, Miss Joan

  Silkin, Hn. S. C. (Dulwich)

  Douglas, Dick

  Lomas, Kenneth

  Sillars, James

  Duffy, A. E. P.

  Loughlin, Charles

  Skinner, Dennis

  Eadie, Alex

  Lyons, Edward (Bradford, E.)

  Spearing, Nigel

  Edwards, Robert (Bilston)

  McBride, Neil

  Spriggs, Leslie

  Edwards, William (Merioneth)

  McCann, John

  Stallard, A. W.

  Ellis, Tom

  McCartney, Hugh

  Stoddart, David (Swindon)

  English, Michael

  McElhone, Frank

  Strang, Gavin

  Evans, Fred

  McGuire, Michael

  Taverne, Dick

  Fisher, Mrs. Doris (B'ham, L'wood)

  Mackenzie, Gregor

  Thomas, Jeffrey (Abertillery)

  Fitch, Alan (Wigan)

  McMillan, Tom (Glasgow, C.)

  Thomson, Rt. Hn. George (Dundee, E.)

  Fletcher, Ted (Darlington)

  McNamara, J. Kevin

  Torney, Tom

  Ford, Ben

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

  Tuck, Raphael

  Fraser, John (Norwood)

  Mason, Rt. Hn. Roy

  Urwin, T. w.

  Golding, John

  Meacher, Michael

  Varley, Eric G.

  Mellish, Rt. Hn. Robert

  Walker, Harold (Doncaster)

  Grant, George (Morpeth)

  Mikardo, Ian

  Watkins, David

  Grant, John D. (Islington, E.)

  Morgan, Elystan (Cardiganshire)

  Wellbeloved, James

  Griffiths, Eddie (Brightside)

  Morris, Alfred (Wythenshawe)

  White, James (Glasgow, Pollok)

  Hamilton, James (Bothwell)

  Morris, Charles R. (Openshaw)

  Whitehead, Phillip

  Hamling, William

  Moyle, Roland

  Williams, Mrs. Shirley (Hitchin)

  Hannan, William (G'gow, Maryhill)

  Murray, Ronald King

  Wilson, Alexander (Hamilton)

  Hardy, Peter

  O'Halloran, Michael

  Harrison, Walter (Wakefield)

  O'Malley, Brian

  TELLERS FOR THE AYES:

  Heffer, Eric S.

  Orme, Stanley

  Mr. Joseph Harper and

  Horam, John

  Oswald, Thomas

  Mr. Kenneth Marks.

  Hughes, Robert (Aberdeen, N.)

  Padley, Walter

  NOES

  Adley, Robert

  Fisher, Nigel (Surbiton)

  King, Tom (Bridgwater)

  Alison, Michael (Barkston Ash)

  Fookes, Miss Janet

  Kinsey, Joseph

  Atkins, Humphrey

  Fowler, P. N.

  Knox, David

  Baker, W. H. K. (Banff)

  Fox, J. Marcus

  Lane, David

  Bennett, Dr. Reginald (Gosport)

  Fry, Peter

  Legge-Bourke, Sir Harry

  Benyon, W. R.

  Gibson-Watt, David

  Le Marchant, Spencer

  Biffen, John

  Gilmour, Sir John (Fife, E.)

  Loveridge, John

  Biggs-Davison, John

  Glyn, Dr. Alan

  MacArthur, Ian

  Blaker, Peter

  Goodhew, Victor

  McLaren, Martin

  Boardman, Tom (Leicester, S.W.)

  Gorst, John

  Macmillan, Maurice (Farnham)

  Boscawen, R. T.

  Gower, Raymond

  McNair-Wilson, Michael (W'stow, E.)

  Bossom, Sir Clive

  Grant, Anthony (Harrow, C.)

  McNair Wilson, Patrick (New Forest)

  Boyd-Carpenter, Rt. Hn. John

  Gray, Hamish

  Maddan, Martin

  Bray, Ronald

  Green, Alan

  Madel, David

  Brewis, John

  Griffiths, Eldon (Bury St. Edmunds)

  Mawby, Ray

  Brown, Sir Edward (Bath)

  Gummer, Selwyn

  Maxwell-Hyslop, R. J.

  Buchanan-Smith, Alick

  Hall, John (Wycombe)

  Meyer, Sir Anthony

  Butler, Adam (Bosworth)

  Hall-Davis, A. G. F.

  Mills, Peter (Torrington)

  Chapman, Sydney

  Hannam, John (Exeter)

  Miscampbell, Norman

  Chataway, Rt. Hn. Christopher

  Harrison, Col. Sir Harwood (Eye)

  Mitchell, Lt-Col. Colin (Aberd'sh'e, W.)

  Churchill, W. S.

  Haselhurst, Alan

  Mitchell, David (Basingstoke)

  Clarke, Kenneth (Rushcliffe)

  Hawkins, Paul

  Moate, Roger

  Clegg, Walter

  Hayhoe, Barney

  Molyneaux, James

  Cockerram, Eric

  Hicks, Robert

  Money, Ernie

  Cooke, Robert

  Hill, James (Southampton, Test)

  Monks, Mrs. Connie

  Coombs, Derek

  Holland, Philip

  Monro, Hector

  Cooper, A. E.

  Holt, Miss Mary

  Montgomery, Fergus

  Cormack, Patrick

  Hornsby-Smith, Rt. Hn. Dame P.

  More, Jasper

  Critchley, Julian

  Howell, David (Guildford)

  Morgan, Geraint (Denbigh)

  Crouch, David

  Howell, Ralph (Norfolk, N.)

  Morrison, Charles (Devizes)

  Curran, Charles

  Hutchison, Michael Clark

  Mudd, David

  d'Avigdor-Goldsmid, Maj.-Gen. Jack

  James, David

  Murton, Oscar

  Dean, Paul

  Jenkin, Patrick (Woodford)

  Nabarro, Sir Gerald

  Deedes, Rt. Hn. W. F.

  Jessel, Toby

  Neave, Airey

  Drayson, G. B.

  Jopling, Michael

  Normanton, Tom

  Elliot, Capt. Walter (Carshalton)

  Joseph, Rt. Hn. Sir Keith

  Oppenheim, Mrs. Sally

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

  Kellet, Mrs. Elaine

  Osborn, John

  Eyre, Reginald

  Kershaw, Anthony

  Owen, Idris (Stockport, N.)

  Farr, John

  Kilfedder, James A.

  Page, Graham (Crosby)

  Fenner, Mrs. Peggy

  King, Evelyn (Dorset, S.)

  Pink, R. Bonner

  1190

  1191

  Pounder, Rafton

  Spence, John

  Waddington, David

  Powell, Rt. Hn. J. Enoch

  Sproat, Iain

  Walder, David (Clitheroe)

  Pym, Rt. Hn. Francis

  Stanbrook, Ivor

  Wall, Patrick

  Redmond, Robert

  Stewart-Smith, D. G.

  Ward, Dame Irene

  Reed, Laurance (Bolton, East)

  Stoddart-Scott, Col. Sir M.

  Warren, K.

  Rees, Peter (Dover)

  Stokes, John

  Weatherill, Bernard

  Rees-Davies, W. R.

  Sutcliffe, John

  White, Roger (Gravesend)

  Rossi, Hugh (Hornsey)

  Taylor, Frank (Moss Side)

  Wiggin, Jerry

  Rost, Peter (Derbyshire, S. E.)

  Tebbit, Norman

  Wilkinson, John

  Scott, Nicholas

  Thatcher, Rt. Hn. Mrs. Margaret

  Wolrige-Gordon, Patrick

  Sharples, Richard

  Thomas, John Stradling (Monmouth)

  Woodhouse, Hn. Christopher

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

  Thompson, Sir Richard (Croydon, S.)

  Shelton, William J. (Clapham)

  Tugendhat, Christopher

  TELLERS FOR THE NOES:

  Simeons, Charles

  Turton, Rt. Hn. R. H.

  Mr. Tim Fortescue and

  Soref, Harold

  Vaughan, Dr. Gerard

  Mr. Keith Speed.

  Amendment No. 17 proposed, in page 1, line 25, at end insert:
  'and
  (c) the amount by which the rent or rent and rates (as the case may be) paid or payable for the accommodation of the said family exceeds £3 per week, so however that such amount shall not exceed £2 or such higher amount as in the circumstances
  of the case may be approved by the Supplementary Benefits Commission'.—[Mrs. Shirley Williams.]
  Question put. That the Amendment be made:—
  The Committee divided: Ayes 126, Noes 162.

  Division No. 24.]

  AYES

  [11.15 p.m.

  Allaun, Frank (Salford, E.)

  Hardy, Peter

  Orme, Stanley

  Archer, Peter (Rowley Regis)

  Harrison, Walter (Wakefield)

  Oswald, Thomas

  Armstrong, Ernest

  Heffer, Eric S.

  Padley, Walter

  Ashton, Jos

  Horam, John

  Palmer, Arthur

  Atkinson, Norman

  Hughes, Robert (Aberdeen, N.)

  Pardoe, John

  Barnes, Michael

  Hughes, Roy (Newport)

  Pavitt, Laurence

  Barnett, Joel

  Hunter, Adam

  Pendry, Tom

  Baxter, William

  Jenkins, Hugh (Putney)

  Pentland, Norman

  Beaney, Alan

  John, Brynmor

  Perry, Ernest G. (Battersea, S.)

  Bennett, James (Glasgow, Bridgeton)

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

  Prescott, John

  Booth, Albert

  Johnson, Walter (Derby, S.)

  Rees, Merlyn (Leeds, S.)

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

  Jones, Barry (Flint, E.)

  Rhodes, Geoffrey

  Buchan, Norman

  Jones, T. Alec (Rhondda, W.)

  Roberts, Rt. Hn. Goronwy (Caernarvon)

  Carmichael, Neil

  Kaufman, Gerald

  Roderick, Caerwyn E.

  Clark, David (Colne Valley)

  Kerr, Russell

  Roper, John

  Cocks, Michael (Bristol, S.)

  Kinnock, Neil

  Ross, Rt. Hn. William (Kilmarnock)

  Cohen, Stanley

  Lambie, David

  Sheldon, Robert (Ashton-under-Lyne)

  Concannon, J. D.

  Lawson, George

  Silkin, Hn. S. C. (Dulwich)

  Cunningham, C. (Islington, S. W.)

  Leadbitter, Ted

  Sillars, James

  Dalyell, Tam

  Lestor, Miss Joan

  Skinner, Dennis

  Davies, G. Elfed (Rhondda, E.)

  Lomas, Kenneth

  Spearing, Nigel

  Davies, Ifor (Gower)

  Loughlin, Charles

  Spriggs, Leslie

  Deakins, Eric

  Lyons, Edward (Bradford, E.)

  Stallard, A. W.

  Dempsey, James

  McBride, Neil

  Stoddart, David (Swindon)

  Douglas, Dick

  McCann, John

  Strang, Gavin

  Duffy, A. E. P.

  McCartney, Hugh

  Taverne, Dick

  Eadie, Alex

  McElhone, Frank

  Thomas, Jeffrey (Abertillery)

  Edwards, Robert (Bilston)

  McGuire, Michael

  Thomson, Rt. Hn. George (Dundee, E.)

  Edwards, William (Merioneth)

  Mackenzie, Gregor

  Torney, Tom

  Ellis, Tom

  McMillan, Tom (Glasgow, C.)

  Tuck, Raphael

  English, Michael

  McNamara, J. Kevin

  Urwin, T. W.

  Evans, Fred

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

  Varley, Eric G.

  Fisher, Mrs. Doris (B'ham, L'wood)

  Mason, Rt. Hn. Roy

  Walker, Harold (Doncaster)

  Fitch, Alan (Wigan)

  Meacher, Michael

  Watkins, David

  Fletcher, Ted (Darlington)

  McIlish, Rt. Hn. Robert

  Wellbeloved, James

  Ford, Ben

  Mikardo, Ian

  White, James (Glasgow, Pollok)

  Fraser, John (Norwood)

  Morgan, Elystan (Cardiganshire)

  Whitehead, Phillip

  Golding, John

  Morris, Alfred (Wythenshawe)

  Williams, Mrs. Shirley (Hitchin)

  Grant, George (Morpeth)

  Morris, Charles R. (Openshaw)

  Wilson, Alexander (Hamilton)

  Grant, John D. (Islington, E.)

  Moyle, Roland

  Griffiths, Eddie (Brightside)

  Murray, Ronald King

  TELLERS FOR THE AYES:

  Hamilton, James (Bothwell)

  O'Halloran, Michael

  Mr. Joseph Harper and

  Hamling, William

  O'Malley, Brian

  Mr. Kenneth Marks.

  Hannan, William (G'gow, Maryhill)

  NOES

  Adley, Robert

  Bennett, Dr. Reginald (Gosport)

  Boardman, Tom (Leicester, S. W.)

  Alison, Michael (Barkston Ash)

  Benyon, W. R.

  Boscawen, Hn. R. T.

  Atkins, Humphrey

  Biffen, John

  Bossom, Sir Clive

  Baker, W. H. K. (Banff)

  Biggs-Davison, John

  Boyd-Carpenter, Rt. Hn. John

  Bennett, Sir Frederic (Torquay)

  Blaker, Peter

  Bray, Ronald

  Brewis, John

  Holland, Philip

  Oppenheim, Mrs. Sally

  Brown, Sir Edward (Bath)

  Holt, Miss Mary

  Osborn, John

  Buchanan-Smith, Alick

  Hornsby-Smith, Rt. Hn. Dame P.

  Owen, Idris (Stockport, N.)

  Butler, Adam (Bosworth)

  Howell, David (Guildford)

  Page Graham (Crosby)

  Chapman, Sydney

  Howell, Ralph (Norfolk, N.)

  Pink, R. Bonner

  Chataway, Rt. Hn. Christopher

  Hutchison, Michael Clark

  Pounder, Rafton

  Churchill, W. S.

  James, David

  Powell, Rt. Hn. J. Enoch

  Clarke, Kenneth (Rushcliffe)

  Jenkin, Patrick (Woodford)

  Pym, Rt. Hn. Francis

  Clegg, Walter

  Jessel, Toby

  Redmond, Robert

  Cockeram, Eric

  Jopling, Michael

  Reed, Laurance (Bolton, E.)

  Cooke, Robert

  Joseph, Rt. Hn. Sir Keith

  Rees, Peter (Dover)

  Coombs, Derek

  Kellett, Mrs. Elaine

  Rees-Davies, W. R.

  Cooper, A. E.

  Kershaw, Anthony

  Rossi, Hugh (Hornsey)

  Cormack, Patrick

  Kilfedder, James A.

  Rost, Peter

  Critchley, Julian

  King, Evelyn (Dorset, S.)

  Scott, Nicholas

  Crouch, David

  King, Tom (Bridgwater)

  Sharples, Richard

  Curran, Charles

  Kinsey, Joseph

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

  d'Avigdor-Goldsmid, Maj.-Gen. Jack

  Knox, David

  Shelton, William J. (Clapham)

  Dean, Paul

  Lane, David

  Simeons, Charles

  Deedes, Rt. Hn. W. F.

  Legge-Bourke, Sir Harry

  Soref, Harold

  Drayson, G. B.

  Le Marchant, Spencer

  Spence, John

  Elliot, Capt. Walter (Carshalton)

  Loveridge, John

  Sproat, Iain

  Elliott, R. W. (N'c'le-u-Tyne, N.)

  MacArthur, Ian

  Stanbrook, Ivor

  Eyre, Reginald

  McLaren, Martin

  Stewart-Smith, D. G.

  Farr, John

  Macmillan, Maurice (Farnham)

  Stoddart-Scott, Col. Sir Malcolm

  Fenner, Mrs. Peggy

  McNair-Wilson, Michael (W'th'st'w, E)

  Stokes, John

  Fisher, Nigel (Surbiton)

  McNair-Wilson, Patrick (N. Forest)

  Sutcliffe, John

  Fookes, Miss Janet

  Maddan, Martin

  Taylor, Frank (Moss Side)

  Fowler, P. N.

  Madel, David

  Tebbit, Norman

  Fox, J. Marcus

  Mawby, Ray

  Thatcher, Rt. Hn. Mrs. Margaret

  Fry, Peter

  Maxwell-Hyslop, R. J.

  Thomas, John Stradling (Monmouth)

  Gibson-Watt, David

  Meyer, Sir Anthony

  Thompson, Sir Richard (Croydon, S.)

  Gilmour, Sir John (Fife, E.)

  Mills, Peter (Torrington)

  Tugendhat, Christopher

  Glyn, Dr. Alan

  Miscampbell, Norman

  Turton, Rt. Hn. R. H.

  Goodhew, Victor

  Mitchell, David (Basingstoke)

  Vaughan, Dr. G. F. Gerard

  Gorst, John

  Mitcholl, Lt.-Col. Colin (Aber'sh'e, W.)

  Waddington, David

  Gower, Raymond

  Moate, Roger

  Walder, David (Clitheroe)

  Grant, Anthony (Harrow, C.)

  Molyneaux, James

  Wall, Patrick

  Gray, Hamish

  Money, Ernle

  Ward, Dame Irene

  Green, Alan

  Monks, Mrs. Connie

  Warren, K.

  Griffiths, Eldon (Bury St. Edmunds)

  Monro, Hector

  Weatherill, Bernard

  Gummer, Selwyn

  Montgomery, Fergus

  White, Roger (Gravesend)

  Hall, John (Wycombe)

  More, Jasper

  Wiggin, Jerry

  Hall-Davis, A. G. F.

  Morgan, Geraint (Denbigh)

  Wilkinson, John

  Hannam, John (Exeter)

  Morrison, Charles (Devizes)

  Wolrige-Gordon, Patrick

  Harrison, Col. Sir Harwood (Eye)

  Mudd, David

  Woodhouse, Hn. Christopher

  Haselhurst, Alan

  Murton, Oscar

  Hawkins, Paul

  Nabarro, Sir Gerald

  TELLERS FOR THE NOES:

  Hayhoe, Barney

  Neave, Airey

  Mr. Tim Fortescue and

  Hicks, Robert

  Normanton, Tom

  Mr. Keith Speed.

  Hill, James (Southampton, Test)

  Sir K. Joseph:: I beg to move,
  That the Chairman do report Progress and ask leave to sit again.
  We have had a useful four hours on the Bill and, although we have not got quite as far through it as I had hoped, we have dealt with the meat of two of the main Clauses. The Opposition have given strong evidence of having done their homework; they have been defeated a couple of times but have had one Amendment accepted by the Government.
  We have had a useful exchange of views on the Bill, and the Government have undertaken to look at several points which have been raised. If the Motion is accepted, I hope that we shall make even better progress tomorrow.
  Question put and agreed to.
  Committee report Progress; to sit again Tomorrow.

  ABATTOIR, MANCHESTER
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Humphrey Atkins.]
  11.25 p.m.
  Mr. Charles R. Morris: I am grateful to have the opportunity to raise tonight an issue which is giving rise to concern, even to alarm, among responsible civic leaders and citizens in the City of Manchester.
  It is perhaps tragic that within the short space of four years since 1966 when the new abattoir was built—I should explain that the abattoir is in my constituency of Openshaw—it should be lying like an albatross around the shoulders of Manchester's ratepayers. The full extent of the financial burden carried by the ratepayers in the City of Manchester

  1195
  can be seen by examining the latest figures of capital outlay for the building of the abattoir, which was £4,160,000, and the present estimated deficit for the current year of £418,000. Disregarding the figure for capital outlay, it means that the Manchester abattoir is at present costing the ratepayers more than £1,000 per day. As for the capital outlay, one need not exercise one's imagination to realise just how much more could have been done with £4,160,000 to improve community life in the City of Manchester had they decided not to build an abattoir.
  Following his meeting on 2nd September with representatives of the Manchester City Council and the National Association of British Market Authorities, the Minister will be aware of just how critically Manchester's distinguished Director of Markets and the Chairman of the Manchester Corporation Markets Committee view their present plight. But it will help my presentation of the case if we first look, briefly perhaps, at some of the factors which influenced the Manchester Corporation's decision to go ahead with the building of the new abattoir and highlight the development of policies which in effect have inhibited the Manchester Markets Department in realising the throughput and financial returns on which their original plans were based.
  As the Parliamentary Secretary is aware, the abattoir was built to replace the Water Street Meat Market and Slaughterhouse which had been in existence since 1872. I should perhaps emphasise that there was no legal obligation on the Manchester Corporation to build the new abattoir—no obligation whatsoever; it was simply a desire to improve the slaughtering facilities and the standard of hygiene in the city's existing abattoir. The new abattoir was built in the belief that it would meet the slaughtering and meat processing needs for a sub-region covering an area of some 20 to 30 miles radius of the city. It was built with the full knowledge and approval and the positive encouragement of the Ministry of Agriculture.
  How well Manchester built can be gauged by the fact that it is the largest and most technologically advanced abattoir in Europe. It is the only abattoir
  1196
  in this country of the standard required by the United States authorities for the export of meat to that country and one of the few abattoirs approved for the export of meat to the Common Market countries.
  What Manchester Corporation and the City Council did not know when they sought to provide an abattoir for the subregion of Manchester and its environs was that the same Ministry which had encouraged them to meet this need would continue to approve the establishment of new private slaughterhouses or material extensions to existing slaughterhouses. Nor were they aware that the agreement entered into with the then Government of Eire would in practice prove to be an incentive for the Irish producer to export meat to this country in carcase rather than on the hoof.
  The consequences of these policies pursued by the Ministry have produced a situation whereby Manchester's envisaged throughput capacity of 225,000 cattle units slumped in the year ending March, 1970, to only 95,000 cattle units, with a hoped-for slight improvement to 105,000 cattle units for the current year. That gives an indication of the extent of the under-used capacity available at the Manchester abattoir. It is time that the Ministry called a halt to the creation of additional private slaughtering capacity, at a time when there is so much under-used capacity in abattoirs such as ours in Manchester.
  I know that the Parliamentary Secretary realises that this problem is not peculiar to Manchester, and that Cardiff, Glasgow, Sheffield, Blackburn, Bradford, Newcastle-on-Tyne and many other cities are or will be similarly affected.
  Mr. Alfred Morris: My hon. Friend the Member for Manchester, Openshaw (Mr. Charles Morris) is far too modest. He referred to the fact that the abattoir is in his constituency in Manchester, but I hope that he will agree that it is necessary to emphasise that this is very much a national problem as well as a problem which seriously affects the City of Manchester.
  Mr. Charles R. Morris: I am grateful for that intervention. I assure the Parliamentary Secretary that he is not the victim of a family conspiracy.

  1197
  I express the hope that the Parliamentary Secretary will say that the Government will not remain deaf to the pleas of the ratepayers in the cities to which I referred or to those who have made submissions on behalf of the National Association of British Market Authorities. I emphasise that they do not seek to be baled out indefinitely but ask that the financial load that they are being obliged to carry in providing for the needs of their communities should be shared by the Government at least over a period of three to five years to ease them through the critical situation that they now face as a result of policies for which they are in no way responsible.
  I invite the Minister to come to Manchester to see for himself the problem that exists. Will he undertake to look urgently at the question of a short-term subsidy for municipal abattoirs? I should like to impress upon the Minister that local authorities, such as Manchester, have reached crisis point concerning the financing of abattoir facilities. Our deficits are now out of all proportion to funds which can reasonably be made available to meet them, and they are escalating yearly.
  Action is imperative. The Government can go on ignoring this problem. The alternatives facing authorities, such as Manchester, regarding the continuance of abattoir facilities will be extremely grave not only for the corporations and city councils but for the communities which they serve.
  Manchester could continue to operate the abattoir as at present in the hope of ultimate improvements; it could curtail the services at the abattoir; it could close the abattoir and leave the traders to make other arrangements. Finally, it could let the abattoir to the traders at a nominal rent.
  Regardless of these available alternatives, I want to conclude by impressing upon the Minister the magnitude of the financial problem facing Manchester and other marketing authorities in the provision of abattoir facilities. I hope that the Minister will give this problem his close and serious attention.
  11.37 p.m.
  The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. Anthony Stodart): I thought
  1198
  that the hon. Member for Manchester, Openshaw (Mr. Charles R. Morris) made the under-statement of the evening when he described his hon. Friend the Member for Manchester, Wythenshawe (Mr. Alfred Morris) as his hon. Friend. I think that he is, in fact, something closer to him.
  I am glad to see both hon. Gentlemen here this evening. I hope that they will accept my sincerity when I thank the hon. Member for Manchester, Openshaw for raising a subject which I agree is not a local but a national issue and which was presented generally to me with what I thought, and said at the time, was outstanding competence by a delegation which came to see me some weeks ago. Moreover, the hon. Gentleman will realise that he is raising this subject at an inconvenient hour. Those of us who attend Adjournment debates are quite sensitive about this point.
  I welcome the opportunity of reminding hon. Gentlemen opposite and the House of the background to this problem. The hon. Member for Manchester, Openshaw said—and I agree, because in this he is factually entirely accurate—that Manchester has run a public slaughterhouse for a very long time now; and before 1950 it became clear that the old premises at Water Street no longer met the needs of modern times. Therefore, plans went forward for a new abattoir, wholesale meat market and cold store, but building work did not start until 1961.
  When the corporation decided to go ahead it knew—let us be fair about this—of the change of policy which had been announced by the Government in a Paper in 1956. This made it clear that the policy of moderate concentration of slaughtering facilities by central planning, which had until then been the accepted aim, was to be dropped. Instead, the idea was that after a limited period, during which traders were to be free to provide slaughterhouses to suit the needs of their individual businesses, there should be a measure of control through the licensing of future undertakings.
  The Ministry did not encourage the Manchester authorities to concentrate slaughtering for this huge area in one centre. It is true—I accept this at once—that we were asked for some technical

  1199
  advice, but we were not consulted upon the size of the project before the general scheme was accepted.
  It is important that I should make it clear that the Minister has no direct control over the provision of slaughterhouses by local authorities.
  Manchester decided to promote a Private Bill and the subsequent Act in 1954 made it possible for it to build a new slaughterhouse, meat market and cold store to replace its old premises, and to borrow £2·5 million for it. As I have said, building did not start for a number of years, not until 1961, and as a result of rising expenses and some misfortune the Corporation was ultimately faced with a cost of £4 million.
  The slaughterhouse now provides facilities sufficient to cope with the needs of 1¾ million people—the whole of the Manchester conurbation. Certainly it was recognised as being one of the best-designed and equipped slaughterhouses of its time and it still is the largest and one of the finest in the country. Of that there is no doubt.
  Mr. Alfred Morris: Is it not the case that Manchester built this abbatoir at least with the expectation, if not the explicit understanding, that it would serve a much wider area than the City of Manchester? Is it not the case that instead of an abbatoir we now have an albatross?
  Mr. Stodart: I will come to that point later.
  From the beginning it has been under-used and losses have piled up. There are some who claim that these losses have been due to Government policy. The hon. Member made some references to Irish cattle. With the greatest respect, indeed affection, for both hon. Gentleman opposite, I must remind them that the Anglo-Irish Free Trade Area Agreement was not introduced by this side of the House but by their side when in government. The responsibility for this agreement and for the side agreement on store animals and carcase meat rests firmly with the hon. Gentleman and his right hon. Friends.
  At the time that the agreement was signed, as the hon. Member for Manchester,
  1200
  Wythenshawe, who has always taken a keen interest in agriculture, may recall, I took the view that the Government of the Irish Republic had in their ranks some very successful negotiators. That is my tactful way of saying what I have said today about the Irish Trade agreement. I do not think that this is something that can be piled on our heads.
  To put the losses and the use of the slaughterhouse in perspective, may I say that I understand that, even if the slaughterhouse were fully used, it would, at present rates, still run at a loss of not far short of £250,000 per year, instead of the £400,000 which the hon. Gentleman mentioned. By no stretch of imagination can Government policy be blamed for this.
  I can well believe that, had the final cost of £4 million been foreseen by the Manchester Corporation, there might have been considerable modification of the scheme before it ever started. I am not blaming Manchester for the rise in costs: I am merely stating the facts.
  There is no absolute duty upon any local authority to provide slaughtering facilities: they must do so only so far as they consider these to be necessary and expedient, and in fact only about 120 out of the 900 local authorities where meat is produced have public slaughterhouses. As a rule, local authorities seek the advice of the Ministry on projects of this kind and our officers have always tended to be cautious and to urge a very careful study of the economics of any scheme of this kind.
  Mr. Charles R. Morris: Did they do so in this case?
  Mr. Stodart: I am in no doubt that they did. The hon. Gentleman said that they encouraged this scheme. My information is that they did not encourage it: they were asked for their advice and they gave it.
  We know very well how easy it is in this field to be led astray by over-optimistic forecasts. The chief complaint against the Ministry's policy is that, in approving the issue of licences by local authorities for new or enlarged premises over the past 10 years, we have not taken enough account of the need to protect

  1201
  Manchester and other authorities who have spent money on modern slaughterhouses.
  The Slaughterhouses Act 1958 allows the Minister to approve such a licence only where it is necessary
  "for the purpose of securing adequate slaughterhouse facilities or expedient for special reasons".
  These are the words of the Act. Before approving, the Minister must consult all local authorities he thinks may be affected. This has always been done.
  I want to turn to a point of some importance—the radius from which slaughterhouses draw. We consult all local authorities within at least 20 miles of any proposed development and we always take their views into account, although we could never accept that the protection of local authority investment must be the over-riding consideration.
  Mr. Charles R. Morris: Is it not a fact that Manchester's objections to 15 applications have been dismissed by officials in your Department?
  Mr. Speaker: Order. It is the hon. Gentleman's Department.
  Mr. Stodart: I should hate to think that you have to carry the responsibility for the administration of my Department, Mr. Speaker.
  Since 1961 there have been 41 applications for licences within 30 miles of Manchester. Of these, 12 were refused, and only one will result in the building of a completely new slaughterhouse. The other licences issued were, in the main, for enlarging existing premises to meet the particular needs of a developing business. They often had desirable features which were very difficult to ignore, because the improvements would lead to more hygienic conditions. They were there already, but they sought to improve them, and what they sought to do would lead to these better and more hygienic conditions.
  There have been great developments in hygienic slaughtering and dressing techniques in the last 20 years. The pattern of slaughtering has changed so much that with modern and refrigerated transport it is becoming increasingly the
  1202
  practice, both here and abroad, to slaughter near to where the meat is produced, rather than near to where it is eaten. I find this process practicable and sensible because, from my own experience, I know that the loss of weight that can take place in a live animal between the farm and the slaughterhouse is considerable. Therefore, an animal that travels only 15 miles will, generally speaking, be more economically handled than one that travels 50 miles.
  There is also the trend towards the wholesale preparation of cuts that is always going on. Therefore I think it right that organisations, whether they are private firms or public authorities, should not be prevented from taking account and advantage of all this.
  It is being said that it is unrealistic nowadays for us to consult only those local authorities within 20 miles and that we should consider the effect on public slaughterhouses up to 50 miles from any proposed development. This means that we are seeking, in effect, a return to the policy of concentration. That policy was firmly rejected when the 1958 Act was passed, and there is no better case for it now. I repeat, however, that we do not lose sight of the need to consider local authority investment. Over the last five year only ten applications have been approved in the whole of England and Wales—this is turning to the national picture—for completely new undertakings, and I am sorry to say—and I freely admit this—that Manchester is not alone in making a loss on its slaughterhouse.
  As both hon. Gentlemen have referred to this, I should tell them that recently I met a deputation from a number of authorities. They put their case forcefully to me and made many of the points which both hon. Friends opposite have made tonight. I promised that the question of slaughterhouse policy would be examined, and we are studying it now. As tonight's debate has shown, I believe that the problem is not simple and that we need a little time to consider it. We are treating it as a matter of urgency, and we shall deal with it as quickly as we can.
  I said to the delegation, and I repeat it to the two hon. Gentlemen, that there is nothing I should like more than to

  1203
  visit Manchester, a city for which I have a profound love as a friend of the late John Barbirolli, the leader of the Halle Orchestra. If I could combine a visit to the City with hearing the Halle Orchestra, I should be a very happy man indeed.
  The Question having been proposed after Ten o'clock, and the debate having continued for half an hour, Mr. SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
  Adjourned at five minutes to Twelve o'clock.

AGRICULTURE, FISHERIES AND FOOD
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  Paraquat
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  Bull Licensing Scheme
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Preamble
The House met at half past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Bath and Wells.
Several Lords—Took the Oath.

LEGAL AID REGULATIONS: PERSONAL STATEMENT
2.36 p.m.
THE LORD CHANCELLOR (LORD HAILSHAM OF ST. MARYLEBONE): My Lords, I should like to correct an inaccuracy, or rather inconsistency, in my speech on the Legal Aid Regulations last Thursday. Looking at columns 828 and 830, I see I committed myself to the view that no one would be worse off as a result of the changes made by me to the draft Regulations laid on May 28 and subsequently withdrawn. As can be seen from the calculation at column 831, this is not accurate, although everyone affected by the changes will be better off than they were when they came into force. Comparing the amendments to the existing scheme now effected with those previously proposed on May 28, the average case will show no change, those with commitments below the average will be slightly better off, and those with commitments above the average slightly worse off than under the previous draft regulations. I must apologise to the House for the error, which was due to my misunderstanding of one feature of a complicated set of provisions.

NORTHERN IRELAND AND RACE RELATIONS ACTS
LORD BROCKWAY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government whether they will extend the Race
922
Relations Acts to Northern Ireland, including their application to discrimination on religious grounds.]
THE MINISTER OF STATE, HOME OFFICE (LORD WINDLESHAM): My Lords, Her Majesty's Government do not have it in mind to introduce legislation to add provisions dealing with discrimination on religious grounds to the Race Relations Acts, or to extend these Acts as they stand to Northern Ireland. Noble Lords will be aware of the wide range of reforming measures being promoted by the Northern Ireland Government.
LORD BROCKWAY: My Lords, while thanking the Minister for that reply, may I ask him whether this would not be the most direct and simple way of dealing with religious discrimination in Northern Ireland, which causes so much frustration? Do not these Acts now apply not only to public places but to housing and unemployment, and are not these the spheres in which discrimination is most practised?
LORD WINDLESHAM: No, my Lords, it is the practice for the United Kingdom Parliament not to legislate on matters with which the Northern Ireland Parliament can deal except at the request and with the consent of the Northern Ireland Government. During the last year the Northern Ireland Government have promoted a wide range of reforming measures, many of them specifically designed to deal with religious discrimination.
LORD BROCKWAY: My Lords, would Her Majesty's Government bring pressure upon the Government at Stormont to introduce a measure of this kind, which would have such a very definite effect?
LORD WINDLESHAM: My Lords, the reform programme includes no fewer than 12 items which, in one way or another, bear on the question raised by the noble Lord. If I could pick out just one, it would be the Prevention of Incitement to Hatred Act (Northern Ireland) 1970. Many of these points have been covered in the reform programme of the Northern Ireland Government.

AIRCRAFT NOISE
BARONESS STOCKS: My Lords, I beg leave to ask the first Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government whether they intend, as the last Government did, that new aircraft shall be only half as noisy as existing aircraft of the same size.]
LORD DENHAM: My Lords, under the terms of the Air Navigation (Noise Certification) Order 1970, which was approved by this House on May 11, new types of subsonic jet aircraft operating in the United Kingdom will, as from January 1, 1971, be required to comply with the noise standards specified in the Order. These standards will ensure that the new aircraft are approximately half as noisy as existing aircraft of the same size.
BARONESS STOCKS: My Lords, I beg leave to ask the second Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government whether they are examining, as the last Government were, the possibility of requiring that existing aircraft be fitted with quieter engines.]
LORD DENHAM: My Lords, the Government are continuing examination of the possibility of quietening existing types of aircraft. To this end it is participating in the work of the International Civil Aviation Organisation's Committee on Aircraft Noise, which is carrying out an urgent study of the problem in the hope of arriving at an agreed international solution.
BARONESS STOCKS: My Lords, may I ask my noble friend whether the Government have ever considered, or will consider, the possibility of ruling out internal air routes to certain English towns such as Birmingham, Liverpool, Manchester, in the interests of minimising noise in the air and economising space on the ground?
LORD DENHAM: My Lords, I have no doubt that the suggestion of the noble Baroness will be looked at.
LORD KENNET: My Lords, when will the examination referred to by the noble Lord in his original Answer be completed? Will it be published, and will it cover the possibility of retro-fitting with quieter engines of a new type, as well as other measures for quietening existing aircraft?
LORD DENHAM: My Lords, this is an examination by an international body, so the question of what and how much is published will of course have to be solved internationally. I am afraid that I cannot answer the noble Lord's second question, but no doubt this will be looked into among other matters.
LORD KENNET: My Lords, in his original Answer the noble Lord said that the Government were examining this matter and, to this end, were taking part in the discussions with the international body. Is the noble Lord saying that there is only one examination, and that international; or that, on the other hand, there are two, one national and one international?
LORD DENHAM: My Lords, Her Majesty's Government will be looking into the matter from their own point of view, because they will be taking part in the international discussions. Therefore, Her Majesty's Government will be considering all the aspects before those discussions take place.
LORD SHEPHERD: My Lords, if the Government are themselves looking into this matter, as the noble Lord indicated, surely it will be possible for them to publish a report, with recommendations.
LORD DENHAM: My Lords. I do not think it would be right for Her Majesty's Government to publish a report before the international body has come to any conclusions.
LORD WYNNE-JONES: My Lords, are Her Majesty's Government as uncertain about the procedure as the noble Lord is about the answer?

FIREARMS INSTRUCTION AT BORSTAL INSTITUTIONS
2.45 p.m.
BARONESS WOOTTONOF ABINGER: 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 instruction in the use of firearms is now given in any borstal or other penal institution in the course of military training; and if not when was it discontinued and at what institution was such instruction most recently given.]
LORD WINDLESHAM: My Lords, instruction in the use of firearms is given at two borstals in England and one in Scotland where Army Cadet Force units are run on a voluntary basis as a leisure time activity for selected trainees. This practice is being reviewed.
BARONESS WOOTTONOF ABINGER: My Lords, while thanking the Minister for his Answer, may I ask whether he will give us a categorical assurance that the result of this review will be that no instruction in the use of firearms is given in any penal institution, in view of the likelihood that these places contain persons convicted of crimes of violence?
LORD WINDLESHAM: My Lords, the noble Baroness will herself be able to take part in the review. The Advisory Council on the Penal System, as she will know, is already undertaking a comprehensive review of the treatment of young offenders. The Home Secretary proposes to invite the Council to look specifically at this question of training in the use of firearms, as part of their review.
BARONESS WOOTTONOF ABINGER: My Lords, is the Minister not aware that the Advisory Council moves slowly, and will no doubt produce a report on this topic of the treatment of young offenders in the course of the next two years, during which time, if military training is being given in these institutions, quite a number of young men will have become accomplished in the use of firearms? Must he wait for the Advisory Council?
LORD WINDLESHAM: I do not think so, my Lords. If the noble Baroness feels that the matter is of such urgency as to demand special treatment, it will be quite open to her, or any other member of the Advisory Council, to suggest that the Council should make an interim report on the subject; as, for example, it did on detention centres for women in recommending their closure.
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Perhaps I may add this comment. The Home Secretary feels that this is a subject which requires careful review. The Army Cadet Force training has been regarded in the past in these three borstal institutions as a useful means of occupying selected boys in a disciplined and orderly activity. Many of them are of an age when they might have been receiving Army cadet training at school or university. The inmates themselves have been selected by age, by character and by nature of their offence, so that they are suitable for Army Cadet Force training. It is therefore an issue which requires some thought, and it seems that the Advisory Council is the correct body to give it.
BARONESS WOOTTONOF ABINGER: My Lords, is the Minister not aware that this is a matter of very great urgency, and that during the time when an interim report is being produced a number of young people will be trained in the use of firearms? May I ask the Minister whether this is part of the Government's policy that citizens should behave responsibly, and that we should rely upon that in relation to young men in borstal institutions?
LORD CHORLEY: My Lords, would it not be possible, while the Committee is preparing its report, to suspend this training for the time being?
LORD WINDLESHAM: No, my Lords; it would not be right to prejudge the issue in that way.
LORD POPPLEWELL: My Lords, will the noble Lord ask his honourable friend to have another look at this matter? Surely it is the consensus of this House, and of the country as a whole, that it is wrong to be training men incarcerated in prison in the use of firearms. Is this not something which the Home Secretary should consider, instead of waiting a considerable period of time before the appropriate Committee is able to investigate the matter?
LORD WINDLESHAM: No, my Lords. There need be no wait. The Committee is already sitting and considering the treatment of young offenders. A reference to the Committee will be made very quickly, and there need be no delay.
LORD SHEPHERD: My Lords, can the noble Lord also say what sort of firearms these youngsters are being trained in? Are they being trained in the use of the ordinary rifle or in automatic weapons? If it is automatic weapons, I should have thought that the fears expressed on this side of the House had some merit, and that the Government should do something about this matter.
LORD WINDLESHAM: My Lords, my understanding is that at the two institutions in England and Wales, under supervision by qualified Army instructors and members of the borstal staff, instruction is given in rifle shooting with ·22 and at exercises with ·303 rifles. The firearms are securely locked away, and the bolts are removed from weapons and stored separately. So far as is known, there have been no incidents suggesting the misuse of firearms. That is the answer to the noble Lord. But I think that noble Lords who are interested in this subject would do well to have it referred to an expert body rather than to ask the Government to make a quick decision, prejudging the issue, on which there is rather more to be said than may appear at first sight.
LORD KILMANY: My Lords, can my noble friend give an assurance that the Army Cadet Force Association will be fully consulted before any decision is come to in this matter?
LORD WINDLESHAM: My Lords, that will be for the Advisory Council on the Penal System. I think they would want to take note of what the noble Lord has said.
BARONESS WOOTTONOF ABINGER: My Lords, would the noble Lord name the two institutions at which this training is given? I think there is another institution in Scotland as well, is there not? May we have the names of all three?
LORD WINDLESHAM: Yes, indeed, my Lords. That was a part of the noble Baroness's original Question. The Army Cadet Force units, each containing about thirty trainees, operate at Rochester and Lowdham Grange Borstals in England, and at the Polmont Borstal Institution in Scotland.
LORD SORENSEN: My Lords, may I ask the Minister whether we can have an assurance that these borstal inmates are not having rifles given to them as prizes to take away with them when they leave?

PUBLIC SERVICE PENSIONS
2.52 p.m.
THE LORD PRIVY SEAL (EARL JELLICOE): My Lords, with your Lordships' permission I should like to make a Statement about public service pensions. We have long felt that the arrangements for reviewing public service pensions are inadequate and in need of radical reform. As your Lordships know, during the passage in another place of the Pensions (Increase) Act 1969 commitments were entered into by both the then Government and the then Opposition to review the change in the purchasing power of the pensions covered by the Act as at April 1, 1971. The present Government will honour this undertaking and will set in train such a review next April to establish the appropriate level of increases down to that date for every type of relevant public service pension. We will carry this review through as quickly as possible, aiming to pay the increases with effect from September 1 following. Thereafter, biennial reviews will take place with a view to making increases, if appropriate, in September every other year.
To provide for these new arrangements for increasing public service pensions and to improve both the machinery and the basis for calculating increases, a Bill will be introduced this Session. Full details must await publication of the Bill, but it will include three main features. First, provision will be made to maintain the purchasing power of public service pensions by a system of biennial reviews. The first of these will be in respect of the period from April 1, 1969, to April 1, 1971. Secondly, because the increases awarded under previous Acts have been uneven in their effect, many pensions will require a once-for-all increase to bring them up to an equitable base-line from which the biennial reviews can start. All pensions which began before April 1, 1969, will need to be examined for this purpose, and not merely those which began before 1956. The Bill will provide

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for this. Thirdly, power will be sought to enable us to reduce, within the lifetime of this Parliament, the minimum age at which pensions may be increased.
The Armed Forces, my Lords, will not be covered by the Bill but my right honourable and noble friend the Secretary of State for Defence will be making similar provision for them by Prerogative Instruments.
LORD SHACKLETON: My Lords, I should like to congratulate the Lord Privy Seal, who I know feels strongly on the subject of public service pensions. I think that his Statement, in all except one respect (and he will know at once to what I am referring), is not only satisfactory but identical to what the previous Government had officially communicated both to the Staff Side of the Civil Service and to the Armed Forces, and in particular to the noble Lord, Lord Bourne. But I should like to ask one absolutely vital question. The noble Earl said:
"Secondly, because the increases … have been uneven"—
and I absolutely agree; we are all agreed on the desirability of a more rational system—
"… many pensions will require a once-for-all increase to bring them up to an equitable base-line."
Up to that point the noble Earl is strictly in line with the officially announced policy of the previous Government, approved by Cabinet. But what he does not state is what the base line is.
The noble Earl will know, of course, that I officially communicated all this to the Staff Side, and they will be anxious to know now whether the Government intend to vary the official policy which was laid down by the previous Government on this matter, in which we made it clear that the base line would be designed to bring pensions—that is to say, all pensions—up to their original purchasing power as at April 1, 1969. Curiously enough, it is not with the older pensions but with some of the post-1956 pensions that this is necessary, and where inflation has bitten so deeply. We also undertook to review pensions in April, 1971. I should be grateful if the noble Earl could tell us what the equitable base line is, and whether it is to be that which the previous Government decided.
Is the noble Earl also able to tell us what other improvements are envisaged?
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He will realise that we were in process of carrying out a major review designed to achieve greater transferability, but this was against the background of Mr. Crossman's pension scheme, which has now been destroyed, and transferability will be less easy. There were proposals for improvements in widows' pensions. If the noble Earl cannot answer that question, I would beg him, as I know he is sympathetic, to press on with these particular improvements. The existing rate of a widow's pension is too low.
LORD WADE: My Lords, may I join in thanking the noble Earl for making this Statement? Some years ago, when I was in another place, I introduced a Private Member's Bill to put on the Statute Book precisely this proposal for biennial reviews, but it was rejected by the then Conservative Government. I am glad that this change of heart has taken place. On the second point which the noble Earl made, may I ask him whether this introduces the principle of parity of pension irrespective of the date of retirement? If not, to what extent does it differ from the principle of parity?
EARL JELLICOE: My Lords, I should like to thank the two noble Lords who have just spoken for the general welcome which they have given to my Statement. I should like to echo what the noble Lord, Lord Shackleton, has said very kindly in my regard. I am very well aware, within the bounds of constitutional propriety, of his own interest in this matter, and of the contribution which he made here. But he did say, I think, that, broadly speaking, our proposals followed not too unclosely those which the previous Government had in mind. I should like merely to remind him that in one respect they differ from those proposals, in that we propose to reduce the qualifying age for public service pension increases, which was not the intention of the previous Government so far as I know, from 60 to 55 years in the course of this Parliament. This is an important and, indeed, quite costly change. I shall come back, or try to, to the points which the noble Lord, Lord Shackleton, made. But in answer to the noble Lord, Lord Wade, I should like to say quite flatly that this does not introduce the principle of parity, as to which both major Parties in this country, so far as I know, have said that although this is something which

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in an ideal world they might like to see, they are not able to admit as a principle.
In answer to the main point put to me by the noble Lord, Lord Shackleton—that is, as to the proposed base line—I should like to make it perfectly clear that our proposal is that the base line is 1969, but that we recognise that special measures may be necessary for bringing up to date the very oldest pensions. I think I must ask the noble Lord to await the details in the Bill in that respect, but we recognise that this is the case. The general intention is that pensioners, whether they retired before or after 1956, will have the original purchasing power of their pensions restored to April 1, 1969, subject, of course, to the biennial review, which will bite as from that date.
LORD SHACKLETON: My Lords, I think it is a pity that this undertaking is not in the Statement. Perhaps the noble Earl was keeping it up his sleeve. The previous Government did give a formal undertaking; and I take it from what the noble Earl has now said that he is adopting that part of the previous Government's proposals. Let me say that I welcome the additional proposals on minimum age. We were in negotiation on a number of these points; but I make no Party point out of that. I agree with him that neither Party has been prepared to consider parity at this stage. Will the noble Earl now say categorically that this will be "inflation-proofing"?—because if ever anything is relevant in this day it is "inflation proofing". This was the important change; the base line was to be 1969 and then in due course 1971. I take it that that is the case.
EARL JELLICOE: My Lords, I can give that categorical undertaking to the noble Lord; although again I say that he must await the details of the Bill. Our proposals are not in all respects the same as those of the previous Government. Indeed, we consider them in a number of technical respects to be quite considerably better. That is quite apart from the proposal to reduce the age from 60 to 55.
LORD SHACKLETON: My Lords, the noble Earl does not know what our detailed proposals were. We had not produced the Bill.
EARL JELLICOE: Well, my Lords, the noble Lord went into considerable detail in his letter of June 3—a significant date—to Dr. Barnes of the Public Services Pensioners Council. Therefore I am fairly well aware of the details which were in the Government's mind just before the Election.
LORD SHACKLETON: My Lords, I must say that I hope that the noble Earl does not think that June 3 was a significant date. He knows that these proposals had been "cooking" for a long while and would have come out in due course.
LORD ROBBINS: My Lords, may I ask the noble Earl whether the Statement he has just made implies acceptance of the general principle that pensions in general should be adjusted pari passu with changes in the cost of living?
EARL JELLICOE: Yes, my Lords.
LORD ROBBINS: My Lords, following that question, may I ask the noble Earl if he would elucidate what is to happen to pensioners in the two-year interval between reviews?
EARL JELLICOE: My Lords, here again I think that the noble Lord should await the details of the Bill. I do not think that we should go into any great detail at this stage.
LORD BYERS: My Lords, reverting to the question put by my noble friend Lord Wade, may I ask what roughly is the cost of the Government's proposals and how much more would it cost to get parity?
EARL JELLICOE: My Lords, at the present time I cannot say what the cost will be as from April 1, 1971. A 1 per cent. increase in the price index means something like an additional £3 million a year. The present cost of these proposals (excluding the proposal to reduce the age) is in the neighbourhood of £50 million a year. The reduction in age would cost about £7 million. To move to full parity would cost a great deal more. by a factor of two.
LORD POPPLEWELL: My Lords, could the noble Earl say whether railway superannuates and pensioners will come under this review. Previously when such reviews have taken place this section of the public service has been neglected and

933
it has taken a long time to bring them into any increase schemes.
EARL JELLICOE: No, my Lords. Pensioners of the nationalised industries have always been outside the scope of the Pensions Increase Acts. But the nationalised industries are being informed very shortly of the Government's detailed proposals so that they may take them into account in deciding their own course of action.
LORD ROBBINS: My Lords, may I ask the noble Earl whether he does not admit that at a time when inflation is taking place at the rate of, perhaps, to put it mildly, 9 per cent. per annum, intervals of two years may put those v/ho enjoy pensions fixed at the early period to considerable hardship?
EARL JELLICOE: My Lords, I would make only two remarks about that: first, it is the Government's intention to bring inflation under control; and, secondly, a move to biennial reviews is a very considerable advance indeed on the present position.
LORD BOURNE: My Lords, as one who is very much interested in Armed Forces pensions, may I unreservedly welcome the main provisions of the Statement made by the noble Earl; that is to say, the maintenance of purchasing power, the base line and the biennial reviews. May I ask two questions, the first, in regard to timing? It will be very nearly two and a half years before many people who are really quite hard up and who feel the effect of inflation very much indeed will receive their increases. I can quite understand the mechanical difficulties of reviewing and then not being able to pay until one knows, on April 1, 1971, the cost-of-living increase. But the fact remains that many people who are hard up will have to wait another 10 months to receive any increases. The question I should like to ask is whether the Government, in view of this difficult situation, would be prepared to pay an interim increase on account on January 1, 1971. I think, myself, that a 10 per cent. increase on account would not only be well received but would fall well within the increase in the cost of living. Secondly, I should like to welcome the possibility which the noble Earl mentioned of reducing the pension increase age from 60 to 55. The
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Statement says, "within the lifetime of this Parliament". May I ask how quickly that is estimated to be? Lastly, may I (and I should have said this at the beginning) thank the noble Lord, Lord Shackleton, for initiating the discussions for these examinations?
EARL JELLICOE: My Lords, I acknowledge the noble and gallant Lord's deep interest in this matter which is also known to the noble Lord, the Leader of the Opposition. I cannot, I am afraid, hold out much hope that the first suggestion that he put to me will commend itself to Her Majesty's Government. It is not for me to speculate on the lifetime of this particular Parliament. All I would say is that the powers to be sought in the Bill will enable us to reduce the qualifying age at any time by Statutory Instrument. We certainly intend—and I repeat here what is in the Statement—to exercise these powers"during the lifetime of this Parliament." We are committed in our Election Manifesto so to do; and like out other commitments, this one will be discharged.
BARONESS WOOTTONOF ABINGER: My Lords, did I hear the noble Earl, Lord Jellicoe, correctly when he referred to the Government's declared intention to "bring inflation under control"? How does he square this with the speech by the Prime Minister at the Mansion House banquet in which he categorically denied any such intention, relying instead on responsible behaviour on the part of the public?
EARL JELLICOE: The noble Baroness is enlarging the area of our debate on this Statement. Perhaps we shall have a minute or two to discuss that particular question in the next two days.
LORD LEATHERLAND: My Lords, coming back to the question under discussion, may I ask whether the noble Earl will agree with my expression of agreement with the decision of the Government to follow up the steps initiated by the last Government and to increase public service pensions? Secondly, does he agree that it is not desirable to create two nations in this country; and, therefore, thirdly, will he take some action to persuade industrial and commercial pension schemes to increase the pensions which are at present paid to their former employees, which

935
employees are at present suffering severely from the effects of inflation?
EARL JELLICOE: My Lords, I take careful note of what the noble Lord, Lord Leatherland, has said, but I believe that he is extending the area of debate on the Statement which is confined to public service pensions. Therefore I do not wish to follow him down the paths along which he is so invitingly trying to entice me.
LORD PARGITER: My Lords, in view of the Statement about public service pensions, may I ask whether the Government will have any Statement to make soon about old-age pensioners?
EARL JELLICOE: My Lords, that is another question which should be more properly addressed to my right honourable friend the Secretary of State for Social Services, who lives in another place.
LORD SHACKLETON: My Lords, the noble Earl will be aware that Ministers sitting on the Government Front Bench speak on behalf of the Government and not their Department.
LORD GORE-BOOTH: My Lords, may I, as a former public servant, ask the noble Lord whether he is aware that while public servants, past and present, will examine the Bill with the thoroughness which is their metier, they will warmly welcome the general direction of his Statement?
EARL JELLICOE: My Lords, I am grateful to the noble Lord.

BERKSHIRE COUNTY COUNCIL BILL [H.L.]
Read 3a, and passed, and sent to the Commons.
BRISTOL CORPORATION (GENERAL POWERS) BILL [H.L.]
Read 3a, and passed, and sent to the Commons.

PUBLIC SPENDING AND ECONOMIC POLICY
3.12 p.m.
LORD BESWICK LORD BESWICK rose to move to resolve, That this House regrets that the measures outlined by the Chancellor of the Exchequer on October 27 run counter to the Government's declared intention to reduce prices; will widen the gap between rich and poor in our nation; will make more difficult the achievement of an acceptable prices and incomes policy; will tend to aggravate the problem of regional development, and generally will impede Britain's progress towards an economically sound and socially just society. The noble Lord said: My Lords, I beg to move the Motion standing in the name of my noble friend the Leader of the Opposition.
We must all have been pleased to see yesterday's published surplus on external trading account, even if there are cautionary qualifications. There is additional satisfaction to discover that the legacy which we left to the present Administration was even more favourable than that actually recorded. Nevertheless, it remains true that since this Motion was drafted some two to three weeks ago our national situation has basically worsened. It has worsened economically and psychologically. It has worsened economically because Her Majesty's Government have not done things which they ought to have done. It has worsened psychologically because they have done things which they ought not to have done. A large part of my case will be that a nation cannot be sound economically if it is not sound psychologically, socially and politically. A sense of social justice, my Lords, is a far better incentive than 6d. off the income tax.
I do not wish to make an old-time Party speech. I do not believe any Party in this country to-day has a monopoly of truth. But I recall the noble Lord who now sits on the Woolsack saying almost forty years ago that without controversy there was complacency. And heaven help Britain if we indulge in complacency to-day! So, my Lords, I suggest that we want controversy but not prejudice in our discussion. And it is

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not simply Party prejudice to say that the situation has worsened since the present Administration took over. Newspapers of all shades of thought, international organisations, authoritative public figures with no Party connections, say the same.
The Financial Times last week gave its biggest headline to an O.E.C.D. warning to the United Kingdom on inflation. The O.E.C.D. Report says that the mini-Budget had worsened the situation and forecasts more serious inflation in Britain than in "most industrial countries". The Times, in a leader on November 1, said:
"Neither the I.M.F. nor the O.E.C.D. nor the Governor of the Bank of England, nor anyone else, desires to dictate British economic policy to the Government. But they are all entitled, as are the British public, to an intelligible and firm account of what the Government propose to bring inflation under control."
The same thing was said at the other end of the Press spectrum The Daily Mirror, as it has done at other times of national crisis, put the position tersely, clearly and urgently. On the day after the Prime Minister's TV interview they said:
"Has Mr. Heath told us the truth, the whole truth and nothing but the truth? The answer is that he hasn't. The public has not the faintest idea of the crisis urgently facing the nation. … Unless we are mighty careful and urgently quick we will all be taking home our pay in suitcases …"
Nothing that was said last night, my Lords, removed the fear then expressed in that article. Or, as The Times delicately put it this morning, the Prime Minister's "intellectual case was not made out." I am suggesting that it is not good enough to counter this criticism by calling attention to the Labour Government's sins of omission. We did at least claim that we were blown off course. But this Government actually boast that they have chosen the course which we are now pursuing; and all that the Prime Minister added in his Mansion House speech to his TV interview was to stress that they were satisfied with the course he has chosen. I hope we can at the very least get some indication from the noble Earl and his colleagues who are to speak that they are not quite so complacent as the Prime Minister sounds.
The first part of the Motion calls attention to rising prices. No one, presumably,
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will deny that the measures announced on October 27 are deliberately designed to increase prices. The defence, as I understand it, is that the increase will be only a little one: only 1 per cent. we are told. But even if it were true and the effect of the changes was an increase of only 1 per cent., it is applying an extra 1 per cent. at a time when other forces are working in the same direction, and when a movement is already gathering momentum. In such a case even 1 per cent. can have an enormously accumulative effect. Of course, the unions can be blamed and no one with a modicum of sense and objectivity can say that the current fever of wage claims does not inflate our currency. No one can deny either that wage claims won this year, with few exceptions, have been won by workers, not at the expense of a wicked capitalist but at the expense of the consumer; and that means other workers and the nation as a whole.
But extravagant wage claims are not now so much a cause as an effect of deeper seated problems. Up to October 27 the charge of organised selfishness could have been made against the unions, and it would have stuck. But to-day the Government have elevated selfishness into a social principle. I do not believe that Mr. Heath is a selfish man, but when he disdains Government or collective or co-operative action against inflation, and when he says that it is up to each one of us to act on our own, he is in fact preaching selfishness. When asked, in his television interview, how his "change of course" amounted to a cure for inflation, he is reported as answering,
"What it means is that people must face up to their own responsibilities, recognising what the change of course is and how they can benefit from it."
And that was spelt out last night. How can each benefit?—benefit himself. That is the old doctrine of "I'm all right Jack." And that doctrine, even wrapped up in fine phrases, is no recipe for national greatness.
This Motion also asserts that the course on which we are now set will widen the gap between rich and poor in our nation. Various figures have been bandied about by Government spokesmen in an attempt to show that the poor have benefited by the mini-Budget, and no doubt the noble Earl who is to follow will refer to that fig-leaf of a measure, the Family Income

939
Supplements Bill. Given time, one could show that with increases of rent, fares and food, even the very poor are going to be worse off, certainly relatively and probably absolutely, than the very rich. The fact is, my Lords—and I do not think it is disputed—that the whole point of the recent economies was to make room for reductions in direct taxation, and this can only mean a shift in resources from the poorer to the better off sections of our society.
If the noble Earl or others insist on quoting figures from the Family Incomes Bill, let me ask them this question. Why is it considered inflationary to pay a low-paid worker 50s. extra on his low wage but something virtuous if he is given the same 50s. as a means-tested charity? Why did the Government lose their temper over Sir Jack Scamp's recommendations'? The families who benefited from that award are not going on an inflationary spending spree. I cannot believe that the noble Earl who is going to reply would prefer that they should have remained as potential recipients of the £3 a week charity.
The gap between rich and poor is not only a matter of a gap in income levels. Charity—not the charity of Christ but the charity of the Poor Law—is a divisive not a unifying factor in society. Self-respect comes into this, as well as money incomes. One great disappointment to me was that the Labour Government never were able to use the substantial trade balance surplus we achieved to do more, within an incomes policy, for the low-paid workers. So I beg the noble Earl not to try to counter this assertion about the widening gap between rich and poor by listing the free gifts of money and milk which one will be able to get by pleading poverty. A more sophisticated means test is not what our people deserve from a modern society of technological affluence.
The Motion also points to the aggravation of the problem of regional development. Other of my colleagues will no doubt go into this aspect in more detail, and no doubt Government spokesmen will stress the pros of depreciation allowances as against the cons of withdrawing investment grants. On balance, though, it seems fairly clear that, again, the better off will benefit more than the
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worse off; the highly profitable firm will benefit while the firm struggling to get established in a development area, having probably gone there under the impression that it was fulfilling a social duty, will on balance, do less well. I notice that Northern Ireland is very concerned about the loss of investment grants, and the Prime Minister's brother is asking in another place for special dispensation for Northern Ireland. Well, my Lords, there are other parts of the United Kingdom which have as good a claim as Northern Ireland. If adjustments and modifications to announced policy are to be made, I hope the noble Earl will be able to assure the House that all the regions will benefit similarly.
I began by saying that the psychological aspect of our present plight was as important as the economic. This is true in more senses than one. Those quotations I gave about the threat of inflation may be contested. It may be argued that they are exaggerated; but what is incontestably true is that when that sort of thing is said, and said so widely, it stimulates the very danger which it fears. It is the psychological climate—the social or political climate, if you like—that is all important. In a nation in which we have all the physical equipment, all the physical skills, it is only the psychological or the social purpose which can prevent us from earning a high and rising material standard of living. To-day, all the talk is of inflation, and if that talk continues, a long-term policy will be irrelevant, for the Government will have only months, not years, to stem the tide.
The question is, then, how we can secure the necessary change in the psychological climate. It can be done. British people still want to help Britain. Here in this House, the Opposition had originally intended this week to discuss a Motion in the name of my noble friend Lord Balogh. It read:
"To call attention to the prime importance of an incomes and prices policy in attaining accelerated economic expansion, while safeguarding relative stability of costs and prices and a surplus in our balance of payments sufficient to assure financial independence."
We had hoped on that Motion to have a more constructive discussion—a helpful discussion. I am convinced, and so are many, if not all, of my friends, that some form of prices and incomes policy, agreed by, initiated

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by and executed by the Government of the day, is essential. It may be said that we failed in this when we were in office. Well, we had some success and we had failure. Had we won the last Election, we should have tried again, and we should have tried, fortified by previous experience and by the improved room for manœuvre which our success in the balance-of-payments struggle had achieved. Only a fool would say that in a matter which deals so profoundly with human behaviour it would have been easy. But we would have tried.
The first charge against the Government, which I repeat again, is not simply that they do not try, but that they elevate not trying into a political philosophy. There has never been such a public renunciation of responsibility since Pontius Pilate washed his hands before the multitude.
The second charge I make is that, even if they did now try, since October 27 they have dissipated the prerequisite sense of social justice. I do not need to be persuaded of the value of self-help. One reason why I spent time and effort propagating the worth of co-operative organisation is because the co-operative form laid stress on individual effort and initiative. I am all for a free society. But we cannot have the free society or the individual freedom which the Prime Minister proclaims in a modern world. The type of freedom of which he speaks belongs to the days of Pitt the Younger. He is flying flat in the face of all technological progress when he tries to extract Government from such a wide area of economic decisions. We are to-day all dependent upon one another. All our efforts are integrated into the efforts of others—whether we like it or not. Our advice to the Government is that they had better like these facts, because they cannot escape from them. Let them show less complacency and more flexibility.
An article in The Times to-day by Mr. Corina says that so far the Prime Minister has only succeeded in putting Mr. Campbell Adamson and Mr. Victor Feather into a ring when they should be sitting round a table. It would be a good start if talks between those two were made possible and an attempt made to extract the fever from the present industrial situation. A prerequisite for any success,
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however, must be that regressive tax changes must be ended; food price rises must be checked; investment must be encouraged and not discouraged—in the public as well as in the private sector; there must be a genuine and agreed attempt to close, and not widen, the gap between different levels in our society. I hope that, by voting for this Motion, this House will encourage the Government along this course. I beg to move.
Moved to resolve, That this House regrets that the measures outlined by the Chancellor of the Exchequer on October 27 run counter to the Government's declared intention to reduce prices; will widen the gap between rich and poor in our nation; will make more difficult the achievement of an acceptable prices and incomes policy; will tend to aggravate the problem of regional development, and generally will impede Britain's progress towards an economically sound and socially just society.—(Lord Beswick.)
3.30 p.m.
LORD HENLEY: My Lords, the speech of the noble Lord, Lord Beswick, was deeply felt, and with a great deal of it we must all agree. I was particularly impressed with what he said about the psychological feelings in regard to these issues. This is as important as anything else. Inflation is something which is driven psychologically, and if you get that one wrong, you will get everything else wrong. I think the noble Lord gave us a warning that we must all take carefully. Before I come to the main theme of the debate, I should like to say how pleased we all are that the noble Baroness, Lady Lee of Asheridge, is making her maiden speech to-day—and what a great ornament she will be to your Lordship's House.
The charges against the Government are in five parts. The first is inflation; then comes social justice, prices and incomes, regional development (on which I do not propose to say anything) and a sort of omnibus charge at the bottom which allows us to say almost anything that we wish. I should like to start with the charge about social justice. It is suggested that the measures are socially unjust. I think that it would be a pity if critics—and here I address myself just as much to my noble friends as to the

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Labour Benches—got into the frame of mind in which they were unwilling to contemplate any reform of the social ser vices. The structure of the social services is based largely on what happened in 1909 under Lloyd George—and what is not 1909 is, to some extent, 1943 from Lord Beveridge. Obviously it would be ridiculous to suggest that a great deal of it is not in need of radical reform. Much of it is ineffective; much of it is wasteful; and a great deal of it goes into the wrong pockets. I think we could all agree about that.
Whether the measures are socially unjust or not, they still are more than a radical reform; they are a revolutionary change in intent. The noble Lord, Lord Beswick, and his noble friends suggest that it is a new version of the old Poor Law. I have yet to feel convinced on that score. It seems to me that it may well be right to put more of the cost on to the direct consumer. There certainly has been a slaughter of sacred cows, but a lot of them are pretty dried up old bags. But if sacred cows must be slaughtered, let us hope that they are slaughtered by humane killers. We are living in a revolution, and we must change with it. So far as these changes in the intent of how the social services should be managed are concerned, I should like to give them the benefit of the doubt, to see whether the social services cannot be made to work better along these lines.
The second charge is the question of whether the measures do have any effect on the inflationary situation. It has been suggested that they are political rather than economic. I agree that they are political; but whether they are economic or not, they are long-term measures. In the short term they are going to have no effect upon inflation; and they may even marginally make it worse. The Government claim that they will be neutral in their effect. This remains to be seen. The cure of inflation is the Government's mandate. They said in June that they would act immediately to steady prices. But they have not done anything yet. I admit that the Government do not pretend that the particular measures outlined on October 27 will cure inflation. Last night we heard of something coming; and we have almost been told by the noble Earl in answering
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a supplementary question on another issue that it is the Government's other policies which are in effect going to hold inflation down.
What are these other policies going to be? Are we going to have a free-for-all? I hope not. You cannot have a free-for-all when half the economy is of necessity tied up. There is, however, one thing that we do know is coming, and that is the Industrial Relations Bill. It seems to me that there is a great deal that is good in the Industrial Relations Bill. But, here again, it cannot do anything in the short term against inflation. The unions will have none of it, and if they will have none of it its chances of being successful, even in the long term, are not very bright. There appears to be a total breakdown in the relations between the Government and the unions. The last Government were prevented in Parliament from giving effect to their legislation on industrial relations, and this Government may be prevented outside Parliament from doing the same thing. It seems to me that no Industrial Relations Bill—at any rate, the one that the Government are proposing—will be effective, so far as inflation goes, until the present monopoly position of the trade unions is brought within the framework of the law in general, and in particular within the Restrictive Trade Practices Act 1956, which at present excludes trade unions from having to have their wage bargains approved by the Restrictive Practices Court like any other bargain. There is, so far as the trade unions are concerned, an unwillingness to co-operate on any reform or any suggestion that there should be reform.
I say this with humility, because I detect in myself when I am talking in your Lordships' House about my own interests, this same sort of attitude. Well, one must do one's best not to be like that. The present monopoly position which the trade unions enjoy is totally out of date. It stems from the Liberal Government of 1906, when the trade unions were emerging and when they were weak in relation to capital. The Liberal Government of those days put them outside the law— it was a reasonable thing to do at that time—and they have remained there ever since. I do not think that that is a state of affairs that can go on any longer. It is impossible for any organisation these days to

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be outside the law. The trade union privileges, like the privileges of the Ancien régime, offend, and like the earlier operators of Ancien régimes, they will assuredly bring their house down if they do not do something about it.
The third count is on the question of prices and incomes policy. The Government may be unwilling to take more part, but if the unions will not, and the employers will not, then the Government must. The Prime Minister said that his critics must define what they mean by an incomes policy; and Mr. Maurice Macmillan, a day or two ago, said that if you are asking for an incomes policy you are asking for compulsion. That is not so. The agricultural industry has had a statutory prices and incomes policy for 25 years. You may say that it has had to do so because it receives subsidies. But, again, this is not so. If you take that part of the subsidy which is not a consumer subsidy, the support which the agricultural industry receives is about the same as the motor car industry gets in the form of tariff.
The agricultural industry can reach agreement round the table; but other industry says that it cannot. Why can it not? In the agricultural industry the Price Review and Agricultural Wages Board come to an agreement as to what the probable national growth rate will be and what national wage increase is possible from that. Couple that with rent properly payable against a background of security of tenure and rather slow rent increases, and you get the situation which I am saying industry ought to be able to achieve. It may well be said: "Look where you are in the agricultural industry; your wages are among the lowest in the country; your farmers are upset, your landowners are getting a return on their capital which no other owner of capital would accept". Nevertheless, it is the only industry which can hold its own in terms of growth with industry in America. Secondly, I do not believe it would be in the position that it thinks it is in—this is psychological to some extent, for it is not really in as bad a position as it thinks—if other industries had been in the same position and played their part round a table in the same way. If the Prime Minister wants a definition of the kind of incomes
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policy I think would work, then there it is. If that is compulsion, I am only too pleased to be compelled.
The kind of negotiation which I suggest has been carried out by the agricultural industry for twenty-five years may well be still in its infancy, but it has worked tolerably well, and I commend it to other industries to see whether they cannot make something of it. With regard to panaceas, I have merely mentioned two that I think are worth looking at: first, putting the trade unions within the Restrictive Practices Act; and, secondly, trying to make something of a prices and incomes policy on the same lines as the agricultural industry. With regard to other panaceas, there are some extremely able economists in your Lordships' House who will be following me this afternoon and who will, no doubt, be enlarging upon this subject. I rather like the suggestion in the Guardian the other day; "Why not try them all?" I dare say you cannot try them all at once because some of them are mutually exclusive, but there is no reason why you should not try to use rather more of them at once than we do. We should get away from any idea that there is only one panacea to be undertaken to combat inflation. I believe the more respectable name for this is the "Broad front".
This is, in effect, a Motion for a vote of no confidence. I find it very difficult to have any confidence in the Government's being able to do what they are setting out to do. Perhaps it would be unfair to vote against them for that reason alone when I had little confidence in the Labour Party's ability to do the same thing—certainly they were unable to do it in the six years that they were in office. This does not mean to say that I believe that the Liberal Party is in any special relationship to the truth—I do not. Nevertheless, on balance, the charges have been made out, and will be made out, with regard to inflation and the Government's failure to give any indication of how they are going to tackle it; and, secondly, with regard to making it more difficult to achieve a prices and incomes policy. With regard to the other charge, on the matter of social justice, I am not sure; as I have said, I should like to wait and see. For all that, I feel that at the end of

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the day I—and this applies to my noble friends—shall probably, in the light of the arguments deployed, join the Opposition in the Lobby against the Government.
3.45 p.m.
EARL JELLICOE: My Lords, the noble Lord, Lord Beswick, has opened this long debate with an agreeable speech. He said that he was not going to make a Party political speech and although there were some Party political strains in some of his remarks, he followed through with that promise. I hope that the succeeding twenty-seven speeches will be as agreeable as the first two to which we have listened. May I join with the noble Lord, Lord Henley, and say how much I am looking forward to the three maiden speeches which we are to hear very soon—not least that from the noble Baroness, Lady Lee of Asheridge.
The noble Lord, Lord Beswick, said that he was not complacent about the record of his Government. It seemed to me that implicit in his argument there was a rather curious fallacy. Listening to the noble Lord I felt that, somehow, he had persuaded himself that, right up until the moment the polling booths closed on the evening of June 18, all was for the best—or at least second best—in the best of all Wilsonian worlds; that the sun was shining, the economy was booming, and that inflation was without our doors. I do not propose to "bang on" about our inheritance. I became thoroughly bored, as I fancy even noble Lords opposite simetimes did, about the "thirteen wasted years", and about the deficit on current account—grossly inflated, of course, by Labour propaganda—bequeathed by Maudling to Callaghan. But, I will not "bang on" about that inheritance, I will readily grant that we inherited a balance-of-payments surplus. But I will grant that only if noble Lords opposite grant that we also inherited £1,500 million worth of external debt, a stagnant economy, more industrial disruption than this country has known for five decades, and rip-roaring inflation. If noble Lords opposite will grant that, they may also be fair-minded enough to concede that we have inherited the slowest growth rate in the industrialised world—
LORD SHACKLETON: You are "banging on" all right!
EARL JELLICOE: No, it is a short paragraph. I have talked about our failure to achieve a satisfactory growth before—a failure for which I do not hold the two last Labour Governments particularly to blame, although they came to power in 1964 basically on the claim that they had the magical key to the door of growth. And growth is, I believe the heart of the matter.
If we are to do the things within our society that we all wish to do, wherever we sit in this House; if our society is to have any real influence on other societies in this interdependent world; if our society is to be healthy and creative, rather than introspective, withdrawn and increasingly frustrated, then somehow we must get faster growth. The fact remains that, according to the O.E.C.D. Report, Outlook for Economic Growth, published this summer, the economy of the major O.E.C.D. countries grew nearly twice as fast as ours in the past decade. Those of Italy and France grew twice as rapidly, and that of Japan four times as fast, as ours. These figures, my Lords, imply a continuing and cumulative deterioration in the relative position of this country in the wider world.
And what of the future? The same Report shows what will happen if past experience is projected for another decade. Income per head in Japan will reach European levels, and the narrowing of the gap in income per head between Western Europe as a whole and the United States, which is already visible in the present time, will continue. But as the rest of Europe narrows the gap, this country will stay where she is, vis-à-vis the United States. We shall in fact be the odd man out in the industrialised world, the poor relation. We shall be dropping further and further behind in the convoy of progressive industrialised nations. I believe that we have a right to expect a better performance than this. Our management in this country is not inherently inferior to that abroad; the quality of our craftsmen can be just as good. In science and technology we have a great deal to contribute to Europe and indeed the whole world. Our industry is supported by a financial system more complete and sophisticated than is found anywhere else

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outside New York. Under these conditions we should not be dropping constantly further and further astern. But we are, my Lords—even in the best of all possible Wilsonian worlds.
I would grant, of course, that our failure to keep up with the industrial Joneses has not been for want of trying. I acquit the noble Lord and his Administration of that charge. They certainly tried. They set up a vast Department to plan faster growth. The noble Lord, Lord George-Brown, published a National Plan full of ambitious targets. There were long discussions with industry and the last Administration—infinitely fecund in matters of theory—gave birth to a whole multiplicity of bodies allowing them to intervene in the detailed affairs of industry. They opened up new channels for the flow of financial resources into industry. I would grant that this was their objective and that they thought they had created the instruments to achieve it. But, my Lords, faster growth was not achieved; slower growth was achieved.
The fallacy, if I may so put it, underlying, or implicit in, much that the noble Lord, Lord Beswick, said was that we should go on as we have been going on in the past. Because of this assumption, he has failed to see how the policy followed by the last Administration was misconceived. One does not achieve faster growth by merely talking about it. The belief that investment would be substantially increased as a result of the general belief in the possibility of further growth was not borne out. But what we did see in the last six years was that the spirit of competition and the freedom to make decisions, and personal incentive, were cabined and confined by more and more Government intervention and by more and more taxation. I do not believe in "the mixture as before", and I really do not see why noble Lords opposite should ask to believe in "the mixture as before", seeing where it has brought the patient. Why on earth they should expect a new Government, elected on a new mandate, to make no change in the policies which they inherited—policies which have been found sadly wanting—I cannot for the life of me imagine.
In any event, that is not our approach. That is why we have conducted a fullscale review right across the board. We
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have now reviewed, first, the whole structure and organisation of Government, which we debated at some length very recently, and, secondly, the whole range of Government activity and expenditure. Our aim has been to see what should be done by the Government, and how it can be done better; to see what is being done by the Government which could be done as well, or better, by private individuals or private firms; and to see what is being done by the Government which need not be done at all, or what is not worth the value of the money spent on it, taking into account the severely depressing and disincentive effects of taxation.
Having completed that review we are confirmed in our belief that what is needed for the British economy is a real change of course—important structural changes. We have come quite firmly to the conclusion that, if we are to achieve the faster rate of growth that we all want, we must reduce the burden of taxation which is borne by individuals and companies alike, and also the rate of growth in public expenditure programmes. Restoration of incentives to work and to save, the reduction of the disincentives of high, desperately high, marginal rates of taxation, and the restoration of freedom and responsibility are the kernel of our policies—and I make no apology for them. The current package, that embodied in the White Paper which your Lordships are now debating, is the first step along this road. These are the recurrent themes in the measures embodied in it.
This package is designed to achieve a reduction in public expenditure of some £1,600 million by as early as 1974–75. Given a reduction of a magnitude of this kind, it is absolutely right that your Lordships should examine carefully the broad measures. But it is also right, I submit, that you should not look so closely that you lose sight of the objectives which we have of transforming the country's prospects for the better. I say this because it would seem that there are some in your Lordships' House who are not looking beyond the specific measures themselves. The evidence for this is plain in the Motion before us this afternoon, which says, among other things, that the measures
"will widen the gap between rich and poor in our nation".

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It is that particular aspect of the Motion which I should like especially to examine this afternoon. My noble friend Lord Drumalbyn will be dealing more specifically with the industrial aspects, regional development and so on, and I hope that this will be for the convenience of your Lordships.
My Lords, who are the people for whom the immediate impact of the measures in the White Paper is most serious, the people whom the movers of this Motion presumably have in mind in this part of the Motion? Presumably it is those who are in misfortune: the families who cannot earn enough to provide properly for their children and themselves; the one-parent families; the old who need care; the sick and the mentally ill. But the measures in this package have been carefully and deliberately designed to preserve and improve upon the benefits available to precisely these people. Let me very briefly itemise—I will do it briefly because most of this is familiar ground.
The income levels below which families are entitled to free school meals and free welfare milk, and to refunds of charges for dental or eye treatment, will be raised so that more people will qualify. Nearly a quarter of a million more children will be entitled under the new arrangements to free school meals. Some 150,000 more mothers and children will be entitled to free welfare milk. Families up to and beyond the level entitling people to supplementary benefit will be exempt from, or will be entitled to have refunded, the charges for school meals, prescriptions and dental and ophthalmic services. The tests of income for these purposes will be precisely the same as they have been hitherto. People aged over 65, whatever their means, are also exempt from prescription charges.
In addition, rent rebates will be available for the first time to all council house tenants who need them and, also for the first time, to those tenants who need them in privately-rented unfurnished accommodation—some of them the poorest people, as we all know, in our community. In addition, half a million children will benefit from the new family incomes supplement, which will bring up to £150 a year to poor families who earn less than supplementary bene-
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fit would bring but who are prevented by the wage stop rule from receiving that benefit. And I would just remind your Lordships that, as a result of the decisions taken in July, those who were too old to join the present pension scheme in 1948 are for the first time receiving a pension, as are women widowed between the ages of 40 and 50. My Lords, these are not the measures of a Government which does not care for the less fortunate in our society.
However, that is only one side of the coin. There is also the more positive side. I would remind your Lordships that £110 million has been added to the programmes for hospital building and for local and welfare services, particularly for the old and mentally ill. For the children for whom the local primary school is an antiquated one—and we all know there are far too many of them—there is now the largest programme of primary school building that has ever been undertaken in our country. My Lords, these are not the measures of a Government unmindful of the need to underpin our social services.
I recognise that above the poorest families of whom I have just been speaking there come the great numbers of the producers, if I may so term them, of our nation: men and women, semi-skilled and skilled, at the bench, at the desk and in management. It is the deep conviction of this Government that their first obligation towards those millions of families is not, as it is for the poorest, to cushion them as far as possible and in all circumstances from any loss of net income, but rather to give them ground for confidence in the future—for themselves and their children—and the assured prospect of increasing their real earnings and their standard of living, without the fruits of their efforts being eroded by excessive taxation.
There is a real choice here, my Lords, and we must recognise it. Of course we could continue to present subsidies to industry and to the family budget. Of course we could let payments for services remain unchanged while costs rise and subsidy increases. Of course the public sector could be permitted to continue to do what may be useful but what is certainly not essential. But if we continue

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to walk down that path, taxation rates would not come down; they would almost certainly have to be increased. And if they did, it would be the bulk of those of whom I am speaking—the great majority of the real producers in this country—who would bear the extra burden.
But, my Lords, there is another path: the alternative path, which this Government have deliberately chosen. The noble Lord, Lord Beswick, was quite right about this: it is a path which this Government have quite deliberately chosen. The alternative is to look at the plans for public spending, to seek out those places where subsidy has been indiscriminate—the investment grants that are given whether investment is profitable or not, housing subsidies which are extended whether the tenant needs them or not, the regional employment premium given whether it creates employment or not, projects which are not essential or economically justified, the services which provide industry with what it could or should do better for itself, and the benefits which relieve families of paying the cost of the necessities of life, even where with advancing prosperity they have become well able to do so.
My Lords, by taking this alternative path the Government have certainly found the means of reducing the weight of public expenditure programmes. But I would claim that the Government have done more. The claim which I make is that this reduction has been achieved without impairing the effectiveness of those programmes in serving the needs of the people. Indeed, it has been achieved with an improvement in the effectiveness of those programmes where the needs really are—in help for the poorest, including the poorest one child families in this country, for the large and needy families, in the provision for creating new jobs in the regions, and in the provision for improved primary schools and for improved health and welfare services.
It is of course true that while the poorest will be helped, as they should be helped, many families will certainly pay higher charges from next year for many services which they now receive either free or cheaply. I recognise this straightaway. But, my Lords, the alternative is for those families to face in due course higher charges for those social
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services, as they have had to face them before, without any offsetting reduction of taxation; with indeed the prospect—nay the promise—of more taxation. I would remind your Lordships that the families of whom I am now talking are in the vast majority of cases not families with incomes that have been static and that will remain static. It is a central purpose of the economic strategy of this Government, the first stage of which is embodied in these measures, to create the conditions in which everyone in this country can earn more—more in teal terms.
But, my Lords, we must remember that Governments cannot do the earning. They can only try to create the conditions in which people can work, and will want to work, hard and well. There is no question, to my mind, of the ability of the people of this country. What is in question is whether there has been sufficient encouragement, sufficient prospect of reward, in the past. And my Lords, this is not selfishness erected into a philosophy. It is not selfishness for a man, or a woman, to work hard and well in order to earn more for himself or herself and his children, and to improve their quality of life. I do not hold that to be selfishness.
LORD BESWICK: My Lords, while the noble Earl is dealing with this point, will he try to answer the question that I put to him about the sewage workers and the other classes of workers on £14 and £15 a week, who did try to improve their earning capacity and were not exactly encouraged by the Prime Minister?
EARL JELLICOE: My Lords, I will leave my noble friend Lord Drumalbyn to answer the detailed points, but what I would point out is that £14 or £15 is the basic wage; in most cases, of course, it is not the take-home wage.
The question that I ask myself when I hear the complaint which is embodied in this Motion—that the measures which the Government have taken will widen the gap between rich and poor—is whether there has been sufficient encouragement or sufficient prospects of reward in the past. Of course, anything that enables people to make their way further ahead widens the gap, in a sense, between those who are capable of

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moving ahead and those who are not. This Government believe in helping those who, because of misfortune, cannot move ahead, and in encouraging those who can. If the country is to realise and to respond to a new prospect of a better life within its grasp—and it is within the grasp of all of us—then I believe this prospect must be proclaimed quite clearly and quite simply. The Government are saying to the country, "Carry your proper obligations and carry less burden—less burden in tax". The right tax to choose in order to proclaim this message and to bring about the response from the people which will turn the new and brighter prospect into reality is the tax that is generally foremost in everyone's mind when he looks at his earnings. That, my Lords, is income tax.
I would say that it is appropriate, too, for the same purpose, to reduce the tax in the way most widely understood, by reducing the standard rate. Of course this means that those who earn the most receive the most benefit from this change; but that is the essence of a policy to encourage the effort to earn. We have all seen the most elaborate calculations of losses and gains for families differently composed and in different situations—the papers have been full of them—as criticisms of the decision to reduce the standard rate. I do not accept the criticism, because those calculations assume that as the measures take effect nothing else in this country will be changing: that real incomes will not increase as families respond to the incentive of a better future. It would be a misunderstanding, if not a misrepresentation, of the measures which your Lordships are debating this afternoon to consider them as if they had been designed for a situation that will not otherwise change. They have been conceived rather as dynamic measures to operate in a dynamic situation, in which the whole nation as one nation—and here I am entirely with the noble Lord, Lord Beswick—will gain from the changes which they will help to bring about. As further studies of the public expenditure and of the taxation system proceed, the Government propose to bring forward further measures, each designed to play its part in achieving this central purpose.
My Lords. I hope I have said enough to make it clear—
LORD SHEPHERD: My Lords, would the noble Earl forgive me for intervening? Since he is speaking about a dynamic policy and the rights and the anticipations of persons to increase their wealth and their incomes, can the noble Earl give any indication of what the Government have in mind as a fair and reasonable expectation for men to increase their wages year by year, particularly at the present moment?
EARL JELLICOE: My Lords, I am not going to give a guideline or norm, if that is what the noble Lord is asking for, because what the Government believe in is an increase in real wages. The sort of wage increases which we are faced with now just mount the spiral of inflation, and this does not mean an increase in real wages.
I hope I have said enough to make it clear that I believe that radical and structural changes in our economy are needed if we are to reverse the sad story of recent decades. It is also my belief that such changes can be made without damage to social justice. However, I think it would be wrong if I were to resume my seat without discussing our most pressing economic problem, namely, inflation. We should, I believe, avoid panic measures, and we must avoid talking ourselves into panic measures. The sort of talk and speculation which I have seen a good deal of in the Press recently, that we are on the brink of some Weimar precipice, is neurotic, unhealthy and nonsensical. Nevertheless the current rate of price advance is quite excessive. It strikes at social justice precisely because it strikes hardest at those least able to protect themselves, and it could also of course strike at our whole economic structure. If other countries can moderate their price increases and maintain higher productivity than we achieve, and it seems that they may be doing so, the continuation of the present trend here clearly poses a serious threat to our trading position in the world and indeed, in the longer term, to our balance of payments.
For both those reasons we are determined to rein in the wild horse of inflation. The key, of course, is the progressive reduction of the prevailing rate of settlements. We believe that responsibility for securing such a reduction rests

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with those directly concerned in the negotiations, not least the employers—a view consonant with our philosophy of restoring freedom and enterprise over a wide range. That is why Ministers have consistently stressed the need to resist unreasonable pay claims. In the private sector this undoubtedly means a determination to stand firm in the last analysis against strike action. In the public sector, by the same token, the Government will accept their responsibility to take a fair but firm line in negotiations with their employees, though this does not mean—and I should like to stress this—unfair descrimination against the public sector.
Another essential element in the fight against inflation is the right background of fiscal and monetary policy, about which, no doubt, the noble Lord, Lord Balogh, will shortly be addressing us. The measures of expenditure and taxation, taken together, are expected, as the Chancellor made clear, to be broadly neutral in their effects on demand. With a continuing increase in consumer spending and a rise in exports, supported also by some increase in public consumption and fixed investment, output over the next six months may grow broadly in line with capacity, and, given this prospect for demand and the present rate of inflation, my right honourable friend concluded, without prejudice to his Budget judgment next April, that it would be wrong to take steps likely to increase further the pressure of demand. It is because our objective is to prevent too rapid an expansion of domestic credit that the Bank of England made a further call for special deposits at the end of last month. I should make it clear that we shall continue to use the mechanism of special deposits as a means of influencing bank lending as and when required.
My Lords, I have emphasised our determination to do all we can to resist unreasonable wage claims, or to encourage others to do so, and our decision to pursue sensible fiscal and monetary policies. I must likewise emphasise my view that the present public expenditure cuts are not a once-for-all operation. We have already by the present cuts won some freedom of manœuvre; we need more. It is our intention, by all reasonable means within our disposal, to seek further cuts in public expenditure. That
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is one reason why we are carrying out a deep and searching review of the functions of Government.
The commentators are calling out in pretty contradictory voices for a policy for incomes. I would suggest that these monetary and fiscal policies, together with our approach to the question of wage settlements, coupled with our whole industrial relations policy and with our intention to create still more room for manœuvre, constitute in the broadest sense a policy for incomes.
LORD ROBBINS: My Lords, I am sorry to interrupt the noble Earl, and I do not want to put a loaded question. But he has opened up for us horizons, with which I am in deep sympathy, of a possible leap forward in productivity in this country so that we do not lose place in relation to others. Is it impertinent to ask him what he would regard as being the possible maximum leap forward in productivity in the next twelve months, having regard to the measures that have been decreed and are in contemplation? It is an important question, because if we are thinking of inflation we have to think of it in relation to the possible increase in the rate of growth.
EARL JELLICOE: My Lords, when the noble Lord, Lord Robbins, said he did not wish to put a loaded question to me I knew precisely that I was going to be faced with a heavily loaded one. I am afraid that I cannot quantify, and I think it would be very rash for me to do so in answer to the noble Lord. But I will certainly ask my noble friend Lord Drumalbyn, who will be winding up, whether he can help the noble Lord on this.
I know that there are noble Lords who are asking us to introduce an incomes policy in the narrower sense of the word. To them I would say only this. The experience of the statutory and detailed policy operated by the previous Administration does not suggest that it brought any lasting advantage. Indeed, it was during that term of office that the present inflation bloomed. It was from the breaking of the fragile dam which they created that stem our present difficulties. It is not enough just to repeat, parrotwise, that we need an incomes policy. As the Prime Minister said recently, its advocates must spell out precisely what

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their incomes policy would involve. If and when they do that openly and honestly, I believe their case will carry very much less conviction.
In any event, may I make one thing absolutely clear to your Lordships' House this afternoon? The Government are quite determined to win this fight against inflation. We do not kid ourselves about the seriousness of the present position. Nor do we propose to be panicked into panic measures. But we realise that not only our plans for the future but also the individual plans of every man, woman and child in these islands are bound up with success here. Success will not be easily won. It will not be quickly won. But success we intend to win.
My Lords, may I, in conclusion, come back to the Motion before your Lordships' House? Noble Lords who do not like the changes we have announced may seek to argue for a continuation of the mixture as before—the policies that have led to fumbling growth and which have sown the seed of this year's record crop of inflation. I am delighted if I am not able to carry them with us in this two-day debate.
But let me add just this. The Motion talks about the achievement of an acceptable prices and incomes policy. Under the previous Administration we saw the destruction of their statutory incomes policy and the emasculation of their voluntary incomes policy. The Motion talks about the problem of regional development. Under the previous Administration we saw record unemployment and a failure to create the new jobs which the regions required. The Motion talks about progress towards a socially just society. After six years of the previous Administration, the Child Poverty Action—no Tory body—stigmatised those policies as making the poor relatively poorer.
My Lords, the Motion also calls for an economically sound society. I would accept that as an objective. I would also accept as an objective a socially just society. But, my Lords, I reject the hair shirt society. I reject the concept of equality in misery. The truth of the matter, my Lords, is that we shall not be able adequately to discharge the
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social responsibilities which we as a society and as a Government owe to the weaker, the less fortunate, the younger, or the less lucky in our society unless and until we achieve a truly buoyant economy.
My Lords, I believe that the White Paper has signposted the way to achieve such an economy and to a society where social justice has real meaning. It is because of that that I ask your Lordships to reject the Motion in Lord Shackleton's name, if and when it comes to a Division to-morrow evening.
4.20 p.m.
LORD BALOGH: My Lords, it is usually difficult to follow the noble Earl. His urbane, civilised and practical empiricism is disarming, even if one does not agree with the case he puts forward. He promised us at the beginning of his speech that he was not going to "bang"; but, as with the Concorde, I should have said that both on taking off and landing the bangs were almost overwhelming. The situation that he wants to convey to us is that something completely new has originated in this country. We have a new policy. We have, obviously, a new Prime Minister. We have a new philosophy of problems. May I most humbly put to the noble Earl, with great respect, that there is a saying by a famous and clever old Jew called Ben Akiba that, "There is nothing new in the world".
I should like to invite the noble Earl to look at the 1952 Budget of R. A. Butler (now his noble friend Lord Butler), which opened remarkably with the same sort of sentiments as we heard to-day. Then, too, people were to be made free. The overloading of the sort of carrot-chewing Labour régime was to be ended, and we should land, so to speak, absolutely marvellously on an upward incline of steady growth. If I may "bank" a little, may I remind the noble Earl that, after all, between 1952 and 1964 our progress was not very good? As my friends in the other House always pointed out, much to the embarrassment of the then Government, we were at the bottom of the league. We were at the bottom of the league, and we stayed there. Mind you, it is not so terribly bad that we stayed there. An economist handling economic matters, obviously will never underestimate the importance of the supply of goods and services, because, he lives by

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them or rather by the explanation of why they do not come forward.
Nevertheless, growthmanship is not the ultimate goal in life. If I contemplate that after 25 years of hard slogging we might approach the United States of America in average output, I must say that this is not a goal which to me looks entrancing. This is a good country to live in, and it was to some extent a good country to live in, because we are tolerant of each other. I am not so sure whether these measures are not going to undermine that sort of cosiness—it may be that it was a slothful cosiness, but it was very cosy—both in our social system and in our absence of class war.
That Budget of 1952 was, of course, very successful. Why was it so successful? It was so successful because import prices fell dramatically and we were handed £1,400 million worth of national presents, mostly from poorer countries. Yet by 1955 we had exhausted this national present. Why did we exhaust it? It was because of the absence of control, the absence of reorganisation institutions: investment did not grow enough. I must remind the noble Earl that it was Montagu Norman—no Labour man, he—who had first intervened in a systematic way in reorganising British industry. Indeed, a very misguided colleague of mine (because he forgot at the moment the disastrous effect of going back to the gold standard and old parity) called Montagu Norman the saviour of British industry in the interwar period.
So I do not believe that this is such a new affair. It is not so very new, and it is not new inter-temporarily, as one might say. It is not so very new geographically, either, because we have an almost complete parallel in the United States of America. Mr. Nixon came in in order to smash the almost Fabian economic system which had been built up by Kennedy and which was also continued by Johnson. Where is he now? The rate of growth has decreased; unemployment has increased. Unemployment has increased especially in those parts of America which are non-privileged. It is the young, school-leaving Negro who is unemployed—25 per cent. of them. I hope very much that we are not going to follow that example. But the measures outlined have a frightening parallel to the American measures.
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The noble Earl, I know does not wish ill, and has aims which probably are quite similar to our aims but I entreat him to think again when he thinks that the sort of measures which he has defended will lead us where he wants to go. May I also say that I was extremely surprised by the spokesman of the Liberal Peers? Their liberalism really seemed to be condescending in wanting penal measures—because obviously the injunction method of the Monopolies Commission would be used against the trade unions. I must say that this is a new thought, for Liberals at any rate, and I hope that some of my Liberal friends and enemies are going to repudiate it, as it should be repudiated, at once.
I do not want to discuss the various social measures, because I am sure that many other speakers are much more qualified than I am to discuss those themes. I should like to concentrate on what is, to my mind, the single basic problem, that of inflation and stability. I must confess that I was a little shocked the other day, when we discussed this problem in conjunction with the proposed Industrial Relations Bill, at what the "double" noble Lord, the noble and learned Lord, Lord Hailsham, said. In his personal capacity, as Lord Hailsham, and not in his capacity as the Lord High Chancellor, he always reminds me of a D'Oyly Carte opera, not Iolanthe but rather The Mikado. He said that not a single word was spoken from these Benches about inflation. As I spent eight minutes, the whole of my shortest speech, on this question, I felt a little aggrieved at this obvious displeasure on his part to listen to me.
For over thirty years now we have been fighting inflation. When we say "fighting inflation" of course we do not mean "fighting inflation", because one can fight inflation in many ways. The whole civilised word—Communist, anti-Communist, non-committed—was, and is, engaged in making full growth, full employment and price stability compatible. I should greatly like to call the attention of the noble Earl and of his friends to this fact: that we are not fighting inflation. What we want to do is to make full employment compatible with price stability. The noble Earl has outlined the conventional case, if I may say so, of why the sort of measures which

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he proposes would work. May I, therefore, humbly put just a few thoughts before him? I know that he is not going to absorb them, but at any rate I dish them out.
The noble Earl and his friends, and especially the Prime Minister, strike me as very good first-year students from an institution which does not accept me as an economist, and whose chairman and representative is among us. It is a sort of first-year Benham course; that is to say, you have a sovereign consumer, who sovereignly surveys the whole field of retail trade and wholesale trade and industry, and by his commands absolutely imposes his will upon the poor competing merchants and manufacturers. In this imaginary world there is no cartel; there is no oligopoly; there is no group of people colluding with one another, and colluding to each other's benefit; but there is a sort of beehive activity. Some time between 1840 and 1860 some semblance of this marvellous world perhaps existed. I am not on that, I must admit, a good enough economic historian, to assert that categorically, but there is a slight semblance of possibility that it may have existed. However, it now no longer exists at all.
One of the most interesting facts of life is that both the Keynesian and the monetary people, all the globalists—the "globalonians" as they would say in America—agreed to regard this world as the real world in existence with which we have to deal. I submit to the noble Earl that this is not so. At the moment there is no such competitive force. The balancing force of the early capitalist economy based on true competition exists nowadays only in agriculture in certain countries. Because it exists in agriculture, it was taken out of the competitive process. Why is there the Common Agricultural Policy in the E.E.C.? It is because the agriculturists had to compete; therefore they could not stand up, and so they had to be regulated. So I would submit that the manufacturers, at the moment, are not in the least in this position. If there is a demand inflation, it is because it originates in the cost inflation. That is to say, we are in a situation in which the entrepreneur's interest is no longer in keeping wages down, because he has everything to lose
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by a strike and nothing to gain by putting up his price, since the very fact that he puts up his price creates the inflationary pressure, and therefore validates the price.
This is the great problem, and it has not been dealt with. I submit to your Lordships that it will not be dealt with by this Government because, whether the noble Earl is right in his assessment of the social implications, or whether my noble friend Lord Beswick is right in his assessment of the implications of the measures proposed, what is certain is that a very large portion of the working class in this country feel that these measures are evil. They will not be persuaded otherwise by the noble Earl, because, after all, they will have it first hand in their own experience.
I fear that this very fact that we have ruptured such consensus as there was, that we have appealed to the competitive forces, will make a settlement without a struggle impossible. If that settlement comes after a struggle, I humbly submit to your Lordships, it will be a very bad settlement indeed, because it will depend on unemployment. Full employment has been the most precious gift of a devastating war, because full employment is not merely a means to higher production, it is an end in itself. It makes a man; it creates decency between humans; it ends the master /servant relationship. It is a precious gift given to us by the war, and we must keep it. I fear that the Prime Minister has embarked on a road which, by slippery steps, will lead down to very large unemployment in this country. That is why I support the Resolution of the noble Lord, Lord Beswick.
4.36 p.m.
VISCOUNT AMORY: My Lords, I am sure that we have all enjoyed the speeches of the noble Lords, Lord Beswick, Lord Henley, and Lord Balogh. There have been occasions when I have thought that the noble Lord, Lord Balogh, had introduced an unnecessary note of acerbity in his speeches, but that was not true to-day. If I may say so, his arguments were beautifully expressed. We enjoyed his speech, and I am sure that it lost nothing in force because it was so agreeably expressed. I always try to put the best construction I can on the speeches of the noble Lord, Lord Balogh, and I own I usually end rather like the student who, when his tutor said to him, "Are

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you now clear?"said," Well, I am afraid I am not clear, but I do feel confused at a higher intellectual level ".
The noble Lord, Lord Beswick, is not here now, but he told us that he and his colleagues had been blown off their course. It must have been a very prolonged gale indeed, because they were blown into a state of economic stagnation; they were blown into discarding their national plan; they were blown into devaluation; they were blown into enormously higher taxation; and they were blown into the start of the biggest wages explosion that has yet been experienced.
It may be that we are in as serious an economic situation as any that we have been in since the war. For the moment, there is clearly no immediate risk on the balance-of-payments front, but let there be no doubt that unless we succeed in relieving the internal inflationary pressure on costs, our old enemy, the balance of payments, will before long be haunting us again. Unfortunately, economists who, I believe, have increasingly over the past decade been sorting out answers to demand inflation, seem far less sure, both in this country and others, as to the right solution for a cost push inflation such as we are suffering from now. The remedies that are right for one do not seem, in themselves, to be sufficient for the other. It is clear, therefore, that the Government have an extremely difficult task in deciding what actions should be taken in the short-term. We all want social justice, but we want it in conditions of social prosperity rather than in those of social misery.
I should like to say at the outset that I support entirely the courageous and, I believe, forward-looking economic aims and conceptions of the Government—a curtailment of the expansion of the cost of Government activities, a reduction in taxation on earnings, and an increasing concentration of subsidies and welfare payments on real need. I suppose that what is wrong, and what has been wrong for long, with our economy is a certain lethargy and too great a complacency in accepting other than first-rate performance. It may be true that ever since the war we have as a nation been giving ourselves, and taking, sedatives, when what we really needed were stimulants.
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In passing, I should like to say that I also strongly support the main lines of the proposed industrial relations legislation. It looks as if it will provide a very fair framework within which sensible arrangements and agreements can be arrived at. I believe that if it is well explained and presented it will receive a very wide measure of public support. I cannot quite understand the policies of the Opposition, who seem to be against any rules whatever for industrial relations, but in favour of the most detailed statutory rules and regulations for every other aspect of the economy.
I believe that one of the best contributions to slowing down the rate of expansion of public expenditure would be if we could stop the rather silly rivalry which has grown up over recent decades between the Parties in power, to see who can carry on to the Statute Book the greatest number of new measures. I do not believe that that is the best measure of national welfare. There is one school of thought which believes that the way out is to treat the balance of payments as the flexible factor. Those who believe this would go for growth at any price; and if that price were further devaluation they would be prepared to accept that. About that, I would only offer this reminder: that one effect of an act of devaluation is not freedom from the necessity for internal restrictions, but, indeed, an accentuation of the need for them. Devaluation means more, not less, internal deflationary measures, and that is a lesson which many people—including, I think, many supporters of the last Government—discovered to their horror in 1967. An act of devaluation is, after all, a deliberate relative reduction of the national standard of living.
There seem to me to be three or four possible alternative policies. One is a really severe deflation, cutting back drastically on consumer spending power, credit and investment. If this were the only weapon, or the main weapon, I believe that it would involve a level of unemployment and waste of resources and a financial crisis that would indeed be counter-productive. I do not dissent at all from what the noble Lord, Lord Balogh, said, that full employment is an end in itself. It may be a slight oversimplification, but we all agree with the spirit of what he said. Full employment

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is a very precious thing indeed, and I hope that it will always remain one of our important objectives.
As one example of the difficulty of this out-and-out deflationary policy, a capital intensive company, even when faced with the risk of bankruptcy, may well choose as the lesser of two evils a big rise in wages and salaries, with a chance of passing on at any rate part of the cost, to the certainty of a crippling loss as a result of stopping a continuous-running plant. I think that that illustrates one of the difficulties of that course, which I do not personally favour.
The second alternative is a dash for expansion at any cost, and that would seem almost certain to lead to another balance-of-payments crisis and a further devaluation. A third policy would be a statutory incomes policy involving detailed control by the Government of wages and prices. In our debate last week. the noble Lord, Lord Brown, outlined a policy for controlling differentials—a very important aspect of the general problem. I am always interested in what Lord Brown says, because he speaks from first-hand experience of industry. But I am bound to say that I do not believe that the plan he outlined, if I understood it correctly, would be workable on a national scale. If he can convince me to the contrary I shall be delighted to have some conversations with him, but I feel that very strongly at present.
LORD BOOTHBY: My Lords, may I put one point to the noble Viscount? I think Mr. Marples agreed with him on that issue.
VISCOUNT AMORY: No, my Lords, I do not think so. I read only one sentence of what Mr. Marples said, but I would not commit him to agreeing. A temporary incomes freeze may or may not have a part to play in a critical situation, but experience so far has not been encouraging. In any case, it cannot of itself be a policy and I find it difficult to believe that the detailed fixing by Government of incomes and prices can in our complicated economy make any sense at all.
The fourth alternative is broadly the policy at present being pursued by the Government. If that is to succeed, as I hope and believe it will, I think the first
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requirement is that public opinion should be convinced, far more than it is at present in this country, that inflation is an unmitigated disaster, and that if it is allowed to continue it will wreck every hope and aspiration that every reasonable person has for the economic welfare of himself, of his family and of the nation. In Germany this, one gathers, is ingrained in public opinion as a result of bitter memories. But hitherto we in this country have suffered only inconveniences and not national disaster or destruction from inflation, and it will be a tragedy indeed if we have to learn the hard way, because it is surely unnecessary that we should have to do so.
Some, I know, say that we are getting dangerously close to the point where inflation takes hold and becomes self-generative. I agree with my noble friend the Leader of the House, that at present that is a panic view. We may be moving in that direction, but I am sure there is still time to pull back if we have the national will to do so. And that is the second requirement, that we should have the national will to avoid inflation. That means making short-term sacrifices to achieve long-term benefits; to escape from the present vicious sequence of rising money incomes, rising costs and rising prices. That the nation is capable of such an effort of will there is no doubt whatever. We have only to remember our war-time experiences.
I know the dangers of generalising from what a taxi driver says, but I thought one put his thoughts not badly to me the other day, when he said, "We know we cannot have all we want and we have to have some rules in the general interest. I myself cannot abide yellow parking lines and other abominable traffic restrictions, but I accept them because I know that to-day it would be chaos without them. Most people", he said, "are law-abiding and will accept rules if they can be persuaded of the need for them."He then went on to say that he wished they would teach his kids economics instead of poetry at school. We arrived at our destination at that critical point, so I did not have time to follow him into that interesting field of speculative thought. But if that taxi driver was right, the important question is: how as a nation can we be convinced of the right policies that the situation calls for? To whom will people

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really listen? I remember when I was a member of a Government which tried to use "the Three Wise Men"—and they really were technically at the top of the class. Nevertheless, the experiment failed, because in that case the trade unions would not accept or listen to their advice. Then we had the Prices and Incomes Board, and while I believe it did achieve something, it eventually lost most of its effectiveness because the late Government ran away from their own economic policies.
As regards the present Government's policies, they are, if I understand them aright, to continue to use monetary and fiscal measures as instruments of general control, but in negotiations over money incomes to limit their intervention to economic advice and attitudes consistent with such advice in cases where they are themselves the employer. My Lords, I myself own that I have grave doubts whether, in the very long term, completely unrestricted wage bargaining in existing conditions of national agreements and organisations which on both sides are getting bigger and bigger and more and more impersonal is going to prove feasible. Look at the way the General Motors strike has held back the economic recovery of a whole nation of over 200 million people. These huge-scale negotiations give too much power to the powerful organisation or to a small group who happen to hold in their grasp power over much larger numbers.
I believe the Government are quite right to invite those who ask for an incomes policy to spell out what they want; and my guess is that few are ready in present circumstances to do so. Most certainly I would not presume to do so at the present time. And unless and until this is done, then I am sure the Government are right to press on with their present policies. But I believe that, sooner or later, not only this country but all other developed industrial countries will have to devise income policies which will provide at least an accepted framework of what is economically feasible at the time, within which normal negotiations can be carried on.
My own guess is that such a policy will eventually have to contain within it a new conception of the principle of arbitration. Arbitration has of recent years
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failed—the Scamp example was a classic instance—and it has failed, in my opinion, because it has got itself hopelessly confused with conciliation. The two roles, arbitration and conciliation, are basically different. In the incomes field an essential prerequisite for the success of arbitration is that the arbitrator should carry out his task within a nationally accepted economic framework—and this brings us back to the need for the economic requirements of the time to be accepted by public opinion. Personally, I should have liked to see the Prices and Incomes Board kept on in a skeleton form (in the cupboard, if you like to put it that way) because I have a hunch that its experience could be used in different ways and is perhaps likely to be wanted at some time in the years ahead.
My Lords, when a ship is in danger a sensible crew does not proceed on the policy of "Every man for himself". As Clemenceau said:
"Liberty is the art of disciplining oneself so that one does not have to be disciplined by-others".
It is a safe forecast that right policies will involve sacrifices in the short term for all of us. It is right that we should do what we can to see that burdens are fairly shared; and the lowest-paid workers should receive fair treatment, particularly those who have no powerful union to protect them. But, my Lords, what will be the effect on the poorer sections of the community if the Government's strategic policies succeed, as I hope and believe they will? If they do, then our country will be stronger, our standard of living will be more secure, employment will be more buoyant, the rate of growth faster, and the prospects for the least fortunate people in the country will be incomparably greater. Those, my Lords, are indeed aims for which it is worth while making sacrifices in the short term, and I hope that as a nation we are ready to do so.
4.56 p.m.
LORD HAMNETT: My Lords, on this the first occasion on which I address this House, I would ask for that indulgence which your Lordships customarily extend to maiden speakers. Unlike many of my noble friends who have recently made maiden speeches in your Lordships' House, I cannot even claim to have spoken in another place in this building. I thus ask forgiveness in advance for any

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solecisms I may commit in this plunge into the debating traditions of this House. I am very conscious of its great traditions and conventions, of so many of which I am still ignorant. I am aware, however, that by convention a maiden speech is expected to be non-controversial. My intervention, therefore, may I hope be regarded as non-controversial having regard to my own background and traditions, possibly in the sense that Humpty-Dumpty meant when he said:
"A word means exactly what I want it to mean—neither more nor less."
On the question of tradition, it is also important that we build new, good traditions, as well as preserve valuable old ones. This should be true of the nation as well as of your Lordships' House. When, therefore, we are discussing the social services they should additionally be looked at in that light—of building great national traditions based on the importance of people rather than things. We should encourage a national philosophy which acknowledges that items on a balance sheet are not so important as humanistic endeavours to build up the health, welfare and happiness—morale, if one uses a more emotive word—for the sake of the nation, its people and its future.
All of us in this House, I think, acknowledge the difficult economic circumstances of the nation, and indeed the economic perils which confront it. What is not agreed, of course, is how these perils are to be confronted and, indeed, overcome. How they cannot be overcome, however, is by encouraging economic privilege and increasing economic non-privilege, or by withdrawing watch and ward over younger, older or weaker sections of the nation, to the ultimate detriment of the whole nation.
Many images have been painted in your Lordships' House this afternoon. May I paint a further one? In a mediœval besieged fortress, if one section took more than its share of water from the communal well or more than its share of food from the granary, that was the moment from which the psychological defeat of the fortress, and therefore its ultimate destruction, could be reckoned and ensured. In more up-to-date wars, the importance of this psycho-logical unity was recognised, and during
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them, particularly the last war, it was regarded, correctly, as just as important to plan for the aftermath, with intentions to carry these plans into effect, as it was physically to fight the war.
We in this nation are a beleaguered economic fortress: a very tight, embattled, economic fortress. In such circumstances, to give any impression of unfairness or inequality of contribution psychologically weakens the total efforts. For example, to take a case in point, to withdraw the supply of free milk to children over seven, or to make it more difficult for many families to obtain school meals by the expedient of raising the price, and simultaneously to cut the standard rate of income tax by 6d. is, apart from any question of the health of the nation and apart from inflationary economics, psychologically unsound in this economic fortress. It is far better to give all children free school milk, even if some parents could afford to pay, rather than that any child should go without. It is far better to give even free school meals than that any child, for any reason, should be without a meal.
Recently, the National Dairy Council commissioned Queen Elizabeth College of the University of London to carry out a nation-wide study into the feeding habits of school-children. This research was carried out by Dr. G. W. Lynch and Dr. S. de la Paz. An interim report on the results of the research was issued in September, 1970. It indicated that 18 per cent. of primary school children had been shown to be deficient in calcium; if school milk were withdrawn, this figure would jump to 34 per cent. In primary schools, the deficiency in riboflavine was 28 per cent.; if school milk were withdrawn this would jump to 39 per cent. In secondary schools, the calcium deficiency was 44 per cent. below the recommended allowance; one-third of a pint of milk a day would reduce this to 7 per cent. In secondary schools, the riboflavine deficiency was 67 per cent.; the reintroduction of school milk would cut this figure to 29 per cent. On the overall findings as a result of interviews with 4,382 children, the diet of only 32 per cent. was regarded as satisfactory, that of 57 per cent. as unsatisfactory and that of 11 per cent. as poor. What the Government's proposal means is an increase in those figures.

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To mention another source, a National Union of Teachers' recent publication indicated that the price increase in school meals by 8d. next April, and by a further 5d., to 2s. l0d. in April, 1973, could mean that 500,000 children would not eat school meals when the increase takes effect. The reason: when meals went up by 6d., in 1968, the result was a 10 per cent. drop in the numbers of children eating them. When a 3d. increase was made last summer the D.E.S. estimated that this would result in a fall of 250,000 in the numbers taking school meals. What fall there would be with a further increase is a matter of extending the examples. The underlying psychology of these cuts is somewhat reminiscent of the two little girls, one the daughter of a poultry farmer, and the other her friend. The friend remarked to the poultry farmer's daughter, "My father keeps hens, too, but the difference is that your hens have to lay eggs; in the position of my father, our hens don't need to."
My Lords, this is not the atmosphere or the tradition that we ought to be building in this nation. I believe, as Ruskin wrote:
"There is no wealth but life, and that country is the richest which contains within itself the greatest number of happy, healthy and contented human beings."
This, I am sure, is a sentiment that will be approved in all parts of your Lord-ships' House. This idea will not be achieved by such measures as the suggested cuts in the welfare services. It is therefore on this plea for a greater acceptance of the real meaning of wealth, the humanistic approach, that I conclude this first speech in your Lordships' House
5.3 p.m.
LORD PLATT: My Lords, I have the very great privilege on this occasion of congratulating the noble Lord, Lord Hamnett, on his maiden speech. It is, of course, the custom of our House that I should do so, but it happens to be one of the occasions when I could do so without having my tongue in my cheek in the slightest degree. I am quite sure that the noble Lord has convinced us all that he is a person who can hold our attention and who can talk sense, even if he has not obeyed absolutely strictly the custom of being completely non-controversial. But he has certainly obeyed the custom of being brief. His speech lasted seven minutes.
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My Lords, I have read again and again the Statement on public spending and economic policy with a view to trying to understand its objectives. To some extent I think I have succeeded and to some extent I go a long way towards wishing that the cures of our economic ills could be found in the measures proposed. But I must say that in some respects it seems to me an ill-considered, rather hastily-put-together document, without sufficient consultation and consideration. There were parts of it which unquestionably, to use the words in the Motion which is being discussed this afternoon, would "widen the gap between rich and poor".
When the Statement was read before this House on October 27 I at once remarked on the possible grave effects of just lopping several million pounds off the grants to the Research Councils, and I should be prepared to discuss this subject in more detail if at some time it came up for detailed consideration. I was a little surprised that the noble Viscount, Lord Amory, who was for so many years the very greatly respected and splendid Chairman of the Medical Research Council, did not refer (as I am sure he would have felt he had to do a few years ago) to the fallacy of saving money in this sweeping way on the Research Councils. I also remarked on October 27 on the absurdity of trying to relate the cost of prescriptions to the cost of drugs, which can, so far as I can see, only slant patients towards taking the cheap and inefficient remedies, which for the most part they would be better off without, and avoiding the expensive antibiotics which can so easily shorten minor illnesses and thereby save a lot of money for the State and man-hours per day.
But to-day I want only to speak on the subject of school meals, and my one quarrel with the maiden speech to which we have just listened is that the noble Lord has taken out of my mouth so many things that I was going to say on this subject. But I shall deal with the matter from a slightly different aspect. I think that to raise the cost of school meals from Is. 9d. to 2s. l0d. is very doubtful economy and may lead to serious consequences, as the noble Lord, Lord Hamnett, has already told us. The first great virtue of school meals is that they

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are of direct benefit to the child; the money cannot be spent on cigarettes or bingo or anything else; it goes direct to the child. It ensures that the children get at least one adequate meal in the day. The second virtue, surely, is that it allows many mothers to go out to work who would otherwise have to be at home preparing the midday meal for the children, thereby "encouraging the effort to earn", if I may quote verbatim from the speech of the noble Earl.
But I want to point to the fallacy—I avoid the word "hypocrisy"—of trying to justify the increase in the price of school meals by taking sixpence off income tax. I will forbear from making too much of the fact that by the time this concession comes into law there will not be any sixpences to take off the income tax; but I assume that the Government are talking in terms of 2½p. The couple with two children of school age will pay approximately £23 for school meals when they go up to 2s. l0d. and, as the noble Lord, Lord Hamnett, said, many teachers reckon that as many as half a million schoolchildren may then go without school meals. To break even, you must have an income of £2.000 per annum. Noble Lords can work this out for themselves from the back page of these tables illustrating income tax payable. [Cmnd. 4517.] A married couple with two children not over 11 must have an income of £2,000 a year to break even. The married couple with only £1,500 a year lose £10 a year on the transaction; those with £1,200 a year lose £16; those with an income of £1,000 a year lose £20 on this transaction alone—that is, not taking into account increased prescription fees, dental fees and so forth. Whereas a couple with £2,500 will make a net gain of £32 and those with £5,000 a year will gain £84 on these two matters alone, the income tax and school meals.
Of course, as the noble Earl has pointed out, the very poor will be looked after, and we are all in favour of that. But it is not that income group of which I speak to-day. I am concerned with those many families with small incomes: respectable middle-class workers, tradesmen, skilled workers, semi-skilled workers and professional people like musicians and teachers, who are bringing up their children. I think it is time that their voices were heard, and I make a
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strong plea for them: that if they are to gain nothing at all from this policy, at least they should not be called on to contribute more to those richer than themselves.
5.11 p.m.
BARONESS LEEOF ASHERIDGE: My Lords, I hesitated a great deal before presuming to address you so soon after becoming a Member of your Lordships' House. In doing so to-day I have no intention of speaking over a very wide range of subjects. But I feel impelled to talk about a matter which is of very great importance, not only to me but also, I am quite sure, to every Member of this House. I should be very proud if, speaking as I am from the Opposition Benches, I could do Her Majesty's Government a service; and if in particular I could prevent the noble Viscount, Lord Eccles, who now has responsibility for the Arts, from being trapped into doing something which I believe he would have cause to regret and which all of us would regret.
I am very well aware that there are great experts on both sides of your Lordships' House who, in debates of this nature, have addressed themselves, and will continue to address themselves, to the basic issues of inflation, imports and exports. There are Members of your Lordships' House who can talk learnedly and with great experience about coal, steel, cotton, agriculture and the rest. But if we are considering our country's future, if we are considering our country's well-being, I hope we shall all agree that there are other factors besides those material factors.
My Lords, during the six years when I had the privilege of carrying some responsibility for the Arts I had all the time to contend with uninformed opinion which, apparently, thought that expenditure in the affairs of the writer, the scholar, the painter and the poet were a kind of superficial frippery which could be done without; that it was not a serious matter, but only a side issue. The noble Viscount, Lord Eccles, knows that I shall be delighted if he can continue to give priority to the Arts; indeed to improve the priorities given by the last Government. There is a very great deal to be done. We have only made a beginning. The tradition established in the last six years was that, to a very large extent

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the Arts would be exempt from the rougher hurly-burly of Party politics. I do not say I did not make sacrifices. But I had a job to do; and I did it with the encouragement of my Prime Minister and my colleagues, and I tried to do it in the spirit in which I thought that it should be done.
As you know, my Lords, there are barbarians in all Parties and there are civilised people in all Parties. The artist is vulnerable; he has not a great pressure lobby. But he is becoming less vulnerable because more and more, as we seek to broaden the basis of our society, as we seek to create a situation in which not just some children from some schools but all children from all schools are given a civilised education, we are creating a very important pressure lobby for the Arts. I was delighted to read Lord Eccles's statement of faith, Politics and the Quality of Life. I do not agree with it all—that would be going too far; but I certainly was delighted that he made this important point:
"Unlike many of their parents before them, children have been taught since the war to have confidence in their own creative powers."
The noble Viscount went on:
"It is well to remember that one can hardly do more damage to a boy or girl than to begin, and then suddenly to stop, the adventure of finding themselves."
In the new world in which we are living school is, or ought to be, no longer just a classroom, or contained within four walls. School is the totality of the environment. It embraces the art gallery and the library. More and more in this mass-media age the child seeks information, and receives entertainment and inspiration from all sources. Your Lord-ships may already have guessed why I have taken the liberty of addressing you to-day.
I do not expect a new, incoming Government, or indeed any Government, to be so persuaded by the arguments of their opponents as to say, "Let us change places, chaps; you are right and we are wrong". But I think it is a mark of an aware Government if they make a decision and then, after the fullest consideration of all its implications, think it wise to change it. I am wondering whether those who made the decision to impose admission charges to our museums and galleries really considered what the
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effect is going to be. I know that there are many who may consider this a rather trivial point, but it is fundamental. This decision is a flag in the wind. All of us pay lip service to the concept of "one nation", and we all know that civilisations seemingly much more solidly based than our own have vanished. This is not an original sentiment on my part. Lord Clark put it well in his series on civilisation. It is possible to have a civilisation which seems solid and indestructible; but if too few people believe in it, or are advantaged by it, that civilisation can vanish overnight. Therefore, my Lords, when we talk about the quality of life, as we all do, I do not consider it an irrelevant issue in a debate on the economy. I am deeply grieved about the decision the Government have made and beg them to look again at what they have done about admission charges to museums and galleries.
If they change their minds, they will not be the first Government who have done so, even about museums and galleries. Surely that is the purpose of debate. Surely we cannot make children pay an admission charge. I am assuming that school children will be exempt, and I hope that this exemption will apply to the children of the rich as well as to the children of the poor, and that there will be no means test imposed on our children. We shall have to exempt students—but which students? Art students only, or all students? Again I hope that it will be all students, irrespective of the incomes of their parents. We know how many people look forward to having more leisure when they reach the cool of the evening, and a greater opportunity to enjoy much that was denied them in their more strenuous years. Surely we are not going to make it impossible for our old-age pensioners to visit our museums and galleries.
And what is it all about? We are not talking in terms of £100 million or £1,000 million: the sum we have heard mentioned is only £1 million. I should be most grateful for any information on this matter from the noble Lord who is going to reply, or from any other noble Lord at any stage in the debate. And who are we going to exempt, over and above children and students? What about apprentices? Many of them have very small earnings, and they are our future

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craftsmen. Surely we want to encourage them in every way to have a civilised outlook on life. Then there are the least fortunate, those who leave school at 15 and go into the "dead end" jobs. Of course they have money in their pockets; but do we want to put obstacles in their way, instead of bringing them into a world where they would have first-rate instead of the third-rate, or even worse?
We are left with middle-class families for whom it might be a small matter to pay a charge of 2s., 3s. or 4s. The noble Viscount, Lord Eccles, put himself exactly in my position when he said:
"I have been lucky. I have been able to do my thinking in the British Museum where everything, books, manuscripts, works of art, and objects of historical interest, combine to teach one that at no period and in no place has man ever been content to live by bread alone."
I agree with that and I, too, am one of the fortunate ones. Museums and galleries were always open to me. I had a highly civilised father and I had the Carnegie Trust in my pocket. The whole of Dunfermline was mine. Edinburgh was mine. I had my years of leisure as a student at Edinburgh University. Like the noble Viscount, Lord Eccles, I was one of the lucky ones. But have not those of us who are the lucky ones a responsibility to those who have not shared our good fortune? Should we not therefore be concerned to look again at the relatively small sum involved? It is going to cause much trouble for the noble Viscount, Lord Eccles. I want to save him trouble. I am his best friend.
The noble Viscount knows that when he was appointed I congratulated him on being given the best job in the Government—a job in which one can heal, do new things, try to raise the general standard of our people. Frankly, I do not want to see the Government exposed to the consequences which will follow from students if this suggestion goes through. This is not a money-maker, but a money loser. I have talked about students in the sense of those who are registered. But what about the 22 to 30-year olds; the young hopefuls who are earning their daily bread in some job or another but still have their dreams, the dreams that they are going to be great painters or sculptors one day? What is going to happen to them? Are they going to have
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to pay every time they go in? It is not like going to a theatre. Everyone seriously interested in seeing the treasures of the British Museum or any other museum or gallery needs free access in order to go again and again. There has been talk about what other countries do. Surely there ought to be fields in which we lead, not follow. This is one of them.
There has been a large and encouraging correspondence going on in all the papers, and I have been avidly filing letters, particularly the letters in favour of my view, from directors and trustees—those who know most about it, who are most dismayed at the effect of proposed charges. The Times, the Manchester Guardian and Daily Telegraph have done very well. I do not usually go to the Daily Express for arguments to support my views, but I certainly could not express what I feel better than is done by Barbara Griggs in her column, which she ends by saying:
"Until now, nobody in this country has been too poor to look at masterpieces of art. Let's not abandon such a great tradition without at least examining the alternatives."
There are alternatives. I have discussed them. I do not want to embarrass the noble Viscount, Lord Eccles, too often, but we were in an honourable conspiracy for quite a bit of time because we both cared about our museums and art galleries. I know that he was as indignant as I was at many of the old-fashioned handicaps from which they suffer. The British Museum has schemes for raising money which I fully endorse. One is the sale of lithographs, postcards and pictures. We ought to bring all our museums up to the standards of the freest and the best. Most certainly there are other ways in which we can raise money.
Again, let us remember that over the last two years our income from the tourist trade has exceeded the expenditure of people who go abroad for holidays. The figures are remarkable. The Board of Trade returns for September of this year tell us that for 1969 £479 million was earned by the tourist trade, an increase of £100 million over the previous year. I am not saying, of course, that all tourists come here to visit our museums and galleries, but we know that 64 per cent. visit at least one museum, which is rather more than the 23 per cent. who

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go to the opera or concerts. But, of course, operas and concerts cost a lot of money.
People come to see Buckingham Palace, the Tower of London and our beautiful country, but we have had these for a long time. What are the new attractions? In recent years, at a time when we are all perplexed by great economic anxieties, we have been able to hold our heads high in the world as a centre of education and the Arts. Do not let us imagine that all the Americans who come to this country for a holiday are American millionaires. To most of them it is the trip of a lifetime. I think it is a gracious thing, whether it is for our own people or for our guests from overseas, to have all our treasures open for them. And we have to remember that many of the people who have made bequests to our museums and galleries have made those bequests because the galleries are free.
I hope you will forgive me, my Lords, if I have trespassed too much on your time, but I feel strongly on this matter, and it concerns all of us here, both sides of the House, Cross-Benches as well. I cannot resume my seat without saying what a debt of gratitude I owe to Members of every part of your Lordships' House for the help and encouragement they gave me for six years. It would have been impossible for me to have done a job which in a sense was a new kind of job if it had not been for this help. There was for instance, the noble Viscount, Lord Chandos. We were at opposite poles in another place, yet no one could have been more dedicated to the establishment of the National Theatre. There is the noble Earl, Lord Drogheda, always campaigning for his Covent Garden. I must not go on because there are so many, but I see the noble Lord, Lord Robbins, who gave me such great encouragement. I hope I am not compromising the Cross-Benches! Indeed, looking round this House, whose Members have so much experience of service to our museums and galleries, I am hopeful that we can combine to reverse the Government's decision. I do not even beiieve that any substantial money is going to be won by the Chancellor of the Exchequer, but if I am wrong there I hope that saving £1 million in such a pathetic way will not commend itself to noble Lords in any part of this House.
5.30 p.m.
LORD THORNEYCROFT: My Lords, it is always an honour to address your Lordships' House, and it is a particular pleasure to me to follow the noble Baroness, Lady Lee of Asheridge, who has just made her maiden speech. If I may say so, I almost greet her as an old friend, because for a few years we sat on opposite sides in the other place, where she represented a constituency which included my own home in Staffordshire. I remember hearing her make many a speech; and, if she will permit me to say so, I recall as a young man in the House of Commons listening to her husband, who, I suppose, on anybody's account, was one of the finest debaters that this nation has ever produced. The noble Baroness made a speech to-day which particularly delighted me. I agree with her that artists are most vulnerable people. I hope that the words which she spoke with great eloquence will carry weight with my noble friend Lord Eccles. He has quite a bit of competition, if one may use such a word in regard to the noble Baroness, to keep pace with the reputation which she established when she was in charge of that particular part of the Government's responsibilities. I therefore congratulate the noble Baroness; I compliment her on the eloquence of her speech, and I express, as I am sure your Lord-ships would wish, the hope that we may hear her in the same vein and on other subjects on many future occasions.
This has been a debate, even so far, in which a number of notable speeches have been made. I particularly enjoyed the speech of the noble Lord, Lord Beswick; and I enjoyed the contribution from the Liberal Benches—though I am sorry that the noble Lord, Lord Henley, at the end left himself in the position of opposing the Miss World Contest and supporting the Opposition. I thought that the logic of his arguments deserved a nobler conclusion than that. I was particularly delighted to hear my old friend Lord Amory, about whose speech I should like to make a few comments in the course of my own.
I have reached only one conclusion so far; that is, that really there is no conceivable course that could be urged by anybody which is not open to the most formidable attack. In a way, this sets the pattern of this, as of all debates on

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economic subjects. It is so fatally easy to tear holes in any proposition that is put forward by one's own opponents, and to gloss over the manifest weaknesses of one's own case, so that the public, and even I myself, I must admit, get a little bit confused as to where the truth lies. I think that a debate might become rather more coherent to the public if we defined, if it were possible, the problem which we were seeking to solve. I do not know whether I have got this right—I really am rather humble about defining problems of economics. I may have got it quite wrong; indeed, I hope that I have got it wrong; but I think I would put it like this. There are some people, at any rate, in this country who think that we are in the middle of a cost-inflation, exemplified by a series of wage demands of almost unexampled size, many of them being met at a rate quite out of touch with any reality of increased production that is actually taking place, and upon a scale which can be paid only in depreciated currency—currency depreciating already (and this is another way of putting inflation) inside this country, which, if pursued too far or too long will end probably in a further devaluation of the pound.
It may be that the problem is not as grave as that. I have not all the information available to the Government. Only Governments and men wiser than myself can say how grave or urgent the problem is. I can only say that to me it looks as though that may be the problem, and I feel that there are an increasing number of people in this country who are beginning, in some way or other, to share that view. If it be the problem, it seems to me that finding the solution of that problem is the first priority of Government. To my mind, that takes priority over anything that was said at the time of the General Election. I do not think the public are ever particularly concerned that everybody does exactly what he says in an Election; in fact, I think they sometimes prefer that people do not do what they say. So I am not very much concerned about that. Finding a solution to inflation, to my mind, takes priority over any statement that has ever been made or any position that has been taken up. It is far more important than the political dogmas on either side. All those
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things, in a sense, are rather irrelevant to the problem of the moment.
I do not mean that I am against discussions of political principles. I think it right that they should take place. I value the debate in this House to-day, and I want to say a few words about political principles, because I agree with the noble Lord, Lord Beswick, in saying that, unless these things are put out with some clarity on either side, you do not really get any clear concept of the background against which decisions are being taken. I certainly would value a really definitive, incisive, and even passionate, statement of a Socialist position. After all, there is, or was, a great thought behind the classless society: the maximum of equality in property and income; a world in which the necessities of life are provided by the State, and in which wages are less and less relevant. All these things I have heard argued all my life. But they are not argued very much to-day. They are thought of a little as typical of, say, the early kibbutzim, or an early Christian society. They are not applied very much to-day.
Equally, I value the statement of another philosophy: and I think that if Mr. Powell did not exist it would be most unfortunate if we did not invent him, because it is essential that someone should put the case for the market mechanism. Whatever Lord Balogh may say about these things, thank heaven! there is somebody who can put with clarity, and in a manner which men can understand, that there is a method in which materials, products, and even money, can be made available by the market mechanisms, and at prices which vary with supply and demand.
Between these extreme positions, if you like, sit the two Front Benches, glancing, if I remember anything about Front Benches, a little more nervously behind them than at one another. I do not say that in any unkind spirit; I have sat there myself, and I know exactly what the feelings are. They have the difficulty that, one after another, they bear the responsibility for governing Great Britain. Looking at it from the outside, as I do, I get rather bored if I may say so to the noble Lord, Lord Shackleton, with the claims with regard to who thought of what first. What we want to know is what we are going to do now about the

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position, and this is what the country wants to know, too. There are sharp differences between the Front Benches to-day, sharper than I have known for some time. This is probably healthy, but it is something we ought to recognise.
The last Labour Government, I suppose, largely abandoned the Socialist approach—the attempt at equality. I do not blame them for it; they found themselves in some difficulty keeping in touch with the Socialist philosophies of their Party, but they tended to move further and further away from them. They were, in a sense, in a dilemma because in the attempt to pursue their policies they were finding greater and greater poverty at the bottom, and less and less incentive at the top, with a measure of taxation in the middle which was proving quite intolerable to the wage-earners themselves. This was an almost impossible position for a Government to find themselves in.
Now we have a new Government, and they have adopted a new policy; and no one can complain about that because it is the policy they said they would adopt. They have set out to try to relieve the poverty at the bottom and to provide rather more incentive at the top. Noble Lords could complain that the Government have not done it well enough or cleverly enough, or that some of the measures do not operate in the way they should. Nevertheless, if you look at that packet of measures there is no doubt that it represents a really important change of strategy. This is an important event in the political life of this country.
For my part, I am wholeheartedly behind Her Majesty's Government in this change of course. I believe it to be right; I believe that in time it will pay considerable dividends, but it will probably take quite a bit of time to work. The question is: "What do we do now?" As I understand it, the policy of the Government is to refuse to rely in any way upon an incomes policy as it has previously been defined. In a sense everybody has an incomes policy, but the Government's policy is to refuse to follow any Prices and Incomes Board as previously defined. They urge restraint on the public and the private sector; they are seeking to support the poorest, and to give some rewards to those who climb the ladder. They say they hope that,
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against this background, we shall come through our present difficulties—and I do, too. I am perhaps a little less certain than some. It is one matter to steer the right course. They are steering the right course, but if I may use a nautical metaphor to the noble Earl, Lord Jellicoe, I think the duty of a captain is to do rather more than steer the right course; he has to be prepared to encounter some of the hurricanes that may meet him on the way. I do not want him to go on saying that he will not batten down the hatches. I am not saying that he has to do it now, but I would rather that he left himself and his colleagues with a reasonable amount of room to manœuvre in a situation which may turn out to be rather worse than many of us suspect at this moment, although naturally we all hope that it will not happen.
The Government have had a reverse with the council workers. I do not know how important they regarded the dispute with the council workers. I do not think any of us want to overplay this matter. But if the Government were really keen to stop an increase being granted, there were some measures that were open to them. They give an enormous quantity of grant aid to local authorities and, therefore, they have rather more control, in my view, over what local authorities do than is sometimes supposed. There is one certain way to disaster with a dispute of that kind and that is to call in someone who is called a "veteran industrial) troubleshooter". I hope that this will be avoided in the future. I do not think it was the Government who called him in, but if they did it was a disaster.
EARL JELLICOE: My Lords, I am sorry to interrupt my noble friend, but I should like to assure him that he was not called in by Her Majesty's Government.
LORDTHORNEYCROFT: My Lords, I was going to say that I was sure that he was not called in by the Government. If ever they feel like calling him in, I hope that they will send for me, because although I do not know the answers, at least I know how to write that kind of report. Give me a situation in which the employers have made an inflationary offer of 45s., and the workers are claiming 55s., and I will provide the answer just as well

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as any veteran industrial troubleshooter. I do not need a computer to do it; I can do it right away, and I know paragraph by paragraph the words to write about, the inevitability of inflation, and the Government, having willed the end, having to will the means. I can do that in my sleep. There is no need to call in any veteran industrial troubleshooter. The noble Lord, Lord Shepherd, is locking very worried—
LORD SHEPHERD: My Lords, I am rather worried knowing the noble Lord's reputation for disasters. Would he not agree that the Scamp Report recommended an increase of 1 per cent. over what the Government thought was a tolerable and fair award? If that is the case, I do not understand how the noble Lord can say that 1 per cent. from 14 per cent. to 15 per cent., is a disaster, unless it is a disaster in the noble Lord's mind.
LORD THORNEYCROFT: Yes, my Lords; but I do not want to talk about disaster. I would only say to the noble Lord that I do not want to overplay this, and I am going to put this in context in a moment. The noble Lord's inability to understand the position in a sense illustrates the difficulty. I have seen this happen over and over again; the position arises where everybody has made an inflationary offer, and the Government are standing behind an inflationary policy before they know it. They then split the difference between that and an even more inflationary demand, and it is regarded as a brilliant piece of work. All I am saying is that it is not a brilliant piece of work. I say send for me, because I can do the job better, quicker and for no trouble at all.
Having said that about the council workers' dispute, do not let us exaggerate the matter. The importance is not that a number of council workers have an extra 50s. a week. The question is: "Where do we go from there?" There are other claims in the pipeline. The workers in the National Health Service are claiming up to 30 per cent. The teachers are claiming 37 per cent. There are railwaymen variously claiming from 25 per cent. to claims which are "substantial". There are a whole group of others marked "substantial". If their trade union leaders know their jobs, I
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doubt whether their claims are very much below the ones which I have quoted.
One has to consider what is the right approach to the situation in those terms. There is something which in business is called the "cash flow", which businessmen have to think about very seriously, and generally did so at least once a week. Now they have to think about it rather more often, and rather more seriously. Broadly, it is a determination as to whether the necessary cash is available to pay the wages or to do what you want to do in the immediate or medium term future. It applies to my mind to the art of government, particularly in the public sector. There is only one way in which the Government can control wage increases granted in the public sector, and that is by refusing to finance wage increases which they do not want. There is no other way of doing it. It is very rough; it is very unpopular—I have indeed had to do it myself. It means that you have to go to Sir Henry Johnson (or whoever it is) and the Railways Board and say to them, "My friends, no more money will be voted for these wage increases. You can keep the same number of men at the same wages, or you can reduce the number of men and pay a modest increase in wages. But you are not going to get the cash from the taxpayer and the Government for the increase."This is really talking about control in the public sector.
I feel bound to say to Her Majesty's Government (I am still dealing with the public sector) that if they wish to control wages in the public sector they must recognise that the cash flow to these great public organisations is something that matters. One sees many references in the papers as to whether Mr. John Davies, the right honourable gentleman who presides over the great Department of Industry, is going to accommodate himself or be acclimatised to the House of Commons. I am sure he will. He is a very able man, and one for whom I have great admiration. But I am far less interested in whether he acclimatises himself to the House of Commons than in whether he brings to the discussions in the Cabinet some understanding of realities that occur inside a business. In business the cash flow must be considered, and if this was really brought home in the Cabinet discussions I think we should

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have a much better chance of success in controlling the public sector.
What about monetary policy? I hope that the noble Lord, Lord Robbins, is going to participate in this debate tomorrow—I am glad to see him signify assent. I had rather hoped that he would participate before I spoke, because he has guided me for so long and I set such store by his comments on many aspects of the economic scene. However, I shall listen to him to-morrow, although I am rather nervous that he may answer me. What I say about the monetary policy applies rather more to the private sector than to the public sector. Although I have practised and suffered under it, I would ask people to consider carefully how far it can be pressed to-day. The strong use of monetary policy has of course a very immediate effect upon how businesses manage to finance their stock and work-in-progress. It has a very great effect upon what they may be going to do about their investment plans. But, as the noble Viscount, Lord Amory, observed, its effect on wages can be a little more remote and will depend on a whole complex of factors, including how capital intensive or labour intensive a particular industry may be. In many cases it may not be a very strong weapon with which to contain wage increases in the private sector, or they may be contained only after we have inflicted upon the private sector a considerable punishment of no advantage to ourselves.
The Motion refers to "an acceptable prices and incomes policy". There may be such a thing as a prices and incomes policy. There is certainly no such thing as an acceptable prices and incomes policy. So far as prices are concerned, if there was a policy the logical step at the moment would be to put them up. I suppose we are allowed to say that. This is undoubtedly what would happen if we were logical. At the present moment, if we are going to generate the necessary cash to maintain business in this country there are many prices that are too low and have not yet reflected the cost increases which either are arriving or are at this moment in the pipeline. It is very difficult to conceive a prices and incomes policy.
My Lords, I should like to summarise the situation in this way. We may be in a crisis, or facing a problem (I do not
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like the word "crisis"), more serious than seems yet to be realised. I do not say that at this moment there ought to be a wages freeze, but I am bound to say that I would rather nobody ruled it out of court altogether yet; I would rather watch a little and see what happens on these next few claims that are being put forward. Because I believe that if they started to follow the pattern of the council workers, and we began to see claim after claim settled at a rate which was out of all relation to what we are producing in this country, a number of unconventional actions by Her Majesty's Government might be called for. So far as the public sector is concerned, I would ask the noble Lord to weigh carefully what I have said about the cash supply to publicly financed sectors of the economy. There is really no other way of operating any restraint in wages in that sector. So far as monetary policy is concerned, I hope that we shall not wade through high-scale unemployment or numerous bankruptcies in an attempt to arrive at our conclusion in that way. Monetary policy will be used, but there is a limit to the extent to which it can be used with real effect.
With regard to prices, let us rely on competition; and if we think at any stage—and I do not say that that stage has yet been reached—that competition here is insufficient, I would far rather see price control operated through higher imports and, if necessary, by lower tariffs. There are weapons well within the range of a free economy which go outside the compulsory scales mentioned in some quarters. If we have a monetary policy, again I would much rather see it operated through interest rates than through methods of physical control or compulsion on bankers to choose, on an artificial basis, between one customer and another.
These are my views, my Lords. I do not say that they are right, and I do not ask the Government to answer them, because on balance I am not sure that it helps to press Government to give definitive answers on complex and difficult matters in a scene which cannot in the nature of things be absolutely clear to anyone. I know that, whatever brave words are spoken at the Dispatch Box, very hard work must be going on in Whitehall at this moment on a fall-back

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position and alternative lines of defence, and I believe that the words we speak in this House are listened to in those quarters, as I know they are listened to by my right honourable friend. I do not ask for an answer; I ask that my right honourable friend should ponder these thoughts from someone who has seen something of this problem and knows something of the difficulty.
6.0 p.m.
LORD AVEBURY: My Lords, it is customary for a maiden speaker to beg the indulgence of your Lordships for any shortcomings. In my case this indulgence is all the more necessary because, whereas most of the speakers who address your Lordships' House for the first time are already very experienced at speaking elsewhere, in my case this is only the third speech I have ever made in my life. When I was a new boy at school I was taught not to speak unless I had something to contribute. Whereas by some standards I am not exactly a new boy in your Lordships' House, my only previous contribution to its work was in 1936, when I sat on a Select Committee. We spent three weeks rubber-stamping decisions which had already been taken elsewhere as to who should suffer the misfortune of losing his front garden, or even his entire home, to make space for the extension of the Central Line eastwards from Liverpool Street. Your Lordships will doubtless be happy to know that I do not intend to take three weeks over my present contribution.
I know that it is a convention of your Lordships' House that a maiden speech should not be controversial, but the fact remains that wherever more than one opinion exists on a subject, any expression of opinion is bound to be considered controversial by holders of the other points of view, and I cannot believe, my Lords, that just because I sit on these Cross Benches your Lordships would wish me also to sit on the fence. My Lords, while I think there is unquestionable merit in the first phrase of the proposed Resolution, the remainder of it is such a hotchpotch of doctrinaire non sequiturs that I cannot support the Resolution as a whole. I am inescapably reminded of the old saying that a camel is a horse designed by a committee.
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This Resolution looks to me like a shelter for sacred cows designed by a committee, and I commiserate with the noble Lord, Lord Beswick, on having been elected assistant cowman. I cannot escape the feeling that the chief cowman, the noble Lord, Lord Shackleton, having given further consideration to the wording of the Resolution, is now ashamed at having placed his name to it, and that it is for this reason that he delegated the job of proposing it.
The chief sacred cow here seems to reside in two phrases which, though separated in the text, are evidently intended to be read together; to wit, that the proposed measures—and I quote—
"will widen the gap between rich and poor … and generally will impede Britain's progress towards a socially just society."
Now this premise is based on what is, to my mind, one of the most dangerous fallacies of modern times—the idea that equality and social justice are synonymous. This, my Lords, just is not true. I make no apology for quoting George Orwell, who spoke nothing but the truth when he wrote:
"All the animals are equal, but some are more equal than others."
Where humanity is concerned there is no such thing as absolute equality. It is patently just as ridiculous to say that all men are born equal as to say that all women are born beautiful. All men are not even born with equal physiques or equal abilities, and it goes without saying that the master craftsman is worthy of greater reward than either the apprentice he is instructing or the labourer who carries his tools. Yet for decades these differentials have been steadily eroded as a deliberate matter of policy and in the unholy name of this false god called "Equality".
By now the process has reached the stage where the social injustice which it has created is far worse than that it was designed to alleviate, and I applaud the Chancellor of the Exchequer for taking a small step—however small—towards correcting this trend. But I do not believe that the present measures go nearly far enough. One of the side effects of this policy of "clobbering" the rich and the highly paid has been the almost total destruction of initiative and incentive. In an ideal society, of course, the general

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good of the society would be sufficient incentive for everybody to do his best at all times. But, my Lords, we live in a society composed of humans, with all their failings, and it is a sad fact that humans are selfish and that most of them require some tangible benefit to themselves personally before they can be persuaded to produce greater effort. In this respect the present measures, slightly favouring, as they do, those who are wealthier or whose efforts make them wealthier, will certainly not impede Britain's progress towards economic soundness, as suggested by the Resolution.
I do not accept the cooing noises currently being made by the Government in an attempt to assure us that there is no crisis, and I do not believe that the measures go far enough to do more than slow down the disastrous trend of recent years. It may be argued that to do more would be inflationary: but inflation is a relative thing. Although individuals like myself on more or less fixed incomes suffer as a result of inflation, the country as a whole is unaffected so long as the inflation is balanced by increased productivity and does not vary widely from that which is taking place elsewhere. But our great problem is that, whereas inflation is running wild, our productivity is virtually stationary. It seems to be generally agreed that two things are needed to increase our productivity—leadership and investment. Leadership can come only from the top, and it is my belief that ways must be found of ensuring that the top people retain a larger proportion of their earnings, whether these earnings arise from their employment or from their investments. Quite apart from the economic interest of the country, social justice demands this. These people, my Lords, are the new oppressed minority in this nation.
I think it is generally agreed that apart from the greater efforts required from individuals, the most serious shortcoming of recent years has been a lack of investment in new plant, or the modernisation of existing plant. It is perhaps arguable whether this has been a deliberate plank of Government policy or whether it has merely followed automatically from those policies. Whatever the reasons, however, this lack of investment remains a fact—and it is something which needs to be drastically
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changed before any great and permanent increase in production can be expected. There are only four sources from which investment money can come: from foreigners who have the money which Britons lack—a pretty forlorn hope in the present climate; from direct investment by Government, which was the policy of the last Administration—all too often misdirected and proved in general to be a failure; from individual savings—virtually non-existent under policies which are deliberately designed to prevent any individual from keeping sufficient of his own money to make any appreciable savings possible, and from business profits reinvested in modernisation and expansion.
It is to the last of these that I would especially like to draw the attention of the Government. The reduction of 2½ per cent. in corporation tax has been hailed as a step towards making more money available for reinvestment in those businesses in which the money was earned—the efficient ones. If that is so—and I believe it to be true—then it follows that corporation tax is of itself a barrier to the increased productivity which we need, and in the present circumstances I can see no justification for retaining it at all. If a reduction of 2½ per cent. is a good thing, then surely its total abolition must be an even better thing.
My Lords, despite the cooing noises I have mentioned, there is a crisis at the present time and drastic measures are needed to prevent its getting totally out of hand. Either inflation must be stopped or production must be increased. Nobody seems to have any idea how to stop inflation within the framework of a free society, so what I am suggesting as an alternative is a means of increasing production to match it.
One of the chief arguments against the line of action I have proposed will undoubtedly be that there is no acceptable alternative way in which the Exchequer could make up the loss of revenue which would result from the abolition of corporation tax. I suggest that this line of thought is not entirely valid. Whether we like it or not, this nation is at war—not a shooting war as in 1914 or 1939, but every bit as much a struggle for survival. In neither of the

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great shooting wars did we try to—or expect to—finance our armoury out of current revenue, and it is my belief that one of the first sacred cows which should be sacrificed is the idea that there is some inherent virtue in a Budget surplus. If we lose this war there soon will not be much point in worrying about Budgets at all. The noble Lord, Lord Beswick, referred to a means test as being a very bad thing. I should think every single one of us has to undergo a means test every year when we fill in our tax return, and what is so wrong about the recipients of the money which we provide having to undergo a means test when we, the donors of that money, also have to undergo a means test?
6.10 p.m.
LORD SHINWELL: My Lords, it is a distinction to follow the noble Lord. Lord Avebury. He bears an honoured name. His illustrious ancestor—correct me if I am wrong—was responsible for perhaps the most constructive achievement in the last 100 years. He opened the door to leisure which had never previously been experienced. The noble Lord's maiden speech was modest, and exhibited much charm; but I regret (I hope he will not mind my saying this) that the maiden's garments were a little old-fashioned. However, I am sure I represent the opinion of your Lordships' House in saying that we shall be delighted to receive further contributions from the noble Lord.
I observed that the noble Lord dislikes the Censure Motion which is to be voted on some time to-morrow. That is regrettable, but I am not altogether surprised, in view of the speech which we had to listen to—or at any rate, thought it desirable to listen to—which emerged last night from the Guildhall, and which has been repeated almost word for word this afternoon by the noble Earl, Lord Jellicoe. The language was familiar—the clichés; the platitudes, and all the assertions; and, above all, "pie in the sky". This policy is not for months; it is for years. What is going to happen in the course of years has not yet been clarified. If we are to rely upon experience—and I must say that mine happens to be almost coincident with the history of the century—then there is little hope for the future. I understand that the
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noble Earl is advising his colleagues on the Government Benches not to vote for the Censure Motion. That affords me great relief. Sometimes I am at logger-heads with my own side; sometimes I detect errors of judgment, an occasional erratic line of policy. But when I realise that the noble Lords opposite are going to vote against the Censure Motion, I am delighted to support it.
What have we heard this afternoon? There is one feature of this afternoon's debate that I have enjoyed immensely—fewer speeches read and more of the cut-and-thrust of debate. That is what we want. We had the remarkable speech from the noble Lord, Lord Thorneycroft. He had some notes in the offing—we are accustomed to that sort of thing; but for the most part he spoke "off the cuff". But I detected at the end that he was not convinced about the propriety or the Tightness of his own ideas. That is a great pity. When all is said and done, one ought to clarify one's own mind before seeking to clarify the minds of others, and in that respect the noble Lord, Lord Thorneycroft, completely failed.
He did in one observation make it quite clear that he was going to support the Government. That is a change for him. I know him; he and I were colleagues in the other place. He came years after me—that was not his fault, but was purely fortuitous. I can recall occasions, indeed historic occasions, which have now become the subject of memoirs by distinguished politicians and ex-premiers, which disclose controversies, difficulties, turbulence, amounting indeed to resignations from a Conservative Government. I am not quite clear what the noble Lord himself is driving at. What is it he wants? What does he regard as the objective? He talked about cash flow and all the rest of it.
Here I digress for a moment to extend congratulations in her absence—but I do not complain about that—to my noble friend Lady Lee of Asheridge, particularly on her references to the need for museums and art galleries in the United Kingdom. I was myself almost exclusively educated in the Kelvin Grove Art Gallery of Glasgow, where I studied, through glass cases, palœontology, osteology, biology and zoology, and was ambitious to want to become a scientist, instead of which I became a politician.

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But I have one distinction; I am no economist. They clutter up the place; and, like members of the legal profession (I hope members of the legal profession who are present in your Lordships' House will not mind my saying this), differ so frequently and are so often at loggerheads on points of law and points of fact that they are hardly worth troubling with. What we want is a little common sense, and with characteristic modesty I venture to offer it to your Lordships' House.
Take this matter which seemed to occupy almost the whole of the speech of the noble Earl, Lord Jellicoe—as indeed it formed a significant part of the speech of the Prime Minister at the Guildhall last night. What I am about to say I say more in sorrow than in anger, both about the Prime Minister and the noble Earl. About the Prime Minister: he has a lot to learn—quite a lot to learn. In a sense, he has been pitchforked into this position. He did not expect it to happen; it was purely accidential; although to a large extent his emergence as Prime Minister was attributable to his declaration, profound declaration, about which there can be no misunderstanding, that if he happened to become Prime Minister he—his Government—would reduce prices. They have done the very opposite. That is a good start.
What did the noble Earl say on this subject? It was a remarkable exposition. He said, "Our anxiety is to help those on the lowest social and on the lowest economic level. So we are going to subsidise them: £150 a year: free milk, free this, free that"—in other words, State charity. How does that square with the philosophical conception of a united nation, of "one nation"? If this is to be the future of this country we are, first, to have, "for ever and ever, Amen", those on the highest level. I am not complaining about this. I do not complain about those who are fortunate—far from it!—either because of their skill and quality, or because of some hereditary position; not at all. We are going to have one sector of society on the peak, on the mountain tops, well clothed, well housed, well educated and secure, not seeking Government aid or charity. We are going to have another sector, amounting perhaps to a few millions in number,
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on the lowest level, relying on State aid. That is the picture that was presented this afternoon, and that is the essential feature of the Government's policy. Well, I reject it. There is a way out.
This brings me to the subject that causes a great deal of anxiety in the public mind. It is troubling the Government, as indeed it disturbed the previous Administration. It is this question of industrial relations. How are we to deal with this problem? Incidentally, I would observe that even in recent disputes which have led to a settlement, where the Government have refused to intervene of their own volition having made the declaration of "no intervention in industry disputes", the norm has been permitted to rise to a higher extent than was ever intended. The result is that the workers realise, whether it be right or wrong—and for the moment I do not express an opinion about the rights or wrongs of this matter—that there is no prospect of an improvement in their wage conditions unless they fight for it. That may be regarded as distasteful, even disastrous. How is it to be dealt with?
I propose to present a constructive point of view. It is easy enough to lambast the Government; it is like falling off a log. Particularly is it easy to lam-bast a Government of this character. It has been done by nearly all the Press commentators, anyhow. Therefore I shall not waste much time about that. I think that public opinion has come to the conclusion that they made a mistake at the last Election. But let that pass. How are we going to escape from this situation, particularly in relation to the matter of industrial relations, which concerns inflation, about which there can be no denial?
I venture to record a piece of history. Because of the Official Secrets Act I am unable to produce the Cabinet papers; I rely on my memory, which I hope produces no violation of the Official Secrets Act. But, inasmuch as those who have been responsible for recent memoirs have let their hair down, perhaps I may be permitted some modest opportunity of retailing what happened several years ago, during the period of the Attlee Government. In 1946, there was much tribulation and there were many official strikes, particularly among the miners. I know all about that! People were demanding more coal, and they thought I should go down and produce it. I had

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to remind them that I was incapable of digging for coal; that I was relying upon others, but the others would not respond. All the points in their charter—a five-day week and all the rest of it—were agreed, yet they would not respond favourably.
In the circumstances, I ventured to submit a policy the title of which was A National Wage Policy. What did it provide for? What did it embody? It suggested that there should be created an Economic Council, consisting of industrialists of repute, trade union leaders, accountants, even economists—I did not mind them. There were even to be members of the legal profession, some from the Judicial Bench. It was suggested that they themselves should be responsible for coming to a decision, which would not be final—it was a matter for the Government—but which would lead to a recommendation to the Government and provide for a minimum wage. I mention this because just recently there was a glimmer of common sense in the Government when Mr. Carr mentioned that the Government might have to consider a minimum wage. I was delighted to read that.
This Economic Council would probe into all the facts, would come to a decision as to what was a just and reasonable wage which would support a decent standard of living, and would recommend accordingly. At the same time, they would consider the matter of prices and price levels, and would make a recommendation on the stabilisation of prices—not over the whole field, because that is impossible or was regarded as impracticable, but in relation to food prices, subject to the difficulties that are associated with the import of foodstuffs, and coal, fuel, electricity, gas and the like.
This was submitted to the Government, but they rejected it. Why did they reject it? It was on the advice of two Members of the Government, both trade union leaders. Why did they oppose it? It was because they argued as they have so often argued, and also quite recently during the period of the Labour Government, that if the State intervenes in a matter of this kind it will impede trade union organisation, and would interfere with the principle of collective bargaining.
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I offer another piece of history. The proposal that was made and rejected in 1946 was re-submitted in 1949, when Sir Stafford Cripps was Chancellor of the Exchequer, and again it was rejected. If the minimum wage policy had been adopted at that time we would have saved years and years of industrial strife.
What about differentials? I agree that differentials should not require legislation. Differentials could be argued between employers and trade unions. Matters relating to overtime, work that requires exceptional skill, work that is called dangerous work—experienced sometimes at the docks and primarily in the mining industry or in quarrying—should be negotiated. But there should be a definite decision about a minimum wage which would provide a reasonable standard of living.
Now I come to the illustration that I promised to give. Way back in the year 1909 the late Winston Churchill was President of the Board of Trade in the Liberal Government, and he introduced, on behalf of that Government, the Trade Boards Bill, which became an Act of Parliament in that year. The purpose of that Bill was to provide reasonable rates of pay for workers in what were then described as the "sweated trades": clothing, furniture, and a number of others where the conditions were appalling. It may surprise your Lordships to hear that when the Board was created Winston Churchill actually appointed me as the representative of the Scottish clothing workers, because I was then employed in the Scottish Co-operative Wholesale works in Glasgow. So I became a member of that Board. Instead of the minimum wage which was enacted in legislation—I repeat, enacted in legislation; there was nothing voluntary about it—impeding trade union organisation, or interfering in collective bargaining, it gave an impetus to trade union organisation. If it had not been for other controversies—the Taff Vale judgment and the Osborne judgment, with which I am sure the noble and learned Lord the Lord Chancellor is familiar (I am not sure that he was born at that time, but he must have read about them), largely inspired by the employers of the time, the trade unions would not have encountered any real difficulty.

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I use these illustrations in order to fortify my contention that if we are to escape from this menace, it is not a matter of an incomes policy but a question of whether we can establish a reasonable wage which is not based on charity; a wage without any fringe benefits and which gives to a man or woman engaged in employment a feeling, if not of equality—and I do not want to enter into the philsophical argument of whether you can have absolute equality, because this is not the occasion for it—at any rate of security, and a sense of belonging to a community which understands his needs.
Why was there trouble in the last Labour Administration about industrial relations and legislation? The facts have never been fully exposed. The majority of Labour Members in the other place during the last few years were not opposed to an incomes policy, and were not opposed to industrial relations being associated with legislation, but they did object, and strongly, to the penal clauses. It was the penal clauses that were rejected by the majority of members of the Parliamentary Party. There is no question of penal clauses if we operate a minimum wage policy; none whatever. Indeed, I understand that the industrial relations policy of the present Government does not contain or embody any penal clauses, and there may be certain advantages in the rest of the proposals in the proposed legislation.
There is one other matter I want to refer to briefly. I want to ask for an assurance from the Government, which I hope they will give if not to-night at any rate to-morrow before the close of the debate. I am very concerned, as indeed most of us are, about the state of the shipbuilding and shipping industries. As a result of a decision by a Conservative Government when Mr. Marples was Minister of Transport, credits were provided for the shipbuilding industry. To begin with, the credit was £75 million, and then under the Shipbuilding Industry Bill, which became an Act of Parliament, the Shipbuilding Industry Board was created, and loans have been provided for the shipbuilding industry varying from £200 million to £400 million. Before the Election the previous Administration had taken a decision to increase the loan credit for the
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shipbuilding industry to £600 million. Unfortunately, we were not able to carry it through, but I understand the present Administration are giving the matter consideration.
I do not want to argue this matter at any length. I do not want to speak too long, but I want to say to the noble Lord, and to noble Lords on both sides of the House, that unless the shipbuilding industry of this country can be afforded credits at a low rate of interest, I doubt whether, in future years, it will survive. It is menaced by the most appalling competition from Japan, West Germany and some of the Scandinavian countries. In recent years it has managed to weather the storm, but there are dangers facing the industry. I very rarely like to quote, but I put in my pocket this morning an extract from the Journal of Commerce. If your Lordships will permit me, in order to fortify my request for an assurance on behalf of the shipbuilding industry—and I also should like to mention the shipping industry, because they are closely related—I will read an extract from it.
This was a speech by Mr. Douglas Souter, Chairman and Joint Managing Director of the Sheaf Steam Shipping Company of Newcastle, after a ship had been launched. Incidentally, there was recently a launch on Tees-side of a tanker, the largest ship built in the North-East, and I happened to be present at the launch. The ship was launched by the Duchess of Kent, and I was invited and glad to be there. The remarkable fact about that shipyard is that three years ago it was doomed for closure, but as a result of the Government loan credit scheme it was able to carry on, and only a few weeks ago launched the largest ship ever launched on Tees-side or in the North-East.
What does Mr. Souter say? A report of the occasion says:
"Pointing out that the 'Sheaf Field'"—
that was the ship that was launched recently—
"was being built with the help of cheap loan facilities and a 20 per cent. investment grant, Mr. Souter said such facilities had been of considerable help in the field of international competition."
I only want to add one further extract. He said that he wants this continued, even if it means the abolition of the investment

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grants, which meant cash on the nail which was very desirable for the shipbuilding industry. Even if it meant increased depreciation allowance, or something of the kind, or additional credits or credits in some form, it is desirable that such a scheme should be promoted. He says that otherwise:
"It will mean that British owners will lose many opportunities which will not recur. I consider that its discontinuance"—
he means the investment grants—
"will lead to a slowing down in the re-equipment of the British shipbuilding industry, to the detriment of British shipbuilders.
"When the effects of this become apparent I hope the Government will think again."
I am asking them to think again. I have offered a constructive suggestion to your Lordships' House. It is no use just dismissing it; sooner or later we shall come to that. After all, as the noble Lord, Lord Thorneycroft, rightly said, we have not yet defined what inflation means. What is the alternative to inflation? Deflation and unemployment, and charity, and at the end of it complete disaster. That is no policy for any Government, least of all for a Conservative Government that prides itself on love of our country and a great future, as indeed so do we all. I have not criticised ruthlessly, as one might do in the circumstances; I merely ask them to think again. And if they do it will benefit not only the workers of the country but the whole nation.
6.39 p.m.
LORD BOOTHBY: My Lords, may I assure the noble Lord, Lord Shinwell, that I too can speak without notes? I can speak "off the cuff". I have tried and succeeded, but there is an objection and a penalty; when I speak "off the cuff" I cannot speak for less than an hour. Therefore I hope, and I am sure, that your Lordships will forgive me if I have a few notes in my hand. I will try not to read them out, but they will keep me reasonably brief.
Shortly before the Summer Recess, I made a speech to your Lordships in which I besought the Government to bring forward a policy designed primarily to achieve an expasion of economic growth and productivity, which is, in the long run and in the final analysis, the only way to beat a cost-push inflation. This
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of course requires a much higher rate of investment in industry; and I therefore drew attention, as I always do, to the weight of taxation bearing upon industry—particularly corporation profits tax—to the shortage of liquidity, both domestic and international; and to the present high level of interest rates. It was an optimistic speech; it was a joyous speech. I enjoyed it, and I think your Lordships enjoyed it. I really thought that the Government meant to do it. Alas! this package deal is the reverse of the policy that I then advocated. I do not despair. I think the Government will come round to it again. But I cannot say that I am not disappointed.
Before I come to the economic issues, I want to deal quite briefly with the welfare proposals, particularly those relating to milk. Here let me at once declare a personal interest. In the summer of 1940, I was Parliamentary Secretary to the Ministry of Food, and my Minister, Lord Woolton, asked me to take a hand in drafting a national milk scheme, which I subsequently had the honour and privilege of announcing and commending to the House of Commons. It was a simple scheme. It guaranteed a pint of milk a day to every expectant and nursing mother, and every child under school age, at the price of 2d.; and, in the case of families with incomes below a certain level, it was free. Subsequently, as part of Lord Woolton's general nutrition policy, the scheme was expanded to cover children at school and school meals. No one can say that the position of this country in 1940 was not more desperate than it is to-day. The Germans were at our throats, poised for invasion. The Battle of Britain had not yet begun. But we did it with acclamation in another place, and with the warm approval of your Lordships.
Now what? It is proposed that most children under five shall not get welfare milk, and that they shall then get it at school for only two years until they are seven. Dairy farmers estimate that they will lose 100 million gallons a year, at a cost of £13 million. On top of this, the price of school meals is to be sharply increased. On balance, meals at home or sandwich meals are no substitute for school meals, as every educational and nutritional authority, as well as the noble Baroness, Lady Summerskill, will agree.

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I say that these proposals cut the ground from the whole nutrition policy laid down during the war. The National Dairy Council has said that the Government's proposals on school and welfare milk are an extremely retrograde step, which will result in nearly 3 million school children being deprived of regular school milk, and a great reduction in the consumption of milk by nursing mothers and young children. What is beyond dispute is that, as a result of these proposals, a great deal less milk is going to be drunk by a great many more children in this country. Nobody can tell me that that will be a good thing for the rising generation. Lord Woolton must be turning in his grave.
Still on welfare, I must regret that family allowances have not been raised to bring us more into line with the countries of Western Europe. On June 1, the Prime Minister wrote to the Child Poverty Action Group a letter in which he said:
"We accept that, as Mr. Macleod said in his Budget speech, the only way of tackling poverty in the short term is to increase family allowances and operate the claw-back principle."
What Mr. Macleod had said was that the Government—that was the Labour Government—should in the Budget have raised family allowances by 10s. a child. The Family Income Supplements Bill is no answer to this. The lower-middle income families will be the hardest hit because they will get the worst of both worlds. They will not earn enough to get significant benefit from the cut in income tax, but they will earn too much to be exempt from the increased charges or to qualify for family income supplement. I could give figures (I worked them out in my room), but I will spare your Lordships. They are easily available.
Next, I object most strongly to the savage increase in dentistry charges. No one goes to the dentist for fun. Far too many people stay away until they are in pain. These new charges will encourage them to stay away. They mean, as a leading London dentist has said, the end of dentistry and back to butchery. Finally. I regret the closing down, at a trivial saving to the Exchequer, of the Consumer Council, because free markets cannot function properly unless the consumer is in possession of at least some reliable information. I use this argument and say these words not in anger, but with a
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sigh of regret. I am sorry that in large measure the great nutritional work done upon which I think the present standard of health of this country is largely based, and which was inaugurated by Lord Woolton should have been to this degree dismantled. I simply say that I regret it.
I now turn from the welfare to the economic front, and first to the international side I have said to your Lord-ships more than once that the world is suffering from a grave shortage of international liquidity. In fact, the liquid reserves of the Free World are now about one-third of what they were at the time of the Bretton Woods Agreement. Why? Because, in Enoch Powell's immortal phrase, the so-called international monetary system is based on the "systemisation" of a lie—the lie that the relative values of gold and of respective paper and credit currencies are constant. My Lords, they are not.
I was therefore disappointed when the Chancellor of the Exchequer, at Copenhagen, set his face firmly against any move in the direction of greater flexibility in exchange rates. If he sticks to the present rigidity, he is faced in the long run, it seems to me, with three alternatives: unacceptable inflation, unacceptable deflation, or a further devaluation of the pound—enforced and overnight, which is the very worst way of doing it. For my part I would let the pound float, with the support of an Exchange Equalisation Fund. It worked well enough for us in the 1930s. One day we may get a real European Monetary Union, with a single currency which itself would have to float against the dollar. But that time is not yet; and meanwhile, to let the pound float is one of the basic answers to our problem.
Secondly, I come to the domestic side. Here we are suffering, by common consent, from industrial stagnation caused, again, by a shortage of liquidity; and by galloping inflation, as the noble Lord, Lord Shinwell, and others have pointed out. It seems to me that this package deal makes no serious attempt to deal with either. In the final analysis, as the noble Earl, Lord Jellicoe, said, economic growth is the only answer to both, because, as the Sunday Times said recently, persistent waste of resources, whether human or capital, is a specific evil, and is absolutely intolerable.

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What does this package deal do to promote economic growth? My Lords, very little. The cut in corporation profits tax is derisory. As the noble Lord, Lord Shinwell, pointed out, it will not offset the change from investment grants to depreciation allowances. Here, I should like to congratulate the noble Lord, Lord Avebury, most sincerely, not only upon a most admirable maiden speech but upon his attack on the corporation profits tax as a tax. He said—and I agree with him—that it should be abolished altogether. There is no reason to suppose that a 6d. reduction in income tax across the board will have the slightest effect on productivity or economic growth. The higher-paid executives—a number of whom, I am happy to say, occupy places in your Lordships' House—do not need £1,000 off their income tax; and, to do them justice, do not want it and have never asked for it. The inheritors of great wealth do not need it, either. The lower-middle income families, again, will not benefit. It would have been far better to abolish income tax altogether on all incomes of less than £20 a week. That would not have cost very much more, and would have given a real incentive to the workers to go flat out and work harder.
My Lords, on a Tuesday the Chancellor announced his package deal and Government disengagement from industry. Two days later the renewed restriction of bank credit was announced. Then came £40 million for Rolls Royce and the offer of another £10 million to Liverpool docks. It simply does not add up, this story of disengagement followed in a few days by an offer of over £40 million to, admittedly, a major industrial corporation in this country. We still have a costly and inflationary surplus on budget account. We still have high interest rates, which are themselves inflationary because the cost of money is itself the basic factor in costs—and that is what we have got to get into our heads.
In fact, my Lords, I agree with Professor John Vaizey when he suggested, in a brilliant article in the Sunday Telegraph the other day, that the abandonment of cheap money may have been the main, ultimate cause of inflation throughout the world. I think there is a great
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deal to be said for that. To get interest rates down may well require action at international level; but there is no sign that the Government intend to take any action at all.
In fact, as both Professor Vaizey and Sir Ralph Hawtrey have pointed out, high interest rates are also inflationary because they reflect people's views of the future. Ten per cent. cost on money shows that most people are anticipating a 6 per cent. rise in prices. Fifteen per cent. on money shows that they expect prices to rise by at least 10 per cent. It therefore has no deterrent effect on traders' borrowing.
Finally, the Government have turned their face against an incomes policy. I think this is a tragedy. The Governor of the Bank of England has repeatedly made it clear that he regards an incomes policy as essential to support monetary policy. The Government intend, apparently, to leave the employers, whether public or private, to fight it out on their own with the trade unions, and to sit on the sidelines. This, as recent events have proved, is a prescription for inflation. How can you settle the thorny problem of wage and salary differentials, as raised this afternoon by the noble Lord, Lord Shinwell, by the crude methods of power bargaining, without a sound "guiding light" policy to control the total level of increases? The noble Lord, Lord Thorneycroft, said that the cash flow must be brought under control in both the public and the private sectors. I agree with him entirely. It is absolutely essential, and the Government should set an example. But the question is how to do it, and before I sit down in a few minutes' time I shall come to that, because I agree entirely with what the noble Lord, Lord Shinwell, has said on this question.
Meanwhile, the Government have abolished the Prices and Incomes Board and the Industrial Reorganisation Corporation, and the Governor of the Bank of England has said:
"We shall feel the lack of some organisation that can keep a general eye on British industry, and help it to use its resources for the benefit of us all".
Upon this I have only one comment to make. For a Government who have at their disposal the advice and the counsel of men of the calibre of Sir Joseph

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Lockwood, Mr. Charles Villiers, Lord Kearton, Mr. Michael Clapham, Lord Stokes and Sir Maurice Bridgeman, to throw it all into the dustbin is, to say the least of it, an act of remarkable complacency. They go. Who takes their-place? Nobody and nothing.
The Prime Minister has asked, reasonably, what in fact the advocates of a combined monetary, fiscal and incomes policy propose. My Lords, I will give an answer—my answer. The noble Lord, Lord Thorneycroft, hesitated; but I have got a very clear answer. I say, first, a reduction of interest rates. Second, a substantial cut—1 will not go so far as to say its abolition, but a substantial cut—in corporation profits tax and capital gains tax, as a stimulus to the investment of risk capital. Both these taxes are vicious. Both were rejected by the last Royal Commission on the Taxation of Profits and Incomes, presided over by Lord Radcliffe. Judging by the performance of the market over the last two years the total abolition of the capital gains tax would not cost the Revenue a single penny. Third—and here I come to what the noble Lord, Lord Shinwell, said—a direct agreement between the two sides of industry and the Government on a prices and incomes policy, particularly with regard to wage differentials, which can achieve some kind of stability. This involves Government intervention over the whole field—and this brings me to my conclusion, my Lords.
What is the basic philosophy that now animates the new Government, and underlies this package deal? Is it, as it would appear, and as appeared to some journals of the Press, a return to the Whig and Liberal doctrines of laissez-faire which prevailed before the First World War? Do they want to go back to Asquith? My Lords, I started my political career as one of Mr. Baldwin's private secretaries. I well remember a journey I took with him to Edinburgh in the year 1923, where he was going to make a speech. He looked out of the carriage window at the smokeless towns and said: "There is only one hope for industry in this country—protection, in the widest sense of that term". Then he added: "The main ambition of my life is to prevent the class war from becoming a reality"—and in this, my Lords, to a remarkable extent, he succeeded.
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Justice has seldom been done to this very remarkable man. Nor is the extent to which he shaped the philosophy of the modern Party Party in the present-day world generally realised. Few of your Lordships are old enough to remember his speech on the Trade Disputes Bill. Fewer still can have heard it, though I have no doubt that the noble Lord, Lord Shinwell, did. I heard it; and no one who heard it can ever forget it. It was not the speech of a man who believed in laissez-faire. I think that the speech of the Secretary for Trade and Industry in another place the other day (whether intentional or not, I do not know) was the direct antithesis of Baldwin's speech on the Trade Disputes Bill. Acute sensitivity was replaced by an almost brutal insensitivity. It was not, I think, deliberately intended; but in fact it was there. The Baldwin economic philosophy was carried on, after the war, by Mr. Macmillan and Mr. Butler. Now, with all the talk of "lame ducks" and "disengagement" by the Government, it seems to have been snuffed out.
My Lords, it will not work. It is impossible to put the clock back half-a-century. For better or worse, the Government, industrial management, the trade unions and the City of London are enmeshed in the modern world, and you cannot undo that mesh, ever, however hard you try. The Government occupy the driver's seat, and they cannot take their hands off the steering wheel as they now seem anxious to do. If they do, freedom as they define it can mean only inflation and a crash, because they simply do not know where they are going. The great industrial corporations and the trade unions are Estates of the Realm and should be so treated. They should be brought within the framework of the law (I agree with that on industrial relations) but with statutory rights of their own.
After the last war Sir Winston Churchill went so far as to suggest an economic Parliament. In a speech to the summer school in management studies at the University of St. Andrews, eleven years ago, I said I thought this had to be rejected because in a true democracy there could be only one sovereign Parliament to which all other Estates must be subjected in certain cardinal respects. But I went on to say

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there should certainly be—and here I echo the words of Lord Shinwell—a National Economic Council consisting of representatives of the Government, managers and trade unions, to give a purposive strategic direction to our economic policy and to make plans for the growth of the national economy, including a minimum wage policy, on the basis of adequate statistical information for submission to Parliament. That is what I mean by an incomes and prices policy, and that is what I should like to see done now—and I believe it may not be too late—because laissez-faire is not going to be the answer. And if the Government do not realise it now, they very soon will.
My Lords, with the best will in the world—and I have a lot of good will—I cannot support the Government in the Division Lobby to-morrow night. But I find myself on familiar ground. I have been making this kind of speech, on and off—more on than off—for just on half a century. No one has ever paid the faintest attention; but I remain an invincible optimist. As I said, I have spoken not in anger but in sorrow. And I still hope that one day before I die somebody in some Government will listen to what I have to say. All is not yet lost.
7.3 p.m.
BARONESS SUMMERSKILL: My Lords, may I, in the first place, congratulate my noble friend Lady Lee of Asheridge upon the excellent maiden contribution she made to your Lordships' House. I am quite sure that what she said must find an echo in the heart and mind of the noble Viscount, Lord Eccles. I would say to the noble Lord, Lord Boothby, in case he wants to go—
LORD BOOTHBY: I do not.
BARONESS SUMMERSKILL: —that it is curious that I should follow him to-day, as I followed him in the Ministry of Food; and so I shall hope shortly to dot his i's and cross his t's. I will say this. In certain quarters, this House is criticised because of its high average age as compared with another place. But, of course, in debates of this kind I think this becomes a tremendous advantage. In fact, I have found in all debates on social affairs that noble Lords on both sides of the House are receptive—they may not
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agree but they are receptive—to speeches which criticise, very often, certain measures calculated to effect great social changes. The proposals of the Government will do just that. They will effect changes and I feel that noble Lords here whose lives have spanned most of the century are in a position to evaluate just what may happen if these measures are followed up.
I feel that it is only in order to keep faith with a few of their supporters that the Government are to cut 6d. off income tax. I contend that this will prove to be a high price for the country to pay in terms of welfare and health, and I was delighted to-day (without in the first place consulting the noble Lord, Lord Platt) to see such an eminent physician rise in his place on the Cross Benches to criticise the Government proposals on the question of drugs. I was delighted, too, to hear the noble Lord, Lord Boothby, with his knowledge of the Ministry of Food (and I also gained much there from the expert advisers we had on nutrition), realising that the Government are about to introduce legislation which will prove to be disastrous.
My Lords, just think of the cost. Some £88 million will come from stopping cheap welfare milk and increasing the charges for prescriptions, and for dental and ophthalmic services. And it is no use noble Lords' telling us how many poor people will still be exempt; there will be hundreds and thousands of families who will suffer as a result of these charges. A further £20 million will be obtained from increased charges for school meals and by ending the supply of free milk to schoolchildren over seven years of age. Milk is going to be given only up to the age of seven. We all know the vulnerable condition of small children in the overcrowded schools. It seems, although the Chancellor was not explicit about this, that he proposed to relate prescription charges to the cost pet item. The Government cannot say to us: "Well, you started charges on prescriptions". I want to point out to them that this is the first time financial considerations will influence the type of treatment that some patients will obtain under the Health Service. The noble Lord, Lord Platt, gave details of this.
Now, when a doctor is prescribing, if the patient says, "Don't make it too

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expensive, doctor; I can't get the prescription", the doctor, if perhaps he feels that he must give a placebo, will write down something that the patient can afford. To charge sick people by the item on the prescription is reactionary indeed. Prescription charges were never the answer to over-prescribing, which I admit is widespread. I have always said that it should be the doctor who should take the initiative in the matter by not prescribing expensive proprietary drugs when there is an equally effective equivalent in the National Formulary. Every doctor has this on his desk; but some are really—and I speak strongly—too lazy to consult it because it is so easy to remember the name of a proprietary drug.
The retrograde suggestion that a patient should pay according to the value of a proprietary drug prescribed, perhaps unnecessarily, by an uncooperative doctor will drive some patients from obtaining early treatment or, indeed, from visiting a doctor altogether. Every doctor in the country knows which member of the family will be the chief sufferer—and let no-one say, "This is the noble Lady's feminism". It will be the wife and mother who, despite rising prices, strives to balance the family budget, the woman who has a limited amount to spend over the week and who is always looking for somewhere to economise. The Minister of Agriculture is fond of addressing housewives and of telling them to "shop around" if they are not satisfied with prices. This is a piece of advice which indicates that the Minister is entirely ignorant of the lives of busy women, whether the poor woman in the home or the better-off woman doing a job outside the home. Where do the Government suggest that a woman with a pain, a lump or a discharge should "shop around" if she is to be charged heavily for a prescription? This is a practical question. The doctor has a monopoly of her. Moreover, my Lords, will she be prepared to obey instructions to return for further essential consultation if she is over-charged on the first visit?
Now we come to school meals. The noble Lord, Lord Boothby, dwelt on the importance of milk. I find it difficult to believe that there was not one member of the adequately fed Cabinet who knew
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that the regular supply of milk and school meals represents the difference between adequate nutrition and malnutrition; that is the point. That is just the difference to these children. The reason why so many children are half a head taller than their parents, and a head taller than their grandparents, is that they have been better fed. These changes have taken place slowly and gradually during the century. We shall not see any dramatic change because of this legislation, but we shall see a very slow change which will be recognised 25 years hence; just as we can look back over the century and think of the tiny, undernourished children with their crooked legs. It is not the genes that have made the change, it is the great improvement that there has been in the feeding.
Education itself can prove wasteful if it is directed to an inattentive, under-nourished child. This fact was established when the school medical inspectorate and the Provision of Meals Act were introduced. Then, and only then, did we see the beginning of a great change in the physique of schoolchildren. Are the Government prepared to ignore the very important contributions which have been made on this subject, particularly the survey by Dr. Benn Lynch, of the Social Nutritional Research Department of Queen Elizabeth College? It was not just a crank who made a survey. Dr. Lynch was helped by 21 education authorities and his Report was made just before the Government announced their proposals. He recommended that free school milk should be reintroduced immediately for children in secondary as well as primary schools. In his Report, The Feeding Habits of Schoolchildren, he urged the Government not to raise the price of school meals.
My Lords, the overall findings really cannot be refuted. Dr. Lynch found that the diet of only 32 per cent. could be regarded as satisfactory; 57 per cent. of the children had unsatisfactory diets and those of 11 per cent. were poor. Now we are told—we were told to-day—that it is proposed that the very poorest will be relieved. But there is no certainty that by fixing a wage below which no charges will be made, neglect and ignorance may be by-passed. As the noble Lord, Lord Platt, said, if a man spends too much on tobacco, beer or bingo—the noble Lord did not mention bingo—
LORD PLATT: Yes, my Lords, I said "bingo". I was thinking of the women as well as the men.
BARONESS SUMMERSKILL: My Lords, I will accept that. If the family spends too much on these things will the Government say, "That is bad luck, but the child must suffer"? Of course not. The noble Lord, Lord Boothby, said that we cannot go back fifty years. The Government have accepted the responsibility that children should be well cared for, well fed and well educated. Why now are they rejecting that responsibility? On the question of the limit below which there will be no charge, but above which it is considered that the family can afford to pay, if all parents in the higher income groups can be relied on to make adequate social provision for their children why do we provide free education? Why not say that now the time has come when those above a certain income group must pay for the education of their children? We provide free education because we realise that it is in the interest of the country that the workers should be educated, and nobody suggests there should be a means test. But they are going to suggest this miserable "means test", whereby the income of the family will be examined carefully by a host of officials—because this "means test" is going to be of a most complex character. My Lords, I believe that to save £20 million on school meals and milk and risk the physical deterioration of children is ruthless cheese-paring.
The Government are assuming that all the beneficiaries of this complex scheme will receive everything to which they are entitled. Are they unaware that poverty often heightens sensitivity? It has been difficult—and the noble Lord, Lord Drumalbyn, knows it as well as I do—to persuade old-age pensioners to apply for supplementary benefits, because they regard them as a form of State relief. Successive Ministers of National Insurance have done everything possible to persuade people to take supplementary reliefs, but they have been regarded as a form of State relief and people have been reluctant to apply for them.
These new "supplements", let us call them, will not be received by some people through ignorance; but others, including schoolchildren, will be reluctant to reveal that they belong to a category who are in
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need of State assistance. What does the Plowden Report say about this? It says that, despite the availability of school dinners for the very poor child, in poor areas fewer children have school dinners. My Lords, curiously enough, a child is always conscious of the relative poverty of its family and is reluctant to have this emphasised every day in school, where it is often general knowledge who are the recipients of free dinners. I agree that some compassionate head teachers try to keep it secret, but in many schools nobody worries, and the child knows it is going to have a free dinner while its friends are in a position to pay. Again, my Lords, are the Government prepared to ignore the recent warning by the National Union of Teachers? They tell us that when the cost of school dinners goes up to 2s. l0d. half a million children will stop taking them, no doubt for the reasons that I have given.
I wish to say something about the "lame duck" speech. I feel that the Secretary of State for Trade and Industry summed up the Government's philosophy in his "lame duck" speech of November 4 when he said:
"The vast majority lives and thrives in a bracing climate and not in a soft, sodden morass of subsidised incompetence."—[OFFICIAL REPORT, Commons, 4/11/70. col. 1212.]
No doubt he will be supremely indifferent to anything which is said from these Benches, but I would remind him that it was Winston Churchill who said:
"There is no better investment than putting milk into babies."
For my part, I should have thought that in the long term the country would benefit more by giving a subsidy to feeding children than by giving a subsidy to the Rolls Royce Company.
The Family Income Supplements Scheme, which has such a high sounding name, is to provide an extra £3 a week, devised ostensibly to help the poorest. But at the same time it will subsidise the incompetent employer who fails to pay adequate wages. This is a question I should like to have answered: could we know whether employers, who are bogged in this soft, sodden morass, are to have this substantial subsidy tacked on to their profits? No doubt the international financiers applaud this scheme,

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but the international financiers, like the Cabinet when deciding on milk for children, are far removed from the problems of the ordinary people of the country, which they consider much below their notice. I ask the Government at this stage to change their minds, and if they wish to save this money, to save it from some other source and not come to the children, the women and the housewives of the country, to those who are mute and inarticulate, to find this miserably small sum.
7.22 p.m.
VISCOUNT WATKINSON: My Lords, I hope that the noble Baroness will excuse me if I do not follow directly the argument which she put forward in her sincere speech. I think she will probably agree with me that, whatever the arguments about how society's money is disposed of, the nation has to earn it before it can spend it. That is why, quite properly, the question of industry has crept into many speeches this afternoon; and it seems to me, having listened to most of them, that the nub of the problem, so far as industry and economic management are concerned, lies in this difficult area of prices and wages and their relation to inflation.
What are the facts? Businessmen under the previous Government went through an interesting experience. I am certain that the previous Government were sincere in their view that a legally enacted prices and wages policy was the right solution for our economic problems. They said so in the White Paper In Place of Strife. This was set in the context of a tight over-all State control of the economy. Prices, I must say, were much more tightly controlled than wages; but there was an attempt to control those, the controls being executed either by direct Government action or by the exploitation of agencies such as the P.I.B., I.R.C. and all the rest.
I do not think that the noble Lord, Lord Beswick, who I thought made a good and straightforward speech, as he always does, would deny that businessmen did their best to support this policy. They did their best often to the detriment of their profits, as we see from statements made to-day by many of the big companies who have not been able to pass on their increased costs fast enough.
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I think it is fair to say that the policy had a pretty fair run. We know now that it failed to achieve its designed objectives. In fact, it played a contributory part in the immense rush for wages, in the record number of days lost this year by industrial action, mostly unofficial, and all the rest.
At the moment, industry is paying a very high price for the failure of that policy, however well-intentioned; and it is paying a particularly high price for the fact that the Government, in face of trade union pressure, retreated from the corner-stone of its economic policy. I did not want to go into the reasons why they did so, but it has encouraged this feeling that you can push the Government over, and the thing to do is to go for large wage demands and stick it out. I think that if we are to examine the position, it is fair to start by saying that one system was tried, backed up certainly by businessmen, failed to meet the challenge of the trade unions, and finally collapsed.
I do not doubt that the object of both sides of the House is fairly simple to define. We want a reasonable balance of payments, a fairly low level of unemployment and a reasonable balance between prices and wages. These things are common ground. We all support them and should like to see them achieved. I think it is perfectly right that the previous Government brought forward a concerted package of policies, hoping to achieve this end. But, though they gained reasonable support, they failed. It seems to me that everybody is now extremely surprised because the present Government have come forward with a different concept, which I think every noble Lord in this debate has agreed involves a complete change of course for the nation.
The noble Lord, Lord Beswick, said—and I am sure he sincerely meant it—that if the previous Administration had been returned, they would have tried again to implement their policy. I do not think that they would have had the wholehearted support they got before, because they so manifestly failed.
LORD BESWICK: My Lords, would the noble Viscount give me this one point? There would have been a difference between the conditions in which we tried at the beginning of the last Government and the conditions which existed

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at the beginning of the present Government's term. There was not the same devilish balance-of-payments problem.
VISCOUNT WATKINSON: I agree, my Lords; that is absolutely fair. The contribution which the previous Government made to getting the balance of payments at least temporarily right should be recognised. I am well aware, from my past experience in Government, that it was probably a painful and difficult policy to pursue. But I am trying to deal with the facts; and the facts are that from a business point of view a package policy, sincerely drawn up and, so far as it could be, practically put over, completely failed. In these circumstances, I do not think that the country should get too excited if, having a new Government, that Government should try to make a fundamentally different approach. It is implicit in that approach to place a greater burden on the people's own personal decision. If we do not make that approach, how do we break out of the spiral of cost inflation or the periodic need for devaluation, which is the inevitable end of completely uncontrolled cost-push inflation, or the steady erosion of initiative and all the rest, which is bedevilling British industry?
So, my Lords, in my view it is perfectly right that the new Government should seek to change the climate, and that the Government's initial budgetary proposals made an endeavour to stimulate those who create wealth rather than those who dissipate it. This may be one of the arguments that take place between us and which have to be carried through to their logical conclusion. I believe that it is right for the Government—and I support them in this—to try to do all they can to encourage the pacemakers, to encourage the leaders. And they are to be found in all ranks of society: they are not entirely among rich industrialists or the technicians and scientists, but are also among many of the people who do such a good job on the floor of the shop. If you accept that we must all be equal; that nobody must have the slightest advantage; that 6d. off income tax means more to a rich man than to a poor man, then you cannot take these risks. And if you do not take them, I do not see
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how we are ever going to get out of our present dilemma.
I should like to say here (and it is perhaps some answer to the noble Baroness) that it is not attacking the social services, for example, if one says that they are entirely vulnerable if the nation cannot earn enough money to support them. And it is not all the nation that is charged with that task: in fact, to-day it is only about 50 per cent. of the nation, because if you look at the gross domestic product to-day, some 50 per cent. of it, if you include the nationalised industries with Government, is still in Government hands. So you can say—and I think it is not unfair to say this—that half of the nation, by its effort and enterprise, has to support the other half, and to provide the large sums of money with which people to-day rightly expect the State to help them: although here again I think that the principle of selectivity, the principle of trying to help those who need it and not help those who do not, is a very sensible policy, which has been thought about by a large number of people for a great many years. I think it is high time that the Government tried to make the process of productivity work.
The point that I want to make here is that the country have to choose. If we are going to have levelling down, however moral this is; if we are going to accept that we can never run the slightest risk of doing rather better for a man who is richer, because he is richer, or because he is more energetic—or, if you like, because he is luckier—then I do not see how we are going to encourage the risk-takers, how we are going to encourage the initiative and the spirit that will increase our total national product, our exports and all the rest of it. This may be a fundamental change from the policy of the previous Government, but I think it is right that it should be tried, and I certainly support the present Government in trying it.
There is, I think, only one other major question with which I want to deal. It may be said that this changed approach would not be necessary if we had some kind of prices and incomes policy. It may also be said that even this new approach will fail if it is not based on some kind of prices and incomes policy.

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I must echo those who say (my noble friend Lord Amory, for example) that if you advocate a prices and incomes policy, even if you are a great expert like the Governor of the Bank of England, you must spell it out: you must say what it is, how it will operate, how it will be implemented and what success it will have in gaining the adherence of trade unionists and employers, who of course have to make it work or fail.
I happen to have seen, partly as a businessman and partly as a politician, most of these attempts since the war. I think it is right to say here that perhaps the only one that really achieved some temporary success was the one that Sir Stafford Cripps operated when he was Chancellor of the Exchequer. But at that time he had all the apparatus of rationing and State control, still largely a carry-over from the war years, and those v/ho remember those days will know that, while it held wages and prices for a strictly limited period, as soon as the dam broke—and it always does break—there was an enormous rush of people on both sides of industry trying to catch up, which extinguished most of the good that it had done. If one looks, as my noble friend Lord Amory did, at the "Three Wise Men", or the guiding light, or the voluntary pay pause, to say nothing of the measures taken recently by the last Administration, one sees that all these did was to dam up demand for a limited period. Some spills over the dam even then. Perhaps you dam a proportion, but in the end in a free society the dam has to break, and then very often you are worse off than you were before.
So I think one has to say at this stage that unless somebody can invent an entirely new prices and incomes policy of this type—what I call the model type—then it is not a workable or sensible proposition, and those who are advocating it as the panacea to our present troubles are doing themselves and the nation a very bad turn, unless they can show how it would work. I agree, as several noble Lords have said, that any Government policy must have within it some kind of prices and incomes policy—
LORD GEORGE-BROWN: My Lords, I am sure it must be unique for somebody who has not yet introduced himself to
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the House to interrupt a noble Lord, but there always has to be a precedent. I understand the point the noble Viscount is making: that if things are going along reasonably well and then you put in a dam, that holds it, but then the dam breaks and it is worse. But when the dam has already gone and the tidal waters are rushing past, do you not then do something, however temporary, to hold them back while you try to put something permanent in place?
VISCOUNT WATKINSON: History, of course, repeats itself. First of all, the noble Lord need make no excuses for interrupting me; he did it often enough in the other place for it to become quite common. Secondly, if I may venture to say this to him, he always used to do it in the other place—and no doubt will here, in just the same way—by anticipating the argument that I was just going to make. He had better wait a moment, if I may suggest that to him, because I am just coming to the problem. His dam, if I may venture to call it that, has broken and the flood waters are rushing out pretty fast. What I understand to be the policy of the Opposition is: build another dam and try to do it all over again. Well, that raises the question of whether you could build any kind of dam anywhere at this point. Therefore I think the Government are absolutely right to take a calculated risk—it is a calculated risk, and it may be a very considerable risk—to try to bring a new approach to this problem.
Where does the eventual solution lie?—and I do not think the noble Lord, Lord George-Brown, or the noble Lord, Lord Beswick, would disagree with me in this. It lies on the shop floor. It lies in the relations between me, as chairman of my company, and those who work with me—I hope not for me, but with me. It lies in some degree on the Government's relations with those whom they employ. As my noble friend Lord Thorneycroft said, in industry, where the Government are the banker for the paymaster, they, as the Government, have a direct action to take, and I do not see how they can do otherwise at this stage than follow the advice given to them by my noble friend Lord Thorneycroft and say: "Money will not be made available for inflationary settlements". I hope that the Government will say that,

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and go on saying it, loudly and clearly, and perhaps that will then encourage employers to take a similar line.
This is the only practical solution. It has to be worked out or fought out—I prefer worked out—on the floor of the shop in every industry in this country. It has to be backed by the Government's taking a fair but tough line where they have any control over the situation. If we can make this work, then we have a permanent solution, whereas even if we try to build another dam, who among noble Lords would really say that if it could be erected—and I do not think it can—it would last for any time? Then we should have it all over again.
LORD BESWICK: My Lords, I am obliged to the noble Viscount for giving way. I am following with great interest what he is saying from his great experience. But will he not try to accept the point that we have made from here, that this talking he is asking for between management and the shop floor cannot succeed while you have a Government with regressive taxation deliberately putting up food prices and cutting into the social services? They are not giving us the atmosphere in which the management and the men can get together.
VISCOUNT WATKINSON: I cannot help feeling, my Lords, that this House is getting more and more like the other place, and perhaps it ought not to. So I will not be drawn into much more debate, much as I should enjoy it. However, I will say this, if I may. I spend a lot of time, as I think any chairman should—and I wish more chairmen would—going round, not talking to people who work with me but letting them ask me questions. I do not find many of the people grumbling about 6d. off income tax. Although they may know that I make a bit more out of it than they do, I find that is reasonably accepted as a sign that at last we have a Government who are preparing what they hope is a long tranche of reduced taxation and increased incentive. I do not find much complaint about that.
My Lords, what I want to say is this. The policies, however sincerely meant, of control, of what I call the wages dam and all the rest, have demonstrably failed. One could argue that it is very sad they
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have failed; but they have done so. What can we do? Do we try again in an almost impossible situation to rebuild? Or do we change course, putting immense reliance on people's good will, on their capacity to be sensible and to try to see things in a sensible way, and let industry have a go? The Government must play their part, as I have said. If that would work, then, again as I have said, it is a much more permanent solution.
I do not like—and I say this quite frankly—the situation that is arising in which it looks to me as if there is no dialogue between the C.B.I., the T.U.C. and the Government—not the Government as a whole but Mr. Carr's Ministry. For the moment, perhaps this is impossible, and I think the Bill on Industrial Relations, which I think is necessary, must be introduced. People must see the good side of things in it, even for trade unionists. But at some point there has to be some dialogue if we are to succeed in this policy. The Government could use the N.E.D.C. or, if it still exists, something like the National Joint Advisory Council, which used to exist in the old Ministry of Labour. I entirely support the policies of the Government, and the only advice I would give them, if I may, is that they should seek to carry the policies through, but seek also—because we are all reasonable men—to leave some doors open where at some stage, at least, there can be some dialogue beginning again between the T.U.C, the C.B.I., in particular, and the Government—not the political Government, but the Government that exists in St. James's Square, which is well known to trade unionists and employers. We shall reach a final solution only if there is agreement between those three partners in the process.
My Lords, I am sorry that I have spoken for rather a long time, but I was a little provoked, particularly by my old friend opposite, if I may so call him. My advice to the Government is: go ahead; I think you have created support in the country behind you. I hope that employers will try as hard as I hope my company will to back them up. Bear in mind, also, that the day will come, if this new policy begins to succeed and solidify, when some bridges must be built and when some talk must go on so that we gradually draw the nation together again under these new and, I hope, more sensible and more permanent policies.
7.43 p.m.
LORD DONALDSONOF KINGS-BRIDGE: My Lords, the noble Viscount will forgive me if I do not follow him in his most interesting speech, to which I listened with fascination. I should have liked to discuss various points on it, but we have now reached the middle watches in the course of the debate through the Chamber, and this is the time when Back Benchers ought to come out and fill in details on the broad canvas which has been painted by their predecessors.
I want to deal with two particular points which have been raised. I was astonished and delighted to find that I agreed with nearly everything that the noble Lord, Lord Boothby, said, which is a surprise and an unusual experience. In particular he raised two points that I want to follow up. The first, on family poverty, was ably opened in detail by the maiden speech of my noble friend Lord Hamnett, who showed in his speech great knowledge of the subject. That was followed by various speakers, particularly by the noble Lord, Lord Boothby; and on this subject I want to give some evidence which comes from workers who are actually doing the job in this field.
The second point raised by the noble Lord, Lord Boothby, was the garrotting of the Consumer Council, which I will deal with first as it lies rather heavily on my chest at the present moment. Your Lordships may think that as the salaried Chairman of this body I must justify speaking about this matter at all. You may think that the Addison Rules are relevant, but I do not think many of your Lordships have read them, and I can assure you that they are not relevant. The Addison Rules are laid down to avoid the situation where a Chairman of a public body finds himself answering questions in this House for the responsible Minister who is in the other House, and thereby causing him embarrassment. I will answer no questions, but I may ask some. The noble Lord who has to reply is in a very embarrassing situation on any basis on this particular point. If anything I say adds to his embarrassment, I apologise.
I have received a modest salary from the Consumer Council, which is now coming to an end, so although I declare an interest, it is a minimal one. I have
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a further interest: that of a bitter resentment at the contempt with which this organisation has been treated. And I use my words carefully. I hope that the Government will treat the noble Lord, Lord Erroll of Hale, more politely than they have treated us. He it was who, before they strangled his baby in this Administration, set it up in the last Conservative Administration. He appointed the Council and he appointed the noble Baroness, Lady Elliot, as its Chairman. He appointed that very brilliant and energetic Director, Dame Elizabeth Ackroyd. And now the Council is going. He it was who, acting on the independent advice of the Molony Committee, thought that the Consumer Council should be formed, and the Government he then served agreed with him. But, this Government does not do so.
Sir Joseph Molony, in a letter to The Times last week, had this to say:
"I express firmly the opinion that in its seven years of life the Council has done all that its designers hoped it would do, and done it well. … Anyone who studies the evidence and arguments we examined before deciding that there ought to be a Consumer Council could not doubt that the need is as great in 1970 and henceforward as it was in 1962".
Whether the evidence was studied I do not know, but the Government's conclusion on this occasion was different. I believe it was a doctrinaire decision and it depended not on whether or not the Council had done its work weil, but on the quasi moral issue of whether it is proper, according to the strict interpretation of the new style of government, for any Government to arrange for such functions to be done by anyone.
If we had been told that we were ineffective and were to be reorganised, or even replaced, we could hardly complain. What is intolerable is the suggestion that nothing more needs to be done. This seems to me to be simply ignorance. There is an enormous amount to be done. The consumer—particularly the poorer housewife—is constantly exploited by unscrupulous tradesmen, and it is only as a result of steady pressure from ourselves and other bodies that she has acquired the protection that she now has. If the Minister thinks our work was unnecessary, I should like him to attend one of our shopping conferences, where 300 or 400 housewives foregather to ask questions. I believe that as a pressure group

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we have done a great deal. The plain consumer is subject to every kind of pressure, ranging from the doorstep salesman to the dishonest advertisement. We provided an essential element in modern life and we also acted as a very necessary and ever-present irritant to the Government themselves. We did not expect them to love us, but we thought we had their respect. It is disappointing to find that we do not have their respect.
The outcry from the consumer movement as a whole, from the Consumers Association, with its 3½ million reader-ship of Which?, from 80 consumer groups in which they have 12,000 members or more, from the Weights and Measures inspectorate and from many influential individuals, suggests that our influence—whether or not it was as large as it should have been—will certainly be missed. This was really a doctrinaire decision by men with no coherent doctrine. Perhaps the only coherent doctrine which defends the decision is: "Up the smart Alecs, and the weakest to the wall."I will say no more on that matter to-day. We shall have a discussion next week when my predecessor, the noble Baroness, Lady Elliot of Harwood, has an Unstarred Question on the Order Paper. This is an item in the White Paper which is under discussion to-day, and I felt it impossible not to refer to it.
The second point is the question of family poverty. I think it is accepted by everybody that the Family Income supplement will do something. I am delighted that we are going to have it. I think that many parts of it are ill-conceived, but I certainly do not deny that the F.I.S. will do something for some people. Our complaint from this side is that the policy has been started the wrong way round. The Government seem to me to have started from the desire to reduce taxation and worked backwards from this conclusion to the premises of where they could find the money to do it. They found the money by a universal raising of various kinds of charge to people, treating those who send their children to Eton and Cheltenham Ladies' College as if they were as much affected by this as people who send their children to statutory education. It is like the old joke we used in the 'thirties about the
1028
grand impartiality of British law which forbade both rich and poor to sleep on doorsteps. It seems to me that it is of that order of approach.
Nobody has denied that the rich will benefit—and I certainly have no quarrel with that. A married man with two children, who earns £20,000 a year, we are told in the supplement to the White Paper will be better off by £450. If a man earns £10.000 a year he will be better off by £200; if £5,000, by £84. Then we reach the critical area. At £3,500 a man gains £60; at £3,000, £42; at £2,500, £32. This is the critical moment. At £32 or thereabouts he tends to break even, if we can accept the estimate of £27 made by my right honourable friend Mr. Roy Jenkins in a devastating speech in another place which figure I think has not been questioned. I can give the details but I do not think I need do so.
We can take it that the break-even point is about £2,500 a year. Of course, this is without the other consequences of the measures which are as yet unquantified. Clearly, the transfer of the agricultural subsidies to the housewife will make a difference to prices. Higher rents must follow the intention to save £100 million on housing subsidies, although of course we welcome the proposed help to tenants of private landlords; that is a thoroughly good thing. Also, there will be higher rates and higher commuting fares. If we accept this as a reasonable figure, it means that a husband and wife, with two children still at school, whose wages are £2.500 will balance. If they have more children they will be worse off; if they have fewer children they will be better off; but the line is firmly set at £2,500. All right. I am delighted that anybody in the range between £2,500 and £5,000 should receive a bit extra; certainly nobody minds that. I personally do not in the least object to the benefit being spread higher, although it seems rather unnecessary, particularly on an increasing scale. And, of course, it will have absolutely no incentive effect. The £450 to a man of £20,000 a year is not relevant in the way it would be to a man on £2.500 a year. So, if one may say so, this is all rather rot. There are incentives, but they are not at the £400 level on an income of that size.

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What worries the Government, and rightly—it worries us—is the family be-low £2,500 which is getting towards the poverty line. The family income supplement (the F.I.S.) is aimed in the right direction and I, for one, welcome the Government's intention to help those who most need it. But aiming in the right direction is not enough. One has to pay some attention to what one is aiming with. This seems to be aiming with a pop-gun with a very short cord on the cork. It is going to do very little. The Government have allowed £8 million—this has to be seen against the estimated £68 million saving in National Health—but, even so, I think they have allowed much too much. Not much has been said to-day about the take-ups, but there is a great deal of evidence to show that means tested benefits are not fully taken up, and I think we must assume that this will happen now.
The truth is that this is really a token scheme, a red herring, I think, to divert attention from the main regressive effect of the package. If you agree with the right honourable gentleman the Chancellor of the Exchequer, who said in his much-disputed and much-disrupted speech in the other place that no family earning a £1,000 a year would be hit by these measures because of the F.I.S.—even accepting that, which many people on my side do not, it means that there is a straight transfer from those earning between £1,000 and £2,500, on the one hand, and those earning £2,500 and over, on the other. This is a regressive form of taxation of an extraordinarily blatant kind. Had it been stated in those terms, no Government would have brought it in.
My Lords, it does not end there. There is an absolute tendency in the present measures to drive the people who are about £1,000 a year down into it, and this is much the most serious aspect. I am not talking about something in the air, or from a doctrinaire point of view. The Child Poverty Action Group accused the late Administration, in my view rightly, for having let the gap widen between the very poor and those who were all right. This happened in consequence of our policies, but we did not do it deliberately and nobody ever thought we did. The action here, however, is deliberate and this is what seems to me unforgivable. The Family Service
1030
Units, which I have the honour to be closely associated with, have 17 outposts or 17 units all over the country. They have a hundred trained social workers and are looking after 11,000 families. This is what they say about this scheme:
"These measures will help to create a group of families with permanently depressed standards of life which will in turn create feelings of bitterness and anti-social attitudes."
They also say:
"Employers already resent so many requests for means test: certificates."
Applications will now have to be made about 12 times a year: twice for free school meals, twice for rent rebate, twice for rate rebate, once for school clothing, once for welfare foods and milk, and in addition four times for the family supplement. They think this will be a disincentive to employers to employ men because of the trouble involved. They know that families on a low income are already failing to obtain benefit because of the cumbersome administration of the means test. The income of these families often varies from week to week. The decision to end free school milk for children over 7 will certainly lead to a fall in calcium intake. They regret deeply the decision to cease the cheap milk scheme at school for children under 5. The lower working classes appear to have the worst dental health at present, and this can only be made worse by extra charges, even if some relief is given. On school meals, they fear that families on the edge will think they can provide a meal for less than 2s. l0d. and will therefore provide an inadequate meal.
I believe it was the noble Baroness, Lady Summerskill, who said that the traditions of working-class families are different and all these squeezes fall upon the housewife. I believe that the Government are quite genuinely trying to help, and I believe that in the most distressing way they have failed. My Lords, I believe this to be a very retrograde move indeed, and if it were only on this aspect I would support my noble friend Lord Beswick in his Motion of disagreement with the Government.
8.0 p.m.
LORD BALFOUR OF INCHRYE: My Lords, in their absence I should like to offer my congratulations to the two noble Lords and the noble Baroness who have made their maiden speeches to-day, and

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I would extend a particular welcome to the noble Baroness, Lady Lee of Asheridge. She and I entered another place more than 40 years ago on the same day. She was then the Member for North Lanark. My Lords, in those days she enlivened the House with contention in debate and delighted it in appearance. To-day we look forward again to the enjoyment of that duality, I trust for many years ahead.
I want to start my short remarks with a question for either the noble Lord, Lord Beswick, or the noble Lord, Lord Shackleton, both of whom I address in their absence. It is a question which has already been asked in this debate, but as this Motion is a serious Vote of Censure upon Her Majesty's Government, I think I am entitled to ask it again. It was indeed the noble Lord, Lord Beswick, who called for these things to be spelt out clearly. In what I call the"package deal" of Lord Shackleton's indictment of the Government, his Motion says:
"… will make more difficult the achievement of an acceptable prices and incomes policy …"
The question I repeat is: what is the acceptable incomes policy which the Opposition have as an alternative to what Her Majesty's Government are doing?
As we know, and as the noble Lord, Lord Beswick admitted, the last efforts of the previous Administrations, first for voluntary and then for statutory income limitation, failed—not completely but almost completely. So we can now ask: what is this new policy which would be acceptable in a free country and which the Opposition wishes to put forward? I think that when the Front Bench speaker for the Opposition replies to the debate on behalf of the Opposition he should be willing, as the noble Lord, Lord Beswick, said, to state in clear terms what is the alternative in the form of an acceptable policy: because if the Opposition condemn the Government for not having an acceptable policy it is quite logical to say that the Opposition must themselves have it.
As the noble Lord, Lord Beswick, again said, the main theme of the debate is the Government's approach to the danger of inflation. The noble Lord said,
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and I think quite rightly, that the approach is a dual one, moral and practical. Taking first the moral terms, it seems to me that the Government's approach was very well defined by the noble Earl, Lord Jellicoe. It is to alter our national outlook to one of greater independence by the individual, and on the individual, rather than reliance on the State, while at the same time helping and supporting the weakest in our community.
My Lords, as a Conservative I have often tried to get clear in my mind the limits of the Welfare State and what it should do in broad terms, and it seems to me that what the Government are doing to-day does not encroach at all upon the Welfare State, if noble Lords opposite will accept what I suggest are the broad terms.
The Welfare State should ensure that every child has the opportunity according to his or her abilities. The Welfare State should protect a man and his family from economic distress arising from circumstances outside the man's control—for instance, redundancy or change of occupation due to changing economic life. The Welfare State should ensure care in illness; it should safeguard the old and the infirm. But what it should not do is to relieve a man from the responsibility of providing for himself and his family, or protect him from the results of his own foolishness, improvidence or slothfulness. I was looking at some writings of Abraham Lincoln—a much wiser man than any of us here—and he put it so well when he said:
"You cannot help men permanently by doing for them what they could and should do for themselves".
On the practical aspects of the approach I have listened carefully to two former Chancellors of the Exchequer, both of whom have given support to what I would describe as the long-term policy of Her Majesty's Government, but both have expressed warnings for the short-term. It is possible that storms may arise and that the ship may be blown off course. The Government believe that this will not happen. We hope that it will not. I am not competent to express any view as to whether or not there will be a short-term blowing off course, but of one thing I am sure: if the Government are confident, they should tell the people

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more than they are telling them at the present time. They should tell us in simple terms from an authoritative source. I should dearly like to see the Prime Minister go on television, not to make a Party speech but to explain to the people in simple terms—as the highest executive authority in the country—what is the long-term objective, and what are the dangers in the short term; and to reiterate the confidence of the Government that they can get through the short term without what the two ex-Chancellors of the Exchequer thought was the danger that lies ahead.
In practical terms the Government explain that an essential feature is to reduce Government expenditure and to channel resources to the individual rather than the public sector, while all the time concentrating State aid where it is needed and not spreading it indiscriminately irrespective of need. This policy is condemned by the noble Lord, Lord Beswick, who used harsh words in connection with Mr. Heath's outlook, saying that Mr. Heath was reactionary and selfish. I should like to put this to Her Majesty's Government—and I am only sorry that the noble Lord, Lord Shackleton, and the noble Lord, Lord Beswick, have both felt it necessary to be absent during a debate initiated on a Motion introduced by Lord Shackleton.
LORD CHAMPION: My Lords, of course I greatly regret the absence of my two noble friends. But both of them have sat here pretty well continuously since half past two, and I should have thought they were entitled to go out for a short time.
LORD BALFOUROF INCHRYE: My Lords, in my young days in another place, if one had a debate, always one of the leaders of the Opposition and one of the Ministers of the Government had the courtesy to be on the Front Benches. It is not for me to lecture the Opposition upon their practice, but I should be very reluctant to see my side ever without a Minister or, if they were in Opposition, one of the Opposition leaders, sitting on the Front Bench during a debate or a Vote of Censure. As I was saying, the Government policy was condemned by Lord Beswick, who used those words "selfish and reactionary". Let me put to Lord Beswick, in his absence, a few questions.
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Is it selfish and reactionary to spend £75 million more on local health and welfare services than last year? Is it reactionary and selfish to plan a 6 per cent. overall increase, compared to 4·3 per cent. planned by the last Government for 1969–70? Is it reactionary and selfish to review housing subsidies and to introduce a rent support scheme for both council, and private tenants? To me, and I believe to many noble Lords in all parts of the House, it is intolerable to think that the burden should go on to taxpayers to subsidise rents in council houses of those who are in a high income bracket—and there are many such, subsidised by taxpayers who are in fact poorer than the tenant they are subsidising. I recently saw reported the case of a man with a four-figure income and two motor cars, who owned property outside the council house, and who said, "Why shouldn't I live in a council house as the Government allow me so to do?"I think it is absolutely intolerable that the subsidy should be spread indiscriminately, and that the burden should fall even upon those who are poorer than the beneficiary.
LORD WYNNE-JONES: My Lords, does the noble Lord object to the subsidy to purchasers of houses given at the present time?
LORD BALFOUROF INCHRYE: My Lords, is it wrong and reactionary to consider a system whereby taxpayers continue to finance the maintenance of strikers who have voluntarily withdrawn their labour? No one wishes to see any woman, any family, suffer or be in distress because of industrial disputes. But surely it is worth considering whether supplementary benefits should not be treated as loans in the long term from taxpayers, and at any rate partially repaid on an agreed scale over a period of time.
BARONESS PLUMMER: My Lords, may I ask the noble Lord a question? Does he consider that a council house tenant is a taxpayer or not?
LORD BALFOUROF INCHRYE: My Lords, that really does not enter into the case. We have something to think about, because we are now getting political strikes. This is a new and dangerous element. I see that the shop stewards in British Leyland are suggesting that

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there should be an industrial strike over the Government's proposed Bill on Industrial Relations. I hope we shall hear from authoritative trade union leaders and political leaders a condemnation of such behaviour, because that way lie all sorts of terrible things in the future; and if industrial strength were to be used for political purposes I do not think it would gain much support from the vast majority of people in this country. Supposing there is an industrial strike for political objectives, I believe that it would be wrong for the taxpayers to have to subsidise such a strike.
Finally, the noble Lord, Lord Shackleton, talked of widening the gap between the rich and the poor. I submit to your Lordships that there is no contradiction between tax reductions and improvement of social services. The basic truth is that, unpleasant as it may be for some to realise, a man will work harder for himself and for his family for material rewards than for the brotherhood of a shared-out egalitarian socialist State. It is sound to remember that you cannot strengthen the weak by weakening the strong, and that character and courage are not built by taking away initiative and independence. And it is these qualities which this Government aim to free in the country, getting away from what I think were the rather meaningless and bad habits into which we may all have drifted during the past six years.
8.15 p.m.
LORD HOY: My Lords, I do not want to be deflected from what I have to say by the speech your Lordships have just listened to, but when the noble Lord talks about municipal tenants as if they were not ratepayers, the same as any other section of the community, I find it difficult to understand. Indeed the noble Lord would not face the question put to him about people buying their homes to-day. I have no objection to their doing so, because I own my home, like most other people; but do not let us forget that those who do so also get considerable tax allowances. Indeed, home purchasers to-day are receiving tax allowances even greater than all the municipal tenants in Britain put together, and we do not have any tests as to whether their income is £10,000 a year or £2,000 a year. If in fact they are
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buying their home, they get tax allowance through the Inland Revenue. I hope we shall get this subject into its proper perspective.
I wanted to deal with one question raised by my noble friend Lord Beswick when he opened the debate to-day. He spoke of a part of the United Kingdom that was protesting against the change in Government policy in regard to allowances and investment grants. It was not my intention to raise the matter, but inasmuch as my noble friend did I am bound to add a word with regard to Scotland itself, and I certainly hope that the noble Lord, Lord Drumalbyn, who is to wind up for the Government, will make some reference to it. And as I see the noble Lady the Minister of State for Scotland here, I am sure she will want to make a note of it.
To-day's Scotsman describes what the effect is going to be on a considerable part of Scotland. That paper says:
"The Government's withdrawal of investment grants to industry has come as a severe blow at the Harris tweed weaver, the Western Isles Crofters Union claimed in a statement yesterday.
"The change means that crofter-weavers will lose the 40 per cent. Board of Trade investment grant under the recently introduced scheme operated by the Highlands and Islands Development Board for new Harris tweed looms.
"Instead, they will be able to claim depreciation allowance on new looms, but, the Union's statement said, 'as depreciation allowances on income tax are dependent on profits, the weaver whose profits are almost nil after living expenses will be back to square one—without assistance.'"
Indeed, I would suggest that this is the position that will face many of the industries and new industries, not only in the Highlands and Islands but in the development areas. I am certain Scotland would expect the noble Lord who is winding up to make clear the Government's policy in this respect.
I wanted this evening to say a few words about agriculture, and I find it a little extraordinary that in the whole course of this debate agriculture has hardly been mentioned. With my honourable friend the Member for Enfield, Mr. Mackie, I have an all-time record in length of service in that Department. I remember that your Lordships' House was not backward in putting questions to us when we were at the Ministry,

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and I am a little surprised that in all the changes forecast we have not had a single contribution with regard to agricultural problems. We should all agree that agriculture went through a very difficult time, not only pre-war but after the war and up to 1947, when the Agriculture Act was enacted. Many Members, not only of your Lordships' House but of another place, have paid tremendous tributes to Mr. Tom Williams of that day, the Minister of Agriculture who introduced the Act. Moreover, not long ago I attended a function which paid tribute to the noble Lord, Lord Netherthorpe, for his part in forming that policy at that time.
There is no doubt that as a result we have been boasting about the position of British agriculture vis-à-vis its competitors, either in Europe or elsewhere. We have argued from both sides of the House that as a result of that Act British agriculture has been better organised, is better mechanised and certainly has given a better return than has almost any other industry in this country. It has been argued that had the output from other industries been even half as good as the agricultural output we should not have been faced with these economic difficulties. All this was the result of the 1947 Act. No one will deny that that Act did for agriculture what nothing else has ever been able to achieve.
When, two or three weeks ago, the Government made their announcement, I asked the noble Earl opposite some questions, and I was interested to hear the questions on milk being repeated this afternoon by the noble Lord, Lord Balfour, and others. But I must once more express surprise that there have been so few, if any, comments either from the agricultural correspondents, from the N.F.U. itself, or from those who are supposed to take such a great interest in agriculture. Because what we are witnessing as the result of the Government's intimation is a complete breakaway from the present system which has put agriculture into the enviable position that all supporters of agriculture have claimed for it. In other words, we are saying, "Away with the policy of 1947".
What the Government propose to do is to replace the present agricultural system with a policy of import levies. Indeed, noble Lords who were present
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will remember that I raised questions on that subject on the day that the Government announcement was made. That announcement has provoked a strong reaction also from British Commonwealth countries. Nowhere have more outspoken comments been made than those we have had from both New Zealand and Australia. It is no use paying tribute to them for all the assistance they gave us when we required it and then economically harming them in the way that the Government propose to do. We all remember how that little country New Zealand harnessed her agricultural production to meet the needs of this country, and how loyally she has served us throughout all these years. Now, at this stage, this Government say, "We are going to impose an import levy on all you send us."I wonder whether the Government have thought what the reaction is going to be, not only from New Zealand but from Australia and other countries. Do the Government really think that they can impose these import levies without having a retaliation from the countries who upon whose goods they propose to impose this import levy?
What does all this mean? The Government have already announced that they propose to cut farming subsidies by something like £150 million per annum. I do not think that anyone on the Government Benches would dissent from that statement: that this is a proposed cut by the Government in agricultural subsidy. As I said a week or two ago, bad as that may be, the Government then say,"On top of that, we will impose import levies".
If the Government are going to make these cuts in subsidies and then, on top of that, impose import levies, obviously someone has to pay for them, and the only person who can pay for them is the housewife of this country. It means increased prices. Indeed, I thought that that was the best comment I had heard in the speech made by the noble Lord, Lord Thorneycroft, when he said that perhaps we ought not to make promises or speeches during Elections, because they are remembered. But we do not need to be reminded of the speech that the Prime Minister made. He was going to cut prices with one stroke of the pen; but this proposal is legislating for increased prices. This is bound to be the case; it cannot have any other effect.

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Moreover there is no guarantee that by introducing import levies the consumers of this country are going to buy the products of our own farmers, as they do at present, because inevitably there will be a price reaction. If there are increased prices, the amount that the housewife herself can buy will inevitably be limited.
If this is done, then the other problem which we have been discussing this afternoon must be faced. If prices are going to rise in this fashion, obviously the wage earner is again going to come on to the market and say, "All right. By their own decision the Government have decided to increase food costs in this country. They have imposed these increased charges on the nation. As a consequence, we must demand even higher wages to meet the new costs". That naturally follows. I wonder, then, what the reaction is going to be on our manufacturing industries. Indeed, anything that contributes to added prices or wages or costs will make us less competitive in the foreign market.
So I hope that before the Government decide to go ahead completely and take this step they will give a little further thought to it and to what they intend to do about agriculture. Agriculture has existed up till now on Government guarantees, without which agriculture could not have achieved the records that have been achieved. As I have already said, it is a record greater than that of any of the industrial industries even in our own country. So I should like to ask the Government these questions. What the Government have to do to-night is to tell us if these are the facts. Do they intend not only to cut the subsidies but also to impose import levies? If so, does it mean that the housewife has to pay for them both? Does it mean, if they do this, that they have faced up to the effect upon wage demands in this country?
Then, I think they have to say something about the effect that this policy will have on our Commonwealth partners. So far, despite their protests, the Government have not said anything about this matter. I hope that to-night, or certainly before this debate concludes, we shall have a reply about British agriculture. There is no use in having speeches throughout the year to the effect that this
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is the greatest industry we have in this country. The fact is that nobody has delivered a speech on it up till now, and I am certain that the country, if not this House, will want answers in regard to this problem.
8.29 p.m.
LORD MAELOR: My Lords, at this late hour I shall not detain the House for longer than a few moments. When the Chancellor's Statement was made some three weeks ago I was surprised to hear members of my Party, both in your Lordships' House and in another place, state that they were shocked and disappointed. I cannot claim to have been shocked or disappointed with the Statement. Had the Statement been different I should have proved myself to be a false prophet, because I took good care to tell all the audiences I addressed during the General Election that if we had a Tory Government, such a statement would be forthcoming.
I did my best to impress upon the electorate the fact that the Tory philosophy of politics is diametrically opposed to that of the Labour Party; that one is the very antithesis of the other. The Tory philosophy is based entirely on class distinction, and the Chancellor's Statement was commendable to the extent that it was true to Tory philosophy. Within a few weeks of gaining power the Government began to put into effect their peculiar philosophy, and this should be a lesson to my own Party. I can only hope that immediately we regain power, as we are bound to do, a Labour Government will be just as rapid in putting into effect the measures which would be in accord with our philosophy as this Government have been with theirs. The Tory Party is a class conscious party, and throughout the centuries has always legislated in the interests of its class.
A NOBLE LORD: No!
LORD MAELOR: You have not read your history. I am saying it, and repeating it; and I shall say more in a minute. I am afraid that thousands in our electorate, blind to the achievements of the last Labour Government, had come to believe that there was no difference between the Tory Party and the Labour Party. You will not hear much about

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that after next April. The electorate will come to realise that the depth of difference is deeper than any chasm in the wilds of Snowdonia.
I said that I was not disappointed with the Statement, but I must say that I was amazed. Listening to the Statement, as it was repeated in your Lordships' House, I could not but feel that it was a clever and subtle confidence trick. I felt that a clever conjuror was performing; we were promised a reduction of 6d. in the income tax, which was something we could all applaud; but before the end of the Statement it became obvious that the 6d. would be swallowed up by the new charges, and that the working man would be worse off than he was before he had the reduction in his tax. Of course this is an old confidence trick. Another "Baba" used to perform it with the aid of the forty thieves.
My Lords, let us face the situation fairly, honestly, and intelligently. What the Chancellor has proposed to do has been well expressed in the New Testament. Let me quote:
"for whosoever hath, to him shall be given; and whosoever hath not, from him shall be taken even that which he hath."
There it is in a nutshell. The working man will seem to have had 6d., but he is going to lose it, and more as well. What frightens me is the thought of what will happen next spring, when the measures announced by the Chancellor come into effect: inevitably they will cause a soaring of prices. It will be inflation with a vengeance. I must say that I was very amused during Question Time to-day to hear this word "inflation" mentioned time and time again. The Prime Minister did not mention it once in his speech last night.
Let us see what will obviously happen. As a result of the cut in subsidies, councils all over the country will be compelled to raise the rents of their houses. In most areas, these rents are already extremely high and are currently taxing the householders' resources to their limits. We have already been warned by British Railways, particularly in the Southern Region, that fares will go up to the tune of 3s. in the pound. This increase in fares will fall fiercely on the commuters, thousands of whom travel to and from London daily. These very people, among others, will be the ones
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who will be paying also the increased rents.
But the meanest declaration, in my opinion, made by the Chancellor was the withdrawal of free milk to children over seven years of age in our junior schools. It was recently reported that the children of to-day in our country are the healthiest children ever known. This was attributed to the fact that they received free milk at school, and were also guaranteed at least one good meal a day; good in quantity and good in quality. And what a proud boast that is for any country to be able to make, that we have the healthiest children in the world! But it will not be true much longer. Small boys and girls are to be robbed of their milk, and I use the word "robbed" deliberately. If a person picks up a bottle of milk on someone's doorstep he or she is immediately prosecuted and charged with robbery. Now Mr. Barber does the same thing on a grand scale, and it is acclaimed by the Tories as a great advance. What about the guaranteed one square meal a day? Many parents will be unable to afford to pay the enhanced prices, or even to give a daily dinner at home. We shall soon be back to the days of the two sandwiches and a cup of tea. This attack on our young children is monstrous and unforgivable, and I am surprised to find Members opposite allowing it to be done in their names, and even with their assistance.
What is frightening, too, is the prospect of industrial strife in the spring as the result of these measures. As the cost of everything will be rising, we shall inevitably see new wage demands being made; and if these are denied we shall have strikes on an extensive scale, and our social and industrial structure will be grievously disrupted.
In conclusion, I would remind the House that on the day of its delivery the Chancellor's Statement had its repercussions even in distant lands. New Zealand said that the levy on lamb sent to Britain was "a slap in the face". Australia said that the barrier against food imports would "cut across its trade agreement with Britain". Those were the expressions made in those two countries. I have no doubt that when a Vote is taken at the end of this debate the Backwoodsmen will have been summoned from all parts of Britain to support the Government, but I am sure the Party opposite

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would be well advised to support this Motion and call upon the Chancellor to have second thoughts.
8.39 p.m.
VISCOUNT MASSEREENE AND FERRARD: My Lords, I should like to ask the noble Lord opposite what century he thinks he is living in? He is not living in the early part of the nineteenth century; he is now living in the middle of the twentieth century. When the noble Lord speaks about the Tory Party being the Party of class consciousness, on what is he basing his division of class? Is he basing it on incomes? If he is, then he must surely realise that you have only to drive around council housing estate at night to see the Jaguars and the Mercedes parked outside the council houses. I am an employer. I employ people in industry and in agriculture, and to say, as the noble Lord has said, that we are going back—I cannot remember his exact words—to the twopenny sandwich and the cup of tea as the daily meal for the worker (I will quote the words of the noble Lord, Lord Shinwell), is really "pie in the sky". That is what the noble Lord said about the policy of Her Majesty's Government.
I shall not pursue the subject any further, except to refer to the last part of the speech of the noble Lord, Lord Maelor, when he said that hundreds of backwoodsmen would come up from the country to support the Government. Those days are over. Surely the noble Lord has heard of leave of absence. There are about 280 hereditary Peers who cannot come here at all because of leave of absence, so the noble Lord really must get up to date.
LORD KILBRACKEN: My Lords, I do not know how many Members of the noble Viscount's Party there are who very seldom appear in this House and who have not applied for leave of absence. Are there not 300 or 400 of them?
VISCOUNT MASSEREENE AND FERRARD: No, my Lords; there are not 300 or 400, but I will not go into the figures. May I come on to the speech of the noble Lord, Lord Beswick?
LORD MAELOR: My Lords, I think I should be allowed to answer the noble Viscount. He asked me what century I am living in. I am the one who is living in the twentieth century. He is living in the days of Disraeli. He talked about class distinction. There is class distinction because of wealth. Who are the Lords Lieutenant throughout the length and breadth of the country? They have looked after their class right through the centuries and they are doing it now. The purpose of the Chancellor's statement was to assure that class that their interests will be looked after for the next four or five years.
VISCOUNT MASSEREENE AND FERRARD: But, my Lords, Lords Lieutenant have no power, and I am prepared to wager that there are plenty of Lords Lieutenant in this country who have far less income than members of the printers' union or of the dockers' union. This is an absurd argument. To come to the speech of the noble Lord, Lord Beswick, I understood him to say that the Government were largely responsible for the present inflation. The noble Lord, Lord Shackleton, knows perfectly well who is responsible for it. It is his own Party. During the Labour Government's six or seven years in office, they raised taxation by £3,000 million; during 1969 there was no growth in output per head of the population, and the growth from 1965 to 1968 was only 1½ per cent. per head per annum, which was the lowest in western Europe. We know who is the cause of the present crisis.
Noble Lords must give the Government a chance; they have been in office barely five months. Some noble Lords remind me of the amateur farmer who, in the evening, put a ram in a field with some ewes and expected a crop of lambs next morning. You have to wait six months for your lambs. I should have some sympathy with the noble Lord, Lord Beswick, if, say, in 12 or 18 months' time, he came back to this House and said, "We now have galloping inflation and the economy is in a terrible mess." But to say what he said this afternoon is absurd.
There are only two matters on which I want to speak to-night, and I shall be very brief. We all know the causes of our troubles, because they have been repeated ad infinitum; they are wages

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streaking ahead of productivity, vast Government expenditure and so on. There are only two ways of curing the problem. The noble Lord, Lord Shin-well, asked for common sense, but it is quite impossible to have a compulsory prices and incomes policy in a democracy. One can have it only in certain countries, such as Communist countries, where there is a closed economy.
Noble Lords who have been behind the Iron Curtain will know that in any of the big towns there you can walk across any street at the busiest time of the day and you will never be knocked over, because no workers have cars. The only people who have cars are the State bosses. If you are prepared to use bayonets you can have a compulsory prices and incomes policy, but it will result in a very low standard of living. In a democracy the policy of the Government is the only true answer, but it must be given time.
I think the noble Lord, Lord Beswick, said he thought that the Prime Minister was being selfish, and I presume he meant that he was being selfish by taking 6d. off income tax. I cannot follow his train of thought because, as I have already pointed out to the noble Lord, Lord Maelor, the vast majority of employees in this country—I prefer to talk of employees and management rather than workers, because that term conforms far more to the economic conditions of today—pay income tax. When the Prime Minister took off the 6d. he was not thinking of people earning £50,000 a year, whom you can count on your fingers. So for the noble Lord, Lord Beswick, to say that the Prime Minister was being selfish is a most extraordinary statement to make.
The noble Lord made another extraordinary statement when he said that the policies put forward by Her Majesty's Government would widen the gap between the rich and the poor. As I read the White Paper, they will do exactly the reverse. Any man with two children under the age of 11 and earning up to £1,000 a year is not going to have to pay any of these increased charges. Her Majesty's Government are going to spend an extra £110 million on alleviating the plight of the people in this country who are poor through misfortune, through illness, through mental handicap or who
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are elderly. So I cannot understand how the Opposition can say that Her Majesty's Government's policies are going to widen the gap between the rich and the poor.
I am particularly interested in housing, and some time ago in this House I asked how many people with incomes of over £2,000 a year were living in council houses. The Minister replied that there were over 500,000. I then asked how many people in council houses had incomes of £4,000 a year or over, but the Minister replied that he had no statistics for that. I then asked him whether the figure would be 10,000 and he replied that it might be that number. That is why I wholeheartedly endorse Her Majesty's Government's new policy regarding rent rebates and fair rents, because the object of building council houses was to help the poor, as the object of the Welfare State is to help the poor, the elderly and the mentally handicapped. It is not to help people earning a large income, and it is not to help scroungers; it is to help the poor. Therefore, the Prime Minister's policy regarding rent rebates is, I think, excellent. What could be fairer than to charge fair rents for council houses to those people who can afford to pay them? If a man is earning £2,000 or £3,000 a year, why should he get his council house at £2 a week rent?
LORD SLATER: My Lords, if the noble Viscount will give way on that particular point, perhaps I may say that if he found time to go into some of the debates—the Adjournment Debates; not debates addressed to the Minister of Housing and Local Government including the present one, but to his Department, and answered by Parliamentary Secretaries—in regard to increased rents, particularly in New Towns, then he would get his answer, because the rents in New Towns alone, apart from council houses, which are subsidised in every New Town, have gone up and up, until the two people within those homes have both had to go out to work; to meet the increase.
VISCOUNT MASSEREENE AND FERRARD: Of course, my Lords, as this policy statement says, the poorer families will get rent rebates for their council houses. They will get very generous rent rebates. Furthermore, poor families in non-council houses are also to get rent rebates; they will be able to pay fair rents for non-council houses. That, of

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course, to a certain extent, will prevent many of these houses that are not council houses from deteriorating into slums: because in the past the rents have been so low that many landlords have been unable to repair the houses sufficiently to keep them in a good condition. My Lords, I really cannot see anyone objecting to the Government's policy on housing.
I think it was the noble Lord, Lord Maelor, again, who complained about the taking away of free milk from children. Here again, anyone in need will continue to get it. Take a man in a printers' union. He is sitting in his chair by his machine—I have been in these places—and the machine is doing all the work. He is sitting down in his chair reading the Sporting Life, and is probably getting £50 or £60 a week. Surely he can spare the cost of three or four cigarettes a day to buy milk for his children. Two or three cigarettes a day; that is all it costs. It does not cost him any more. Really, we must make people in this country responsible for their children if they have the money. We must give them back their pride. Otherwise, if everybody is dependent on the State, the whole moral fibre of this nation will go.
SEVERAL NOBLE LORDS: Oh!
VISCOUNT MASSEREENE AND FERRARD: It is no laughing matter; it is completely true. You have to make people feel they are responsible. You have to do it.
My Lords, I should like to refer to the speech of the noble Lord, Lord Hoy, who spoke about agriculture. Of course he is quite right; and it rather surprised me that nobody has spoken in this debate about agriculture. That is odd, because the House of Lords is supposed to be composed of great experts on agriculture. The noble Lord, Lord Hoy, was rather concerned that if we went on to import levies the housewife would have to pay more for her food. Of course she will have to pay slightly more. But the point is that the money saved on subsidising the farmers, as the noble Lord will see if he reads the Policy Statement on spending (I think it is paragraph 29), will, again, go to those in need. So the food will not cost them any more.
We have to worry only about those in need: we need not worry about, as I
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say, persons earning good salaries or good wages. They can well afford to pay 8 per cent. or 10 per cent. more for their food. If you look at the average family budget to-day, you see that the amount spent on food, percentage-wise, compared with twenty years ago is infinitesimal. As we have had the cheapest food in Europe for years, then it is perfectly logical that well-off people ought to pay a fair price for it. The farmers have been the most downtrodden species in this country, economically, for far too long. The farm-worker has not been paid a wage anything near that of the industrial worker. Therefore I think it is perfectly fair that the public should pay more for their food. I can see nothing wrong in that, provided, again, that the genuinely poor are helped. The point of the Welfare State is to worry only about the genuinely poor, not to worry about, as I say, people earning £30, £40 or £50 a week. There is no need to worry about them.
LORD PLATT: My Lords, may I intervene for one moment? People earning £30 a week are much worse off, if they have two children, under these proposed measures.
VISCOUNT MASSEREENE AND FERRARD: Actually worse off since when?
LORD GEORGE-BROWN: Since the Government came into power.
LORD PLATT: If the noble Viscount will read my speech he will understand.
VISCOUNT MASSEREENE AND FERRARD: I cannot agree with the noble Lord, because I did not hear his speech.
My Lords, before I sit down—and I am going to by 9 o'clock—I should like to congratulate the noble Baroness, Lady Lee of Asheridge, on her maiden speech. I agree with her. I, too, should like the Government, if possible, not to impose these charges for public museums and galleries, because I think it a great pity that the art treasures of this country which are in public galleries should not be able to be seen completely freely by the public. The White Paper talks about granting an extra £1 million to the Arts, and at the same time it says that the charges for art galleries should bring in £1 million. Of course, if that £1 million

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brought in by the charges goes to support the Arts, there may perhaps be something to be said for it. But if that £1 million is to go to be spent elsewhere, I think it is a pity to charge for admission to public museums and art galleries.
The other thing I should like to say is that the noble Lord, Lord Shinwell apart from saying that the Government's policy was "pie in the sky" (and I did not agree with that) said: why cannot industry have a minimum wage and why should we not do away with all this charity? Agriculture has a minimum wage; and it might be a good thing if industry had a minimum wage. Up to date, of course, this has been a matter between employers and unions. But you cannot do away with charity (although I do not like that word, since it is not really charity) because there is bound always to be a certain amount of unemployment. Therefore, even if there is a minimum wage, there must also be all these other benefits. I have never objected to the strong supporting the genuinely weak, the genuinely unfortunate. Before the war I was stationed for a time at Maryhill Barracks, in the Gorbals. I have seen my share of poverty and it is not a pleasant thing. Anything that can be done to alleviate it ought to be done. I support the policy of Her Majesty's Government as set out in this White Paper because more money is to be spent on alleviating genuine poverty. I cannot understand why the Opposition appear to object to this. I would say that this is a most admirable White Paper.
I will merely repeat, before I sit down, that there are only two choices: either a compulsory wages and incomes policy—which probably means, if it is to be made effective that it will have to be enforced with bayonets—or the present policy of Her Majesty's Government, an appeal to the sense of responsibility of the people of this country, in combination with the Industrial Relations Bill. It is extraordinary that the Opposition Party did not object to a compulsory wages freeze and incomes policy yet do object to this mild measure for the unions. I fail to understand that. Opinion polls among trade unionists appear to favour this Bill. My Lords I feel sure that when the Industrial Relations Bill goes through Parliament and its provisions, including a secret
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ballot, become law the common sense of the British working man—and I know plenty of them—will prevail; and that when Lord Beswick stands up in this House in eighteen months' time, or perhaps sooner in an economic debate, he will have to eat his words.
9.5 p.m.
BARONESS BIRK: My Lords, the few remarks I want to make are concerned with the Government's policy on health, and here I must declare an interest as I am the Chairman of the Health Education Council. I welcome the Statement last week by the Secretary of State on the extra help which is going to be given to the old, the mentally ill, the chronic sick and alcoholics; and with others I await with interest his coming Statement on family planning, for I have been pressing for a comprehensive contraceptive service ever since I was appointed Chairman of the Council. In mentioning this at this stage, perhaps before the plans are finalised, I hope that the plans will not just be an extension of the present scattered and inadequate facilities turning them into a rather larger contraceptive patchwork quilt.
Since this debate is centred round the economic situation, I would remind the Government of the cost-effectiveness (which is a very important point to-day) that will result from having a comprehensive contraceptive service which will be a real investment not only in human and social terms but in economic and population terms too. Also, I feel it my duty to point out that any wide service of this sort, if it is to be successful, must enjoy the strong backing of health education. I was also pleased to note the Secretary of State's interest in health education as it was reported in the Press last week, and I am glad to see that from his answers to questions he appeared to recognise that many of our contemporary illnesses are caused by our own behaviour and attitudes. It is changing these which is the basis of modern health education. Therefore anything that deters people from maintaining and improving their health and well-being is, in my view, not only short-sighted but socially and economically bad.
This, I am afraid, applies to the proposed increases in dental charges. Last March there was published a Government social survey on adult dental health in

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England and Wales for the year 1968. It is very interesting to note, looking back at the papers, that the Press handout from the Department was headed: "We are winning the battle against tooth decay"; whereas the handout put out by the British Dental Association had the headline: "Battle against dental diseases has not been won." At that time the British Dental Association said
"To-day's national dental survey shows a great deal of untreated dental disease, particularly among the lower income groups where treatment charges act as a deterrent. Although there is a continuing improvement in dental health the community as a whole is not attending for the treatment it needs."
This report also showed that 36 per cent. of the people of this country over the age of 16 have none of their natural teeth; and that when we get to the over 55s the percentage jumps up to 72.
Following this report the Health Education Council itself conducted a survey among mothers of very young children, primary schoolchildren and teenagers, and found that the only dental health rules that they were following generally were visits to the dentist. The other ones, such as brushing teeth regularly and not eating between meals, and things like that, were being ignored completely. It is also true that the dentists recently made representations to the Secretary of State asking that no further financial obstacles should be put in the way. When the White Paper appeared the British Dental Association said:
"We are convinced that the proposals as set out in the White Paper represent a serious threat to the dental health of the people of this country and that we have a duty to point this out."
My Lords, all the evidence shows that initially the charges will depress the demand for dental care. It is true that in some instances they may favour those who are regular attenders at a dental surgery, but the great problem about dental health in this country is the need to encourage irregular attenders to become regular attenders before they get to the stage where all that can be done for them is an extraction job. According to the dentists, it will also discourage dentists from operating in areas where the attitude to visits to the dentist is less favourable. This applies mainly in the North-West and in South Wales. It will
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mean that there will be an increasing backlog of cases of dental disease and, as was pointed out by the noble Lord, Lord Boothby, a return, unfortunately, to the conditions which existed in the days when people said it was much better to take teeth out, and that it was easier for them; and in this instance it would probably be cheaper—
THE LORD CHANCELLOR: Taking them out is all you can do with"snappers".
BARONESS BIRK: My Lords, I wish that the noble and learned Lord on the Woolsack would make his asides louder; they are very amusing, but I just cannot hear them.
THE LORD CHANCELLOR: My Lords, I said to the noble Baroness that taking them out is all you can do with "snappers".
BARONESS BIRK: My Lords, all I am trying to do is decrease the number of people who have "snappers". We do not seem to be sufficiently aware that dental disease in this country is also a social problem. Though it may not account for long illnesses, like some other diseases do, it does account for a number of short-term illnesses. It affects other parts of the body, and a great many man-hours are lost as a result of it.
What I think is a very unfortunate proposal—I am hoping that these proposals will not end as final decisions—is the one to reduce the age for dental care free of charge from 21 to 18. Where this has been tried, in New Zealand, experience has shown that young people who are finishing their education or leaving home do not immediately get into the habit of going regularly to a dentist; and this may affect the pattern of their conduct all their lives. If free dental care were continued until they were 21 there would be a better chance that they might visit a dentist regularly. The views I am expressing are also the views of the dental representative on the Health Education Council, who is also the Chairman of my Dental Health Education Advisory Panel and a distinguished ex-President of the British Dental Association.
I hope from the point of view of health education that the Government will not

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insist on going on with these proposals but (as was said by my noble friend Lady Lee of Asheridge, whom I congratulate on her maiden speech) that they may look at the matter again and change their minds about their original decision. However, the only known scientific method of counteracting the inevitable deterioration of teeth is by the fluoridation of the public water supply. I suggest that this is a good economic proposition for the Government, but the only way that we shall ever achieve it—we have tried all sorts of other ways, through education and propaganda—is by legislation. The more we try to educate people in favour of fluoridation, the louder and more articulate becomes the 2 per cent. in the country which is against it. It is really a case of the dedicated barking up the wrong cause. There is very little that we seem able to do about it.
The question of increased charges for school meals and milk has been dealt with by a number of noble Lords, in particular by the noble Lord, Lord Platt. I should like to quote a sentence from a leader in last week's Lancet, which said:
"The Government has failed to grasp that these supplements represent for a large number of children the difference between adequate nutrition and malnutrition."
What we arc concerned about in the field of health education is that where free milk is cut out, and children are given money to take to school to buy milk—which is presumably the way it will work out—the children are going to buy sweets and chocolate and sweet drinks, and then we shall have even more dental decay and increased obesity. One of the problems we have in this country is to get people to reduce the amount of sugar they eat.
May I suggest to the Government that there is another way of getting revenue, by increasing the taxation on sweets and chocolates, which at the moment is 22 per cent. and brings in £75 million a year? It does not seem to have reached the point of diminishing returns, because during the eight years this tax has been running consumption has gone up. The saving on dental charges is estimated at £14 million. I should have thought that this would be covered by increasing the tax so that dental charges would not need to be put up.
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Without going into the political philosophy behind the scheme, one of the problems was illustrated by what the Prime Minister said on "Panorama" last week. He was asked whether people would not be worse off with 6d. off income tax and with the increased charges. He replied that this would only be so if it was assumed that the pattern of our spending remained the same. When he was pressed as to what should be given up, he said—and I am sure he meant what he was saying—that examinations were free of charge, and he found that most people accepted that they should pay a reasonable amount for such things. With great respect, I would say that visits to the dentist have a low priority in most budgets. Beer, bingo, betting and a better television set all come well above dental treatment. For all these reasons, I hope that the Government will look at this again and see what they can do about it.
I am aware that in the scheme set out by the Government exemptions are based on the same levels as under the Labour Government. But, as my noble friend Lady Summerskill pointed out, many people will not apply for exemptions or take up benefits due to them whatever they are called. Although we in this House, and Members of another place, may say that these exemptions are rights, to many people they appear not as rights but as charity, and the only remnant of human independence and dignity left to them is to refuse something to which they are entitled but which they still find humiliating to accept. We may think this is right or wrong; but the fact is that the people do not apply and therefore they are going to suffer. This is why my own view is one of greater universality, with more taxes on the better-off rather than selectivity in these fields, which means that a certain number of people—not necessarily the very poor but those on small incomes—will lose out. I do not think that as a country we can afford this, particularly when we are discussing children.
Finally, I would say that many people feel that the individual's health is his own concern. But this again is rather a debatable point when we live in a society and are not islands unto ourselves. What I think is absolutely true is that the health of the people is a

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matter of social concern, something with which all are concerned, and we must make as sure as we can that there are not too many losers in this field.
LORD PLATT: My Lords, before the noble Baroness sits down, as she has spent a good deal of her time on the important question of dental health, I should like to ask her this question. I personally believe that fluoridation of the water is perhaps the most important factor of this. Is there any law against fluoridation of the water? If not, why do we not do it?
BARONESS BIRK: The trouble is that it is necessary to get the water supplier to agree. There are often several local authorities that make up the water supplier, and out of over 200 local authorities in this country, 110 are in favour and the others are against. It is almost impossible. You have only to get one or two people on an authority disagreeing and the whole thing falls down. It is not democracy, in the sense that the majority makes the decision; it has to be an almost unanimous decision. It is clear that unless there is legislation—and this is not a Party point, as I am sure noble Lords opposite will agree—we shall not get fluoridation.
9.22 p.m.
LORD ROBERTHALL: My Lords, this is the first occasion or, which I have participated in a Censure debate in your Lordships' House. When I was a civil servant I had to listen to a good many debates of this kind in another place, and I always felt that there was a sort of ritual dance about it—the pots and the kettles calling one another black, In your Lordships' House, where a somewhat more detached view is taken, one could not feel that and, although I am a Cross-Bencher, I feel encouraged to participate in this debate.
On the measures of October 27, I think that, on the whole, I agree with the first part of the speech of the noble Earl, Lord Jellicoe. The measures were intended in two ways to shift the forces acting on the economy. The first was to place more reliance on competition and on incentives. Mr. Douglas Jay long ago enshrined the opposite doctrine in the well known phrase, "The man in Whitehall knows best." Long experience in Whitehall made me increasingly doubtful
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about that proposition. I think there are two reasons for that. First, the economic system is very complex, and it is doubtful whether the man in Whitehall knows as much about it, or can reach such good decisions, as the man who has the responsibility and the simple and straight-forward criterion of profit and loss. Secondly, there is the great problem of getting enough people with the ability to deal with the complexities of Governments. I must say, however, that I somewhat regret the demise of the I.R.C. I thought that on the whole they accelerated the reaching of the ends which ideally the competitive system is supposed to reach, and they did not try to interfere too much They found out where something was wrong, put in a man they could trust, and left it to him. Also, in passing, may I say that I share my noble friend Lord Boothby's regrets about the Consumer Council.
The second part of the new lock is the movement away from spreading social benefits too thinly and concentrating them more on those in real need. The arguments for doing this are familiar, and I will not rehearse them. Although many speakers to-night have argued that they do not go far enough, I must say that I think it is a move in the right direction, and I hope that the arrangements will be smoothed and extended. I was interested in one remark of the noble Baroness, Lady Birk, although most of her speech was too technical for me. When I read the debates which took place in another place last week, I was tremendously struck by the number of speakers who called attention to a point to which the noble Baroness referred; that is, the number of people who do not take up their entitlements because of ignorance or fear of bureaucracy. It seemed evident that an enormous increase in welfare could be secured if more entitlements could be taken up. We ought to welcome the statement of the Secretary of State for Social Services that the Government are launching a campaign to encourage people to take up their entitlements. He said also—and I think this is important—that he hoped that the family income supplement would act as a passport for other benefits so that people would not have to establish a case. At any rate, this is the direction in which one ought to go, and I hope that the Government will look at the idea of a

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negative income tax, which is supposed to deal with the whole matter in one lump. As the Leader of the House has said, the Conservative Party made it clear that they were going to move in these directions, and it is not surprising that they are moving, and something can be said for them.
But, my Lords, they agreed—and a number of speakers to-night have agreed—that it would take a long time before the effect of these measures was fully operative; they are only a start. Whether their results will be more or less "economically sound" and "socially just"—to use the words in the Motion of the Leader of the Opposition—we shall not know for an even longer time. My difficulties arise when I ask: "Have we all this time available?" The noble Viscount, Lord Massereene and Ferrard. used a homely agricultural simile about the sheep in the field. He did not ask himself whether they might be suffering from contagious abortion, which would have required more immediate measures. The difficulty is whether our present maladies will wait for us. Industrial relations are undoubtedly our trouble to-day. The Government have put forward a programme to deal with one part of this question, and your Lordships had a most constructive and responsible debate on November 4. It was generally agreed that there was something wrong; that we ought not to go on saying that our system is the best in the world and that it ought to be left alone.
However, there is another aspect of industrial relations, one that is referred to in the Motion, and has been dealt with by the noble Lord, Lord Shinwell, and many other speakers to-night. It is the problem of inflation. Clearly, it is now due to the wages explosion. Prices are rising, not because of profits, not because of import prices, but, as is generally recognised, because of the rapid increase in wages. Many countries are suffering from this, but we are nearly at the head of them.
The dangers of cost inflation under a policy of full employment have been recognised for a long time. They were first recognised in this country by the post-war Labour Government of the late Lord Attlee when (I think in 1948) they produced the first White Paper on the subject. Since then we have made many
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attempts to deal with this problem, of which the most drastic was the prices and incomes policy of the last Administration. I thought they began very well with that, and that the great misfortune occurred when it was abandoned. I agree with noble Lords who have said that that abandonment was largely the cause of the present wages explosion.
I think the cause goes back through several Administrations. The fact that the present Government have inherited the problem is not, I submit, a reason for not doing anything about it at this point. Here I part company from the noble Earl the Leader of the House. He said that we must avoid panic and that those who spoke about the present dangers of inflation were neurotic and unhealthy. If that is the result of being neurotic and unhealthy, then I am afraid I am approaching that sad state. I find myself much more in sympathy with two noble Lords under both of whom I had the privilege of serving at one time: the noble Viscount, Lord Amory, and the noble Lord, Lord Thorneycroft, who in different degrees expressed more anxiety about this matter.
We are only just waking up to the acceleration in the present rate of inflation. When there is a small rate of it there are what economists call "tradeoffs". There are some advantages of full employment, and many economists think (and I am not sure they are not right) that there is faster growth with some inflation. But as the rate of inflation becomes greater the dangers become greater and the compensations become less. Now we are experiencing the worst of all worlds: we have high unemployment, very little growth, and a very rapid rate of inflation. As is well known, there are grave objections to this. There are generally disruptive effects on the economy. People have to attend to price difficulties instead of getting on with their work, and serious social injustice is involved.
The benefits of inflation go to the strong, and at present the strong in our community are those workers who are, best organised and in the strongest strategic position. They are the ones who are on the whole, in the middle income range. The rich do not benefit from inflation at present. This may sound extraordinary, but if one looks into the position one can see that with present progressive rates

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of taxation, and a rate of inflation of about 7 per cent., it is almost impossible for them to benefit, except perhaps by speculation, which it is very difficult to keep up. Until 6d. was taken off income tax, a man on £20,000 a year, with a 6 per cent. rate of inflation, needed an increase of 28 per cent. in his salary to stay where he was.
Of course we do not weep too many tears for the rich, but it ought to be pointed out that they are losing from inflation. But the real sufferers are the poor: those on fixed incomes; workers who are badly organised or not in a strategic position; those on State benefits. And I think it is a sad reflection on the situation that the great trade union movement, which was once based on compassion and on sympathy for the weak, is now lending itself to a policy which I am quite sure is hitting the porest and the worst-off people in the community.
Besides this, the community suffers economically because of the stagnation and because of the bad inflationary effects on company liquidity. With prices rising at their present rate, for a company to keep its working capital intact it has to put aside a substantial part of its taxed profits, and we suffer always from a lack of growth. Sometimes we can catch up with it, but where we are suffering from the strong disincentives to investment we shall never catch up.
Also there are the well-known social and political dangers of inflation. Belief in the value of money dies hard, and that, no doubt, is why we have not had very serious disruptive effects so far. But the present rate of inflation of somewhere about 7 per cent. cannot be concealed from anybody. Everybody knows now that we are in the state of highest inflation and nobody—perhaps with the exception of the Government—feels much confidence that this rate will not accelerate. It is a fact of history and of experience that, once people become conscious of the rate of the inflationary situation, they act in a way which makes it worse. They get rid of their money faster and faster, so that the disease gets worse and the remedies more drastic. In many countries, as your Lordships well know, as a consequence of this people get so upset by the grave injustice that the result is grave disruption of the social and political
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system; and I do not think we ought to say that that cannot happen here.
We now come to the difficult problem of what can be done about it. I thought the noble Viscount, Lord Amory, gave a very good account of the alternatives. It can be allowed to go on—though I think there are strong reasons against that. Or one can try deflation. At one time it was thought that this was the easy way, and I believe that Mr. Jenkins tried it to some extent. But it did not work. It can be done: there must be some amount of deflation that will give price stability. But I was glad that the noble Earl the Leader of the House said that it was not the policy of the present Government to push unemployment to the point where we got price stability. The noble Lords, Lord Balogh, Lord Amory and Lord Thorneycroft, all emphasised the same point—that the economic and social stresses would be too severe. I can remember very well receiving lectures from central bankers when I was economic adviser to the Government, to the effect that all we needed was a bit more deflation, and that our attempts to combine full employment with price stability were bound to fail. But central bankers have now changed their tune, and it is not only the Governor of our own central bank but many others who are saying that it cannot be done by deflation; there must be an incomes policy.
Then there is the voluntary incomes policy. That has been tried here and elsewhere. At one time I was a strong believer in it. I very much agree with the noble Lord, Lord Balogh, and indeed with many other speakers, when they say that full employment is good in itself; it is something which adds dignity to human relations. I used to think that in order to have this great benefit we could persuade the workers to a voluntary incomes policy; that they would pay something. But it has been tried. The T.U.C. used to co-operate with the Government in their attempts to get a voluntary incomes policy, but it broke down because they could not carry their members with them.
So we come back to some form of incomes policy. People say, "What do you mean by that?" I know exactly what I mean by an incomes policy, but it would take all night to go into all the details, and I will not do that. But, first, there must be a norm, or guide-lines.

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Secondly, there must be some machinery for exceptions and for differentials. It is not often remembered that Mr. Selwyn Lloyd started off with a serious incomes policy, but it broke down because he started with the nurses and lost all public sympathy. There must be exceptions, just as there must be machinery. Finally, there must be in the end some form of sanctions. My own view is that the disease has now got so serious that we need a bit of all of these. We do not want over-full employment, but some deflation. With over-full employment I do not think any incomes policy is going to work. That has been found recently in Germany, in the Netherlands and in Japan, all countries that used to be held up as bright examples of how to combine growth and price stability.
You must have public opinion behind you; and here I agree very much with the noble Viscount, Lord Amory, when he says that if we take this seriously, as I am sure we must, there must be more education of public opinion. You must have some form of sanctions, and it was very much in accordance with my own thinking when Lord Amory, and, to my surprise, Lord Thorneycroft, who I do not think always felt this, both argued that we ought at least to keep something in the cupboard and not just get rid of the machinery for incomes and prices policy. I hope I am wrong in saying that I think we are in a dangerous position, but the inflation is very heavy, and it is a pity that the Government should be burning their boats in this matter. Finally, the most important thing is to take it seriously. It will cost us something, and if we have to face strikes and interruptions I am sure that the country can take it, if it is explained.
I have almost finished, but I should like to add a word or two about the present policy. I understand the policy of the Government to be, not to have an incomes policy, because it did not work, but to stand up to claims in the public sector, to encourage the private sector to stand up, and not to bail out those industries becoming bankrupt. I thought that this had in it the elements of a policy, particularly the determination to stand up to claims. But the disease is worse than it seemed to be even a few months back, and the toughness appears to be less than it was. We
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have not even a norm or a guiding light at present. The Prime Minister says that an incomes policy would be a contradiction of a free society. I have a great respect for the Prime Minister, whom I think to be a man of principle, but I wonder whether he is not being a little misled by the sound of the words "a free society". What is a free society? It is not a free-for-all. There have to be some constraints. Unemployment removes a lot of freedom, and inflation removes a lot of freedom. We have to look at the whole situation as it exists.
9.46 p.m.
LORD MOYNE: My Lords, my intervention, especially at this late hour, will not be unduly long because I am no economist, but I intend to speak entirely on the inflationary question, which I think is absolutely over-riding. I could wish indeed, being no economist myself, that the Government had paid more heed to the weight of expert opinion of so many economists or even of the Governor of the Bank of England; but that is another matter. In any case, when feeling critical enough of one's own Party to leave off silting on the fence, it is no joy to stay longer than necessary impaled on the horns of a dilemma. My dilemma has been how to look at the Motion, when I believe that the Government's long-term economic strategy is sound, but that they are showing themselves to be completely blind by their short-term tactics, or rather by the lack of any tactics other than pious exhortations, to the need to check the cruel flood of domestic inflation which is likely, if not checked quickly, to sweep away all their long-term planning and cause much human hardship besides. I think that the hatches should, in Lord Thorneycroft's phrase, be battened down at once before the waves beat in. It is too late afterwards.
The danger behind the self-defeating clamour for more pay comes not so much from the extremists who set it off and parade with placards saying:
"The only way
To get more pay
Is strike to-day."
The real weight of the wage pressure comes not so much from the extremists as from the understandable attitude of moderate, sensible, unselfish people who see prices rising, and threatening to rise

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even more—such as the postage increase in January and so on—and who seek to force the pace of pay increases simply in order to stay where they are. If the Government could hold prices steady for the time being, and even bring some of them down, the internal pressure for illusory wage increases would be eased. This, I suggest, would be helped enormously by the immediate fulfilment of the Government's promise to abolish selective employment tax, combined with prices and incomes control of a temporary nature and, in places where prices were actually on record as having been put up on account of S.E.T.—this was an excuse that was widely used, and indeed usually it was necessary—they could be reduced by the same amount. We would do well to remember that the last Government's freeze began to break down in 1966 because of the rise in prices sparked off by S.E.T. which made the whole thing seem nothing but a cheat.
These considerations seemed obvious enough already last August, when I wrote them in a letter to The Times and received support from economists such as Sir Roy Harrod and others. Prices and incomes control they emphasised as an essential concomitant of such reductions in taxation. My point is that only a visible reduction of some prices can give confidence, just as the increases shook confidence when S.E.T. began to take effect.
The Government are pledged to abolish this tax. The Budget surplus is so vast that a comfortable margin would remain without S.E.T., especially since half the year's proceeds have already been collected. The Chancellor of the Exchequer has said, I understand, that the forthcoming reductions in income tax will be balanced by the savings being introduced—that the effect of the two will be neutral—so the margin for abolishing S.E.T. is unaffected, and indeed some other reductions in the taxation of consumer goods would clearly be helpful.
The Conservative position at the Election seemed to me perfectly logical. Their strategy had always been one of economic freedom, but at the time of the Election the present Prime Minister put forward, as a priority, the checking of the inflationary spiral. That, to me,
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implied a temporary control of prices to check the spiral of wage inflation, and a management of wages compatible with stable prices—but not, of course, any intensification of the credit squeeze, which would be disastrous. My interpretation was clearly far from justified.
Mr. Maurice Macmillan, on the wireless last Sunday, castigated those holding a different economic view from himself as proposing something criminal—which seemed to me somewhat intemperate language—and complained that a prices and incomes policy would involve compulsion. But, my Lords, as indeed the noble Lord, Lord Boothby, has already asked, when did the Conservative Party become the Party of laissez-faire? When did they cease to be the Party of discipline and order? Of course we believe in freedom, but unqualified free enterprise can become, with us, as much of a shiboleth as did nationalisation with the Labour Party. Free enterprise is a means to develop prosperity, not an end in itself. Freedom, my Lords, needs the protection of order in the economic as well as in other fields.
9.53 p.m.
LORD REAY: My Lords, the Chancellor of the Exchequer on a former occasion closed his speech with these words:
"This is a Budget for growth, …It is a Budget not just for today, but a Budget geared to the needs of the whole year ahead. and to the period beyond that, too."—[OFFICIAL REPORT. Commons, 14/4/70, col. 1253.]
That Chancellor of the Exchequer was Mr. Roy Jenkins, and his speech the Budget Statement on April 14, 1970. That was seven months ago, and it is unarguable, as those words suggest, that the economic situation to-day, which this Motion of Censure gives us an opportunity to debate, reflects the consequences of that Budget's policies. It reflects also the consequences of earlier policies, including more structural and longer-term policies, of the last Government, as well as trends which those policies ignored or, for other reasons, failed to influence. What the present economic problem cannot reflect is the policies of the present Government. The policies of the present Government may have determined confidence; they cannot have determined the facts. I should like, therefore, to look a little more closely at some of the elements in the present economic situation.

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I should like to start with the question of economic growth and its consequence for the increases in real incomes, perhaps the most obvious test of success of a modern Government's economic policies. The real rate of growth of this country's gross national product in the last decade has been outstandingly worse than that of all our major trading competitors. This is the point that I was pleased to hear the noble Earl the Leader of the House himself emphasise at the start of his speech. Moreover, it should be pointed out that this growth rate was worse during the last six years than during the previous six.
Since 1968 the gross national product has increased by less than 2 per cent. per annum, compared with a rate of some 3T per cent. per annum over the previous decade, and an average of about 5 per cent. in the main O.E.C.D. countries, excluding Japan. Total output, forecast by Mr. Jenkins to rise during this period at an annual rate of 3½ per cent., does not seem to have expanded at all in the first six months of this year. The expectation by the people of this country that their standards of living should improve in line with those of other developed countries have been frustrated
It was one of the essential requirements given by Mr. Jenkins for the future health of our economy in his speech on April 14, that there should be an improved and sustained growth of industrial investment. It is such investment that is our provision for economic growth in the future. In the list of our major O.E.C.D. competitors this country has appeared sometimes one, sometimes two, from the bottom for its rate of industrial investment over the last ten years, and it has been estimated that in the first half of this year—the last period under the previous Government—fixed industrial investment was static.
It was another of Mr. Jenkins's requirements that we should maintain our competitive position, but this year, taken quarter by quarter, our current surplus has been declining. It is also estimated that wage costs per unit of output have risen more than those of Japan, the United States and France: which means that, given an equal inflationary experience for ourselves and for those other countries, our own export prices
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will rise faster and so our own competitive position will deteriorate.
These factors are the long-term factors which describe the depressed and unimproved position of this country, as a country with the task of surviving on equal strength with the other countries of Europe. Economic growth may be morally overrated as a philosophy, but not to grow when our economic and political competitors are growing (if the noble Lord, Lord Balogh, were in the Chamber I should address these remarks principally to him) is for us to decline in political power.
On top of that, there is the new problem of our age: which has produced inflation at the same time as there are underutilised resources of plant and manpower. Figures published by the Department of Employment and Productivity make it plain that from the end of 1966, for the first time, wages as a whole started to rise while unemployment was still rising; in other words, the periodic rise in wages proved for the first time impossible to stop by a policy of repressing demand. One of the consequences of this malignant combination has been the rise in prices. In the year 1967–68 prices began to move on to a higher level of annual increase than in the past. The level was higher still in the year 1968–69, and higher still—at a rate of about 7 per cent.—in the year to August, 1970. By August, 1970, average weekly earnings were some 13 per cent. higher than a year earlier. So that since the level of productivity increase is about 3 per cent., and output is expanding at under 2 per cent., prices must still be on a rising trend.
The problem., therefore, is twofold. On the one hand, there is the peculiarly low level of this country's economic activity, and, on the other, there is the inflationary problem of the age, where wage increases can continue to push up prices even though the economy is held depressed to prevent the process. Neither of these problems was solved by the last Government. Growth was minimal and deteriorated; the rise in real incomes was minimal. Consumption rose only a little over 1 per cent. between 1965 and 1969—proof of how little value wage increases have been to those who demanded them. Investment was minimal.
It was the last Government's proud boast that, on the basis of a single act

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of involuntary policy, they solved the balance-of-payments problem. But even on a continuation of their policies, it is doubtful whether this solution could have been permanent. To control wage increases they introduced an incomes policy. Indeed, they introduced a statutory incomes policy on two occasions: the first time, in July, 1966, to avoid having to impose on the country the effect of a devaluation; the second time, in March, 1968, to assist the effects of the devaluation which by then they had had to impose. For a short period, both these policies appear, together with the deflation that accompanied them, to have been successful in containing wages. They then abandoned an incomes policy in exchange for a reform of the trade unions before that policy was, in turn, abandoned; and after that wages were allowed to rise, with the consequences that we have seen.
This is a poor record, my Lords. The noble Lord, Lord Balogh, offered us a curious analogy, I thought, to American experience which seemed to suggest that, like the United States, we were about to move from the idyll of a Kennedy type era, with expansion, full employment and so forth, into the darkness. We may indeed be about to move into the darkness, but it will not be out of the light. I sympathise with the Labour Opposition for their political obligation to attack the Government on the question of the state of the economy, and I understand that they should wish to concentrate on the future possible effects of future possible policies. But in a debate on the economy I should not wish to be sitting in their place. And if they desire to introduce morality as an element of their criticism—and the noble Lord, Lord Beswick, talked about the Conservatives' elevation of selfishness into a moral principle—then I would only suggest that morality must belong first of all to those who have proved their capacity to discharge successfully the task of improving the economic welfare of the people of this country—a task, after all, which the last Government voluntarily, proudly and confidently assumed.
I should like to turn from how the present situation has been determined to how it may be alleviated. I propose to make some remarks about inflation
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only. I will simply extend a little further the precedent set by the noble Lord, Lord Beswick, in giving this question priority. It is the overriding problem, the problem which is causing an increasing measure of public alarm, and one which it is not clear yet the present Government are going to solve. If that problem was solved, then the rest of their measures would be readily accepted. The present phenomenon of inflation has been described as the first crisis in economic theory since the 1930s; the first time since then that the facts of economic experience have appeared in a conjunction considered impossible by the textbooks. Now if it is the case that the primary cause of inflation is the pressure of wage demands which industry has neither the strength nor the incentive to resist, then the problem is not an economic problem but a political one. And if it is a political problem then a solution does not depend on a new development in economic theory by professors in Chicago or elsewhere, but on political leadership.
It is a fact of our time that power belongs to the workers, if I may be permitted to use that naked Marxist term. It is a consequence of their recognition of this that each group of workers looks for new possibilities for the exercise of this power; and the complexities of our technological society give the opportunity for each group to discover and exploit the dependence of society on its own vital contribution. This process has clearly not been led by the trade unions.
The trade unions, in fact, have for the most part been led, albeit reluctantly, by their members. The trade unions have seemed in the process to occupy a lonely, almost a deserted, position, standing powerless and forlorn halfway between labour and the Government. They have been tentatively willing to collaborate with Government but have not always been supported by Government. When the Labour Government introduced its Bill for trade union reform, at last the trade unions found a role; but, from the point of view of the country, it was a negative role. They were enthusiastically reunited with the workers, with their membership, but in direct antagonism to the Government and to the welfare of the country. To-day it seems, as a consequence of this, that the unions are

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willing to support every demand for higher wages. Rejected by the Government, they are simply prepared to ignore the economic consequences to the country of their aggregate demands.
It is undeniable that the workers today are highly aggressive in their demands on society. Unlike in the 1930s, they have power. Yet the working class is excluded from the middle class by the houses they live in, by the conditions they work in and by the way in which they are approached and handled by management. Their sense of exclusion can only be reinforced by the way in which television is entirely directed towards the middle class. It is small wonder that they are aggressive. It is a tragedy—and in the long term could also be a disaster—that their demands for ever-increasing wages, the expression of their aggression, should produce, even for those who receive the increases, so little reward.
It seems to me that the satisfaction of this aggression will ultimately depend on the working class for the most part losing their sense of being an excluded class, of acquiring the same educational possibilities as the middle class, the same conditions of work as the middle class, the same ambitions and the same sense of individual responsibility within their jobs and within society. But it also depends on their acquiring a sense of a share of responsibility and a sense of control over the decisions taken by the firms for which they work and the Government by which they are led. Such goals are necessarily long term; and such satisfaction will have to be postponed. But the debate on industrial relations is in any case about how to postpone these satisfactions.
To get acceptance for such a postponement, to get acceptance both by the unions and their membership, but first by the unions, for a share of the responsibility for the future of this country as a whole, must be the task of political leadership. The last Government proved that there was such a possibility; but they failed to establish it on a correct, and therefore a lasting, basis. What in particular they failed to do was to give any sense of political responsibility, any actual sense of responsibility for the choice of the policies and the management
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of those policies, to labour and labour leaders.
And of course if such a co-operation, such an integration, of the divided leaderships of this country can be achieved, then economic growth as a policy can be resumed without excessive risk. Management and labour and society may then all learn to identify more closely with our country's economic competitive performance. It is too early to judge whether this Government can provide the necessary leadership. But anyone can be excused who is not yet convinced that they can.
10.8 p.m.
LORD WELLS-PESTELL: My Lords, it is inevitable, in a debate that has been going on for something like seven hours, that at this stage one cannot say anything new or something that has not been referred to before; but I want to deal with just one section of the community, the section which is depressed more than any other group in our society. I suppose that we on this side of the House should not be surprised, nor should we show any amazement, as some of my noble friends on this side have shown, at the Government's proposals for dealing with the plight of those living—if "living" is the right word—in poverty. Their problem was highlighted during the General Election by none other than the present Secretary of State for Social Services, Sir Keith Joseph, who complained then that there were between 7 million and 10 million people living on or below the poverty line in this country. He went on to say that this situation left no room for complacency.
Notwithstanding their awareness and their accurate assessment of the situation, the Conservative Government, in my view, have reacted in a manner which is in keeping with the true Tory tradition and philosophy. I hope your Lordships will forgive the expression, but they have acted in this way by giving to him that hath and taking away from him that hath not. In my view, the Chancellor's package deal is both dishonest and also dangerous. It is dishonest because it does nothing to improve the problems that the Government referred to during the Election. We have seen as recently as last night that

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the Prime Minister is silent about inflation and the worsening economic situation in this country. I say that the package deal is also dangerous because it adds to those inequalities which already exist in our society. It is stated that, in all, income tax concessions will cost the Exchequer about £350 million in a full year. But how much of this amount of money will go to help the poor, those who are living in real poverty? Most of it will go into the pockets of the 7 per cent. which owns 84 per cent. of the private wealth of this country.
The average industrial worker with a family of two children will benefit to the extent of 4s. 2d. a week. This amount, and larger amounts, will be eaten up several times over by the proposed increases in school meal, prescription and dental and spectacles charges, not to mention rising prices. Only two days before the Election the Prime Minister said that he would act directly to reduce prices, and, if my recollection is accurate, the Tory Party said much the same thing in their Election Manifesto.
I should like to ask the Minister who will try to defend the Government on this matter to give the reasons why over 3,000 food prices have risen since June 8. I should like to know what the Government have done, if anything, to prevent prices from rising. I should like to ask the Government how many price increases they have prevented. The Prime Minister is going to stake everything on competition. These are meaningless words; it is humbug. In to-day's papers we see that one large firm manufacturing bread decided to raise the price of its loaf last week. To-day another bread firm has followed suit and we are assured that by the end of the week all the bread firms will raise their prices. Within the last week or ten days we have seen this happen with petrol. One company puts a penny on the price of petrol and every petrol company follows suit. Where is the competition that is going to keep down prices? It is just meaningless.
I suggest to your Lordships, with great respect and quite sincerely, that the Government's measures are bound to make life harder for the poor. The Family Income Supplements Bill, which is parsimonious in the extreme, is designed to assist about 164.000 families whose
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incomes fall below the Supplementary Benefits level. It will make very little practical difference to those families. The Government are prepared, and are proposing, to set aside £8,600,000 a year for this purpose—but not until August of next year. It means that these families cannot expect any immediate relief. I ask the Minister: is it really beyond the ability of this Government to give financial relief sooner? Is it impossible to operate meanwhile an emergency scheme through Supplementary Benefits? In view of the ever-increasing rise in prices, it is going to be a very difficult and harsh winter for the poor, and I think it is reasonable to ask the Government to act more quickly in this matter.
I read the speech that the Prime Minister made at the Lord Mayor's Banquet last night, when he outlined the philosophy underlying his brand of the new Toryism. He said:
"As individuals, we have lost sight of our duty to accept responsibility."
He went on to say:
"The freedom is yours, but yours to use aright".
What freedom does he think these 164,000 families have, who have been living for years below the poverty level?
LORD ABERDARE: My Lords, would the noble Lord perhaps tell us what his Government did about it?
LORD WELLS-PESTELL: My Lords, if the Minister does not know of the increases the last Government gave in these fields immediately they took over, I suggest that he looks it up. There can be no freedom for people who are living in poverty. If the Prime Minister wants to give freedom, I suggest that he must see to it that all those living in poverty receive the amount which the Supplemental Benefits Commission lay down is essential for families of a particular size.
There are several objections to the Family Income Supplements scheme, not least among them that it requires poor families to parade their poverty (which I think is a humiliation) in order to get a little help. Would not increased family allowances reach a far great number of needy families?
During the Election the Conservative Party were convinced of the need for

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increased family allowances. In April of this year, Mr. Heath, the late Mr. Macleod, and other Tory leaders damned the then Labour Government for not providing a further £30 million for that purpose. The amount now being set aside under the Family Income Supplements Scheme is a derisory amount, a shamefully small amount in view of the Government's intention, if their Election Manifesto is to be believed, to restore at the same time in the tax system the provision for children's income to be taxed separately from the income of their parents.
Your Lordships will recall that the Labour Chancellor of the Exchequer, Mr. Jenkins, abolished the privilege which enabled children's incomes deriving from trusts, presumably to pay their public school fees, to be taxed separately from their parents' incomes. This egalitarian tax reform added no less a sum than £25 million to the Exchequer in a full year. The Government are prepared to set aside a mere £8 million for families living in poverty. In practice they are unlikely to get anything like that sum. And I suppose that next April we shall find the Government restoring the £25 million to families rich enough to afford a children's trust.
I suggest to the Government that if they are to retain the confidence of the people of this country which they received only a few months ago, they need to change their tune and they need to change their motto from,
"To him that hath it shall be given"
to,
"hath filled the hungry with good things and the rich he hath sent empty away."
It is doubtful whether 50 per cent. of the families designed to benefit from the Family Income Supplements Scheme will benefit. As I have said, many will not want to parade their poverty or subject themselves to a means test. Others will not want what they feel is charity. We know this; every social worker knows it;
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the Ministry of Social Security know it. There has been a poor response in the past to various benefits. The take-up has always been low, as we have seen in school meals, supplementary benefits for the aged and in respect of other benefits.
In my view the family income supplements proposal will not lift out of poverty the majority of those families that it is supposed to assist. A married man with a wife and three children of school age paying a weekly rent of £4 10s. 0d. would be assessed by the Supplementary Benefits Commission as needing £20 a week. If his take-home pay is £15 10s. 0d. a week—and this applies to a large number of the 164,000 families living in poverty—plus family allowance of £1 18s. 0d., making a total income of £17 8s. 0d. a week, he will get no help under the Family Income Supplements. Yet they would be £2 12s. 0d. a week below the poverty line as assessed by the Supplementary Benefits Commission.
This is not an isolated example. Under Family Income Supplements only a minority of those living below the poverty line will benefit. The scheme is supposed to assist about 164,000 families who have between them 500,000 children, and it is possible, so the Bill says, to assist them up to a maximum of £3 a week. If one does some simple arithmetic it is quite clear that very few will receive anything like that amount, because if each of the families did, then we should need three times the amount of money that the Government have set aside. As it is, the £8,600,000 works out to about 3s. 6d. per person a week. That is hardly enough to give them the strength to climb out of poverty.
I said at the beginning, my Lords, that I believe the proposals of the Government, which have had so much publicity in recent days, are dishonest and dangerous. I believe: that the Government's proposals, because of their dishonesty and their dangerousness, make Fagin look like an honest man and Scrooge like a benevolent old gentleman.
10.25 p.m.
THE EARL OF LAUDERDALE: My Lords, it was disappointing to hear a noble Lord of the quality, if I may say so, of Lord Wells-Pestell affront an honourable Parliamentary tradition, that however much we may disagree and challenge one another's judgment, we at least give each other credit for honourable motives. The word "dishonesty" occurred, I should think, a good half a dozen times in the noble Lord's speech, and was applied at least once, and I think more than once, to the Prime Minister personally. I have no doubt that the Front Bench will reply to that particular point. All I would say on the general tenor of the noble Lord's speech is this. Custom does reconcile us to everything, and in this controversial debate we have found it moving on wholly predictable lines, indeed:
"The march of the human mind is slow",
as we find, for
"history teaches that peoples and governments have never learned from history".
This controversial debate has over and over again overlooked four simple, clear facts. The first is that since the direction of labour and the rationing of supplies were ended, no prices and incomes policy has been made to work. The second is that money borrowed is money sorrowed. The third is that when the growth of public expenditure outpaces the growth of the gross domestic product then inflation invariably follows, with all the catastrophic damage to the lower end of the scale that the noble Lord deplores so seriously and so sincerely. Lastly, there is what I would choose to call the "Barber medicine", and this is simply stage one of a programme, at any rate well-intentioned, to correct this.
The final phrase of the Motion before the House refers to "an economically sound …society", so, as many noble Lords have been quick to point out, the real issue in this debate is a strategy to combat inflation—something that is as menacing to this country as the battle of the Atlantic itself. Inflation is poverty, and as I think was said by a noble Lord in the 17th century: "Come away—poverty is catching."
Throughout this debate, by and large, all speakers have been agreed that there
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is a bafflement amongst economists that levels them down to the rest of us as mere insects of the hour. So, when the O.E.CD. in Paris positively clamours that to halt the infection every remedy should be brought into play, one is reminded of Sir Winston Churchill's own endeavours to rally every kind of device and resort, and to assemble these from every possible quarter, to master the battle of the Atlantic. Such indeed was the plea from the noble Lord, Lord Henley, when he opened from the Liberal Benches, quoting the Guardian's reference to the "Broad front"; and such was the plea raised in, I think, one or two points by the noble Viscount, Lord Watkinson, and others.
It behoves us as serious men and women, without repining, without losing time, energy and emotion on meaningless personal denunciation, to search our minds and memories to see whether there is anything we can suggest. It is on that basis that I beg leave to draw the attention of the Government, and that of noble Lords here, and persons elsewhere, to a most interesting article published by the Westminster Bank Review, in May, 1964. The Westminster Bank felt that it was worth while, even then, calling attention to the ideas, as part—and only part—of a strategy against inflation, of an Australian thinker who has latterly been less in fashion, Mr. St. Clare Grondona. He had an approach to the stabilisation of commodity prices, since much refined from those days, which seems to offer some prospect of useful international results.
These are not my ideas, my Lords: they are Grondona's ideas, and I would summarise them briefly in this way. He argues, first of all, that violent swings in commodity prices tend to push up manufacturing prices but never bring them down; and that in itself is an inflationary factor. Also, for example, of Britain's import bill of around £2,000 million or so, something like half goes on raw materials, on commodities of a durable character.* Over the past decade these have swung and staggered in their price range like a drunken man in Glasgow going home. Copper has varied between £200 and £800 a ton—that is not a minor
*See OFFICIAL REPORT, Vol. 313, 24/11/70, col. 1.
fluctuation—lead and zinc between £60 and £150; tin between £750 and more than £1,700; rubber between £130 and £380; sugar between £12 and more than £100; cocoa between less than £100 and more than £400; wool between £360 and £830 or thereabouts.
Grondona argues that these swings are not simply due to the fixity of demand as against an elasticity of supply, but have a strong psychological content; and he suggests that, at a cost of a relatively few millions of pounds sterling per durable commodity—say, half-a-dozen or fewer—chosen, it would be possible in this country, acting unilaterally, to establish a commodity bank as a custodian or buyer of last resort. He calls it a Price Stabilisation Corporation. It would be able to proclaim both a low and a high price at which we could take, or part with, selected durable commodities very much on the analogy of the gold standard as it worked within certain set limits over seventy years.
He argues—and I reproduce this only because the Westminster Bank thought it was worth drawing attention to it—that in such a set-up producers would gladly sell or deposit with such a buyer or guardian of last resort if they were denied better prices elsewhere, and buyers would gladly buy because they would be unwilling to pay more elsewhere if that was what they would have to do. In effect, this would set ceiling and floor prices within a band of about 20 per cent. which would in turn steady commodity prices in the primary producing countries of the Commonwealth and elsewhere, about which noble Lords on both sides of the House are anxious for aid and assistance, support and development. It would also have the effect of bringing some stability from a different quarter into the value of our own currency: it would provide a kind of anchor. And it would diminish at least certain inflationary pressures.
Such a system is now, I understand, being seriously examined in other quarters than the Westminster Bank, quarters with an international reputation being able to rally for the purpose students and scholars and economists of the highest repute. For there are those who do believe that this may offer one glint of light, one
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piece of hope at the end of the tunnel (if I may mix the metaphors), with regard to simply one of many possible components in a new strategy to deal with inflation. These people believe, and the argument is, that if such a thing were done in this country other countries would necessarily be affected by it to a stabilising degree.
My Lords, I beg our Government, in studying and framing an anti-inflation strategy for the future, to consider appointing a committee which can look at these ideas and indeed other proposals in stabilising commodity prices in public. These particular theories, so far as I am aware, have never been tested, and it is no use saying, as one has heard in the past, that all this has been looked at before. It has not been looked at technically in public. Therefore, all I would say is that, since all economists appear to be baffled, and certainly all Governments, it is well to remember Bacon's lines:
"If a man will begin with certainties, he shall end in doubts; but if he will be content to begin with doubts, he shall end in certainties."
Or, to put it in another way: Knowing what thou knowest not is, in a sense, omniscience.
10.35 p.m.
LORD RAGLAN: My Lords, since I am last to bat tonight I am tempted to say that it gives me the luxury of a long speech, and I hope your Lordships will not consider me too pointed if I say that if I were to follow the example of some of my betters earlier in the day it might be a very long speech indeed.
Ever since I can remember there has been an economic crisis. The Prime Minister is pretending that there is not one. If he is right then it is due to the good management of the last Government, so it is no credit to him. If there is a crisis—and I must say that it looks very much like it—then the Government are gravely at fault for not doing anything about it. To me, the most interesting speech today has been that of the noble Lord, Lord Thorneycroft. He is an old-style Conservative of the 'fifties. A bit pinkish in colour, he seems against his own Front Bench today. He recognised that the economy and the management of it is a very complex matter indeed. He says that the public are confused—and indeed they well might be.

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So difficult are the problems which confront us that it is not surprising there is an attraction in trying to reduce them to simple terms. This appeals particularly to the logically minded type of person who looks for significant features and imagines that he has found the most salient one, and from it he derives his solution, his panacea. If these people preach and take care that their words do not fall on stony ground, the converted and the faithful roll up in their numbers, believing that here is the clue to the crock of gold at the end of the rainbow, because they, too, want the easy life and the instant solution. It is very attractive.
My Lords, if preachers are not actually stirring up civil strife we usually leave them alone, and large numbers of sects, believing in every sort of thing for their salvation, flourish all over the country, apparently with no great harm to anyone. It is their own life that they are concerned with, and it is not for us to interfere. But when a religious faith deriving from simplistic thought motivates those who are in charge of the economy, then I think it is time to argue and protest. The noble Lord, Lord Moyne, called it a shibboleth. I call it a religion; and the religion which the Government are urging us to believe in is called "private enterprise". The archpriest of the cult is Mr. Enoch Powell, in whom one detects signs that he believes he has a Messianic role in British politics. He has the answer for everything, and he has a great many disciples for his economic theory, particularly among rich and able men. Like all his theories it is very clear and simple, and it has this additional attraction when you are dealing with the economy: that you do not have to do anything; it is all done for you. "Look", he says, "No hands! The natural forces of supply and demand will look after it all". It is very clever, and for him and his followers it is very comfortable.
It would be very clever, my Lords, except that this philosophy (it is a philosophy and not a policy) was thought of years ago and has become discredited. Its height, as my noble friend Lord Balogh pointed out, was in the mid-Victorian era. For all that private enterprise made us rich and laid the basis of
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our wealth, we know how comfortable then were the great mass of the population. We also know what happened in 1929.
I think it is not surprising that Darwin's theory of the origin of the species by natural selection was a product of the mid-19th century. He afterwards, to his regret, simplified the theory to a friend as "the survival of the fittest". We know that he was not accurate, and we know that, in the light of later knowledge, his main theory was not correct in some respects. For instance, he knew nothing of genetics. But in outline his idea was that in the struggle for existence the able and the adaptable would rise deservedly to the top and the incapable and the inadaptable were left deservedly at the bottom. I say it is not surprising that it was a 19th century thesis, because that was the character of society in Darwin's time, and the reason I am on these Benches is because I believe that to far too great an extent it still is.
We know better now than the Victorians, or I thought we did. We know that private enterprise is like nature, red in tooth and claw. That is why there has grown up such a great stack of legislation, like company law, to control it, and consumer legislation like the Trade Descriptions Act. But in spite of the warnings which history teaches us, the Government are evidently so naïve as to continue to believe in the natural beneficence of competition. That is why, I believe, they destroyed the immensely valuable Consumer Council, which was shaking their otherwise comfortable faith.
They also believe in more money for those already at the top. One of their first aims, we have heard so often to-day, was to reward those who were already so successful that they would benefit from 6d. off their income tax in spite of more expensive social services. I agree that they guarded their flank by disbursing extra charity to the poor. How long that charity will maintain its value we do not know. We do not yet know either how it will work out, because the Government have not given the details. But, their cry being selectivity, the people they have naturally selected as being worth the most help are the rich and successful. This tax cut is intended

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to be psychologically stimulating, in that it will reward success, but I think that psychologically the effect may well be more damaging than stimulating. For one thing—and I put this to the noble Lord, Lord Balfour of Inchrye—I question whether the principal stimulus to hard work, or reward for it, is necessarily money. In fact I know that it is not. Some of the hardest working people in Britain to-day are Government Ministers. The noble Lord, Lord Denham, told me to-day that he does not do any work, but I know certain Government Ministers who do work a great deal. Yet the salaries they earn, compared with those in industry, bear no relation to the work they do and the responsibility they carry.
Neither is Government a private enterprise; it is very public. Besides being a public enterprise, it is also loss making. It takes about a third of everyone's income and distributes it in various ways, taking a cut to run itself. It makes no money at all, except for a few arms sales here and there, and other by-products. Yet we see Conservatives, who believe that the prime consideration for the promotion of wealth and efficiency is private enterprise and money reward, falling over themselves to join the Government, which can be nothing else but a social service making a heavy loss. They toil away for less money than they would get elsewhere for equivalent work and responsibility. So we see that in the most powerful and influential organ in the State profitability is not the first consideration. In fact, it is no consideration at all, and the people who run it with such zeal do not do so primarily for the monetary reward; they do it for honour, status and job satisfaction. Perhaps, then, we can learn something from that.
I say that the Government's philosophy may well be psychologically more damaging than stimulating for this reason: in the United States and Canada the class structure is more straight-forward than it is here, where, I am glad to say, it has become much confused. In that land of private enterprise status goes by income, and long after a person has reached a comfortable living wage what more often than not prompts him to continue to ask for more is that higher income means higher status. I think
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that the Government should consider very seriously the implications of that fact.
The Conservative philosophy lays emphasis on success, especially the equation of success with higher money income. But making money is a knack possessed by comparatively few. This is a fact which is not always realised. What has been happening in the United States for some time is that many of those who have been unsuccessful by conventional standards have either dropped out or are beginning to hit back, in whatever ways they can, at the system which has selected them as failures. They are not Darwin's animals; they are thinking human beings, and they feel with great intensity that they are deprived. I will not go any further into that aspect today because your Lordships have not the time; but it is a matter of much importance and very great social significance. It is so important that it is beginning to be one of the great problems of our time; and I hope that the Government will take notice of that, too.
My Lords, I end by saying that Britain has given the world many ideas and inventions—Parliamentary democracy, British justice, and even sport. We began the Industrial Revolution; we invented trade unions; and our health and social services, though not perfect, are the envy of the world. But one of our traditions is fair play. I do not believe that a people with such a tradition of inventiveness, such extraordinary inventiveness in the realm of social institutions and organisations based on fair play, can have run out of ideas. Yet for the moment it looks as if we have run out of them so far as this Government are concerned. They look back more than one hundred years, believing that what made Britain great then is good for her to-day. We heard that from the Prime Minister yesterday. In some respects it is a romantic idea. I know that bachelors over 40 can be romantic; but romanticism, certainly of that kind, is not enough. The simple panacea of private enterprise, the profit motive, monetary reward for success—these are the Government's tenets of faith, in spite of the fact that it has all been tried before and its cost in human misery has been enormous.

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My Lords, we must have some better ideas than these. Perhaps the Government will pay some attention to some of their Back-Benchers to-day. I do not impute to the Government Front Bench in this House any harsh motives. I know them to be kindly men. Some of the Government measures have shown that they are not totally oblivious of the needy. They really do believe that their measures mean more freedom; but—and I think that the noble Lord, Lord Robert-hall, mentioned this—it is their kind of freedom. Looking back over 150 years I am sure that they can learn (although the noble Earl, Lord Lauderdale, said that Governments never learn from history) that when laissez-faire economics are equated with freedom by those who are comfortably off at the top, the lucky ones, it is a poor look-out for those who are least able to help themselves.
10.50 p.m.
THE MINISTER WITHOUT PORTFOLIO (LORD DRUMALBYN): My Lords, we are coming to the end of the first day of this two-day debate. Many matters have been raised, and I am sure that noble Lords will not expect me, at this hour, to reply to all of them. If there is one very good example of our not all being inspired only by the profit motive, it is the number of noble Lords who are present here at this time. We all have mixed motives. What we are saying, and what I shall be arguing, is that financial incentives are an essential part of those motives. Fortunately, my noble friend Lord Aberdare will be speaking tomorrow, and he will deal more particularly with the social services to which the noble Lords, Lord Wells-Pestell, Lord Raglan, and Lord Platt referred. I think that the noble Lord, Lord Raglan, will find then that there are a great many more details than he thinks that have been decided so far as help to the less fortunate is concerned. May I also say at this point that I think he was perhaps a little less fair to my noble friend Lord Denham than he meant to be. A joke is a joke, but it does not look quite so well in cold print, and perhaps it is just as well to remember that.
LORD RAGLAN: My Lords, it was a joke. I was chatting with the noble Lord, Lord Denham, at lunch over what I was
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going to say, and I said how hard Ministers work, and he just said, "Well, some of them don't work as hard as you think", or something like that.
LORD DRUMALBYN: My Lords, I am much obliged to the noble Lord for having made that plain. I thought it was just as well to make it clear.
LORD SHACKLETON: My Lords, I am not sure that my noble friend has not made it a bit worse now, but I am quite sure that we all have it on record that we have the highest regard for the noble Lord, Lord Denham. He works as hard as any noble Lord in Waiting: they sit for hours having to listen to other people making speeches.
LORD DRUMALBYN: My Lords, and in the rest of the day he does some work as well, I can assure you. My noble friend Lord Aberdare will also have the advantage of being able to read in Hansard the points which noble Lords have made and the questions they have asked, and therefore he will be better able to deal with them tomorrow than I could tonight, even if I had his detailed knowledge of the subjects.
Before I do anything else, I should like to refer to three notable maiden speeches. First of all, there was the speech from the noble Lord, Lord Hamnett, to whom we all listened with the greatest of interest. I am afraid that again I have to say that my noble friend Lord Aberdare will be dealing with the subjects referred to by the noble Lord, which mainly concerned school milk, calcium deficiency, and the rest. Then we had a remarkable and most delightful speech from the noble Baroness, Lady Lee of Asheridge. She brings to this House a depth of humanity and an œsthetic vision that I am sure will be of the greatest benefit to all of us, and we are delighted to see her here. She, quite rightly, took the opportunity to make a plea to the Government to look again at the decision to impose charges on our museums and galleries, and asked who were to be exempted. It must be remembered that when charges are raised for prescriptions and school meals it is part of our strategy to do likewise for museums. Perhaps I ought also to mention that it is no novelty in this country for charges to be made for museums, because many municipal museums already make charges.

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So far as is practicable and reasonable, people should make a modest direct contribution towards the services which they receive. Most museums and galleries in advanced countries charge for entrance. The noble Baroness said that perhaps we are leading in this way; but there does not seem to be any great following behind us. The amounts will be discussed with the institutions concerned, and administrative costs should form a reasonably low percentage of the income. I hope that the noble Baroness will not feel too aggrieved that we are not able to respond immediately to her plea.
We have also had a speech from the noble Lord, Lord Avebury. He has waited many years to make that speech, and I must say that, although we had a little difficulty in hearing it to start with, when we did hear it it was well worth listening to. We shall certainly look forward to hearing the noble Lord again, and I hope that he will not wait so long before he makes his next speech.
What we are really discussing to-day is whether the Government are right to adopt new measures, whether the measures which they are adopting are the right ones, and whether they will do what the Motion states they will do. First of all, it is right to ask: why should new measures be adopted? It is not only because the Conservative Party are pledged to introduce new measures but also because the events of the past six years have shown that it is imperative that there should be a change of course.
LORD BESWICK: My Lords, before the noble Lord pursues that theme, and since all his friends have emphasised that the Government are doing only what they pledged to do during the Election, will he be good enough to say at what period during the Election they pledged themselves to raise food prices?
LORD DRUMALBYN: My Lords, that, I think, is a logical fallacy, apart from anything else. I did not say that everything the Government were doing they were pledged to do. What I said was that, by and large, the measures which they are taking are those to which they are pledged. The Motion states that the measures proposed will impede progress towards a society which is both
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economically sound and socially just. We all want such a society. But, after all, social justice is a highly subjective concept. Take at random a dozen people, put them into a room, and you will probably find a dozen different concepts of social justice, a dozen different interpretations; and every one of those interpretations will have to be modified if you want not social justice alone, but a combination of economic soundness and social justice. Of course, you can have social justice at many levels and, indeed, economic soundess at many levels; but even that combination is not enough.
Noble Lords have made a little play—and here I think of the noble Lord, Lord Raglan—about freedom. But in this package we must also take into account man's aspiration to be free. That means freedom from excessive control, freedom to make our own decisions and freedom to live our own lives within the law. I need hardly remind noble Lords that there are countries which regard themselves as being much nearer to perfect social justice than we are but where freedom, as we know it, hardly exists at all. So that, so far as we are concerned, this is a vital element.
What we have to consider, first, is whether the policies which were originally adopted in the last war and which have continued ever since are ever likely to lead to a society that is economically sound, socially just and free; and, more particularly, whether the policies of the last Government, which the electorate rejected, were leading in that direction. At this point, I should like to give one or two figures, because they are very revealing.
The growth rate under the Labour Government (this is the one comparison I shall make here) fell from an average of 3·8 per cent. in the last five years of Conservative Government to about 2·3 per cent. Industrial production in the years 1965–69 rose by 13·3 per cent. over the whole period at constant prices. Wages—not at constant prices—rose by 38 per cent., and consumer prices by about 22½ per cent. The present wage explosion started in September, 1969. It started with the local authorities' manual workers' pay settlement, and in the following twelve months, to August, 1970, average wages: rose by 11 per cent. and

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earnings by 14 per cent. Unemployment has been high. In the last three years, unemployment fell below 500,000 in only one month, and then only marginally, in a summer month.
LORD SHACKLETON: My Lords, may I interrupt the noble Lord? In the last Government I had a good deal to do with prices and incomes policy. It is really complete nonsense, if I may say so with respect (because I know that the noble Lord has to take his brief) to link what he calls the wage explosion with that particular local authority wage settlement. There was a whole chain: and, of course, a great number of increases in the public section were catching up on some in the private sector before that. I am trying only to correct the noble Lord. It ought not to go on record that, historically, the autumn of 1969 was the date when something dramatic happened. The matter is much more complex than that.
LORD DRUMALBYN: My Lords, when things start they need not necessarily be dramatic. It is from this point, at any rate, that it seems we can trace this higher level of wages—
LORD SHACKLETON: The noble Lord should do a bit more research.
LORD DRUMALBYN: I am very willing to do more research, but research has been done on this and this is what I am told.
My Lords, strikes also were running at a level not equalled since the General Strike in 1926. The expenditure of Central Government over those years—1964–65 to 1968–69—rose by 53 per cent., and of local authorities by 74 per cent. Between 1964–65 and 1968–69 the public sector took a little over 70 per cent. of the total increase in domestic output. At this time, over that period, gross trading profits of companies rose by only 7·8 per cent., which means, of course, that in real terms they fell quite considerably. In general, existing taxes were increased, and new taxes were invented. The tax burden on the community as a whole rose steeply from 28·3 per cent. of the gross national product in 1964 to 38·4 per cent. in 1969, excluding National Insurance contributions.
LORD SHACKLETON: My Lords, I am very sorry to interrupt the noble Lord, but since we shall not be getting tomorrow the Hansard Report of his speech would he mind giving these interesting figures again? I did not get the one about 70 per cent.
LORD DRUMALBYN: What I said there was that between 1964–65 and 1968–69 the public sector took a little over 70 per cent. of the total increase in domestic output.
My Lords, side by side with these figures one has to put the fact that the level of investment as a percentage of the gross domestic product rose by only one half of 1 per cent., or rather less, from 133 per cent. to 13·7 per cent.—and that at a time when investment was badly needed in the development areas to provide employment for those who had to leave declining industries. And, of course, at the same time liquidity was greatly reduced. Then, as my noble friend the Lord Privy Seal said, the average rate of growth in the O.E.C.D. countries was running at double that in our own. What is more, the projections for the United Kingdom are alone among those for the major European countries and Japan in failing to close the productivity gap over the next decade.
Most difficult of all, we inherited soaring inflation following on suspension of the wage freeze—an inevitable consequence of which we on this side had warned the Government when the wage freeze was put on. I say "suspension" because the Leader of the Opposition consistently declined to respond to the Prime Minister's challenge to deny that if Labour won the Election Mr. Wilson intended to reimpose it. The real task is to set the climate for economic expansion and to do so by individual incentives: by seeing that to a much greater extent people pay for what they get, fix their own priorities, whether in business or in their individual lives, and accept the consequences. Ideally, help should be given where it is needed, and only where it is needed.
My Lords, I have been asked to give an indication of the Government policy on inflation, and I should like now to give a summary, encapsulated in a few brief words, as follows. The Government

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policy towards inflation is as follows. First, the maintenance of firm monetary and fiscal policies. Secondly, progressive reduction of the excessive rate of wage settlement prevailing; first by encouraging employers to make fair and reasonable offers and then to stand firm on them even under duress; secondly, by not using the conciliation services of the Department of Employment to persuade employers to increase their offers; and, thirdly, by taking a firm but reasonable line in negotiations with their own employees and encouraging other public sector employers to do likewise. The third major aspect of policy is to take a firm grip of nationalised industry prices. Coal prices and Post Office charges both went up by less than the amount asked for. Lastly, to rely on competition as the best safeguard against unjustified price increases in the private sector.
I thought it right to set these out because of what has been said on these subjects this evening. This is the basis of Government policy. It means that the Government aim will be to reduce public expenditure and so to reduce taxation and leave people with more of their earnings; to help those who are least well off by working for the improvement of low wages relative to earnings as a whole, and this must mean that some people in the middle, while benefiting from reduced taxation, may have to pay more for what they get. The noble Lord, Lord Wells-Pestell, talked about this. One can never have major changes of a kind that do not have an adverse impact somewhere. One must accept this.
Perhaps I could remind the House of this point. In October, 1951, the average earnings of manual workers amounted to £8 6s. 0d. By October, 1969—and this is the latest figure available—they had reached £24 16s. 0d. Between 1951 and 1970, the value of the pound in terms of purchasing power fell to 10s. 7d.; so the average earnings trebled and the value of money fell by less than half. Surely it follows, therefore, that we can afford to be more independent of subsidy than we were in 1951. The more independent we are, the more money will be available for the improvement of the services.
What is likely to be the effect on household budgets? So far as families whose
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earnings are above the level of assistance are concerned, school meals, prescription and health charges and the levy scheme for agriculture will raise the cost of living between now and April, 1972, altogether—this is the estimate—by less than 1 per cent. The interim levy scheme would not in general increase prices above present market levels which have risen recently as a result of market forces. So far as poor households and pensioners are concerned, families up to and rather beyond the official poverty level, the level entitling people to supplement benefits, will be exempt from the new social service charges, or entitled to have them refunded. The income remission limit for school meals, welfare milk and dental and ophthalmic charges will be raised so that more people qualify. First, we have the incentive, and, secondly, we have the help for old people. By applying the principle of selectivity the Government have been able to give effective help to those who really need it, particularly families of low wage earners and one-parent families, and to make improvements in the basic fabric of the health and education services, and still reduce taxation.
My Lords, I have already drawn attention to the high growth in subsidies and the low growth—in fact, the reduction in real terms—of industrial profits, and to the lack of liquidity, coupled with inadequate growth of investment and the percentage of the gross national product. It is absurd to expect industry to invest unless it can see the prospect of a reasonable profit on its outlay. It is equally absurd to try to encourage industry to invest if it cannot see any such prospects. The noble Lord, Lord Hoy—I apologise for the fact that during his speech was the one period when I left the Chamber—raised the question of investment incentives with particular regard to Scotland. The Government's measures affecting industry are profit-oriented. In their view, profitability is the best indicator we have of efficiency in the allocation and use of resources; and we intend to provide a framework of requirements, incentives and restraints for industry which will first liberate energy and enterprise in industry, making the best use of our skills and resources, and secondly, make profitability an even better indicator of efficiency. Of course there

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can be abuse of market powers, and it is there that the restraints will lie. Our policies are designed to create a more favourable climate for investment than we have had in recent years. The cut in corporation tax, the first for so many years, will help to ease the immediate situation.
LORD HOY: My Lords, may I interrupt the noble Lord? What he has said will bring no solace at all to those concerned in the case I made about Harris tweed and the people engaged in the Highlands. Under the new proposal of the Government they will not benefit by a single penny. Indeed, the new proposal will put them back to square one, as they themselves said. If the logic of the statement the noble Lord has just made is such that it means that these firms will be wiped out, I hope that he will not look on that situation in as cold a light as the way in which he has put it.
LORD DRUMALBYN: My Lords, I hope that I have not put it in a cold light. The fact remains that there are some industries, obviously, that will be adversely affected by these moves, as is the case with any change. The firms to which the noble Lord, Lord Hoy, referred come well within the responsibility of the Highlands and Islands Development Board, and one would expect that the Board will look after them. The Party opposite, with our support, passed the Highlands and Islands Development Act because that is a very special part of the country, with special problems of its own. Special cases will always exist. I am sure that the noble Lord would not want to misrepresent what I am saying, but there can be no question whatsoever of our being hard-hearted in a matter of this kind. The noble Lord is quite right in raising a particular case but obviously one cannot give an answer to particular cases right away when one is considering setting a general economic climate.
Perhaps the noble Lord will allow me to go on, because I should like to explain to him how this system is going to work. The general level of profits has for a number of reasons been depressed in recent years. Capital liquidity has been very tight. No wonder investment has been sluggish, despite the substantial
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investment grants available! It is now clear that the previous Government failed to provide the right conditions for investment and growth overall, in spite of, perhaps even because of, their indiscriminate handouts. The investment scheme failed to meet the objectives set out in the 1966 White Paper. The rate of growth of manufacturing investment has been slower since 1966 than it had been in the previous five years. Output in terms of general domestic product has also grown more slowly in real terms. Overall, our investment performance has declined. This is unanswerable.
We are concerned not only to raise the level of new investment; we are equally concerned, if not more so, with the need to improve the quality of new investment, the need to improve the effectiveness with which existing assets are used. Investment incentives are one element in our strategy for improving investment performance. Incentives which are too generous and pay no regard to the profitability of investment can lead to uneconomic investment. The new system of capital allowances must be seen against the wider background, including the cut in corporation tax.
LORD DIAMOND: My Lords, I am sorry to interrupt the noble Lord; I only want to ask him a simple question. When he keeps on talking about profitability being the key to the incentive for investment, am I right in assuming that he means profitability as measured for the benefit of the shareholders and not profitability as measured for the benefit of the community?
LORD DRUMALBYN: My Lords, the noble Lord will remember that in the Local Employment Act there was always the proviso that money should be made available only to those firms likely to be able to become economic concerns. That is what we are saying now. What we are also saying is that the previous Government had been pouring out money to firms irrespective of whether they were ever likely to do any good or not; and if these were really incentives, they must have been encouraging some people to put money into projects which were not likely to make a go of it.
On the other hand, the new incentives—I apologise for detaining the House, but I attach great importance to making

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this absolutely clear—have four major advantages. First of all, they are profit-oriented, in that firms benefit from them only in so far as they are profitable, and there is no element of subsidy, either through indiscriminate handouts or by enabling firms to set off against tax more than they have actually spent. Secondly, they assist company cash flow in the early years after capital expenditure and enable more rapid write-off of equipment for tax purposes. This should encourage early replacement of existing assets with more advanced equipment, providing better performance at reduced cost, and should help to improve our technical competitiveness. Thirdly, the new national incentives apply to manufacturing and services alike, to public as well as to private enterprise, to assets used overseas as well as those used in the United Kingdom. There is no unjustified discrimination, as in the current investment grant scheme. Lastly, the new system is much more simple than the previous system. Firms will be saved the administrative burden of claiming grants and they will no longer have to distinguish between different categories of plant and machinery for tax accounting purposes. This will save a surprising amount of manpower, both in industry and in Government. In addition, the cut in corporation tax will improve the post-tax profitability and cash flow in both new and existing investment.
One point that emerged from the survey that was initiated by the Party opposite, done by the Ministry of Technology, was that a majority of the firms covered would welcome a system of incentives based on free depreciation as opposed to investment grants or investment allowances. This shows a complete turn round from the last time when some kind of investigation was carried out, which I think was in 1964. Free depreciation would be too expensive to introduce generally, but the new system shares many of the advantages of free depreciation, such as simplicity and quick write-off of capital expenditure.
Before I conclude, I want to say a word about regional development. Of course the Government are extremely conscious of the problems in those parts of the country suffering from high unemployment. We cannot afford the economic waste involved in letting the
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scarce resources of labour and skill stand idle. But behind the cold statistics of unemployment lie the human problems of men and women who have given loyal and often long service to an industry which no longer needs them. They are having to seek new employment in other industries, perhaps to acquire new skills and to adapt themselves to a new working environment. We have made it clear from the outset that we regard an effective regional policy as a vital part of our economic and social strategy.
We are particularly concerned about the older industrial areas which are suffering from structural changes and where the rundown of the traditional industries has been accentuated by the stagnation of the national economy. Unemployment in Scotland has risen over the last four years from under 3 per cent. to 4·3 per cent. Of the 96,000 unemployed in Scotland, over 54,000 are in West Central Scotland, where male unemployment currently averages 7 per cent. The problems are greatest in Glasgow itself, but the solutions must be sought over an area wide enough to make sense in physical planning terms and to provide the attractive sites for industry that are needed.
Unemployment has continued to be a major problem facing the Northern Region, particularly since 1966 when the effects of the accelerated programme of colliery closures began to show. As this has gathered momentum, unemployment has risen to the highest levels since the peak of the previous unemployment cycle in 1963, reaching 52 per cent. in January, 1969, and in January, 1970. Out of the 61,000 currently unemployed, 56,000 are in the North-East, and on Tyneside alone unemployment numbers 20,000, a rate of 51 per cent. The continuing rationalisation of basic industries is reflected in the high unemployment on Merseyside, where it is running at a rate of 45 per cent., and the same also in Wales.
It is particularly disquieting that previous regional policies have made so little impact on the heavy and persistent unemployment centred on these older industrial areas, which have in addition pressing problems of urban renewal and rehabilitation of the environment. The problem has been worsening over the past years, despite the lavish expenditures on regional policies of the previous Administration. It is because of the urgency of

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these problems that we are making significant changes in regional incentives. In particular, we are terminating the regional employment premium in 1974, and are replacing the indiscriminate 40 per cent. investment grant to manufacturing industry in development areas by free depreciation. We are increasing assistance under the Local Employment Acts to projects providing employment, and are also proposing to make greater use of our powers under these Acts to give assistance towards the cost of improving basic services and of clearing dereliction. We are confident that these measures will be more successful in stimulating industrial development in the areas of employment need than those adopted by the previous Administration. They will help to attract to the areas the efficient, competitive and profitable firms which can alone provide secure and continuing employment.
My Lords, I know that there has been criticism of our proposals, and it has been suggested that they will reduce the cash flow to firms in development areas. I should like to make it quite clear that the new incentives will provide a similar liquidity benefit if one compares them with the effect of the former 45 per cent. corporation tax—the only meaningful basis of comparison. The comparison will vary from case to case, depending on a variety of factors—the relation, for example, between investment and taxable profits in each company. There has also been criticism because the value of the development area differential in the investment incentive will be reduced by proportionately more than the reduction in the national incentive. But I do not accept this argument. The point is that the former differential involved substantial payments to assist capital intensive projects regardless either of what employment they provided, or were expected to provide, or whether they would be undertaken anyway. Moreover, since the grant was unrelated to profitability, its very magnitude carried the inherent misdirection of resources.
The new differential, together with a substantial body of additional assistance under the Local Employment Acts, will be broadly equivalent to the present cost of the regional differential in the investment grant. What we are doing is using the same volume of assistance to better
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effect. And other features of the policies we have announced should also be taken into account. First, a larger proportion of manufacturers' investment will attract free depreciation than under the former investment grant. Secondly, investment in industrial buildings will continue to attract the 40 per cent. initial allowance which was previously due to revert to 15 per cent. from April, 1972. More generally, account should also be taken of the higher capital allowance which will be received by services and commerce in the development areas.
In the meantime, we are continuing our review of regional policy to ensure that regional policies are more effective and yield better value for money. We have seen that indiscriminate measures of assistance in a climate of economic stagnation make little real impact on the regional problem. Effective management of the economy, coupled with vigorous regional policies, should enable us to narrow the existing regional disparities and to give the less prosperous areas a greater share in higher national prosperity.
My Lords, the basis of what we are trying to do (and I hope that in saying this I shall pick up what has been said by a great many people in this debate) is to draw the distinction between two things that can be done. On the one hand, it has been said that we could revert to an incomes policy and perhaps we should have kept on the National Board for Prices and Incomes in some form or another—in fact we are keeping it on in a form—or rely on voluntary effort. Noble Lords opposite have tried the prices and incomes procedure. They backed it up with sanctions; they applied sanctions for a period. They found that it was impossible to go on applying sanctions—the wage freeze at its most extreme—and they then proceeded to go on to the voluntary procedure. It is clear that the voluntary procedure has not worked. The Prime Minister has made it abundantly clear that we are saying in effect to all the people in this country: "The responsibility is with you; it cannot rest with the Government alone, unless you are prepared to accept the sanctions to go with it".
The Government are giving the leadership. What is important is that, as my noble friend Lord Watkinson said,

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at factory level in each case the lead should be taken by management; the responsibility should be taken by management. It is their duty to get the support of their workers locally. This is nothing whatever to do with politics. The purpose should be for each unit in the economy to pull its weight, to enter into the spirit of competition and, by sitting down and working out schemes together, make the economy work in that way. It is all very well for the noble Lord, Lord Shepherd, to shake his head, but the fact is that nobody has suggested any other viable alternative.
LORD BOOTHBY: I have, my Lords.
LORD DRUMALBYN: My Lords, with the greatest respect to the noble Lord, I did not think it was one. I know that other noble Lords have suggested the possibility of an economic council which followed perhaps much the same line as was put forward from the Front Opposition Bench by the noble Lord, Lord Brown, in our debate on industrial relations. I know that that is so. But there really is no alternative. And surely it is right that we should try to make this work. My Lords, I very much hope that with the lead that is being given, with the additional incentives that are being given and with the help that is being given to the poorer members of the community, we shall make it our duty to make this work.
LORD SHEPHERD: My Lords, I beg to move that this debate be now adjourned.
Moved, That the debate be now adjourned.—(Lord Shepherd.)
On Question, Motion agreed to, and debate adjourned accordingly.

RHODESIA: SANCTIONS POLICY
11.31 p.m.
LORD ALPORT LORD ALPORT rose to ask Her Majesty's Government:
Whether, since any settlement with the Rhodesian Front Régime must accord with the Five Principles and in view of the attitude to these Principles set out in recent public statements by Mr. Ian Smith indicating that they are
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unacceptable, they have any proposals with regard to the implementation of the sanctions policy during the indefinite period ahead during which sanctions must consequently be maintained.
The noble Lord said: My Lords, I beg leave to ask the Question in my name on the Order Paper. I hope that if I do so at somewhat greater length than would be perhaps normal in the circumstances, your Lordships will extend me your indulgence. I should like to say, if I may, how much I regret adding to the burdens of my noble friend the Leader of the House, who has kindly undertaken to be here and to reply to this small debate. I had not realised that the Minister of State was away; otherwise this debate might have taken place at a different time.
I raise this Question at this late hour, at the end of an important day's debate, because, as I am sure my noble friend the Leader of the House is aware, there are some unhealthy rumours circulating at the present time in this country and no doubt in Rhodesia as well. As a distinguished individual put it to me a few days ago, there is the sour smell in the air of a deal between Her Majesty's Government and the Rhodesian Front régime involving the effective abandonment of the Five Principles in return for some meaningless political formula of intent by Mr. Smith, the gradual emasculation of sanctions and the eventual acceptance of the political situation in Rhodesia, first de facto, and later de jure, on the assumption that this will restore British trade and commerce with that country. I am sure in my own mind—and I know that noble Lords on both sides will agree—that, with Sir Alec Douglas-Home at the Foreign Office, and my noble friend Lord Lothian as his Minister of State in charge of Africa, such a betrayal of the reputation of Britain and the Government's good faith is unthinkable. Nevertheless, there are people, including perhaps Mr. Smith himself, who have been encouraged to think precisely on these lines, and the sooner they are disabused the better.
I recognise that, in accordance with their Election pledges, the Government are bound to have at least one more try

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at achieving a negotiated political settlement. I understand that the preliminary moves are now being made. Lord Lothian said in his speech last week that Sir Arthur Snelling in Pretoria is speaking for Her Majesty's Government and Air Vice-Marshal Hawkins is his contact. I can think of no two individuals more likely to conduct talks about talks with greater integrity and good humour. But I hope that these negotiations will not be allowed to proceed to any extent veiled in conditions of secrecy, because in these circumstances there is great danger in the reactions both in Rhodesia itself and here if public opinion is not kept fully informed about the developments that take place.
My Lords, it is my personal view that the Government would have been better advised to have delayed the start of any negotiations of a political nature for twelve months or more, in order to give them a better chance of success. I am personally sure that the gap is still too wide for political bridge-building. If I am wrong, and the Government negotiate an agreement which can be accepted with honour and conviction by Parliament and by the people of the United Kingdom, no one will be happier to be proved wrong than I.
I feel sure that my noble friend the Leader of the House, in replying to this short debate, will re-affirm that it is the policy of Her Majesty's Government to adhere strictly to the Five Principles in spirit as well as in letter, and that any soi-disant spokesman of the Conservative Party who has given the impression here or in Salisbury that Her Majesty's Government are prepared to accept Mr. Smith's solution of the Rhodesian problem has no authority and must be repudiated, and that in the absence of an acceptable solution from the point of view of Her Majesty's Government sanctions will continue.
The last time I spoke in favour of Her Majesty's Government's sanctions policy was almost exactly five weeks ago, when I addressed a large overflow meeting in a hall about 150 yards from Mr. Smith's office in Salisbury, Rhodesia. Before doing so, I had the chance of meeting and talking to representatives from a wide spectrum of political opinion, African as well as European, stretching from the
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Left to the extreme Right. I was able to get some idea of the effect of sanctions on the Rhodesian economy. I tried to assess that impact in political as well as economic terms. There is no doubt, my Lords, that sanctions have had a profound effect upon the Rhodesian economy and that below the surface economic tension is mounting. Most Europeans in Rhodesia do not realise that the healthiness of their economy is not being measured by the quantity of consumer goods in the shops, or the elaborate menus in the hotel dining rooms, or the ready availability of petrol for their motorcars, or the number of attractive bungalows being built in the European suburbs of Highlands and Borodaile.
Until 1965 the economy of Rhodesia was based primarily on agriculture—European and African. Sanctions have gravely damaged the whole agricultural industry on which the country depended for its most important exports and for maintaining a reasonable standard of living for its increasing African population. That population has grown during the last 10 years from 4 million to 5 million. The switch, which sanctions has brought about, from agriculture to light consumer industry and mining, has created the need for substantial capital investment in buildings, imported machinery and transport facilities. In the short term the creation of an import substitute consumer industry has been very successful, but it has masked the reality of sanctions. Foreign exchange resources have been either frozen or are exhausted, and Rhodesia is living from hand to mouth, depending on what she can sell through devious channels. And such foreign exchange as she can obtain is increasingly needed to maintain her existing transport system and service existing industrial installations. For instance, my Lords, three months or so ago all available rolling stock had to be concentrated to move priority exports to the coast. Some said that it was tobacco, others that it was chrome for the United States or for Russia or China—but the result was that the whole Rhodesian railway system was disrupted for a considerable period of time.
Rhodesia requires capital urgently for transport, for mining machinery; its budget is heavily encumbered by defence expenditure; its agriculture is unable to

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contribute to its foreign exchange resources; equipment is wearing out in its factories, and the latter cannot expand in a way which will enable Rhodesia to meet the employment and social needs of its exploding African population.
I have no doubt that with some continued help from South Africa and Portugal, by an even more ingenious policy for evading sanctions, a couple of good agricultural seasons and the continued refusal of the European population to face the realities, the present Rhodesian Government will be able to carry on for a period of time. But it can only do so at the cost of seeing its economy gradually slowed down and eventually become involved in a financial crisis. When I was in Rhodesia in 1967, I was told that it was estimated that the Rhodesian pound was worth 8s. to 11s. To-day, the Rhodesian dollar, which is normally the equivalent of our 10s., and which claims a better exchange rate against the U.S. dollar than the pound sterling, must be worth a good deal less than 5s. What chance is there of Rhodesia, which is desperately short of foreign exchange for essential re-equipment and development, meeting its overseas liabilities without massive outside help, and where is that help to come from?
I have studied the statement of Mr. Wrathall, the Minister of the Treasury in Rhodesia, of November 8, and I find nothing in it to alter the view expressed to me in South Africa and Rhodesia that the foreign exchange situation was becoming so grave that Rhodesia must in time face an eventual day of reckoning in the shape of a financial breakdown. Rhodesian Ministers to-day are caught in a fearful dilemma. They dare not admit the seriousness of the financial situation in case they sap European morale, yet until they do admit it hard line Europeans will not be prepared to accept a settlement with Britain or allow Mr. Smith to do so. Thus they are doomed to go on to the bitter end.
I referred earlier to the great growth of the African population from 4 million to 5 million in ten years. In the same period, the European population has increased by only 19,000, and of the 218,000 of Europeans there in 1960, 82,000 have left the country and 74,000 immigrants have arrived.
LORD FERRIER: My Lords, may I interrupt the noble Lord? When he says that the population has increased from 4 million to 5 million, can he say how many of that 1 million are indigenous Rhodesian Africans and how many Africans from Nyasaland?
LORD ALPORT: My Lords, this is an increase of Rhodesian Africans, so far as I know from the figures; there are 5,010,000 in Rhodesia at the present time. The present Government has reduced some of its problem of African unemployment by refusing to allow Portuguese East Africans and Malawi Africans who returned home to come back to Rhodesia for employment. It is difficult to get the exact increase, but the problem they face at the moment is dealing with an African population which, according to their statistics, is 5,010,000 in 1970.
LORD FERRIER: Nevertheless, of that 5 million, the noble Lord will agree, a number are from Malawi?
LORD ALPORT: So far as I know, but it is not made clear from the statistics. Of the Europeans, 74,000 are immigrants who have come into Rhodesia in the last ten years, and many of the Europeans there today would get out of Rhodesia if they could repatriate their funds or could get passports; and many more would go if Rhodesian Ministers told them the truth. The mistakes which Mr. Smith and his colleagues in Rhodesia have made are to believe, first, that they could rely on U.D.I, being a seven-day wonder; secondly, that the ready ability of a beleaguered community to defend itself against economic attack in the short term could enable them to withstand the effects of long-term sanctions; and, thirdly, that the supremacy of a racial minority in Africa today can be maintained indefinitely.
It is because I do not think that the Rhodesian leaders or public opinion realise the extent of the misjudgment which has taken place that I do not think the time has yet come to enter into negotiations for a political settlement, and why I feel sure that if there are negotiations those negotiations are bound to fail. It follows, therefore, that in renewing sanctions for a further period we should examine the effect which these will have on all the people of Rhodesia. After all, the object of sanctions is to coerce those who

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hold power in Rhodesia today, and not to inflict hardship on those who have no power to alter Rhodesian Front policies or who have opposed those policies right from the start.
I shall offer certain views in a moment with regard to the Europeans. But for the present I am concerned with the position of the Africans in Rhodesia. The number I have already said: 5,010,000. When I was in Salisbury I met and talked with representatives of all the Rhodesian political Parties, those that claim to represent the Chiefs and people; the multi-racial groups; the successors of Zanu and Zapu, with leading African clergy and with ordinary Africans from the native purchase areas. It is the Africans who have been hardest hit by sanctions, and it is also for the Africans that the policy and philosophy of the Rhodesian Front is creating the greatest discrimination. By 1975 there will be 5½ million Africans in Rhodesia, and if sanctions are to continue indefinitely some thought, I submit, must be given to the fact that their present application may inflict hardship on them quite disproportionate to the political results which the sanctions policy can be expected to achieve.
As many of your Lordships know, the basis of social security for the African is the right of recourse to the tribal lands. For those who have moved out of the primitive economy of the tribe the native purchase areas provide independence and relative affluence. Both depend for their prosperity and development on investment by means of grant or loan. Some years ago a group of far-sighted Rhodesian Europeans, led by Mr. Colin Kirkpatrick, set up an African loan and development company to act as a sort of agricultural and industrial investment bank for Africans. It has recently been reorganised as a trust, and is directed by men in whose integrity and judgment Her Majesty's Government could have complete confidence. Although its activities at the present moment are confined to the native purchase areas, I am assured that it could extend its work to the tribal trust areas through independent co-operatives. While the Labour Government was in power £50,000 was transmitted by OXFAM to this organisation. If sanctions
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are to continue, I suggest that financial support should be made available to this trust by Her Majesty's Government on conditions to be negotiated with the Smith régime.
The economy of rural African Rhodesia is one problem; another is African education. All the Africans I spoke to confirmed my impression that standards were falling. Africans themselves do not have confidence in the ability of the ill-educated African local committees to support a tolerable system of African education. There is widespread suspicion that it is the deliberate policy of the present régime to depress African educational levels in order to prevent the African from attaining the standard of educational and economic advancement necessary to achieve the degree of political influence which even the 1969 Constitution holds out for him. My Lords, since 1965 large sums of money have been made available for African education through the missionary societies. Much more is now needed. I suggest that these societies should be the channel through which financial help for African education should be given; and that the forthcoming negotiations should be employed to decide how this should be done.
But many people in Rhodesia will say: "If you develop the African tribal trust and native purchase areas and still keep strict sanctions, we shall be prevented from exporting the surplus tobacco and maize which these tribal lands will produce." Much of their production would be consumed internally. I can record that for the first time I was accosted in Salisbury by a beggar, who said simply,"I am hungry"—and hunger is increasingly a possibility for Rhodesia's Africans.
I should be prepared to remove sanctions from exports of tobacco and other crops grown by Africans. I see no reason why sanctions should, like rain, fall on the just and the unjust, on Africans in the tribal trust areas and European supporters of the Rhodesian Front alike. Then the Rhodesians may say that if large sums of money are spent on African education it will only increase the unemployed, semi-educated African proletariat. The grievous thing is that at present many of the 74,000 Europeans who have entered Rhodesia since 1960 are artisans, who, on arrival, replace

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educated Africans in industry, so that the latter revert to unskilled or semi-skilled jobs. Here, again, an intelligent use of sanctions could ensure that exports which were shown to contribute to African skilled employment would be relieved of sanction.
What I am asking is if, as I believe, no early political agreement between Her Majesty's Government and Mr. Smith is possible, that the policy of sanctions should be used not only as a coercive instrument against a rebellious régime, but that it should also be employed constructively in the interests of the Africans of Rhodesia. I suggest that the extent of sanctions on African agricultural production should be decided by Her Majesty's Government in consultation with the Commonwealth Sanctions Committee. Similarly, the contribution which the relaxation of sanctions against industrial and mining production of Rhodesia can make to the entry of Africans into skilled categories of employment should be similarly assessed. Thus sanctions, instead of being a dead hand on the economic and political advancement of Africans in Rhodesia, could be converted into an instrument for speeding their economic, educational, and eventually, perhaps, their political progress, and this at any rate would give some hope—and for subject peoples hope is the most precious commodity.
No one enjoys a policy of destruction, certainly not the British people, who are heirs of a long and honourable record of political and economic power in all the Continents of the world. It would be a sad end to this record if its last chapter represented either an unconditional surrender to an arrogant and selfish minority who have indulged in an unscrupulous abuse of power, or led to a period of political and economic retardment for 5 million Africans, whom the Government have rightly regarded as the continuing responsibility of Great Britain.
I have tried to suggest a constructive approach to Her Majesty's Government in the present situation. During my tour of Africa, I was assured that at any rate the majority of those African States I visited would not be opposed to a policy designed to give practical help to the African population of Rhodesia if, at the same time, it did not compromise their ultimate political rights. I know
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that there are individuals in Rhodesia, in whose judgment Her Majesty's Government would have the greatest confidence, who are thinking along the same lines. I therefore ask my noble friend, when he replies, and the Government in general, to make sure that they do not allow the pressure of groups within the Government Party, or consider that the short-term interests of our finance and commerce here, or undertakings generally given by an Opposition before an election, should cause them to jettison, without examination, a policy for Rhodesia, and a basis for negotiation, which might give the chance of a constructive interlude before the eventual showdown, and which might even make that showdown avoidable.
I have spoken so far in the interests of the Rhodesian Africans, and I am not unmindful of the difficulties of the shrinking minority of liberal-minded British orientated Europeans, who have fought a losing battle against what the Prime Minister once called a Police State. I would ask on their behalf that the British Government, in matters of finance, of passports, and of communications should discriminate in their favour. I ask that if there is to be a negotiation with Mr. Smith, the British Government should insist that those who negotiate on behalf of Rhodesia should include both representatives of liberal European minorities and of the Africans; not Rhodesian Front nominees, but genuine representatives of those who believe in a multi-racial solution for the future of Africa between the Zambesi and the Limpopo.
I am grateful to your Lordships for your patience at this late hour. I want to end by saying this. Last night at the Guildhall, the Prime Minister spoke of realism and of British interests, and contrasted the formulation of policies with the striking of moral attitudes about the problems of race in Africa. I think that many of us whose lifetimes have spanned two world wars have learned at any rate one thing; that is, that political realism, British interests and moral attitudes usually coincide.
11.55 p.m.
LORD SALTOUN: My Lords, I want to ask Her Majesty's Government a very much shorter and, I hope, simpler question on this matter. I think everybody

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in the country is entitled to ask of this Government that they pursue reasonable objects, with a reasonable probability of their achievement. I do not ask Her Majesty's Government what their object is in this difficult situation, but whether they have a reasonable probability of achieving it. I deeply regretted it when Mr. Smith declared U.D.I., but I am bound to say that, in spite of the history dished out to the people by Her Majesty's Government, it seemed to me that he was very much in the position of the States of America 180 years ago. I can leave it at that. It is our own position that troubles me a good deal.
When this situation first arose I heard the noble and learned Lord then on the Woolsack point out to the House that in this matter the Government felt that they had responsibility but had no power, and they promptly entered into a series of hostile acts in order to acquire the power to charge them with the responsibility. To my mind that was, morally, an unjustifiable course of action. I believe it is a principle of our law that where you have no power or control you cannot be saddled with responsibility. I hope that Her Majesty's Government share that view, because I think the noble Marquess, Lord Lothian, pointed out last week that he had no responsibility for the Rhodesian police because he had no power. I could not agree more.
The situation has changed considerably since the Government of the time embarked on the course to which I have referred, because, as your Lordships will remember, the Government took the matter to the United Nations and asked them to direct activities. Now, my Lords, you do not go to the police when your children do wrong, and I think that by that act the Government tacitly conceded to Mr. Smith his independence. I think that it certainly complicates the situation for Her Majesty's Government, but I also think that the status of the United Nations in the matter is not very clear. I do not think that the institution of slavery is consistent with any portion of the United Nations Charter, but it is the case that a great many of the members of the United Nations who are most active in this matter cherish in their own countries the institution of slavery, and would be very sorry to have to
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discontinue it. So I do not think that Her Majesty's Government's colleagues in this matter are necessarily worthy of particular regard.
Therefore, I think that there are factors in the matter which might assist a happier outcome than I can see eventuating by insistence beforehand on a complete surrender to principles which, if everybody interprets them in the same way, are very unlikely to be accepted. I return to the original question which I asked Her Majesty's Government. Have they a definite object, which they have a reasonable hope of achieving, in entering into negotiations on this matter?
12 midnight.
EARL JELLICOE: My Lords, despite the lateness, or comparative lateness, of the hour, and the thinness, or comparative thinness, of your Lordships' House, I should like to make a few general remarks before I turn to the specific points which have been raised in this short discussion. First of all, I hope my noble friend Lord Alport will forgive me if I deal with what I may call the procedural aspect of this matter. Before doing so, I should like to extend to him and to your Lordships' House—those Members who are here—my apologies for the muddle which occurred last Tuesday, when a number of noble Lords who have an intense interest in the affairs of Southern Africa and were expecting to speak on the Rhodesian Order were not able to as a result of a quite sudden and unexpected change of business. I take full responsibility for that muddle and for the inconvenience which was caused, and I freely admit it to noble Lords.
What happened was a very simple thing. That afternoon we were debating the Reorganisation of Government—a rather dry subject. I happened to be replying to that debate; but so great was the magnetism of this, even in prospect, that over the weekend a great many noble Lords suddenly put their names down to speak, with the result that that debate went on much longer than we had anticipated when we were planning the business of your Lordships' House. That was the reason, and the only reason, why we thought, because of the importance of the Rhodesia Order and the issues which surround it, that it would

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be better to take it on the following day. But I apologise to those noble Lords who were inconvenienced.
My Lords, having said that I must pick a slight quarrel with my noble friend Lord Alport over the procedure which he has adopted on this occasion. First, he has raised this matter at extremely short notice. I certainly would not wish to complain for myself, but I am very acutely aware that the Question which my noble friend has put to your Lordships this evening is one in which many Members of this House have a very keen interest indeed. Apart from that aspect, my noble friend has made an extremely interesting speech. I know that he recently spent some weeks in Southern Africa, and I think it is a great pity he did not permit a fuller House the chance to listen to that speech, because he speaks with great personal and recent knowledge of Southern Africa.
The other bone I would pick with him is that he has asked this Question on an evening when it seemed very probable that the House would be sitting until a pretty late hour, as indeed we are. It is precisely because your Lordships' House is so untrammelled by restrictive practices that the noble Lord—and I repeat: I am not making any complaint—in putting this Question tonight has acted with absolute technical propriety. But the point I wish to make is this: that we manage here without many restrictive practices because, and perhaps only because, Members of your Lordships' House show a tremendous degree of restraint in these matters. If I may say so, and if my noble friend will permit me, if more Members of the House were to avail themselves so freely of the freedom which our absence of rules allows, I have a fear that we should be forced, in self-protection, to adopt rather more rigid and restrictive rules in the future, and I personally should deeply regret that.
LORD ALPORT: My Lords, may I just say to my noble friend that I fully appreciate his rebuke and I fully appreciate his earlier apology. But what is sauce for the goose is also, if I may say so, sauce for the gander. The Orders of the House were suddenly changed last week without any Notice being given, to all intents and purposes. I, at any rate, gave the Government far more notice of
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this Question than they gave me of the change of business on that previous occasion.
EARL JELLICOE: My Lords, I am surprised that my noble friend is revealing so clearly his motives in bringing on this debate so late this evening. I had not thought that this was his motive; but he has explained what was his real purpose in so doing. I much regret it. He made an extremely interesting speech and it would have been much better if that speech, which was full of information—
LORD ALPORT: My Lords, may I ask—
SEVERAL NOBLE LORDS: Order, order!
LORD ALPORT: My Lords, may I ask my noble friend one question? Would he have made it possible for a private Member to make an intervention in this way and to have a debate of this sort at any time within the next three weeks in Government business?
EARL JELLICOE: My Lords, I should certainly have done my utmost to have made it possible. We have our Rules, which are extremely flexible. It would certainly have been possible for my noble friend to make the interesting remarks he has made at an early date and to a fuller House. I can give him that assurance. I think it a great pity he did not take that course. But there it is. I have picked my procedural bone and should prefer to leave it like that.
May I now turn to the substance of the matter? It was made clear, both by my noble friend Lord Lothian when he introduced the Southern Rhodesia Order in this House last Wednesday, and by my right honourable friend the Foreign Secretary in another place last week, that the Government intend to carry out their pledge to find out whether a realistic basis for a negotiated settlement in accordance with the Five Principles can be found. In answer to my noble friend Lord Saltoun, all I can say is that we intend to make an honest effort. I cannot say what the prospects are. I cannot say whether this effort will succeed. I hope that it will. I know that there are pessimistic voices in this respect. I cannot, in all candour, be terribly optimistic myself;

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but there will be an honest effort, so far as Her Majesty's Government are concerned.
In any event, in pursuance of this aim, the first step has been taken, as noble Lords are very well aware, in the shape of a preliminary message to Mr. Smith which is purely exploratory in its nature. The Government have made the purpose and method of this approach entirely clear; but I should like to add this. The House will appreciate the need to keep confidential all the exchanges at this particular stage between the Government and Mr. Smith. It really is important at this stage that these exchanges should be kept confidential. It is the Government's intention to make no statement about these exchanges unless and until there is something of substance to report to your Lordships.
My noble friend Lord Alport referred to the "sour smell"—I think those were his words—which there is about this. I must say I have not myself smelled this "sour smell", but no doubt my noble friend has. He asked whether I could do anything to dispel these rumours or to disabuse the House. I think that all I can do is to refer my noble friend to what the Foreign Secretary said on November 9 in another place about these very preliminary negotiations about negotiations, if one may so term them. These are his words:
"There will not be a settlement except within the five principles. Therefore, if there is a settlement, it will be within the five principles."—[OFFICIAL REPORT, Commons, 9/11/70, col. 35.]
That is what my right honourable friend the Foreign Secretary said. I think that my noble friend Lord Alport knows the Foreign Secretary well enough to know that when Sir Alec Douglas-Home says something like that he means it.
I think that those words are sufficient to dispel any "sour smell" that may be around. But I might also repeat the words which my noble friend Lord Lothian used in this House last week. This is what he said, in reply to some remarks made by Lord Shepherd:
"The noble Lord also made the point that the settlement that we hope to achieve must be watertight and that there should be no sell-out—I think he used that word. Of course, Her Majesty's Government entirely accept that position."—[OFFICIAL REPORT, 11/11/70, col. 795.]
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Well, my Lords, if repeating those words of my noble friends helps to dispel any "sour smell" that may be around, I am glad to repeat them. That is the position, and I can give my noble friend Lord Alport a categorical assurance that it is the position.
In the meantime, as has already been made clear, sanctions are to continue; and if I understood what my noble friend said, he is in support of their maintenance in principle, if not in every particular detail. As my noble friend Lord Lothian said in your Lordships House on November 11, it must surely be right—until we know the result of our attempts to find out whether a negotiation is possible—to rule out any change in our attitude towards sanctions.
But, my Lords, what I have said applies to major modifications in our sanctions policy. I would certainly not rule out minor adjustments. The Government have already made it crystal clear that they will be ready to consider any further need for mitigation for humanitarian reasons, in addition to the action which has already been taken over the small matter of postage stamps, and the other perhaps small matter—though I thought it had a very definite humanitarian aspect—of the invalidity of certain Rhodesian divorce decrees, where this can be achieved without affecting the general structure of economic sanctions. Again I can only repeat that this is our position on this matter.
My noble friend asked certain questions about the particular application of sanctions policy to matters of finance, to passports, and indeed to travel. I should like to assure him, and I can do so straightaway, that I have carefully noted what he said and will see that it is conveyed to the proper quarters in the Foreign and Commonwealth Office. Meanwhile, on the question of travel facilities for young Rhodesians there is, as my noble friend will be well aware, a mandatory Security Council resolution which requires Member States to prevent the entry into their territory of persons travelling on Southern Rhodesian pass-ports. That is the United Nations position. But, that said, my Lords, we are always prepared to consider in individual cases whether there are any humanitarian grounds which would justify an exception

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to this requirement. Within this general principle we shall give further thought to the suggestions which my noble friend has made in this and in other areas. All I can do at this rather late hour is to say that his particular suggestions have been noted, and I will see that they are properly considered. With that I would conclude my few remarks.

  PETS' DISEASES AND HUMAN HEALTH
  PETS' DISEASES AND HUMAN HEALTH