Orders of the Day — Incomes and Productivity

– in the House of Commons at 12:00 am on 18th December 1961.

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4.8 p.m.

Photo of Mr James Callaghan Mr James Callaghan Shadow Chancellor of the Exchequer, Member, Labour Party National Executive Committee

I beg to move, to leave out from "That" to the end of the Question and to add: this House deplores the handling by Her Majesty's Government of the Pay Pause, which has undermined the well-established machinery for freely negotiating wage settlements, is grossly unfair in operation, and provides no long term solution to the problem of inflation; and further regrets the failure of Her Majesty's Government to propose measures that will increase productivity and remove the underlying weaknesses in the national economy instead thereof. The danger of inflation is ever present and will be accentuated by the drive to achieve a balance of payments…Our costs of production are of vital importance and they depend to a considerable extent on the amount which industry has to pay in profits, salaries and wages…It is essential, therefore, that there should be no further general increase in the level of personal incomes without at least a corresponding increasing in the volume of production. Unless we are prepared to check any such tendency we shall find ourselves unable to fulfil our export task owing to the rise in costs. Those are not my words, neither are they those of the Chancellor of the Exchequer. They are those of a great man—Sir Stafford Cripps. He uttered them four Governments, six Chancellors and thirteen years ago, but they may just as well have been uttered last week for all that the Government seem to have learned during the last decade.

That is exactly what the Chancellor has been telling us about the current situation. We have a right to ask the Government why it is that, since Sir Stafford Cripps made his first attempts, shortly after the war, in the White Paper on Personal Incomes, Costs and Prices, co analyse the situation, place it before the House and the country and to invite support for it, thirteen years later the Chancellor of the Exchequer is still putting before the House the same dilemma and in almost exactly the same words.

When I remember that the Government have had complete control over our economy and over our destinies for the last decade, I say that they must share a heavy measure of responsibility for not carrying us further on the road to a solution.

Their usual answer is the answer given recently by the Prime Minister, at Sheffield. He turns the question aside. "Ah," he said, "look at the increase in our standard of life. Is that a failure? Of course we have not failed. Look at the number of houses we have built, look at our educational progress and the way in which we are adding to our National Health Service." It depends to whom he is talking. So he turns aside this basic question, which was posed thirteen years ago.

We have had substantial increases in our standard of life during the last thirteen years, but not very evenly distributed. Many have been left out of the national bounty. But these increases in our standard of life have been bought at a very heavy price. They have been bought at the price of our decline as a major industrial nation. Is there any hon. Gentleman opposite who believes that the standing of Britain in the world today, either as a industrial nation or in terms of the influence which she can exert, is as great as it was at the time when the late Ernest Bevin held Lord Home's portfolio? Is there any hon. Gentleman who believes that the influence of this country in the affairs of the world is as great as it was at the time of the outbreak of the Korean War?

I think that no objective person studying the situation can deny that there has been a steady decline in Britain's position in the world and in our relations with our neighbours on the Continent of Europe which has brought us to the position where we are now one of a company of equals. There is nothing to be ashamed of in being one of a company of equals, but the Government have held responsibility for ten years, during which our position has slipped from one of industrial pre-eminence in Europe to a position in which we are struggling along trying to clutch the coat-tails of other nations in the Common Market.

Photo of Sir Martin Lindsay Sir Martin Lindsay , Solihull

Knocking your country.

Photo of Mr James Callaghan Mr James Callaghan Shadow Chancellor of the Exchequer, Member, Labour Party National Executive Committee

Well, I suppose that anybody who analyses the situation will be told by hon. Members opposite like the hon. Member for Solihull (Mr. M. Lindsay) that he is knocking his country, but in anything I have to say on this topic, as I said during all the time when I was dealing with colonial affairs, I do not intend or wish to knock my country.

I want, however, to see that the truth is understood and known both in this House and in the country. In my view, this is the mood of a growing number of people. We are not content to shelter behind complacencies. We need a nationally concerted effort to escape from the position in which we are today, and the Chancellor has failed to evoke the mood which is necessary if the country is to gird itself for a move forward now.

Why has the right hon. and learned Gentleman failed to do so? The Trades Union Congress has certainly not extended a welcoming hand to him. Does he blame them for that? I suppose the hon. Member for Solihull would, but I wonder whether the Chancellor does. If he does, let me remind him again of the contrast that exists, not in the analysis of the situation between him and Sir Stafford Cripps, but in the remedies that were put forward. I have read from the White Paper on Personal Incomes, Costs and Prices. The Chancellor has told us that it is necessary in the national interests to set aside arbitration awards and collective agreements. What was the view of the Government of the day? It was: In the view of the Government it is essential that there should be the strictest adherence to the terms of collective agreements. Does not the Chancellor think that he would have evoked a different response from the Trades Union Congress if he had included that passage in his speech, instead of deliberately spitting in the face of the Trades Union Congress, as he has done? What else did Sir Stafford Cripps say? In paragraph 7 (d), he said this: It does not follow that it would be right to stabilise all incomes as they stand today. But the Chancellor says that there is to be a wage freeze. He calls it a pay pause, when he means a wage freeze. Indeed, it is carried to the level where the Minister of Power can tell the miners, as he did ten days ago, that even if there is an increase in productivity that is not a case for an increase in wages.

The right hon. Gentleman said, "There is no immediate case for an increase in wages". He added, "It may be that if you increase productivity now, at a later stage that will be a very powerful factor in giving you an increase in wages". Am I not interpreting him correctly? But that is not what was said in the White Paper of 1948. In that White Paper, increases in incomes were directly related to increases in productivity. Under this Government, not only is there a wage freeze but even if one works harder one must get no benefit from it. I will come back to this point later.

There was a third difference. In paragraph 8 of his White Paper, Sir Stafford Cripps said: …if, at some future time, there should be a marked rise in the cost of living the level of those personal incomes which as a result became inadequate will need reconsideration. The cost of living has gone up and is going up. So far from protecting the value of wages the Government are eroding it by allowing the cost of living and the retail prices index to rise. Under the measures which were in force during the wage restraint of 1948, these cases merited special consideration.

I do not know whether the Chancellor has ever refreshed himself by reading Sir Stafford Cripps' White Paper. I hope that I have said enough to make the Chancellor wonder whether, if his approach to the Trades Union Congress had been different, the response would have been different. He must know, because he has met them, of the deep feeling of resentment which is felt by every trade union officer who have been touched by the wage pause, the wage freeze, in the way in which it has been presented by the Chancellor. It operates unfairly, unjustly, unevenly and inequitably. But there are wide areas in which it is not working at all. There are other areas, such as the Civil Service. in which it is working with partial efficiency. And there is a no-man's-land in which it has undoubtedly operated to slow down the settlement of wage claims.

I have here a list of industries in which wage increases have been awarded since the pay pause. They are printing and bookbinding—an increase of 5½ per cent.; heating, ventilating and domestic engineering industries—an increase of 7d. an hour for craftsmen; flour mills—an increase of 10s. 9d. a week for craftsmen; the Ford Motor Company—an increase of 1½d. per hour and a reduction in weekly hours; building and civil engineering—an increase of 6d. an hour. These are quite apart from the famous electricity supply industry settlement, the only one which brought a public rebuke from the Prime Minister. I calculate that at least three-quarters-of-a-million workers have been awarded increases of pay since 25th July, when the Chancellor announced his wage freeze.

As I said, it operates very unevenly. There was the famous case of the baggage loaders at London Airport—960 of them. It is worth putting on record again that they went on strike because they could not get 2½d. an hour to bring them into line with men employed by B.O.A.C. who were working in the next hangar and were doing exactly the same job. It cost the Government and B.E.A. £300,000.

There was a week of shuffling by the Government—and we know how well they can shuffle; we had an illustration of it last week. And at the end of the week they sent the baggage loaders back to work with a higher rate of pay than they had originally refused and for which they went on strike. They were regraded; they were to be master baggage loaders instead of baggage loaders, which is what I mean by a shuffle. Perhaps it was baggage masters—I do not know the precise title, but I know that the result is that they were doing the same job and that the Government looked as foolish as even this Government can look.

I have another example from the Health Service. My hon. Friend the Member for St. Pancras, North (Mr. K. Robinson) tells me that because the service is unable to get clerical workers there is a proposal that they should not be started at the foot of the scale, but should be started part of the way up it, giving them two or three increments. That is fine. But the staff side said, "What about those who joined just before the pay pause? Will you put them on the same scale?" The answer was, "No, we cannot do that because it would mean breaking the pay pause".

Serious consideration is now going on in the ranks of the Health Service workers whether these clerical workers who joined before 25th July should resign and rejoin as from a current date in order to get the higher increments. What folly and stupidity the Chancellor has allowed himself to get into. There was the case of the 27 Government car drivers denied raincoats—which were in stock—because of the pay pause.

The Chancellor pretends that he is concerned with other incomes apart from wages. Now and again, in an almost catalectic whisper, we can hear him speak of dividends and profits. I regret to say that those whispers do not seem to reach the board rooms, or they are drowned when they get there. Not only has he not carried the trade unions of the country with him, but he has not carried some of his hon. Friends with him.

Yesterday, there was a roll of dishonour in Reynolds News, a newspaper which ought to be read more frequently for the information which it contains. I am all in favour of giving a good paper a piece of advertisement now and again. This paper said that 13 hon. Members on the Conservative side of the House were involved. I have the roll of honour here, but I do not propose to trouble the House with it at this stage, although I can read it out. [HON. MEMBERS: "Read it out."] I am always the servant of the House in these matters.

There are 13 hon. Members whose companies have declared higher dividends since the pay pause than they declared last year. I hope that we shall hear from some of these hon. Members, whose votes were given to the Government in July, how they voted in their board rooms in September. It will be very interesting to know what protests were made by some of those hon. Members who are sitting in the House now when the dividends were increased. [HON. MEMBERS: "Read the names."] In response to popular appeal, I will read the names.

Photo of Mr James Callaghan Mr James Callaghan Shadow Chancellor of the Exchequer, Member, Labour Party National Executive Committee

We know that they are all honourable men. There is the hon. Member for Chelmsford (Sir H. Ashton); the hon. Member for Middleton and Prestwich (Sir J. Barlow); the hon. Member for Holland with Boston (Sir H. Butcher)—I do not think that they need all stand up as I read the names. There is the right hon. Member for Blackpool, North (Sir T. Low); the hon. Member for Portsmouth, Langstone (Mr. Stevens); the hon. Member for North Angus and Mearns (Sir C. Thornton-Kemsley); the right hon. and learned Member for Hertfordshire, East (Sir D. Walker-Smith); the hon. Member for Exeter (Mr. Dudley Williams); the hon. Member for Shipley (Mr. Hirst); the hon. Member for Ayr (Sir T. Moore); and—

Photo of Lieut-Colonel Sir Thomas Moore Lieut-Colonel Sir Thomas Moore , Ayr

The hon. Member has asked me to stand up. With your permission, Mr. Deputy-Speaker, I should like to make a statement on the charge which he has just launched.

In May of this year, as chairman of a certain company, I announced an interim dividend of 7½ per cent. compared with 5 per cent. last year. I forecast and promised to the public, and presumably to our own shareholders, that the final dividend would be 12½ per cent., making it 20 per cent. for the whole year against 17½ per cent. last year. This was long before the Chancellor announced his pause, or his desire for a pause. After the Chancellor had made his statement I did not increase the final dividend.

Hon. Members:

Withdraw.

Photo of Mr James Callaghan Mr James Callaghan Shadow Chancellor of the Exchequer, Member, Labour Party National Executive Committee

That explanation strikes me as being on exactly a par with the Post Office Engineering Union case. It was awarded an increase in pay by the arbitration tribunal before the pay pause in respect of conditions existing before the pay pause. As soon as the pay pause was introduced the Government said, "We will pay them only 8s. and we will keep the extra 12s. back for some future date".

Photo of Lieut-Colonel Sir Thomas Moore Lieut-Colonel Sir Thomas Moore , Ayr

I must intervene again. I made a promise to the shareholders of the company, to the public and to the prospective shareholders of Eastwoods Ltd., and I carried out my word to the public.

Photo of Mr James Callaghan Mr James Callaghan Shadow Chancellor of the Exchequer, Member, Labour Party National Executive Committee

The hon. Member is making my point for me. All I want the Government to do is to carry out their word to the Government servants in exactly the same way. That is exactly my case.

Photo of Mr James Callaghan Mr James Callaghan Shadow Chancellor of the Exchequer, Member, Labour Party National Executive Committee

I will not give way to the hon. Member. I did not mention him in the roll of honour.

Here are two different standards of treatment. The chairman of a private industry believes that he must keep faith with his shareholders and that it would be wrong to do anything else, because he had made them a promise. Is there to be a lower standard of morality for the Chancellor of the Exchequer?

Photo of Mr James Callaghan Mr James Callaghan Shadow Chancellor of the Exchequer, Member, Labour Party National Executive Committee

I have given way twice and I will not give way again at this stage, although I will do so later.

Photo of Mr Cyril Bence Mr Cyril Bence , Dunbartonshire East

Finish the roll of honour.

Photo of Mr James Callaghan Mr James Callaghan Shadow Chancellor of the Exchequer, Member, Labour Party National Executive Committee

There is only one more.

I believe that by now the Chancellor understands the deep feeling of resentment which his treatment has caused. Mr. Charles Smith, secretary of the Post Office Engineering Union, who used to be a Member of the House, put it this way, "If the Government say that they can override agreements and ignore contracts and bargains which they enter into because they are the Government, that is the first step on the road to totalitarianism."

I remember a large number of Conservative Members of Parliament binding themselves together, some years ago, to hound the Minister of Agriculture out of his office because they thought that one man had been dealt with unfairly by the State. What the Chancellor of the Exchequer does not seem to realise is that this action of his in breaking long-standing agreements is regarded by the trade union movement as their Crichel Down, and the same feeling of resentment is felt by hon. Members on this side of the House and among those of us who have had to deal with these matters for the last thirty years as was felt by his hon. Friends over Crichel Down and all that arose from it. [HON. MEMBERS: "More so."]

That may well be true. Although the Chancellor of the Exchequer made a disingenuous attempt to deny it, the Minister of Labour admitted to a Civil Service deputation that the Government are in breach of their agreement with the staff side on matters of arbitration. What do the Government say to unofficial strikers? They say, "Get back to work before we negotiate". What do we say to the trade unionist who is in default with his dues? We say, "Get into compliance and then we will act on your behalf". I say to the Government, "Get into compliance. Get back to work. Honour your agreements. Then the T.U.C. will be in the mood to negotiate with you".

I have never known a situation in which three of the largest and most responsible Civil Service trade unions have announced that they will advise their members to work to rule as from the beginning of next year. I do not understand how such a situation could arise, or how the Government can possibly permit it to continue. I know these trade union leaders personally. I have worked with them for many years. They are not men who are given to "flying off the handle". They eschewed the strike weapon years ago. That is why they are more concerned with the preservation of agreements and arbitration awards. This is their fortress, which the Chancellor of the Exchequer has undermined. They have now been driven into a position where they believe they can get no justice out of the Chancellor of the Exchequer as a result of his action.

I hope that this decision by the Civil Service trade unions will not come into force. I believe that it will strain loyalties very considerably. It will make great difficulties. It has already undoubtedly poisoned industrial relations. I beg the right hon. and learned Gentleman, even now, to give the union leaders a statement that they can take back to their members which will ensure that their wages claims are to be considered fairly and impartially and without the Government's guillotine the whole time.

I read that the locomotive men at Gillingham are to resume their unofficial strike on 1st January. I can sympathise with and understand their exasperation when they are dealing with the Government in their present frame of mind. I put this to these men. Why should they let the Government escape from their responsibilities by themselves becoming the scapegoat, because that is what the Government will see happens to them. They will use the men as an excuse for saying, "Look how irresponsible these fellows are. There is nothing we can do with them". The Government will divert attention from the very root of the problem and will say to the hapless traveller and the men and women going home tired after a long day's work who are held up by these men's exasperation, "It is the loco men's fault".

I beg the locomotive men at Gillingham not to fall into this trap. They have two Conservative Members in the House. They cannot expect to elect Conservatives and escape the consequences of Conservative philosophy. I suggest a simple remedy to the men, "You put 'em in. You get 'em out".

Photo of Mr Charles Loughlin Mr Charles Loughlin , Gloucestershire West

Before my hon. Friend leaves that point, may I put this to him? I accept that it is true that a go-slow will result in the men being a scapegoat for the Government, but my hon. Friend must recognise that an alternative to a go-slow is strike action, in which case they will still be the scapegoat for the Government.

Photo of Mr James Callaghan Mr James Callaghan Shadow Chancellor of the Exchequer, Member, Labour Party National Executive Committee

We have not yet reached that stage. The railway unions are still discussing their pay claim. The executive committees, which are charged with responsibility to the whole membership, have by no means reached that conclusion at this stage. If the army is to move at all, it had better move and fight together and not be picked off singly.

Photo of Mr Percy Collick Mr Percy Collick , Birkenhead

I am sorry to interrupt my hon. Friend, because he has already been interrupted several times, but I think that, on reflection, he will agree that he has a little exaggerated the position. I can assure him that the locomotive men at Gillinghame did not put the present Government in.

Photo of Mr James Callaghan Mr James Callaghan Shadow Chancellor of the Exchequer, Member, Labour Party National Executive Committee

I hope that they will work very hard to get them out.

I have been discussing this afternoon the short-term measures the Government have taken and in which they have failed during the last few months in relation to what was undoubtedly a very real problem, namely, the problem of the £. I readily agree that the Chancellor of the Exchequer was faced with a very serious problem in July, but I believe that he could and should have handled it very differently. I believe that he could even have got away with his pay pause for a short time if he had said in July, "I call for a pause in all our arrangements, whether they be profits, dividends or wages, for a period of two months while I may have the opportunity of discussing with the Trades Union Congress and with leaders of industry how we are to tackle this situation".

I believe that if the right hon. and learned Gentleman had coupled that with an atmosphere of leadership, which he singularly failed to generate, he would have got a response, because there would have been a time limit. It would have been seen that there was a short period in which everybody had to stand still to protect the position of the £. I believe that he would then have got the response he hoped for, but, in fact, failed to get.

For the moment the £ is safe, so we understand, although we have heard about borrowings again this afternoon. The need of the right hon. and learned Gentleman is to get on to his long-term solution, but he is unable to do that because he cannot climb out of the pit that he has dug for himself. Until he climbs out of the pit the £ is in danger again, or could be in danger. I wish to choose my words carefully. Until that time the £ could be in danger again, because all he has done is to put a temporary stopper on wages. No stopper has been put on either profits or prices. No stopper has been put on rents or dividends.

If this situation drags on, there is no reason why we should not go through the same dreary round which we went through last July, which we went through under the administration of the right hon. Member for Monmouth (Mr. Thorneycroft), my Parliamentary 'neighbour, and which we have gone through on earlier occasions during the last sixteen years. The Chancellor of the Exchequer ought to scrap the pay pause now and start again. He should start again by bringing the Trades Union Congress and the Federation of British Industries in at the beginning, before he takes any steps and not at the end. I do not know that he can do this, but he ought to do it.

In the words of the E.C.E. Report: The chief hope offered by the July measures is that by temporarily restraining increases of wages and of production, time will be given to discover long-run solutions… Ten years after the Tories have been in power we are still trying to discover the long-run solutions. This is what the Chancellor ought to be doing now.

I do not believe that the official explanation that he is giving productivity time to catch up with wage rates holds much water. There is now a far greater built-in resistance to lower costs when there is lower production than there used to be. Not only are salaried workers kept on, but managements now tend more to hoard labour—weekly paid workers. They are not thrust out on to the employment exchanges at a week's notice as readily as they used to he. Moreover, there is a small decline in the number of weekly wage earners in manufacturing industry. There is also a large increase in the number of white-coated workers, and in overhead costs such as advertising.

These are all built-in costs. I understand that £500 million is likely to be industry's bill for advertising this year. It may be cut down over a period, but I venture the opinion that the resistance to lower costs today, when we have lower production, is likely to increase the cost per unit of production and not to decrease it. If that is true—and it is at least likely—our exports become more, not less, costly.

Let us look at our experience. In 1957, when the present Minister of Aviation put his measures into force, the manufacturing production index was 108·3. The following year it had declined—not increased—to 106·9. Let us take 1955. The manufacturing production index was 106·4 when the Home Secretary introduced his measures. In 1956 it had declined—declined—to 105·9. What evidence is there, what basis is there for believing that on this occasion, contrary to the experience of the last two occasions, if we follow this short-term economic policy our unit costs will be reduced, our exports will, therefore, increase, and that they will be less costly in the process?

The signs already are that the pattern of the last two occasions is repeating itself. In June, 1961, the index of manufacturing production was 127. It was the same in July. In August it was 125, in September it declined to 123, and productivity, which we are told is the excuse—the Government say that productivity must catch up with wage costs—was 118 in July and, in September, 114.

Our economy is rather like a jet aircraft engine. It operates most efficiently when it is operating at a high altitude, and it is most inefficient when operating at a low level. Not to appreciate that is one of the basic mistakes that the Chancellor is making by the short-term remedies that he has proposed. Our exports are showing no resilience. They were exceptionally high in June at £331 million, but the figures in succeeding months have been £307 million, £324 million, £297 million, £311 million and, in November, £305 million. There is no evidence there that, according to the theorists, the cut in home production is releasing exports, or is having any effect at all. Indeed, the figure for November of this year is well below that of November of last year, when it was £329 million.

When the present Minister of Aviation introduced his measures he had exactly the same experience. Exports declined immediately after he raised the Bank Rate. They remained at a low level for over twelve months, and it was two years before they had fully recovered to the level at which they stood at the time of the crisis of September, 1957. What reason does the Chancellor give the House for assuming that things will be different now? He is using the same measures, taking the same remedies; why will the solution be happier this time than last?

The Government pay lip-service to growth, but their actions hardly bear out their words. Indeed, this concentration on restricting consumption, on driving down the economy, has a most damaging effect on the appearance of Britain in the eyes of the world. Over the last two years I have had the good fortune to do more travelling than have most hon. Members, and I am only too well aware of the image presented abroad by this country—a large part of it entirely misplaced. The accent put on unofficial strikes and official strikes gives an impression in overseas countries that is quite far from the mark when one realises that 20 million men and women are going to work every day and are carrying out their jobs faithfully and well.

Nevertheless, it is the "image" that matters—to use the popular current word—and what is reported abroad and considered by those who have less desire to help this country than, I hope, have hon. Members is the damage done to our economy by strikes; the damage done to our economy by the high Bank Rate, the damage caused to our economy by constant inflation, and the damage that is done to our economy by constant balance of payments crises.

The Chancellor is giving additional currency to those who would take this view. Let me quote what is said by the Export Council for Europe—a semi-Government body, I believe: An adverse factor affecting Britain's exports"— in this case, to Belgium— is a widely-accepted image of the U.K. as old-fashioned. It is important that this should be corrected, and replaced by a picture of a dynamic, imaginative and forward-looking industrial nation. Germany's widely-advertised industrial recovery has captured the Belgian's imagination. It has captured the admiration of others besides the Belgians.

I know that this picture is misplaced, but as long as the Government persist in adopting short-term remedies without getting down to the fundamental weaknesses in the economy they merely play into the hands of those abroad who have no desire to see this country prosper.

The Chancellor uses a specious argument—not so much in this House but when making speeches in the country and when broadcasting—that the Government's purpose is to preserve the value of wages. It is doing nothing of the sort. If I may point the contrast, when Cripps introduced the wage-restraint policy the cost of living in this country was held stationary for two years—

Photo of Sir Spencer Summers Sir Spencer Summers , Aylesbury

Will the hon. Gentleman tell us which two years?

Photo of Mr James Callaghan Mr James Callaghan Shadow Chancellor of the Exchequer, Member, Labour Party National Executive Committee

Yes. That period was from March, 1948—when, I think, the hon. Gentleman will find that the index stood at 108, although I have not the figures with me; I remember them, having looked them up during the weekend—to the autumn of 1949, when the figure was 109. By the spring of the following year it had risen only to 111. The cost-of-living index was held practically stationary during the whole of that period—[HON. MEMBERS: "Oh."] I do not know why hon. Members should want to take exception to something that the Labour Government did to hold down the cost of living. I know that it destroys their theory that the cost of living constantly went up. The fact is that it remained stationary or practically so.

What is now taking place is that the cost of living is going up constantly every month. The Government are not preserving the levels of wages at all, but are eroding them. The Chancellor cannot tell trade union leaders that they should tell their members, "What we are doing is preserving the value of your money." It is doing nothing of the kind, and I can tell the right hon. and learned Gentleman that he will be faced with a number of claims over the next few months—I do not see how trade union leaders can avoid making them—based on cost-of-living considerations.

The effective increase in the cost of living this year has already been 4½ per cent. Is the Chancellor to say to men on £10 a week, "There shall be no recompense to you for that?" He may well do so. I am reminded that he has already said it in the case of the laundry workers who are getting about £7 10s. a week, but Sir Stafford Cripps made it quite clear in the extract I have quoted that if such a situation should occur he felt that there must be recompense for inadequate personal incomes.

I am here pointing out the difference in the treatment meted out to the people by each side of the House when in power; and why the Chancellor has utterly failed to understand the psychology of ordinary men and women, and has utterly failed to understand the deep and bitter resentment felt by trade unionists over his acts of folly.

Incidentally, further to answer the hon. Member for Aylesbury (Sir S. Summers), I find that I have with me the figures for which he asked. On 13th April, 1948, the retail price index stood at 108; on 12th April, 1949 it was 109—one point up—and by the time of devaluation, and I must ask the hon. Gentleman's pardon, it had gone up to 112 points, not 111. [HON. MEMBERS: "Oh."] I do not know why hon. Gentlemen opposite are saying "Oh," for the index has gone up more than that in the last nine months. I have been talking about a period stretching over two years.

Photo of Sir Spencer Summers Sir Spencer Summers , Aylesbury

Was that not exceedingly unfair? The hon. Gentleman was seeking to argue that for a certain period there was stability. In the course of that argument he failed to disclose details we have now extracted from him; that after the index had gone up by four points we had inflation, which must have increased the cost of living thereafter.

Photo of Mr James Callaghan Mr James Callaghan Shadow Chancellor of the Exchequer, Member, Labour Party National Executive Committee

I am informed that in the ten months after devaluation, the retail price index went up by one point. Does the hon. Gentleman wish to refute that?

Photo of Sir Spencer Summers Sir Spencer Summers , Aylesbury

I do not have the figures.

Photo of Mr James Callaghan Mr James Callaghan Shadow Chancellor of the Exchequer, Member, Labour Party National Executive Committee

The Chancellor said that he wanted time in which to think about long-term activities. That is why the Chief Secretary to the Treasury has been appointed: to give the right hon. and learned Gentleman time to think. He has taken over control of all this massive expenditure about which he told City of London young Conservatives the other day.

I speak of the £66 million which went out in beef subsidies last week. I hope that an inquiry will be instituted to discover to whose fingers some of that money is sticking. It is clear that the housewife has not had the full benefit, nor has the farmer. Where has it got lost? If the Chief Secretary has control of this massive portion of expenditure, why did he sanction it without inquiring or telling the House where it has gone and who was to benefit from it?

I regret that the right hon. Gentleman the Member for Flint, West (Mr. Birch) is not here. He has a sort of gloomy cynicism which befits a retired stockbroker. He has no time for moral appeals or pious aspirations. I want to deal with that right hon. Gentleman because, I understand that some of the supporters of the Government have criticisms to offer and I imagine that he would probably be echoing their criticisms.

I want to ask hon. Gentlemen opposite what they think the Chancellor should do within the limits of their own philosophy. The right hon. Gentleman the Member for Flint, West was clear on this point. Manufacturers were in the game for profits and trade unions were out to get more money, he said. It had to be expected. What was wrong with that, he wondered. That is what that right hon. Gentleman said, and in the circumstances, what would the critics of the Government do?

I hope that some of those critics among hon. Gentlemen opposite are present today, for they have two remedies within the limits of their own philosophy. The first they followed before the war, when the remedy for a weak balance was unemployment. "We live well at the expense of those who cannot afford even the necessities of life. That will keep down imports", they said. Since the war the second remedy has been used. They have turned the penny over and the remedy which Conservative Governments have adopted time and again in the last ten years has been that of inflation.

What am I to believe, for I am only going by the indices? I can only believe that the value of money has continued to go down in the last ten years—the life of Tory Governments. What has been the remedy if it has not been inflation? When the Tories have had to choose between pre-war unemployment and post-war inflation, they have chosen the latter.

Photo of Mr Raymond Mawby Mr Raymond Mawby , Totnes

Would not the hon. Gentleman rather say that at all times we have chosen against a high level of unemployment? That is the important thing.

Photo of Mr James Callaghan Mr James Callaghan Shadow Chancellor of the Exchequer, Member, Labour Party National Executive Committee

I want to put this to critics of the Government. The dilemma which this Government have failed to solve during the last ten years is how to keep a satisfactory balance of payments, how to pay for what is brought in by increased exports and, at the same time, how to keep industries running all-out and to keep a stable level of prices. Is that not the dilemma?

Photo of Mr James Callaghan Mr James Callaghan Shadow Chancellor of the Exchequer, Member, Labour Party National Executive Committee

Then what are the figures in this equation? We must keep the balance of payments squared. But there are two other variable factors: first, unemployment; and, secondly, inflation. I am saying that the Government have chosen inflation. They say, "We are the party who will protect pensioners and people living on small fixed incomes". They have done nothing of the sort. They have chosen inflation as the remedy.

The Chancellor has told us just what is his view. He has said that, in his view, inflation is the biggest social evil. He did not say that about unemployment. Thus, he had to decide between unemployment and inflation, and I would be interested to learn what his critics on the back benches opposite think the Chancellor should do. I know that the Chancellor will say that he wants a National Council for Economic Development to be established.—He wants that for only one purpose—to get a guiding light for wages. He wants to be able to give some guidance to arbitrators, to those sitting on joint councils and people working out wages, what is the amount the economy can stand in any one year for wage increases. From all the propaganda that has been put out, planning—according to a speech made by the Chancellor—means …examining together the underlying factors in our situation and exposing some of the obstacles to growth so as to find a significant new area for common action. Any idea that the right hon. and learned Gentleman may have to plan or fix wages in isolation from planning the rest of the economy is politically unacceptable to the Labour movement and the T.U.C. That should be quite clearly understood. We are not having wages singled out while profits, dividends and all other types of incomes go free. While the Chancellor may believe that a development council will do that job for him, if the T.U.C. serves on it my guess is that he will find that he has unlocked Pandora's Box.

We are not going to be content with regulations about wages while other sections of the economy go free. This is one nation, and if we must make sacrifices we must share them in the same way, all of us. The Chancellor must choose between a laissez faire type of economy—which has run us into three successive crises—and a planned economy, in which we can go forward as a nation. With all the aid we can get we must, as a nation, single out our objectives to ensure that we have the resources available to fulfil them and to ensure that the objectives and the means to secure them are agreed by the nation as a whole.

Photo of Peter Tapsell Peter Tapsell , Nottingham West

I agree with much of what the hon. Gentleman has been saying, but is it not a fact that, as a proportion of capital employed, profits and dividends have been falling this year?

Photo of Mr James Callaghan Mr James Callaghan Shadow Chancellor of the Exchequer, Member, Labour Party National Executive Committee

As far as I know, dividends have not been falling, although profits have been—at any rate, in certain sectors. We are talking about a long-term solution to our problems. We are not discussing whether profits in the next six months will fall but the type of economy Britain should have. I am saying that the Chancellor cannot have an economy in which he is going to have the benefit of controlling wages while the remaining sectors of the economy escape unscathed. It is all or nothing.

I have long since come to the conclusion that the only type of economy that can enable this country to escape from this constant round of crises is one in which planning plays a more predominant part than has been the case hitherto; an economy in which public ownership employed at the growing points of industry will be able to stimulate much of private industry. I doubt if this Government has the stomach to carry out the sort of economy and reforms that are necessary if this country is to survive. The Times newspaper today asked my hon. Friend the Member for Southwark (Mr. Gunter) and myself to produce a blueprint of what we thought the Labour Government should do. I must decline the invitation, speaking for myself. I do not know what my hon. Friend will do. This afternoon I think it is sufficient for us to examine the defects in the Government's administration.

I should like, however, just to say this. When a Labour Government comes to power—[HON. MEMBERS: "When."] Yes, when, and I tell hon. Members opposite that they have lost the confidence of the country whereas we on this side of the House have two years in which to gain it, and we shall do so. When we come to power I promise this, speaking at any rate as one member of the Labour Party which will then form the Government; we shall govern, I believe, wisely, soberly and fairly. We shall place the needs of those who are in need first. We shall try to secure a dynamic growth in the economy. [An HON. MEMBER: "How?"] We shall see that the product of industry is fairly distributed. We shall see that there is a proper balance between private and public expenditure.

An hon. Member asked how we should do it. Over the next two years, do not fear, we shall be able to show the people of this country that not only have the Government failed them but that we have proposals which will be entirely foreign to the ideology and prejudices of hon. Members opposite, and which, if carried out, will enable Britain to recover the greatness from which the present Government have allowed her to slide.

5.2 p.m.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

I have listened with great interest to the maiden speech of the hon. Member for Cardiff, South-East (Mr. Callaghan) in his new capacity. He spoke with his usual force and clarity. I must say that although the spokesman is new the substance was not so very different.

The hon. Member said something which I should like to endorse. He spoke of the image of Britain overseas and said that he did not wish to knock Britain at all. I want to begin by telling the House that I heard one of those leading the drive for exports, Sir William McFadzean, say at the last meeting of the National Production Advisory Council on Industry that there has been so much denigration of Britain by the British, so much talk of inefficiency, of bad management and bad labour relations, that our exporters have to remove this general impression about Britain before they can begin to sell British goods. I think there is a great deal of truth in that comment, and I do not think it is possible for the Opposition altogether to escape responsibility when they talk about the underlying weaknesses in the British economy.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

Of course, there are weaknesses or disadvantages or handicaps about our position. These facts should be known generally. We import half our food. We have to import three-quarters of our raw materials. We spent most of our overseas savings in two world wars. Many of our industrial practices are designed to deal with conditions of mass unemployment rather than full employment. We have heavy defence obligations overseas. We have heavy responsibilities to emerging nations in the Commonwealth. The pattern of our trade has been built up on the export of capital, and within the sterling area we have no exchange control over movements of capital. Our currency is a reserve currency and, therefore, susceptible to movements in world trade or confidence. These are the facts of our position. Not all of them need cause us shame, and most of them cannot be altered whether we like it or not. Because our currency is a reserve currency, we are particularly concerned with international monetary arrangements. I want to mention something which, amid all the upsets and disappointments, is one of the most important events in 1961, and that is the result of the discussions in Paris last week. They resulted in an understanding between Ministers of ten Govern- ments on proposals which they would submit to their Governments for supplementing the resources of the International Monetary Fund. Her Majesty's Government are prepared, for their part, to accept the proposals, and we hope that the other Governments will confirm very shortly that the scheme is acceptable to them.

The action required to complete the scheme will then be taken in the Board of the Fund, and the Government will put legislation before the House to sanction the possible British contribution. I am not going into details today pending acceptance by other Governments, but I think that without impropriety I can say to the House that the figures canvassed in the Press have not been very far out.

When this all goes through, there will be a valuable addition to the resources effectively available to the Fund, and this should reinforce international liquidity and help to improve the stability of the exchange markets. I think this is certainly one of the most important developments this year. It is something for which we have been working since I spoke on the matter at the Fund meeting in September, 1960, and I am very pleased that we are within sight of another stage in the development of international co-operation in the monetary field.

Having said that, I come to the part of the hon. Gentleman's speech dealing with what he described as the decline in our economic position. He said that he wished that the truth should be told. We hear a good deal of talk about the poorness of our economic performance compared with that of our competitors, and the "league tables" are constantly quoted against us. I have always had some doubt about these various statistics. In the debate on growth last February almost every Opposition speaker said that Britain was stagnant and that our competitors were leaping ahead. From the statistics now available, it is quite clear that in the first eight months of this year the level of activity of Germany and Holland, for example, was decreasing and ours was growing. Therefore, one has to take these statistics with a grain of salt.

The right hon. Member for Battersea, North (Mr. Jay) said in the February debate: I will not quote the league tables again today. I do not think that it is now denied by anyone on either side of the House that our production record is deplorable, corn-pared with the rest of Western Europe or with Russia, or with Japan, or with a number of other countries."—[OFFICIAL REPORT, 6th February, 1961; Vol. 634, c. 38.] I read an article that he wrote in the New Statesman on 24th November in which he said: The truth is, of course, that the spurt in Germany. France, Italy, Austria and Japan from 1952–1960 was the belated recovery from the war, helped by United States aid, of the devastated countries, which had not shared in the quick recovery of the victorious ones, the United States, the United Kingdom and Canada. It is now slowing down. Yet we are being asked"— He was arguing against the Common Marketto make great national sacrifices for a reason which will be seen a few years hence to have been a temporary statistical illusion. Therefore, I think I should leave the "league tables" with that wise comment upon them. It is not quite the spirit of the debate of last February.

I agree, whatever the "league tables" may say, that our economic growth can certainly be improved. Economic growth is a phrase frequently on our lips in this House, and I wonder how much it conveys to the man in the street. It is not an end in itself. It is the means of achieving better living standards, better social services and improved capacity to do our duty in the world, particularly in helping the poorer nations. But for us, with our balance of payments position, the growth must take place on the sound basis of an increase in our visible exports. I think the one way of trying to achieve growth which we ought not to follow is to increase the pressure of home demand upon our resources irrespective of what happens to exports.

With regard to exports, this year we are selling overseas about £3,600 million worth of goods. Therefore, the quality, the prices and the delivery dates cannot be so bad. In Western European countries our exports went up between 1959 and 1960 by £112 million, but our imports from those countries went up by £214 million, and the balance against us, therefore, went up by something like £100 million. But in the first ten months of this year our exports to those countries have gone up by £145 million and imports from them by £22 million. That, so far as this area is concerned, is a striking improvement, and those who went to the recent Convention at Eastbourne were, I think, convinced of the determination of exporters present to carry on that progress next year. I should like to pay my tribute to the work being done by that Convention, and I think that the figures I have mentioned are an indication of the success which it is beginning to have in its task.

I am not going to repeat what I said in the last debate about help for exports. I said then, however, that I thought there was room for improvement in our machinery for the provision of credit. I was thinking both of the availability of credit and of its terms. We have been pursuing those matters with the institutions principally concerned. I had hoped to make a statement before the House rose for the Christmas Recess, but the discussions are not yet concluded. However, I am able to say that progress is being made and I expect to be able to say something to the House as soon as Parliament reassembles. This is an extremely important matter from the point of view of the national interest, and that is recognised by those responsible.

I believe, therefore, that there are going to be substantial opportunities for expansion of our exports next year. Our purpose has been to put the economy into a position in which full advantage can be taken of those opportunities, and there should be sufficient room in the economy to enable the necessary goods to be produced and exported.

Because of the action taken—so much criticised—in July, I believe that we are in a better position than we have been for a long time to meet the increasing export demand without introducing inflation. But the level of home demand must be carefully watched and the restrictions on home demand which have produced the slight slackening of pressure on our resources in the last few months must be maintained. As the House knows full well, though not, I think, everyone outside the House, upon this expansion of our visible exports depends the maintenance of our present standard of living and the prospect of economic growth. This is the first priority—the expansion in our visible exports—and I hope that there will be unanimity in the House on that.

Photo of Mr Roy Jenkins Mr Roy Jenkins , Birmingham Stechford

Can the right hon. and learned Gentleman tell us whether, in making the most optimistic assumption about possible exports in, say, the first three months of next year, which may be a period of expanding exports, he thinks we can move back into a period of full utilisation of our resources without allowing the home market also to expand during that period?

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

I think that it is a question of priorities, and that, in fact, our resources will be higher if we take advantage of the opportunities. I believe that there are very great prospects in the export market. This is, of course, a dilemma, but I do not want the increase in the home demand to draw away from the possibility of serving the export demand. One hopes, therefore, that there will be an increase in exports and that that will lead to an increase in home demand. But the increase in exports must come first if we are not to damage our balance of payments position. I would say to the hon. Gentleman, when he talks about the first three months, that I think it would be wiser to look at the year as a whole in that context. The full opportunities may not be realised in the first three months.

With regard to investment, one of the stock criticisms in the past used to be that we were not investing enough as a country. In the past ten years fixed investment has gone up from about 15 per cent. of the gross national product to 20 per cent. That is for the first six months of this year, and I think it is the first time that this figure has been given publicly. It is an improvement of which we can be considerably proud.

In the third quarter of this year, the gate of investment by manufacturing industry was 20 per cent. above that of the third quarter of 1960. In buildings it was up 16 per cent., in plant and machinery it was up by 24 per cent., and substantial increases in the public sector are also taking place. I think that that is very satisfactory and, when we are dealing with so much criticism, it is a thing we should remember—the very satisfactory growth in investment. I can concede at once that a high rate of investment is not by itself enough. There are many other factors. That is why I have been trying to set up a National Council for Economic Development. I have had several meetings with representatives of trade unions and employers. At the second meeting with the T.U.C. representatives in October they were led by Sir Alan Birch. I should like to pay a sincere tribute to him from my knowledge of him. He was able, wise, firm but courteous in argument, and his death is a sad loss to the trade union movement and to the nation.

I am disappointed not to have agreement yet from the representatives of the T.U.C. to join in the work of the proposed Council. I am still awaiting the T.U.C.'s reply. I hope that it will be favourable because I believe that we have offered it a great opportunity to exercise influence on economic policy at the formative stage and to co-operate in creating conditions under which the real standards of living of its members can improve.

I certainly do not regard this body as one whose duty is to negotiate about wages or to seek to enforce a wages policy. Its primary task is to tackle the obstacles to sound growth, to consider the availability and use, or misuse, of resources, the availability of technical skills and matters of that sort, although, of course, I quite agree that it is impossible to dissociate completely from those tasks consideration of the proper relationship between increases in incomes and increases in production.

Photo of Mr Albert Cooper Mr Albert Cooper , Ilford South

I do not wish to embarrass my right hon. and learned Friend, but we can assume that there is a possibility that the trade unions may not wish to co-operate in this new Council. What will be the position of my right hon. and learned Friend in that eventuality? Will he go ahead, as I hope he will?

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

If my hon. Friend will wait a moment, what I am going to say now may be a partial answer to him, although I think that I should be very unwise to cross that particular ditch before I come to it.

As I have told the House before, the work of this Council will take place at two levels. First, the Council itself and then the staff, which will be independent of the ordinary Governmental machine. I have decided that it would be wrong for me to delay any longer the setting up of the staff. It can do valuable preparatory work pending the setting up of the Council. I accordingly propose to appoint a Director-General and to proceed with the recruiting of the staff.

I am glad to be able to inform the House that Sir Robert Shone, who has had a wide experience of forward planning, particularly in the steel industry, has agreed to accept this appointment. He will take it up early in the New Year. So far as the staff is concerned, quality rather than quantity will be the criterion, and full use will, I hope, be made of existing machinery within the Government and elsewhere for the accumulation and examination of statistics. I have no idea of a great new empire being set up to deal with these matters—quality rather than quantity, and a small high-powered body rather than a large one.

I have spoken of the encouraging opportunities for exports. The trade gap has narrowed since the beginning of the year. In the third quarter of 1961 it was running at minus 35 and in the third quarter of 1960 at minus 146. Therefore, there has been an improvement. But I do not want anyone to misunderstand me. Although on a balance of payments basis our visible trade deficit is now probably quite small, our external payments problem is still far from being solved. Its solution will depend upon sound growth and expansion of our visible exports, which in turn will depend upon restraint on excessive demand at home and also upon the crucial factor of the level of our costs, as well as the vigour of our salesmen. This brings me to the question of the pay pause and a national incomes policy.

I have noted—what the hon. Gentleman said at the beginning of his speech confirmed it—that the Amendment does not oppose the pay pause as such. It condemns my handling of it and says that it is grossly unfair and not a long-term solution. The hon. Gentleman seemed rather to indicate in what he said that, had it been for only two months, he might have been able to support it.

As regards the handling of the pay pause, I had made repeated requests for restraint during the previous nine months or so, starting with the speech I made at the Mansion House in October. 1960. I had discussions with both sides of industry. In my Budget speech, I said that there was reason to fear that inflationary pressure would speed up further, that it was our principal menace then and one which it was impossible to exaggerate. In my view, the increases in the cost of living which have taken place were directly due to the increases in the wage and salary bill which had preceded them. By July, it had become quite apparent that further action was needed.

The request for a pay pause in increases in personal incomes was only one of several tough and unpopular measures. I am blamed for failing to consult the union leaders. It would have been impossible for me to consult them or anyone else without telling them the full background. That background included the 2 per cent. increase in Bank Rate and substantial increases in indirect taxation. It is obvious that I could not have consulted either side of industry effectively before my announcement.

Photo of Mr Hervey Rhodes Mr Hervey Rhodes , Ashton-under-Lyne

Does not the right hon. and learned Gentleman realise that a Labour Chancellor, Sir Stafford Cripps, took five months to negotiate with the T.U.C. before he brought in his wage restraint policy?

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

I discussed these matters both publicly and otherwise for a very long time beforehand. I know that Sir Stafford Cripps' precedent has been put before me, but I do not think that it was a very successful one. Considering what happened in 1949 and 1951, I do not think that it can be represented as a very successful precedent.

As to the pause providing a longer-term solution, this has never been even remotely suggested by me. It is a temporary measure to secure a breathing space. It is the means of carrying out, during a certain phase, a policy of restraint over increases in personal incomes to which so many pay lip-service. Again and again we hear lip-service to the idea of restraint in personal incomes, yet as soon as action is taken, there is immediate criticism on all sides. I have said throughout that I should review the position early in the new year. I shall return to this point later.

The next point made by the hon. Gentleman was as to the unfairness of the pay pause. This allegation, no doubt, relates to what has happened in the public sector. The Government felt that they must carry out in the area where they had direct control the policy which they were advising others to pursue. I admit that there are obvious disadvantages and elements of rigidity and discrimination whenever a line, even a temporary one, is drawn. But I do not accept that it has been grossly unfair or that it has undermined machinery for collective bargaining. In general, I believe that the pause has been much more widely understood, accepted and followed than some would have us believe. I think it has materially contributed to a growing feeling that we are again becoming able to beat competition overseas. It has helped in holding costs and making our resources more nearly equal to the demand upon them, and by doing that it is defending the real value of money, and, in that way, the interests of all those with small fixed incomes. Having said that, however, I say again that it is not a long-term policy.

With regard to the longer term, I am convinced that we must try to evolve a national incomes policy. The Government cannot impose one without interferences with liberty which would be insupportable.

Photo of Mr James Callaghan Mr James Callaghan Shadow Chancellor of the Exchequer, Member, Labour Party National Executive Committee

May I put to the Chancellor a question which weighs very heavily on the minds of the Civil Service trade union leaders and the T.U.C.? If he were able to announce that. as from a date, say, 1st January or 1st February, he would be willing to allow cases to go to arbitration, it being for the arbitration tribunals to fix the effective date, he would, I believe, be on the way to solving some of his undoubted difficulties. Can he go as far as that—which, after all, is really bare justice?

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

I shall deal with that point later, if I may. I shall come back to it later.

I was speaking about the longer term. I was saying that the Government cannot impose a national incomes policy without interferences with liberty which would be insupportable. Equally, the Government cannot stand aside, particularly in view of the persistent tendency over a period of years for the rate of increase in incomes to outstrip the increase in production, having regard to the leap-frogging of claims and the extent to which retrospection has become expected in certain sectors. The Government, therefore, in my view, cannot impose and they cannot stand aside.

As I see it, any policy designed to secure this more realistic relationship between increases in incomes and increases in production would have to include the following elements.

It must be the Government's responsibility, through their fiscal and monetary policies, to stop home demand interfering with exports, attracting excessive imports and causing inflation.

A better and much more widespread understanding is needed throughout the community of the distinction between money incomes and real incomes and of the harm we do ourselves when total incomes rise faster than production.

All who influence or decide the course of wages and salaries, whether by negotiation, arbitration or in other ways, or who determine profit margins, dividends and prices, must recognise that, in the long run, all will suffer if sectional interests are allowed to take precedence over the interests of the community as a whole.

Appropriate arrangements will, therefore, be needed—this relates to what I said earlier—to make information generally available about the country's economic circumstances and prospects in such a way that not only those immediately concerned with a particular negotiation but also the community as a whole are able to judge what rate of increase in incomes will be practicable and safe. Such information will clearly carry far more weight if it is prepared in a process of consultation, perhaps through the National Council for Economic Development, rather than if it is prepared by the Government.

The Government would have to recognise that, as part of the incomes policy, appropriate corrective action would have to be taken if aggregate profits showed signs of increasing excessively as compared with wages and salaries.

Finally, a policy of this sort must concern itself also with expansion, for the promotion of sound economic growth is just as much a part of a national wages policy or national incomes policy as the other measures to which I have referred. Again, this is where the National Council for Economic Development comes in.

I have described this as a national policy rather than as a Government policy because, to be effective, it will need not only action by the Government but also the support of all sections of the community. All must feel confident that restraint on their part will not be exploited by others. It will necessitate the development of new procedures and new attitudes of mind which, in certain respects, will involve a break with long standing traditions. The experience of several European countries suggests that, even with smaller and less complex economies, the evolution of a satisfactory incomes policy is a long and difficult task.

I believe that there is a growing realisation that a policy along something like the lines I have sketched could transform the economic scene and do more than anything else to secure the rising standard of living we all wish to see. To achieve this within the framework of a free society with a high level of employment is an inherently difficult task and one to be effectively handled, as I have said, only with the fullest consultation with both sides of industry. Inevitably, this will take time, many months, in my view, because there are great issues involved.

So far, I have had discussions in general terms only. I have been held up by the delay in the decision about the National Council for Economic Development because the two operations cannot be dissociated. If we are making a cooperative effort to expand the economy on sound lines, this must very much change the atmosphere for evolving a national incomes policy.

Photo of Mr Samuel Silverman Mr Samuel Silverman , Nelson and Colne

The right hon. Gentleman talks throughout part of his speech of the limitation of incomes, and I apprehend that he uses that term because he wishes the House to understand that the limitation is to apply to dividends as well as wages. If he means that, is it not a little misleading? If we limit wages, the wage increases that are not granted are, of course, lost. But if we limit the distribution of profits already earned, the income is not effectively limited at all, because the only effect of not distributing the earned profit is to increase the capital value of the shares, which can be made into income by selling them and is then additionally not taxable.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

I understand the hon. Gentleman's point, but if he will study carefully what I said in my speech about profits, which is one of the elements, I think he will find that his point is met. I think that meets what he has been saying.

I have indicated the sketch of a longer-term policy. In the meantime, what of the immediate future? It would be a negation of policy to bring this phase of the restraint, the pay pause, to an end prematurely. When it does end, we must put something more in its place than just Governmental exhortation. Nor do I think that the pay pause can continue on present lines for the whole period that will be required for the effort to work out with both sides of industry a fully fledged national incomes policy. I repeat that it will take a considerable time, because there are great issues at stake and it is really a novel experiment in this country. What we must now do is to try to devise, for the next phase, an intermediate phase, in consultation with both sides of industry, arrangements for maintaining the necessary restraining influence on the growth of incomes. The broad picture is, I think, by now fairly well known.

The national bill for wages and salaries is running at about £16,000 million a year and represents over 70 per cent. of the total of personal incomes. National production has over recent years tended to rise at an annual rate of about 2½ per cent. to 3 per cent. I hope that, if all goes well, we can do better than this in the future. But it would be most unwise to count on this in advance, and, of course, we have the immediate future already mortgaged to some extent by agreements which have already been made but which will only come into effect during the course of 1962. I am bound to say, therefore, that in the Government's judgment the general scope for wage and salary increases in the Doming financial year will be small. There may be room for modest increases in certain cases, but, on the best judgment that we can form, any large increases in wages and salaries would serve merely to add to inflationary pressures; they would be gained only at the expense of other groups of workers and of the community as a whole, and they would weaken our competitive position in world trade.

I am inviting representatives of both sides of industry to meet me very early in the New Year for consultation about arrangements for this intermediate phase, against the background of the factors I have just mentioned.

Taking up the point which the hon. Gentleman made about those in Government service, consideration will have to be given to the position of the Civil Service in this interim phase. I shall ensure that there will be early discussion with staff representatives about this problem.

Photo of Mr James Callaghan Mr James Callaghan Shadow Chancellor of the Exchequer, Member, Labour Party National Executive Committee

Will that include a point about which they feel very deeply, namely, the restoration to the arbitration tribunals of the right to fix dates from which increases claimed can be awarded?

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

If one is offering discussions I think that it would be most unwise to exclude anything. I shall certainly not exclude anything from discussions that I may have with both sides of industry, or with the staff representatives about these matters.

If we want to maintain the value of our currency and to promote growth in real terms, we cannot again risk letting the increases in incomes outstrip the increases in national productivity. In July, 1961, we had to defend this principle by the rough and ready method of the pause, with its admitted imperfections. In 1962, we shall, I hope, be able to devise better arrangements to keep incomes and productivity in balance. But the need to be on guard will remain. It is no good pretending that any of this is easy. It is not, whatever lip-service may be paid to the idea of restraint.

What are the alternatives to the approach to this problem that I have outlined? On the one hand, we could move towards a totally managed economy in which wages, prices, production and consumption—everything is fixed by the central direction of the Government. Not a very attractive prospect. The other possibility would be for the Government to take the steps necessary to produce a large dose of deflation, reduce demand still further, and so to check the growth of incomes. I do not think that this is a very attractive prospect either. It would threaten our prospects of securing rising standards of living and of maintaining the high and stable level of employment which we have achieved since the war. It would also discourage that high rate of industrial investment which, as the whole House recognises, is essential to Britain's competitive performance in world markets. The stakes are very high. But I believe that there is a solution based on common sense and co-operation, and in asking the House to reject the Amendment I say that it is my intention to continue to seek it.

5.36 p.m.

Photo of Mr Henry Hynd Mr Henry Hynd , Accrington

I think that we on this side of the House at any rate must be very disappointed by the Chancellor's speech. Towards the end of his remarks he promised us that he would say something rather definite about what was to happen at the end of the wage pause, even, as I understood it, when the wage pause was to end. I did not hear him tell us. He talked about the intermediate phase in not very specific terms, and I am certain that that will not satisfy the trade unionists of the country, or indeed, anybody else. We really must have something a little more definite than that.

I resent the implications from hon. Members opposite that if we talk about the position of our economy today and point to any defects we are "knocking" the country. No one on this side of the House wants to do that. We all want to see the country prosper. We would all rejoice if the situation were better, but as the situation is as it is we can discuss it intelligently only if we face the facts and bring them out in this House, otherwise we shall get nowhere at all in discussing this problem. So let us discuss it without any charges that anyone who mentions the unpleasant side of the affair is knocking the country and being unpatriotic.

The Chancellor admitted a few moments ago that his policy, in his own words, had "admitted imperfections". That is the burden of our complaints. Let us look at what he is asking us to accept.

The Chancellor is asking us, on the one hand, to accept the pay pause and he has done his best in the public sphere to introduce and to hold a pay pause. He has gone a little further and descended last week to asking the 10s. widow to accept a pay pause. The whole country would accept a pause if it were fairly applied. But look on the other side of the balance sheet. There is no pause in dividends, as my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) said. He mentioned some of the companies to which reference was made in yesterday's Reynolds News. I have a whole sheet of other companies which have raised their dividends in the last few weeks. It is perhaps necessary for the record that I should mention some of them: Steel Barrel Scammells and Associated Engineers, Telefusion, Dimplex, Cozens and Sutcliffe (Holdings) Limited, Buxted Chickens and the Rank Organisation. Last week the Financial Times published a whole list of companies in a similar position. I will not mention their names but will merely count them. Eleven companies were mentioned in the Financial Times.

In view of these dividend increases, how can any Government ask the workers to accept a pay pause? How can they ask the trade union officials to get their members to accept the pay pause? The matter goes further than that. The Chancellor of the Exchequer said more than once today that he considered it essential to restrict the demand on the home market. Why, then, has he given extra spending money, amounting to £85 million a year, to Surtax payers? No doubt a large part of that will be spent on the home market. Is that restricting the demand on the home market? The right hon. and learned Gentleman must be a little more consistent.

A few days ago we heard about the terrific increase in agricultural subsidies. There is no pause in agricultural subsidies. There is no pause in increased dividends, in the issue of bonus shares or in rent increases. Every day, more and more houses are going out of rent control as tenancies change. Every time that that happens it means an increase in rent. Why should there be a wage pause but no pause in anything else?

The precedent that Sir Stafford Cripps set has been mentioned more than once. He tried to apply it fairly and to deal with profits by taxation and in other ways. If the Chancellor of the Exchequer would do something like that, and if there were a fair deal all round, I am sure that the Labour movement and the rest of the country would co-operate with him, as he wishes them to do. The Chancellor knows that his policy is unfair. He talked about "admitted imperfections". More than once he has hinted that he intends to tax certain profits. Those are his promises. We are waiting for the performance.

We read in the newspapers about the terrific opposition that there is to his policy on this point. I have no doubt that the right hon. and learned Gentleman is having a pretty hot time from certain financial interests and, no doubt, from his own back benchers. Does he propose to match his promises with performance? If not, his pause policy will fail. It is already beginning to crack all over the place, and it will continue to do so unless he convinces the country that it is fair all round.

There is another aspect of this matter which I should like to emphasise. My hon. Friend the Member for Cardiff, South-East mentioned it, but I think that it is worth underlining. I refer to the damage being done to negotiating machinery. It has taken many years to build up the present negotiating machinery whereby both sides of industry can meet round a table or in an industrial court and argue the case instead of merely resorting to strikes and lockouts. We were beginning to think that we had gone beyond the days of strikes and lock-outs, but the Chancellor, by damaging the negotiating machinery, is driving us back to those days. It is no good hon. Members smiling. This is a very serious menace. However wise, level-headed and stable the trade union leaders may be, they may not be able to hold their members, even if they wish to do so, in view of what is happening.

The Chancellor of the Exchequer referred to his long-term policy and invited us to consider the possibility of a national wages policy. I should like to see a national wages policy, but I cannot visualise it happening under this Government. I do not think that it is possible in the atmosphere which has been created. How can the proposed National Economic Development Council or anyone else talk about working towards a national wages policy when there is no confidence and no trust in the Government's bona fides? I regret to say that that is the situation whether we like it or not.

I ask the Chancellor of the Exchequer to accept the possibility that people will co-operate with him if only he makes the pause fair all round. I accept for the sake of argument that the pause is necessary, but if it is applied, it must be fairly applied. If it is not, we may find ourselves in industrial anarchy and thereby create a position which is far worse than it was before the pause started.

5.46 p.m.

Photo of Sir Spencer Summers Sir Spencer Summers , Aylesbury

May I be allowed to make two very brief personal observations? First, I must apologise for my voice, which I hope will survive the ordeal. Secondly, I wish to apologise to my right hon. Friend the Minister of Labour if I am not present to hear the winding-up speeches. I hope to improve labour relations by dining with a trade union friend in another place.

The argument of the hon. Member for Accrington (Mr. H. Hynd), that it is very unfair to restrain wages at a time when there are self-evidently, he said, increases in dividends, left out of account one very important factor. Dividends which are declared now relate to a period six, nine and even twelve months ago, at a time when wages were increasing. It is, therefore, reasonable to argue that the shareholders, who are the counterparts of this discussion to wage earners, wait a considerable time for their dividend after the time to which the dividend relates. That is something which should be taken into account in studying these matters.

The hon. Member for Cardiff, South-East (Mr. Callaghan) began his speech with some very sanctimonious advice given by Sir Stafford Cripps and indicated that it was still valid and that the Government had done very little about it. He failed to remind us, however, that, first, within a very short time of that advice being given we had devaluation, which could not have been good for this country and that, secondly, the trade unions, in particular, and many others paid very little attention to the exhortations of the Chancellor of the Exchequer of the day. It therefore does not get us anywhere to suggest that matters were handled quite differently, with success, from the way in which they are handled now. That is not what occurred.

The hon. Member for Cardiff, South-East is a very good debater. However, sometimes he overdoes it, and he overdid it today. He sought to argue that the pay pause was almost a farce because 750,000 people had had increases during the pay pause. Later, he apparently had forgotten what he said said because he argued that it was unfair to put a stopper on wages when people were able to get greater increases in income. The hon. Gentleman cannot have it both ways. He would be more convincing if he decided which of his arguments he wished to advance rather than arguments which contradicted each other.

It is said that the pay pause is very unfair because only one side of industry is affected. I referred earlier to dividends. I think that it has been forgotten that the impact of what the Chancellor of the Exchequer did in July on other people and other incomes by way of a very high Bank Rate should be taken into account. Moreover—I cannot quote the figures, because I do not have them—there has been a very substantial increase in Profits Tax in the last two years, which, again, is a counterpart of the pay pause policy which is criticised.

Until the speech of the hon. Member for Accrington, I was beginning to get extremely depressed on this point. If there is a disparity, as it is said, between the pay pause as it affects wage earners and the lack of restraint on other forms of income, there are two ways of getting equality. One is to restrain the other forms of income to match the pay pause and the other is to take the pay pause off to let incomes of that kind rise. It would not be unfair to infer from what the hon. Member for Cardiff, South-East said earlier that his criticism of the pay pause was that it stopped people getting more wages.

The hon. Member spoke of the image of this country abroad. Let me tell him that the attitude of the trade unions is giving to thousands of people in this country the image that the only thing they want is more money. If that is an unreasonable image, and not related to the truth, they should try to do something to remove that image if it is a false one in the minds of the public.

Photo of Mr Percy Collick Mr Percy Collick , Birkenhead

The hon. Member is losing sight of a vital fact. If the Chancellor of the Exchequer seriously expected his pay pause to be well received among the trade unions, how does the hon. Member expect that the trade unions could favourably respond to it when, only a few weeks earlier, the Chancellor, in his Budget, had announced his intention to give £83 million a year to the Surtax payer. Until the Chancellor takes that back, I do not think that the Government will get any co-operation from the trade unions.

Photo of Sir Spencer Summers Sir Spencer Summers , Aylesbury

The hon. Member has entirely missed the point of what I was saying. It would be much more convincing to the country at large if the criticism was that other people were getting too large an income than to concentrate on the fact that the restraint on wages should be removed. I hope that I have made myself clear.

There are others who criticise the pay pause on the ground that it is not fair. Any decision which is made or, as frequently has happened in the past, any Act of Parliament, may create unfairness as between those who do business before the passing of an Act and those who are affected by it. Promises which were made in advance of the pay pause must be fulfilled. In all these ways, if one is to desist from a sensible policy on the ground that discrimination would be caused, one would never do anything. I do not think that the degree of unfairness which is to be found in this situation is strong enough to suggest that the pay pause should never have been embarked upon.

As my right hon. and learned Friend reminded us, exhortations to restrain wages, which represent 70 per cent., of the total of incomes, have failed lamentably ever since the war.

Photo of Sir Spencer Summers Sir Spencer Summers , Aylesbury

I am happy to be corrected—wages and salaries.

Photo of Mr James Callaghan Mr James Callaghan Shadow Chancellor of the Exchequer, Member, Labour Party National Executive Committee

Salaries are well outside the control of the T.U.C. At a guess, they constitute at least 30 per cent. of the 70 per cent.

Photo of Sir Spencer Summers Sir Spencer Summers , Aylesbury

My guess would be a different figure. If wages and salaries comprise not less than 70 per cent. of total incomes, clearly the effect on the cost of living, on our ability to compete abroad and on inflation generally, is enormous unless something is done to relate increases in incomes to increases in productivity.

It has been said many times that the pay pause as such is no policy, but must be a prelude. I was glad to hear from my right hon. and learned Friend this afternoon that without any more ado, he is appointing the staff of the National Council for Economic Development without waiting for the top tier to be put in place at a later date. I have known Sir Robert Shone for many years and I am happy to be able to testify that he is an outstanding person to head this organisation.

There is a danger that people will come to regard the establishment of this instrument, when it is completely developed with both tiers in place, as a sort of patent panacea for all our ills and too much may come to be expected from its formation. We should be careful not to fall into that trap, which others less acquainted with events than we in this House might be tempted to do.

Nevertheless, the new instrument can have important functions. It can tend to create a public opinion which is given only to instruments which are divorced from the suspicion which is attached to Governments, whatever may be their colour. Secondly, it could enable representatives of labour, speaking of the whole field—not only in matters of wages, but also of dividends and other forms of income—to express views in favour of restraint through that instrument which they might not find themselves able to express were it not for the instrument through which they are speaking.

There is one important thing which, I hope, will be high-lighted in the Press reports of this debate. In the last few years, we have had many requests for the Government to formulate a wages policy. Today, my right hon. and learned Friend used a different phrase, "incomes policy". It is important that the search should be for an incomes policy and not for a wages policy. If that is one of the outcomes of this debate and is recognised as such on the part of the Government, a very useful job will have been done.

A third advantage which could flow from the creation of the National Council for Economic Development is the ability of experts to make available to the country their opinion, based on such evidence as they can collect, of the state of the country and what ought to be done about it, freed from the scrutiny and censure of Ministers in charge of civil servants. We have some brilliant men in the Civil Service, but they all have Ministers over them. The views of civil servants which percolate to the public are only those which Ministers choose to allow to percolate. It is to be hoped that the experts who study these matters will be freer to get their views across, because in the nature of the case the situation will be somewhat different.

The hon. Member for Cardiff, South-East suggested that it was up to back benchers on this side of the House to make clear what, in their view, the Government should do about the pay pause. I want to express at least my views on what ought to be done. There are two factors to be considered in deciding what it would be reasonable for the Government to take into account. First, if the Government are tough, will there be such strikes as would cause serious blows to the national economy? Secondly, if they are tough, will they be sustained by the back benchers of their party?

The one way to create trouble under both those headings is to wobble. My belief is that whichever of those two possibilities one is talking about the right course for the Government is to be resolute and determined and to make plain here and now our position without delay. Then they will find that people line up behind them because they know the facts and will not seek to influence the Government because they will have made their position plain.

There have been a number of wages councils awards and, I think I am right in saying, a number of arbitration awards in which the operative settlement was fixed at the beginning of April. I think that it would be very unfair on those who have been through the process of arbitration, and been told they have got to wait till April for their award, if they were to find that in the interval the Government had altered their policy and permitted increases—or no longer criticised increases, shall I say?—which take place before that date.

I do not think that they can hold it any longer. I think that it would be unwise to try to hold it any longer, and the sooner it is recognised as a piece of policy, with its advantages and disadvantages, which is due to last till April, but not after April, the better it will be for all concerned with this matter.

In the meantime, there are two very important—

Photo of Mr Charles Loughlin Mr Charles Loughlin , Gloucestershire West

Will the hon. Gentleman enlighten us? If we are to have a fixed date, say, 1st April or 2nd April, for the time when the pause is to come to an end, what is to happen immediately afterwards? I can assure the hon. Gentleman that even those wage applications which are not in the pipeline will be in the pipeline by 2nd April. What is to happen once all the blank cheques become due?

Photo of Sir Spencer Summers Sir Spencer Summers , Aylesbury

That is a question which suggests that the longer we put off 1st April the better, because of all the dreadful consequences which will happen when 1st April comes.

Photo of Mr Charles Loughlin Mr Charles Loughlin , Gloucestershire West

The hon. Member cannot change the date.

Photo of Sir Spencer Summers Sir Spencer Summers , Aylesbury

All I am saying is That I think that it is unreasonable for it to be prolonged beyond that date, and equally unreasonable to bring it to an end sooner.

There are two sources of difficulty to which no reference has yet been made. The first is the coal industry, and the second is the railways. I want to say a very brief word about both.

It is said how very unfair it will be to the miners if they are denied an increase in wages during the period of the pay pause while, at the same time, it can be demonstrated that they have earned an increase by increased productivity. Unless my memory serves me false, the last increase in miners' wages was given on the strict understanding that it would be followed by an increase in productivity. It is, perhaps, debatable how much of the period since should be backdated in terms of the fulfilment of the promise then made when wages were increased, but at any rate a great deal of the time which has elapsed since then has, in my judgment, related to the last increase and the honouring of the promise which was then made, and only from then—I say that it is debatable—should begin the argument that productivity since that date has justified an increase in wages.

Let there be no mistake: pay in the coal industry is very good, and that cannot be said of the railways, where, I think, the position is a very difficult one. There, I am advised—in the terms of that very unfortunate word "comparability", which, I hope, will not find too much favour nowadays—wages are behind by about 11 per cent.

I think that it is most important that we should try to get a settlement one way or the other in the engineering industry and know what that settlement is before we finally settle an increase to the railwaymen, if any. I hope that the outcome of the engineering industry negotiation will be to mark time, and have no increase at all, because I do not believe the facts warrant it.

If that be so, then I should like to see an increase to the railwaymen of a modest percentage from April, because I do not think that we can indefinitely expect those in charge of the railways to recruit the necessary numbers if the disparity is as great as that—unless one alternative is preferred, and I mention it so as to offer an alternative: to break the principle of uniformity of pay irrespective of where men work and authorise increases to be negotiated where there is scarcity of skilled men owing to the competition of counter employment, and have varying rates according to the difficulty of recruitment for the uniform type of skill. That seems to be the only alternative to recognising that a modest increase at 1st April is, in fact, called for.

The hon. Gentleman the Member for Cardiff, South-East referred to the locomotive drivers at Gillingham and suggested that they would hold the Government responsible for the actions which they had taken. Let him be in no doubt. The public are holding the trade unionists responsible for the lack of discipline in their own ranks.

Photo of Sir Spencer Summers Sir Spencer Summers , Aylesbury

The hon. Member may think that it is an unfortunate situation, but let me assure him that there are thousands of people who are "fed up" with the failure of trade unionists to induce their fellow workers to follow the advice they tender.

Photo of Sir Spencer Summers Sir Spencer Summers , Aylesbury

Hundreds of thousands.

These strikes and unofficial strikes are admittedly, as was said earlier in the debate, tending to give Britain a bad name. I think that it is very satisfactory that my right hon. Friend the Minister of Labour should have made clear—if I have not got the figures exactly right I hope that he will correct them at a later stage—that about 60 per cent. of the strikes last year were about 11 per cent. of the employment of the country.

Photo of Mr John Hare Mr John Hare , Sudbury and Woodbridge

Seven per cent. of the working population.

Photo of Sir Spencer Summers Sir Spencer Summers , Aylesbury

I am very much obliged—60 per cent. of the strikes were to be found in those areas where only 7 per cent. of the working people were actually to be found. In other words, they were concentrated, and concentrated in the motor industry, the docks, shipbuilding and ship repairing.

I think that this is an occasion to pay tribute to his work in trying to get the two sides together and to the progress which he has made in those particular industries in trying to establish some satisfactory arrangements between the two sides and to iron out the difficulties which exist.

Photo of Mr Raymond Gunter Mr Raymond Gunter , Southwark

I am no lover of strikes, official or unofficial, but we ought to keep very clear in our minds what is the actual position. If I remember correctly the figures for 1959—the I.L.O. figures—strikes in this country, including official and unofficial, account for a loss of only one-tenth of 1 per cent. of all the working days worked.

Photo of Sir Spencer Summers Sir Spencer Summers , Aylesbury

Well, I hoped that in this company it was not necessary to emphasise the amount of first-class work going on in this country and the extent to which there are good relations, but if the omission is thought to be a pity, I am only too ready to pay tribute to the excellent work which is going on. Nevertheless, we all know that those particular areas leave a great deal to be desired, and it is not only the effect in those areas which we must have in mind but the impact of stoppages in those areas on other facets of our economy.

I think that this is an occasion also to pay tribute to Lord Rootes and his colleagues, supported by the official trade unions at the time, in smashing the unofficial strike at Acton, because there is no doubt that the discipline which we all wish the unions to exert will not succeed. [Laughter.] The hon. Member laughs, but I am sure that he does not object to wishing for discipline.

Photo of Mr Charles Loughlin Mr Charles Loughlin , Gloucestershire West

I am fascinated by the oft-repeated references to discipline in the trade union movement by people who seek to exploit the strike situation for their own ends.

Photo of Sir Spencer Summers Sir Spencer Summers , Aylesbury

I do not really think that that interjection carries us anywhere—

Photo of Mr Charles Loughlin Mr Charles Loughlin , Gloucestershire West

That is what the hon. Member is doing now; precisely what he is doing.

Photo of Sir Spencer Summers Sir Spencer Summers , Aylesbury

—and I hoped that we were to hear something a little more constructive. All I am saying is that here we had a situation in which employers and trade unions deeply regretted the strike which went on for some time.

If the employers had behaved differently right hon. Members would have said from the Opposition Front Bench that trade unions had not had a chance to justify their existence because they had been let down by the employers who had negotiated with unofficial strikers. The employers did not do that. The strike cost the company a great deal of money. The blow that was struck for good industrial relations by this firm should be mentioned in the House at the first opportunity.

I hope that it will not be necessary to charge anybody who finds fault with anything with saying things which make it more difficult to export. One can overdo the criticism and justify that comment, but I do not think that what I want to say need be challenged as seriously as all that. It is hoped that from my right hon. and learned Friend's plans we may find a means to get across to people that how we conduct our economic affairs is important not only to the country's interests, but to those of the individuals concerned. We may succeed in devising instruments and in having planners and wise men here and wise men there. They, no doubt, will be necessary, but unless there is at their disposal a constructive co-operative attitude on the part of the public, be they trade unionists, consumers or anybody else, they will not get very far.

There is great scope for improvement in this respect on the part of the public. I do not know whether hon. Members saw a film called "I'm All Right, Jack". It was first-class entertainment and it pointed a finger at a great many people who deserved to have fingers pointed at them. Too many of them are still about. There are too many housewives who, when they pick up an article in a shop, have to criticise it by saying, "Shoddy workmanship. It was not like that before the war." We have too many people who abuse expense accounts.

Photo of Mr William Ross Mr William Ross , Kilmarnock

And too many on expense accounts.

Photo of Sir Spencer Summers Sir Spencer Summers , Aylesbury

There are too many people who are not concerned that what they are paid is commensurate with what they give and are only concerned with how it compares with other people's pay. If we all paid more attention to comparing what we give with what we receive it would be better for everybody all round.

Far too many people are unaware, also, of the dangers of Communism in their own sphere of life. It is incredible that it has taken nearly three years to wipe up the mess in the Electrical Trades Union. It is incredible, too, that despite the decency of the ordinary working man, the stronghold of Communism should be among the general run of members, as witness the changing of the rules so that the general run of members shall say what should happen to the staff. They would be little pleased as ordinary British folk to be told that Communism can rely in any way on their help.

In trying to iron out these matters, in which it is said that wages are competing with dividends, it should be remembered that there is also another competitor—prices. I have not heard anyone today say that one way to make it easier for labour to restrain itself in not coming forward with wage demands is for a firm to demonstrate that it has reduced its prices. It would be helpful if the notion got around that lowering prices is one way in which firms can demonstrate that they are willing to cooperate in this matter. I have great confidence in my right hon. and learned Friend the Chancellor. He is approaching these matters, which are by no means new, in a way which is different from what has been attempted in the past and I hope that he secures all the support that he deserves.

6.15 p.m.

Photo of Mr Harold Boardman Mr Harold Boardman , Leigh

We are concerned today with whether inflation is to be regarded as a necessary corollary of full employment. Our problem can be summed up in that question. Fortunately, in this country we have never suffered inflation in the acute form in which many parts of Europe have suffered it. When the Labour Party was in power and I was associated with the Ministry of Labour I accompanied my right hon. Friend the Member for Caerphilly (Mr. Ness Edwards) in visiting displaced persons' camps in Austria to recruit labour for British mines and cotton mills. My right hon. Friend tried to outline to these people the advantages of working in British mines now that they were nationalised. He was giving some idea of the kind of wages that could be earned when one of the displaced persons said, without emotion, "That is all right, but what will those wages buy?"

This is the whole problem. What will the wages buy? I speak as a trade union official when I say that we are not concerned so much with what the wages packet means in terms of £ s. d. but with what it means in terms of food, shelter and clothing. This wretched man in a displaced persons' camp had learned too well the meaning of inflation, but I doubt whether the present Government, who have given us so many lectures on the subject, know what inflation means. Is it not ironical that the Government stand idly by and say emphatically that they can do nothing about the extortionate increases in land prices and about other matters where they have made it virtually impossible for many local authorities to build houses to let and thus for many people who would choose to buy their own homes to buy them?

This single instance will form part of the wage agitation in the near future, and I would point out to right hon. Gentleman opposite that applications for increased wages are not cooked up in trade union board rooms. The agitation generally starts in a working-class kitchen when the husband hands over the house-keeping money and the wife recites the increases in prices since she last received a wage packet. Most housewives are well informed about prices and they can work these things out without the help of Treasury statistics. It is obvious that before a Government of any colour can appeal to trade unions it must be regarded as a first, fundamental prerequisite of that appeal that the Government have demonstrated that they have taken such action as will keep prices stable if not reduce them.

Photo of Sir Spencer Summers Sir Spencer Summers , Aylesbury

If what he has described is the situation, would the hon. Member explain how it was that when we had stable prices for nearly two years the rate of increase in wages was very much the same as before and after?

Photo of Mr Harold Boardman Mr Harold Boardman , Leigh

The people whom I represent as a trade union official are people whose wages are considerably below the so-called average wage. The distributive workers have a long way to go before they come up to the so-called national average.

The second condition—and here I am re-echoing what has been said by two or three hon. Members—is that any appeal must be preceded by the Government making an appeal to all other income groups. It is not only utterly futile, but positively dangerous, for the Government to make appeals and then to find that they apply only to those people who are represented by the trade unions. To do that is to store up trouble, and the Government ought to take notice of this fact.

Trade union officials are a pretty good lot of people. They are well-informed and responsible. It is not sufficient for the Chancellor, or any of his colleagues in the Cabinet simply to appeal to the Trades Union Congress and say, "Look, we are a bit concerned about this. Things are a bit out of hand. This may be only temporary, but we want you to take such action as will enable the £ to be worth tomorrow what it is worth today. We want to make £1 worth £1".

That sounds very good. It is not difficult to get a story like that across at T.U.C. level, but what happens in the trade unions? When they hear a speech like that, they report to their executive councils, who probably send out circulars to their area officials, where they are received with less enthusiasm. The area officials in turn send circulars to their branch officials, where the interest is practically nil. Therefore, let us not think that we can solve a problem by convincing the T.U.C. that something has to be done about it.

There was a precedent for this appeal, and it was mentioned by my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan). He mentioned the appeal made by Sir Stafford Cripps. What he did not mention was something that happened as a result of it. Sir Stafford Cripps met the T.U.C. He told them much the same story as has been told today. He impressed the Council, and there was a period of stability, but the offshoot of that has never been mentioned, and it was this. As I said, the real agitation does not start in the trade union boardrooms but in homely kit chens, and because Sir Stafford Cripps mot members of the trade union leadership and they decided to go steady, we gave the greatest possible impetus to the unofficial element in the trade unions to say, "Hey, boys, it is all right for Sir Stafford Cripps to put this argument to the people who are our leaders. They can afford to accept it, but we cannot", and as a result the unofficial boys moved in. We must at all costs avoid this happening in the future.

I sometimes wonder whether the Government have any real understanding of the problem of labour relations. I am glad that the Minister of Labour is here, because I propose now to refer to him. He will recollect that when he made his speech at the last meeting of the International Labour Organisation in Geneva he said that there was an acute shortage in the world of people with a knowledge of labour and industrial relations. How right he was if he was thinking of the Government when he said that. The Government have shown a lamentable lack of understanding in labour relations. If that were not so, they would not have taken the action they have.

I give one example. The Government's attitude to the teachers' pay was well publicised. What was not quite so well publicised was the attitude of the Minister of Labour on the Laundry Wages Council Order. His action in respect of laundry wages was tragic. I am sorry to say this, because I was associated with the Ministry of Labour and have an enormous respect for the work it has done and is doing, but when the Minister refuses to sign an Order of this description for people whose wages are as low as those of the laundry workers, it becomes abundantly obvious that he is becoming nothing more than a tool of the Chancellor of the Exchequer.

Photo of Mr John Hare Mr John Hare , Sudbury and Woodbridge

I am sure that the hon. Gentleman would not want to give the House a misleading impression. He said that I would not sign this Order. I signed it, but I adjusted the date.

Photo of Mr Harold Boardman Mr Harold Boardman , Leigh

For the Minister to talk about signing an Order which has been negotiated through the proper negotiating machinery, and then putting the operative date months ahead, is going a little far. I am not trying to score a point. I have too much respect for the Minister of Labour.

It used to be the proud boast of many people that our Ministry of Labour and our system of labour relations was a fine example to the rest of the world. A good deal of this stemmed from the fact that the Minister of Labour always showed a certain aloofness and independence, and, above all, that he was fair. It was significant that Sir Walter Monckton generally received the acclaim of both sides of the House for the way in which he did his job. I have many times heard him being paid compliments from my Front Bench. A large measure of his success was due to the fact that both sides of industry had confidence in him. They had that confidence largely because he kept himself above party strife. It is more important than ever now that the Minister of Labour should demonstrate his independence, because we are getting to the point where, whatever we think of a national wages policy, we have to give it serious consideration.

I do not know anyone who has produced a magic formula to deal with this, but I cannot see how we can avoid inflation under existing conditions so long as we maintain full employment—and not only the British Government, but all Governments, are pledged to such a policy. We therefore must give serious consideration to a national wages policy, and it is in this connection that the Minister of Labour will have to demonstrate his independence and aloofness and an overwhelming desire to be fair to both sides. We will not get it by the refusal of the Minister to put into effect wages which have been properly negotiated.

Photo of Sir Alexander Spearman Sir Alexander Spearman , Scarborough and Whitby

What does the hon. Gentleman mean by full employment?

Photo of Mr Harold Boardman Mr Harold Boardman , Leigh

The hon. Gentleman must take me for a very young bird to ask me that one. I am talking about full employment, not in terms of percentages, but in terms of using every available man and machine to the fullest capacity. It is nonsense to talk about percentages. In his new role the Minister of Labour must play an even more important part if we are to have anything like a national wages policy.

I give the Minister a word of warning about this. It is no use thinking in terms of a national wages policy until a lot of wage levels have been elevated to something near the average. I have mentioned the people in the distributive trades, and I am thinking also of the agricultural workers. I am thinking also of the hospitals in this country which probably would not be able to function for another day were it not for the number of immigrants employed in them. People think that the girls working in the hospitals and carrying Florence Nightingale's lamp are doing so for love. We must be prepared to look at the wages of some of these people and bring them up to a much higher level.

If the Government act sensibly in this matter they will get the active support of almost the entire trade union leadership. They will require it. If the Government do not get this co-operation—and they will not unless they act sensibly—we shall face disaster in labour relations. I therefore want to make a final appeal, quite seriously. It is not too late for the Government to withdraw this wages pause. I know that it will require tremendous courage for the Government to take a backward step. It is an awful thing to lose face. Wars have started because Governments have refused to lose face.

On the other hand, although the Government may lose some face, and may be criticised in certain newspapers, such action would do more to weld the two sides of industry together than any other single action could, and it would guarantee the co-operation of the trade unions on the bigger and more permanent issue of a national wages policy.

6.30 p.m.

Photo of Sir David Price Sir David Price , Eastleigh

In spite of the interesting observations of the hon. Member for Leigh (Mr. Boardman) I shall have no qualms of conscience about voting against the Opposition Amendment. That is not to say that I am an uncritical supporter of the actions and judgment of my right hon. and learned Friend the Chancellor of the Exchequer. It is rather that, having heard the speech of the hon. Member for Cardiff, South-East (Mr. Callaghan)—whose performance, if I may say so without patronage, I find much more agreeable than any that we have had from his predecessor the right hon. Member for Huyton (Mr. H. Wilson)—I can assure my right hon. and learned Friend that I am in no way tempted to vote to unseat Charles to make James king.

I was minded to make some observations about the first half of the Opposition Amendment but, in the interests of hon. Members on both sides of the House who wish to speak, and because I would rather address myself to the second half of the Amendment, I shall exercise restraint and throw away ten pages of admirable notes in which I have no doubt that I would have adequately answered most of the arguments put forward against the pay pause. I shall, therefore, address myself to the second half of the Opposition Amendment, which refers to the need for a long-term solution to the problem of inflation… I do not believe that there is a long-term answer to the problem of inflation. The whole of our economic history shows that there is no answer. If we act as if there were such a solution we shall get into the most awful trouble, and fail to do many of the things that we should be doing. That does not mean, contrarily, that I am an out-and-out inflationist, or that I believe that Governments of the day ought to admit in public that they should not direct part of their policies to trying to restrain inflation. If they admitted publicly that inflation could not be restrained we should have run-away inflation overnight. Therefore, it is towards restraint of inflation rather than a long-term solution of it that the House should direct its attention.

It is proper that the Government should aim at restraining inflation. The problem is: how do a Government restrain inflation under conditions, first, of full employment and, secondly, of Parliamentary democracy. I am not making any party point out of this. I am a professional economist, and I know of ways in which it would be possible to have expansion, full employment and stable prices under conditions that were not democratic. I believe, conversely, that under conditions of democracy one could have expansion and stable prices, but it would mean surrendering full employment. The majority of the House would reject both alternatives.

This is a continuing problem. It is not special to Britain. Many other countries face the same problem. But this country has two particular conditions which make the problem more urgent and more acute. The first is the exposed nature of our economy, with its great dependence on imports and exports, and the second is the role of sterling as an international currency. So far, those hon. Members who have spoken have not paid sufficient attention to the basic weakness of our sterling position, arising from the fact that, over many years, we have borrowed short and lent long, which makes our financial position even more exposed than it would be by virtue of our exposed physical trading position. That adds particular urgency to the need to restrain inflation.

As the House knows, the problem of inflation is not limited to democracies. Even in the glorious planned paradise of the Soviet Union, Mr. Khrushchev—as readers of the Observer will know—recently had to talk very tough to the farmers of the virgin lands. He has his pay pause, wage freeze, call it what you will. It is interesting to recall what he told the farmers of the virgin lands in the planned economy of the Soviet Union. He said: The question of wages is a big State question. Their level depends entirely on the output of produce, on the productivity of labour in a given society. Since 1953 the output of produce in the countryside has increased. But there is still not enough meat and milk. Why? Because the wages of workers and officials and the incomes of collective farmers have increased. If we raise wages and the total of wages is higher than the total of goods, what happens? You will have a lot of money, but you will not be able to buy meat and milk in the shops, because the output of produce will fall still further behind the population's purchasing power. Under the Russian system inflation shows itself immediately in shortages in the shops and poor quality of consumer goods. Under the conditions of our economy inflation shows itself in the sterling crisis or a balance of payments crisis, which is much the same thing. Even the Soviet Union has had to devalue. I hope that the anti-party group will take this into their calculations. The Soviet Union had what was virtually a 100 per cent. deflation in November, 1960.

The Opposition Amendment goes on to seek measures that will remove the underlying weaknesses in the national economy. If the Amendment had related solely to that point many hon. Members on this side of the House might have voted in the Lobbies with them—including, I suspect, most of the Government Front Bench. The hon. Member for Cardiff, South-East put out a challenge to the Government back benches asking how, if we had the power, we would approach these problems. I accept that challenge. I can tell the House how I would tackle these problems. First, as a nation we must get our priorities right. I have said this in Budget debate after Budget debate. We are trying to make our resources do too much in the world. Our first priority must be to strengthen the home front and the home economy. Until we do this successfully all our ambitions to be a world Power are sheer illusions. The French call it Folie de grandeur.

I have watched with trepidation through succeeding debates the emerging partnership of the new Imperialists on the Left with the old Imperialists on the Right to force Britain into overseas commitments which our economic circumstances, apart from the general climate of world opinion, cannot enable us to fulfil, and can only lead us into bankruptcy and dishonour. To get sense into our affairs we must firmly reject the siren voices both of the commissars and of the Bourbons alike.

Our immediate priority, as a nation, is to make Britain more competitive in everything she does. Our long-term aim must be sustained growth, but we cannot have growth until we are more competitive.

What do we need to do to deal with these recurring crises? As a nation I believe that we must realise that many factors contribute both to our failures and to our successes. If we are to be more competitive we have to work over a very wide range of factors many of which may in themselves appear to be marginal. For instance, I am of the opinion that we need an improvement in the teaching of languages in our schools, so that our overseas salesmen can speak the language of the countries in which they are trying to sell. But our problems are not amenable to a sort of gimmick solution, and many good ideas are spoiled by being over-exaggerated and taken out of context. Further, we must recognise that the whole range of economic and social problems which the House is discussing tonight are amenable only in part to action by the Government under conditions of democracy, because in a free society even the most resolute Government cannot ensure prosperity.

The Government can state requirements and create a climate of opinion and exert some influence. But the rest is up to industry. However, I believe that there still exists a wide range in which the Government could take appropriate action, and I desire to suggest briefly twelve points to my right hon. Friend—[HON. MEMBERS: "Oh."]—there are moments when I look with envy on Mr. Fidel Castro who can speak for five-and-a-half hours outlining his economic plans, whereas the humble back-bencher cannot without taxing the patience of the House claim more than 15 to 20 minutes.

Photo of Sir Edward Boyle Sir Edward Boyle , Birmingham Handsworth

I hope also that my hon. Friend will not forget the wise Mr. Clemenceau's remark that God had only Ten Commandments.

Photo of Sir David Price Sir David Price , Eastleigh

My right hon. and learned Friend may have learned something from experience in negotiating with trade unions. I am putting forward twelve points in the hope that I may be satisfied with six put into action.

The first point, I suggest, to which the Government must adhere is a sound budgetary policy. While I do not go the whole way with the deflationist argument, if Governments in their Budgets do not so arrange their fiscal affairs that they equate supply and demand, they have no hope of dealing with the situation at all. Looking on past Budgets—my strictures include Chancellors from both parties—there have been only a few Budgets which have been sufficiently tough in their approach to our general affairs. Had we had some tougher Budgets some of the irritating monetary measures which have proved necessary might not have been necessary.

Secondly, I believe that we must adhere to the comprehensive use of the monetary weapon. I emphasise the word "comprehensive" because I believe that there are still some parts of our credit system which do not get caught by the measures used by the Government. I am thinking particularly of special deposits and whether there are not other sections of our financial institutions which can create credit just as easily as the joint stock banks.

Thirdly, I think that we have to have long-term budgeting by Government Departments. I know that my right hon. Friends are trying to do this, and I believe that the House of Commons must get up to date on this matter. We must start thinking of budgeting for a longer term than a year. Here, may I say that I believe that we in this House will not fulfil our traditional duty of criticising the Government constructively until we reform a good many of our procedures. I get very distressed over the obsession which we have for our outward forms of our institutions which causes us to dehydrate and throttle the spirit of our institutions. In no sphere is this expressed more clearly than in the completely inadequate efforts this House takes to control Government expenditure constructively.

I believe that we must have more long-term planning. If we are prepared to cheer that in this House we must be prepared to have more long-term planning in our own affairs. Notwithstanding my welcome for what my right hon. and learned Friend is trying to do, I believe that he will get into great trouble if he starts using his new planning council to deal with wages stright away. The first rôle which I visualise for this planning council, and on which I shall personally judge its success, is its ability to start modestly by persuading a number of major industries to co-ordinate their future investment plans. In most individual firms this is already being done and it is merely a matter of co-ordinating what already exists.

We must recognise that planning is not an incantation and that it is harder to plan future industrial development in an open, exposed economy like ours than in a closed economy like that of the Soviet Union, for the simple reason that our problems are not solely problems of production. There are problems of overseas selling, and in fact at the present moment I would say that there are more problems of overseas selling than of production.

I believe that we must have a complete recasting of the taxation system, and not a little fiddling around with it. We must have a really good new look at it. Our purpose should be, first, to make Britain more competitive. What more foolish tax is there than the fuel tax which adds to oncosts in industry? Secondly, we should tax expenditure more and earnings and savings less.

I believe that in order to make Britain more competitive we have to lower our tariffs, and I am prepared to see us do that unilaterally if we cannot do it through the G.A.T.T. That to my mind makes the economic case for joining the European Economic Community overwhelming. I wish that the Government would put the broad economic case for going into the Common Market instead of all the time taking the snivellers round the corner and telling them that they are not to be hurt. My belief is that they will be hurt, and I think that it would be jolly good for some of the inefficient people in this country if they had the fear of "going bust".

Photo of Sir Spencer Summers Sir Spencer Summers , Aylesbury

When my hon. Friend refers to the people who will get hurt—I agree with his general proposition—I hope he will remember that New Zealand may be hurt.

Photo of Sir David Price Sir David Price , Eastleigh

I do not propose to be diverted in that way for the moment. I will merely say that, accepting that there is a responsibility to New Zealand, it makes complete nonsense of the thoughts of my hon. Friends who are worried about sovereignty. Perhaps my hon. Friend will think out that one. New Zealand will not lose sovereignty by our joining the Common Market, but if arrangements to protect New Zealand are not made she will be hurt, and her sovereignty will be of precious little use to her.

I believe that my right hon. and learned Friend should be working to try to turn the International Monetary Fund into the central bank for the whole of the free world. In my view, the dollar and the £ sterling are being asked to do for the world something for which under modern conditions they have not sufficient reserves. In the short term the solution may be to raise the price of gold, but that decision does not lie within our power. Increasingly, we have to expand the resources of the International Monetary Fund until the day when it is the central bank for the whole of the free world.

I believe that we have to improve the way in which Governments prepare themselves to do their job. I could detain the House for a long time discussing this matter, but I will throw out one idea. How many people employed in the senior ranks of the Civil Service have a degree in any of the applied sciences or the natural sciences or mathematics? There are precious few. I believe that we must concentrate Government resources where they will help to increase the national productivity most. I believe this to be particularly so in the sphere of education. We must expand far more our facilities for commercial and technical education and the teaching of languages. Here I would declare a policy priority. I regard that as more important than education merely for recreation. People refer to the great problem of educating for leisure. I believe that in pursuing that idea we are drawing on the bank before the money has been put in. We can come to the problems of leisure when our balance of payments position is a little better.

It is reasonable to ask whether these measures would prevent incomes from running ahead of national productivity. Partially they would, but in wages and salaries there is still an institutional factor, which has arisen out of the developing pattern of social behaviour in this country over the last twenty years, which will not be completely restrained by the kind of measures which I have outlined. There is an intellectually respectable school of thought which says that the only way to restrain the wage-cost spiral is by further deflationary policies, but I believe that the amount of deflation required to prevent that wage-cost spiral would not only be socially unjust but would be economically crippling to the country. I do not believe that such a policy would succeed even with as much as 3 per cent. unemployment.

In the long-term we can be helped by increasing production and productivity, but there are limits to this. Although I favour it, I wish that people would not overstate the argument and suggest that these increases would solve all our problems. They would help to ameliorate them but no more. A more extensive use of work study and the use of modern management techniques would help. The Government must take over the problem of apprenticeships, because the biggest single shortage in British industry is the shortage of the really skilled. My hon. Friend the Member for Mitcham (Mr. R. Carr) tried to handle this problem, when at the Ministry of Labour, in the indirect, the gentleman's, way, and he achieved some results. But I do not believe that our present system, if it can be so called—I prefer to call it anarchy—meets the needs of the nation, and I should like the Chancellor to take the opportunity with the trade unions of making a radical approach to our apprenticeship schemes.

One can see great opportunities for more realistic wage structures, but I do not wish to detain the House on that. I would merely say that the biggest problem with which we shall be left is that between those who are employed in productive industry and those who, broadly speaking, are employed in non-productive industry. I believe that, with good management and reasonable good will between unions and management, we can get a wage structure in productive industry which, in the broad, will not he inflationary. but how do we deal with the increasing percentage of our working population who are not employed in productive industry? If we say to those in productive industry that they shall relate wages to productivity and share in increased productivity, how do we deal with those in non-productive industry? To put it in Marxist terms, for those in productive industry we can say, "To each according to his work", and to those in non-productive industry it would be "To each according to his need". How can those two different approaches live together? I believe that that is the 64-dollar question in a national income policy.

I suggest that the Government have to pay the going rate for jobs, and I support them in closing down that which is uneconomic, provided that there is adequate costing information to show genuinely what is uneconomic, which certainly is not the case with British Railways at the moment—and that makes the problem more difficult.

At the end of the day this is a psychological matter. It can be said that all our economic problems are statistically marginal, but if one constantly has a temperature which is marginally 5 per cent. above normal, one feels very ill. Our problem has been marginal for so long that it has taken on the proportions of a crisis. The extra effort required to solve our recurring economic difficulties is well within the nation's means, but to get it we must have a change in attitude. As the famous leader in The Times said in July, fundamentally Britain's greatest ill is the collapse of discipline. It cannot be imposed at one level without being restored at all the others. It is most important that the Front Bench should look at this problem from the different points in the economy which we believe are affected. I do not mean only the obvious points of the man at the work bench and the man on the plant. I also mean the civil servant, the minor official, the people mending roads, the people living on fixed incomes. These problems, which are often so obvious from here, look very different to them.

With that in mind, I want the Government to introduce, in legislation, some form of workers' charter which will give certain basic statutory rights to people employed in industry and will place certain obligations on management. I should like to see a capital charge introduced for land where there is a change of planning consent. Where land is rationed by the community and where a community decision changes the use value of land, there is a clear case in social justice for the Government, by means of a capital tax, to take back some of the enhanced value which has arisen out of the community's decision.

I am not enamoured by a capital gains tax, but I will accept it in a package deal. As a quid pro quo our trade union friends must accept some reform in trade union law along the lines of giving the Registrar powers to ensure that we do not have a recurrence of the E.T.U. type of situation. I hope that my friends in the trade unions will see that there must be a package deal with give and take on both sides.

I have an open mind on other measures which may be necessary. There must be extra effort. We cannot run away from that. It is well within our capacity. But we must cease exploiting the conscientious at every level by raising the general level of effort nearer to that shown by the conscientious. Above all, we must stop blaming everybody but ourselves. The fault lies not in our stars but in ourselves. Only when the nation acts by this simple truth shall we get some sense in our economic affairs and thereby fortify our influence in the councils of the world.

6.58 p.m.

Photo of Mr David Ginsburg Mr David Ginsburg , Dewsbury

Like the hon. Member for Eastleigh (Mr. D. Price), I will concentrate on the second half of the Amendment—the country's economic weaknesses. In view of the hon. Gentleman's argument, much of which I accept, I am surprised that he says that he will not follow us into the Division Lobby on our Amendment—and I hope that he will not think me churlish in saying that.

I begin deliberately with the question of the balance of payments because the Chancellor's remedies can be assessed only by reference to the problem which they seek to cure and because the Chancellor's speeches have consistently shown that he has misconceived the problem. The true significance of the now famous Leicester speech—I am sorry that the Chancellor is not in the Chamber—was not the correction controversy, fascinating though that was, but the fact that the Chancellor justified his July measures on the ground of pressure on domestic resources and stated that he had counted on increases in incomes not materialising. This statement was nonsense, as the Chancellor's Economic Survey of 1961 and his Budget speech show—and I have the references here.

If we re-read what the Chancellor said earlier this year we see that he had allowed for certain increases in incomes and demand and that, if anything, they were much less than he had expected. What happened—and I draw the attention of the House to this—was that the Chancellor had apparently not reckoned with a crisis of confidence in the £, although he had been given ample warning from these benches. The immediate result of the July measures, especially the increase in the Bank Rate, has been superficially, and only superficially—as the hon. Member for Eastleigh has shown—to restore the position. The gold reserves are being built up, but once more at the cost of attracting hot money to these shores. There is bound to be a reckoning. I was very glad that the hon. Member for Eastleigh touched on the overriding question which remains, which is whether the Chancellor of the Exchequer's prestige policies—because we are pursuing prestige policies as an international banker on our scale—are within the capacity of the real balance of payments resources of this country. The answer is that of course they are not.

I want to refer to the third quarter's balance of payments figures, which were issued last week by the Treasury and on which the Chancellor of the Exchequer commented. They are very disappointing figures, and the right hon. and learned Gentleman was very complacent this afternoon. There has been no improvement in the balance of payments. Most of the improvement is hot money coming into this country. After allowing for invisible exports, we still have a deficit in the third quarter of £25 million. out of which we have to finance capital investment overseas. I could say quite a lot about this very disturbing result, the first result after the Chancellor of the Exchequer's measures. It is fair to say that exports are very disappointing. Secondly, I refer to the imports position, because what will happen to our balance of payments position when imports start rising again? The account has gained from a fall in imports and also in import prices.

There is a further component of the recent balance of payments accounts which is worth referring to. That is invisible earnings. Earnings on invisible account have fallen. There has been a catastrophic fall in invisible earnings over the past ten years and in the last quarter once again invisible earnings are going down.

I should like to hear from the Government speaker something about my plea for the publication of further balance of payments statistics relating to the international earnings of the oil industry. Invisible earnings are decreasing and we are not being provided with any figures relating to the oil industry. This is bound to be a case for concern. It is a very unsatisfactory situation.

I suppose that the most serious comment on the last lot of balance of payments figures is the Government's failure to earn an adequate surplus on current account to provide for our overseas investment. Every year that passes we have commitments which are beyond our needs. The only year when the balance of payments situation was in balance and when there was a surplus to finance overseas expenditure was 1958, when the economy was working at 7 per cent. to 8 per cent. below capacity. This is the measure of the Government's failure all along the line, and especially their failure to boost exports.

The Government's answer to this problem is to damp down demand. The Government do this every year or two. As some hon. Members opposite have recognised, this is a counsel of despair because it means, as happened in 1958, putting up not for a few months but year in and year out with a level of unemployment of labour and capital which would be quite unacceptable politically to the country as a whole. There is no doubt that this is the logical conclusion of this policy.

The Government's record of production resulting from their policy of damping down demand is a shocking one. My hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) said that production at last started to crawl upwards in the first and second quarters of this year. Now, as a result of the Chancellor of the Exchequer's squeeze, it is falling back again. I warn the House that it is bound to take several months before production recovers again.

However, production is not the full story. Consumption has fallen as a result of the Government's July measures. It is interesting to note that the Economic Review of the National Institute of Economic and Social Research says that on the present form the consumption position will not be restored until half-way through 1962. This is a grim outlook.

But production and consumption are not the full story. Investment in the private sector is tailing off now, and the indications are that there will be a turndown in 1962. In particular, I draw the attention of the House to the figures of the Federation of British Industries relating to intentions for increases and decreases in investment in plant and machinery. These figures show that the ratio of these two intentions has gone back once more to the position obtaining in 1958. It is not surprising to learn, in view of all these figures, that there is a tremendous amount of spare capacity in the country. Many industries are working below capacity at present—the steel industry, the motor car industry, and now even parts of the textile industry.

Photo of Sir Alexander Spearman Sir Alexander Spearman , Scarborough and Whitby

Does the hon. Member agree that there has been no falling off in the consumption of steel, but there has been a certain amount of de-stocking?

Photo of Mr David Ginsburg Mr David Ginsburg , Dewsbury

I do not dissent on that specific point, but the general picture is of a decline in demand and excess capacity. There is evidence of substantial hidden unemployment in the economy today.

I want to say a few words about an industry which is most important in my own constituency, namely, the heavy woollen industry. The statistics for clothing and textiles—it is an omnibus figure involving cotton as well as wool—show that net new orders are down by 25 per cent. to 33 per cent. on 1959. This is very serious. In answer to a Question I asked two weeks ago, the Parliamentary Secretary to the Board of Trade said that there was nothing disturbing in the figure I had elicited and that the critical thing was the size of the total order book. It is very easy for the total order book to run down very fast, and the hon. Gentleman's view is short-sighted. It is a pity that we have not the specific figures of net new orders for the woollen industry, but deliveries for certain woollen fabrics are unquestionably falling.

It is a matter of very grave concern not only to my constituents but to the constituents of my hon. Friend the Member for Batley and Morley (Dr. Broughton), because our two constituencies comprise the bulk of the heavy woollen district. We are not only worried about these developments, but as to the effects of Britain's entry into the Common Market on our local industry, which could be exceptionally serious. The National Union of Manufacturers undertook a survey of the effects of the Common Market on certain industries. Some industries will benefit. Some will not. This is what the Union said about the industry in my constituency: The trade in woollens however has its cheap end, and this is where competition from Italian shoddy manufacturers, based on the largest rag market in the world, a good labour supply and significant weight of low-cost cottage industry, threatens. French woollens have already felt its impact. Not surprisingly, British woollen manufacturers are less keen on joining the Common Market than the worsted manufacturers. It may be asked, "Why worry about a hypothetical development". It is not a hypothetical development; it is a likely one.

The interesting thing is there is already a trend towards increased imports of woollen goods. It is extremely disconcerting to learn from the latest Trade and Navigation Returns that importations of woollen goods from Europe and Ireland and, perhaps, from Japan are up by about 50 per cent. I hope that the Government spokesman will comment on that.

In my own area and, I imagine, in the constituencies of many other hon. Members, statistics are not of themselves adequate guides to the incidence of unemployment. There is much migration, and much concealed unemployment. I would, in particular, ask the Minister of Labour to consider the numbers of married women going out of employment when closures occur. This very serious form of concealed unemployment is taking place in my division.

The lack of growth in our economy is a very serious matter, indeed. It means that we, as a nation, cannot discharge our overseas responsibilities in relation to investment, particularly in the Commonwealth. It also means that our living standards are directly affected. Some years ago, the Home Secretary spoke about doubling our standard of living in twenty-five years. I will not argue about whether or not we shall succeed in doing that—although, admittedly, progress is rather slow—but I know that my constituents, who live in what is called a low-wage area, could do with a far faster rate of economic growth. I feel that that view is not mine alone but is shared by my hon. Friends.

What relevance has this pay pause to our problems? The Chancellor has often referred to excess demand, but on the basis of the arguments I have tried to deploy I suggest that this is really a non-existent disease in our economy today. There is need for substantially more demand; we have had excess capacity now for more than a year.

I concede, of course, that cost inflation is a totally different problem, but there is absolutely no evidence in any economic doctrine I have read that a squeeze on demand is of any use as a cure for cost inflation. Further, if cost inflation is a problem today, it must be said that the Chancellor's personal contribution of pushing up costs now has been particularly harmful to any attempt to meet that problem. I will give just two figures that bear very critically on the Chancellor's own personal contribution in the last few months.

If we look at the index of wage rates between the first and third quarters of this year—a six-month period—we find that it has gone up by 1·2 per cent. but that, in the same period, the index of retail prices has gone up by over 2·6 per cent. Those figures leave no doubt that some living standards have already suffered as a result of the Chancellor's policy. If he had really wanted to make a contribution to solving this very difficult problem he should not—quite apart from the way in which he handled the trade union movement—have intervened, as he did, in July—and, indeed, in February—to push up costs still further. Can anyone really be surprised that all this resentment has been generated in the public?

Another thought on the pay pause is that, in a sense, we have all been here before. I would urge hon. Members opposite and, in particular, the Minister of Labour, if he has not already done so, to read "The Employers' Challenge," by Mr. Hugh Cleggs, Fellow of Nuffield College. It deals with the 1957 dispute between the engineering trade unions and the engineering industry. In particular, it deals with the occasion—and here, I think, the hon. Member for Aylesbury (Sir S. Summers) spoke wisely—when the Government first urged the employers to seek a showdown with the unions and then left the employers high and dry.

Another moral about the pay pause is worthy of thought. The right hon. Gentleman the Member for Flint, West (Mr. Birch), who I regret is not present in the Chamber, has said that ethics make bad economics. I disagree with him there because, surely, politics consist of the reconciliation of those two things. But I would agree with him in the sense that a wages policy based on ethics alone brings very great and, perhaps, intractable difficulties in its train. I believe that the Cripps freeze ran into difficulties because, in the end, it just was not possible to influence the whole totality of wages—as the Chancellor is charitably, perhaps, now seeking to do—without dealing with the details, and without detailed bargaining involving intricate questions of labour supply and demand and the whole question of State intervention.

Up to the present the Chancellor's wages policy has been really half-baked. Some hon. Members opposite may agree with me when I say that up to now there has been no ethics in the matter at all, and may also agree that there has been no economics in the working out of wages policy, either. The problem is immense. The Chancellor is not now present, but I recall that he was a staff officer during the war and it could, perhaps, be said to him that, so far, none of the serious staff work necessary for launching any kind of wages policy has been undertaken. I would also remind the Minister of Labour that it is all very well appointing Sir Robert Shone who will, no doubt, do valuable work, but what studies have the Treasury and the Ministry of Labour made so far of the implications of all these problems?

The hon. Member for Eastleigh gave the Government twelve points; I am trying to give them a reading list. I suggest that the Minister of Labour and his colleagues should read Sir Roy Harrod's recent article in the District Bank Review. Surprisingly enough, it contains some extremely constructive ideas on what the Government could do towards creating a better and more cordial framework for their relations with the trade union movement. He makes some very unorthodox suggestions. He suggests that restrictive practices are logical and can be understood in their setting; that there should be negotiations, and that, if necessary, compensation should be paid for the abandonment of certain restrictive practices.

The Chancellor is constantly saying that cost inflation is Britain's greatest problem today. Although one welcomes the right hon. and learned Gentleman's conversion, it is a rather odd new doctrine for a Government who made other statements in 1958 when the Cohen Report denied that there was such a thing as cost inflation.

If, however, the Government have come to the conclusion that cost inflation must be tackled, it can be tackled only by fairness and co-operation. But, apart from fairness and co-operation, there must be economic growth. It is simply no use the Government and the Chancellor going in for policies that one can only describe as economic masochism, such as that undertaken in July this year. In this connection, I must quote an excerpt from an O.E.E.C. publication, "The Problem of Rising Prices", to which the Chancellor has often and approvingly referred. This is an interesting excerpt on the whole question of pauses and wage policy, for it states: Price stability by itself will not assure adequate research and development, technical education, increasing business and labour efficiency, a skilled and adaptable labour force, a high level of investment, active competitive conditions, progressive and vigorous business leadership, and other real factors that are responsible for economic growth. Economic policy must provide incentives which foster these elements of growth and which assure that the requisite resources and savings are made available. For it is evident that economic growth will itself assist stabilisation efforts in the very important sense that, provided the targets for growth are not unrealistic, the political and social problems involved in price stability will be more easily overcome the greater the rate of growth of the economy.

Photo of Mr David Ginsburg Mr David Ginsburg , Dewsbury

Let the Chancellor ponder those words and bring in sound, positive measures and, above all, end the squeeze.

7.23 p.m.

Photo of Mr Raymond Mawby Mr Raymond Mawby , Totnes

It is a problem for me to follow two economists and I hope, therefore, that the hon. Gentleman the Member for Dewsbury (Mr. Ginsburg) will forgive me if I do not follow closely the remarks that he made.

One important factor emanated from the speech of the hon. Gentleman the Member for Cardiff, South-East (Mr. Callaghan); the one great problem we must solve is the dilemma of how to maintain full employment and, at the same time, prevent inflation. That question was properly asked by the hon. Member for Cardiff, South-East, but it appeared from the speech of my hon. Friend the Member for Eastleigh (Mr. D. Price) that in his view it was impossible to achieve this objective. My hon. Friend's remarks seemed to indicate that one could not have stable prices and full employment, including a high level of productivity, without inflation. I am sorry if that is his view, for I believe that stability in both spheres must be our final aim. After all, we have so much in common in the objectives at which we are aiming.

The hon. Member for Cardiff, South-East quoted at length from the 1948 White Paper. I appreciate that he could not quote the whole document, but one sentence in it which attracted my attention was that which said: It does, however, follow that each claim for an increase in wages or salaries must be considered on its national merits and not on the basis of maintaining a former relativity between different occupations and industries. I can see the great similarity in the views held then and those held today. My right hon. and learned Friend the Chancellor pointed out something today which we all realise, that the pay pause can only be a temporary measure tackling a symptom of a disease that has been with us since the war. I do not think my right hon. and learned Friend would even claim that it will do more than tackle the symptoms. What we need is an answer to the disease and unless we find one we shall, from time to time, be faced with these problems which will need palliative and short-term solutions.

It is obvious, from what we have learned in the past, that this problem can only be solved—regardless of what the economists tell us—by realising that we are in this together. We need to find a point of agreement on which we can get closer together and realise that we have more of a common interest. I urge hon. Members to study a report which the T.U.C. published in 1950. That report stated that the T.U.C. General Council, on 28th June of that year, had approved a statement which read: When, in 1947, the economic position of the country so threatened the maintenance of full employment and created a grave danger of inflation the T.U.C. then directly sponsored a policy of restraint which was overwhelmingly confirmed by succeeding Congresses. This was a considerable move forward, but the trouble is that the report went on to say: After the Congress last year the Government's decision to devalue sterling was announced. This, in itself, occasioned some surprise but the extent of devaluation created a profound shock". Thus, we see that the T.U.C. was prepared to accept a voluntary wage restraint—and to call on its members to carry it out—but that that was followed by an admission that it had not worked out because devaluation had occurred. It is important to note that when devaluation took place, on 18th September, 1949, it was only on the following 30th November that the voluntary wage restraint principle was broken by the engineers going forward with a claim for a wage increase. It was at that time that the policy of voluntary wage restraint completely fell down.

The question is whether other measures could have been taken while voluntary wage restrain was operating, and trade unionists and the Government were co-operating, to prevent inflation being brought about at the end of the day. I wonder whether some other action might have been taken so that the situation would not have been spoilt and trade unionists would not have gone back to the old round of wage increases because they were dissatisfied and felt that they had been "sold a pup."

The question is whether we have learned any lessons from that? Can we not at least appreciate some of the reasons why trade unionists and the T.U.C. do not appear keen on entering an agreement? We must prove to them that we have learned some of those lessons before we can expect them fully to work in harmony with the Government again. It is also important to note from that T.U.C.'s statement the concentration that is placed on the maintenance of full employment. This is, after all, an important matter for the T.U.C. and it is generally agreed that all hon. Members are interested in continuing full employment. I am rather happy to see that no hon. Member has been bandying about the percentage of unemployment that is needed before the country can be in economic balance. If we have to consider that type of argument, if we have to go back to a situation such as there was between the wars, there must be something wrong with us.

The Prime Minister, speaking in the debate on the Gracious Speech on 31st October, referred to one of our great problems. He said: …between the wars we were all haunted by unemployment on a massive scale. Everybody felt that, if only this could be cured, we could have a sort of paradise. But such is the fate of humans on this earth, we find that we have solved one set of problems, at arty rate temporarily, only to be confronted by another. Full employment has brought with it a new set of difficulties and a new set of dangers…we can preserve what we have won only if no interest presses its case too far or too hard."—[OFFICIAL REPORT. 31st October, 1961; Vol. 648, c. 40.] This, I believe, poses the major problem that we have to solve. We have to find a way of coming closer together, and prove that what all the economists—perhaps I should not say all the economists, because most of them disagree with each other—what many of the economists say is untrue, and that we can have a stable economy and rising productivity without a high level of unemployment. That is a state of affairs which we might attain providing we can set aside our differences and agree on the lessons that we have learned.

The principle of comparability is fair; but it is important to ask how far we should go when comparability is judged by a completely changing yardstick all the time. It is necessary to consider that point when we reflect how many people have their wages and salaries decided by comparing them with the wages and salaries of others. Unless we can find some sort of yardstick which is fairly constant, we shall run into difficulties from time to time.

I do not think that we can blame a Chancellor of the Exchequer for slamming on the brakes if he finds that the economy is gravely affected to the extent that another devaluation may be brought about, with its associated problems. The job of the Government is to govern, and certainly the job of any Chancellor, whenever he sees danger signs looming ahead, is to take the necessary steps, however temporary, to try to put a halt to our race downhill. Therefore, it is necessary to fashion a more reliable yardstick for comparing wages and salaries in order to make certain that we do not run away with ourselves.

The hon. Member for Dewsbury mentioned two types of inflation. To me, inflation is the same, however we separate it into types. When the Cohen Committee was set up it was hoped that it would be able to give some guidance to industry. Unfortunately, very few people took any notice of it, and I doubt whether many people read any more of its Reports after the publication of its first. But in many senses the first Report talked very good horse sense.

On page 53 of the 1958 Report, among its recommendations is a very important point: In general, we think it important that, in the occupations where productivity is rising fastest, wages should not be allowed to rise in full proportion to the increase in productivity. For if they did, wages elsewhere would tend to rise in sympathy, and the result would be that average wages would rise faster than average productivity, and the rise in prices would continue. That is as true now as it was then, and, unless we are prepared to accept the truth of that fact, we shall continue to have a situation in which either incomes will lead productivity or we shall leave behind our fathers and mothers who are now receiving pensions and even the men who taught us our jobs, enabling us to increase our productivity and thus to enjoy higher benefits. This is one of the dilemmas that we have to face, and we have a responsibility in that respect.

The Chancellor has given us a progress report on the Council which he suggested should be set up. Apparently, the staff will be recruited and the Council will begin to operate. The question arises: what work will this Council do? I agree with those who have said that if the Council is to be purely a body to lay down criteria to guide changes in wages, then it is not "on" because, in the words of the late Ernest Bevin, "The lads won't have it." The Council must have a wider application, and then it will do a great deal of good. Certainly, if it attracts the type of people whom we hope it will, it will certainly possess a wide circle of interests and will, therefore, have considerable effect. It will at least give some guide to arbitration courts in the decisions which they make.

People may say that arbitration courts should be free and unfettered in considering the matters before them. I do not disagree with that, but I would ask: is it really in everybody's interest if an arbitration court concerns itself with one small sector, regardless of all the other sectors concerned, and then there follows at the end of the day a claim based on comparability with an award in that small sector? I am not saying that arbitration courts normally consider matters in isolation, but if we can devise a yardstick whereby the arbitration courts, while not losing their rights or impartiality, can obtain some guide on what ought to be the general trend, I believe that this could help. Certainly, it could slow down the queue in which we all follow each other only to find, at the end of the day, that we are very little better off.

The T.U.C.'s decision on whether or not it should join the Council seems to be tied to the end of the pay pause. In other words, the T.U.C. seems to require to be satisfied on the question of when the pay pause is likely to end before expressing any willingness to join the National Council for Economic Development. Unless there is something to replace the pay pause, we may quickly get back to where we were before. One could not suddenly announce that the pay pause was at an end without being satisfied that there was something to take its place.

To show how close together we are on this problem, I will quote what the right hon. Gentleman the present Leader of the Opposition said when he was Chancellor of the Exchequer. In 1951, addressing the Trades Union Congress, he said: The plain fact is that the cost of living here will go on rising in 1952 even with stable world prices if we go on pushing up our own costs through substantial rises in wages and salaries. This is what we must surely avoid. If incomes go up more than production goes up, then prices will rise. The truth is as simple as that, and I would like to see it hanging as one of the old texts on the wall of every office occupied by anyone, whether employer or trade unionist, who is concerned with negotiations about increases of any kind. Would it be possible for my right hon. and learned Friend—it would cost very little—to have some of these texts produced and ask that they should be hung in all offices? It is important to remember that there are many involved on both sides of negotiations who lose sight of such truths, which are just as true now as in the past. Whatever our differences of opinion may be in this matter, we sink or swim together.

7.41 p.m.

Photo of Mr Jeremy Thorpe Mr Jeremy Thorpe , North Devon

The hon. Member for Totnes (Mr. Mawby) is, I believe, something of a rarity in his party since he is its only trade union Member of Parliament. I hope, therefore, that the Government will listen very carefully to what he said not only about the desirability of the trade unions co-operating in the National Council for Economic Development, with which I agree, but about why it may be difficult to persuade the trade unions, in view of past events, to have the necessary confidence to join the Council.

I was particularly struck by the speech of the hon. Member for Leigh (Mr. Boardman). Listening to that speech, from someone who is a very respected trade unionist, I thought that it gave an indication of the sort of co-operation which the Government could have from the trade union movement if the movement could be convinced that the wages policy which the Government were following was fair and just. I felt that very strongly as I listened to what the hon. Gentleman said.

Today, I hoped that the Chancellor would give us a good deal of information about the intended course of the Government's wages policy during the next few months. I thought that there might be a stirring call to action. He gave us some information, but not even his most ardent supporters would accuse him of dynamism or his most vitriolic opponents of demagogy.

We are, after all, considering the wages and production policy of a Government who have been in power for eleven years. We are looking at it in the context of a wages pause which in itself is an indication of the unbalance or imbalance in our economy. On Christmas Day, the Chancellor of the Exchequer, like some latter-day Scrooge, will be celebrating the fifth month of his pay pause, which he introduced on 25th July last. It is a pay pause which has been consistently breached not only by private firms, but by the nationalised industries and by his fellow Ministers. It stands today as a policy riddled with holes, looking rather like a Gruyèere cheese in a good year.

There is no clear pattern in the holes. Some agreements made before 25th July have been honoured. Others made before that date have been broken. Some awards are to become operative on 1st January, others on 2nd April, while others will depend upon the Chancellor. It is right to consider the extent of the breach in the pay pause which has taken place in order to see the impossibility of sustaining the present policy. To point the argument clearly, I shall put to the Chancellor several questions, some of which, I must admit, he has attempted to answer in his speech today, and, somewhat diffidently, one or two suggestions.

On 3rd August, the Industrial Court awarded to 10,000 clerical and administrative workers in the national and private aircraft industries increases of from 8s. to 13s. a week. That was the first breach in the pay pause. The next breach came on the same day, when the Civil Service Arbitration Tribunal, flatly rejecting a suggestion from the Minister of Education, made a wages award to repairer craftsmen at the Victoria and Albert Museum following a 4 per cent. increase awarded earlier to other civil servants. On 9th August, there was a 7 per cent. increase awarded to electricians in the cinema industry. On 21st September, 50,000 employees in the National Association of Theatrical and Cinematograph Unions were given a 4 per cent. increase as from 15th August. These were all part of the consistent breach there has been in the policy which the Government announced on 25th July.

There have been further awards by the Industrial Court. On 10th October, the Ministry of Labour Wages Council recommended a 3 per cent. increase for 130,000 road haulage workers to be operative on 1st January next, but I understand that already 20,000 in the private sector of the industry have had the award.

In November, the Government woke up with horror to find that a substantial award had been made by the Electricity Council. The Government suddenly found that not only were they unaware of the award, but they had virtually no power of control over the nationalised industries. If my information is right, the Government, to their horror, heard of the award approximately one day before it hit the general public. It may be that they only read about it in a newspaper. Perhaps the Home Secretary found out during his reading of the Irish newspapers, or the Lord Privy Seal in his gleanings from the Swedish Press. At any rate, the Government woke up and found that a substantial award had been made in the electricity supply industry and they could do nothing about it.

When my right hon. Friend the Leader of the Liberal Party suggested that the situation indicated the need for a wages policy to relate wages, dividends and salaries, the Prime Minister, in what I thought was one of his more petulant moments, protested that this was advocating a policy of Fascism. All I can say is that if that measure of planning connotes Fascism to this Government, they have a very old-fashioned laissez-faire view of economics.

So the breaches go on—the firemen on 8th December, the refinery workers, workers in British Oxygen, hosiery dyers and finishers, and many others which the hon. Member for Cardiff, South-East (Mr. Callaghan) mentioned. Every time one happens, a shudder goes round the Treasury Bench, waiting for a spine to run down. We are now reaching a situation when, as the pay pause is breached time and time again, the Chancellor will very soon be left only with the unswerving loyalty of the Minister of Education. Whatever else may happen in our economy, he will firmly keep his foot on the head of the teaching profession.

I believe that the pay pause is grossly unfair. The Chancellor of the Exchequer waived this criticism aside. Of course, it is grossly unfair when the only people in respect of whom wages can be kept down are those who are not organised, who are unlikely to take action politically—the white collar workers, the nursing profession, the teaching profession—while in the nationalised industries, the heavy engineering industries and all the industries in which there is power, the Government, when the "chips" are down, give in. That is why I regard this pay pause as unfair.

I do not support the view of the Labour Party that it is unfair because profits have risen. I understand that, during the first six months of this year, profits actually went down by about 8 per cent. and wages went up by 9 per cent. But, quite apart from its unfairness, I believe that the pay pause is completely unworkable. It has become a farce.

In July, the Chancellor said, somewhat pathetically, that the pay pause would give the Government a useful breathing space in which to think out how they could relate production and wages. It seems to me that it is an extremely expensive way of affording a Chancellor time to think. I was hoping that after nearly five months we could have heard a little more from the Government about their intended wages policy. If I may suggest it, in the words of a former leader of my party, Lord Samuel, the Government, in adopting the pay pause, have jumped out of the frying pan into the refrigerator and the economy is suffering in consequence.

I should like to put one or two questions very briefly to the Chancellor. First, when does he think that the National Council for Economic Development will really get down to work? How much longer is it to be before a national wages policy is hammered out? Does he still set a target of 5 per cent. increase in production whilst holding down wages to within 2 per cent. to 3 per cent.? That figure was quoted in the Economist on 9th December, and it would be interesting to know what is the Government's view on that matter. If that is the objective of the Government, how do they intend to stimulate the economy? What is to be the duration and the extent of the pause?

The Chancellor went some way to admitting that there might be minimal increases in the new year. Is the pay pause to go on despite the fact that it will be continually breached, or are the Government hoping to take powers to shore up the defences? What will be their attitude towards the nationalised industries? Is there to be a total prohibition of increases in wages in those industries where the Government have complete control, among the white collar workers and particularly the civil servants?

What is to be the effect of the new differentials which will be created as a result of one sector of the economy artificially having its wages held down while other sectors of the economy have increases? What thinking have the Government done about the new machinery which they will have to create now, having flouted not merely the Burnham Committee, not merely the Whitley Council, but the Industrial Court as well?

The hon. Member for Totnes said that it would be wrong for a reward to be made in total isolation without having regard to the national economic position. With that, I entirely agree. But that is not in itself a justification for rushing around with an axe and hacking at the independence of well-established bodies. I think that the Government would be entitled to claim that they have a right to make their views known at any such arbitration tribunal, that they would have the right to comment on suggested increases within the context of national policy, but they would not be there as a sort of court of appeal which could set aside a judgment or, alternatively, name a date when that judgment could be executed. They would be there as one of the parties to the negotiations. They would have a right to be there, but they would be an equal party and not one with special rights or privileges.

I should like to make one or two suggestions to the Government. I think that, first, our real problem in this country is a psychological one. I agree with the hon. Member for Eastleigh (Mr. D. Price). I wish that the Government could think ahead and try to produce a plan for at least the next five years for the sort of increase they want for our economy. I would suggest something on the basis of 8 per cent. cumulative rate of growth in our annual industrial output. If we could keep up that very high rate of growth over five years it would yield about £6,000 million for private and public investment.

I believe that the first necessity is a national plan for at least the next five years which could get the genuine support of both sides of industry and of both sides of the House. Frankly, I would prefer to see a Cabinet Minister in charge of the N.C.E.D. rather than a director-general; a Cabinet Minister who stood aside from the Treasury, a Cabinet Minister who was responsible generally—and this has happened in some countries—as a member of the Government, who was largely there to co-ordinate the activities of the other Ministries involved and of the trade unions and of industry as a whole.

I believe that it is an appointment that a Cabinet Minister should hold, that it should not be an outside person who will not understand the pressures within the Ministry and the political negotiations and questions which are bound to be thrown up. I believe, also, that this policy must be a policy of consistent growth. I am not, as a Liberal, by any means opposed to profits, and large profits, provided that they are profits which are genuinely earned and in a genuinely competitive economy. That is why I was delighted to hear the spirited cry for free trade from the hon. Member for Eastleigh. I felt that he was coming a very long way towards being a reasonable radical.

I.C.I.—I am grateful to the hon. Gentleman for mentioning it—during the past sixteen years has ploughed back about £535 million out of £410 million worth of profit. [HON. MEMBERS: "Oh."] I.C.I. has ploughed back £535 million. That figure is made up partly of new money invested and partly as profit. The profit section of the total percentage is £410 million. If one takes £410 million out of profits, that is a substantial slice. I.C.I. makes very high profits. I admit that freely. I do not think that there is any sin in making high profits. I am in favour of a firm making high profits provided that it is not in the position of a monopoly capitalist, such as the drug firms which we were discussing in the debate the other day.

I believe that there may be a case for substantial reductions in the profits tax. I believe, also, that there is a very strong case, which the Chancellor was very anxious not to go into, for generous export allowances, possibly a tax-free allowance of 25 per cent. of the total sum represented by export figures. Taking, as a hypothetical figure, that a firm has a turn over of £50 million, if £10 million of that is export, the gross profits are £5 million and the exports represent 20 per cent. of the total turnover, I should like an allowance of 5 per cent. of the £5 million, which would be £250,000, and which, at the standard rate of Income Tax, would have a tax rebate of approximately £94,000. I believe that this would be a great stimulus to exporting firms.

I believe that if this is to work fairly we must have, without any more nonsense from the Government, a healthy capital gains tax. We were told that this would be coming in very shortly. Now we are told that we have to wait until April. I wonder why the Government have suddenly run into difficulty on this matter. There is no difficulty about it so far as the Americans are concerned. It has been working in America for years. Unless there is a fair wages policy, unless there is a capital gains tax, and unless the Government will make known their position with regard to economic policy over the next five years and get agreement on both sides of industry I do not believe that we shall get a response from the trade unions and, frankly, I do not blame the trade unions if they are not prepared to participate.

I believe that the pay pause is not only a farce, but expects the white collar workers to take the "rap" for what has been eleven years of riotous living under a Tory Government. The tragedy is that they are not the pace setters for wage increases. They are the people who always drag behind. What we want from the Government is dynamism and a clear indication of what their policy is to be. Above all, we want both sides of industry to feel that the Government believe in fairness and social justice.

8.0 p.m.

Photo of Mr Robert Carr Mr Robert Carr , Mitcham

It is easy to throw stones at the pay pause policy of the last six months. The hon. Member for Devon, North (Mr. Thorpe) has just given a list of wage increases over that period in spite of the appeal for a pay pause. Earlier in the debate, the hon. Members for Cardiff, South-East (Mr. Callaghan) and Accrington (Mr. H. Hynd) gave examples of how dividends have been increased and said that this showed how the Chancellor of the Exchequer's appeal had been ineffective and how unfair this was in a wage freeze. All that these things prove is that in some cases in wages and in some cases in dividends the Chancellor's request for a pause has been disregarded.

I believe that, putting aside the breaches on both sides, the pay pause has had a considerable effect in the last six months and that that effect has been beneficial to the economy. But it is not, and I do not believe that it was intended to be, a permanent policy. It can only be an emergency measure. if it were meant to be a long-term policy it would be hopeless. It is, of course, unfair, frustrating and unconstructive. Therefore, it can be tolerated only as a short-term emergency measure. I for one welcome the signs which my right hon. and learned Friend gave this afternoon that he hoped soon to emerge into more constructive longer-term developments.

With all humility—one needs humility in this sphere because it is easy to know the answers when one has not the responsibility of being Chancellor of the Exchequer and having to carry out that responsibility—I wish to suggest what I believe should be the bases of a long-term policy for incomes and productivity. It requires action under three main headings. First, it requires the control of total demand on the economy within the total capacity of the economy. Secondly, it requires deliberate action to increase the total capacity of the economy so that, while keeping demand within capacity, demand can increase and expansion can take place. Thirdly, it requires a reform of our system of wage negotiations. I believe that action is necessary under all three headings. Hitherto, we have had it under one or the other but never under all three headings simultaneously.

These three headings take in the Government and both sides of industry. Action under the first heading, control of demand on the economy, is entirely a matter for the Government. That is the Government's chief responsibility. Action to increase the total capacity of the economy is something that should be shared between the Government and industry. By "industry" I mean both sides of industry. Action under the third heading, reform of our system of wage negotiation, is almost entirely the responsibility of industry, and the Government can do little more than help and encourage on the sidelines.

I should like to say a few words under each heading. First, I deal with the control of the balance of demand in our economy, the Government's first job. In my view, it should be the aim of the Government to keep the volume of demand consistently somewhat below the total capacity of the country's economy. I wish to make clear that I am not suggesting that a policy of deflation can solve our problems. Like other hon. Members—for instance, my hon. Friend the Member for Eastleigh (Mr. D. Price) and the hon. Member for Dewsbury (Mr. Ginsburg)—I do not think that we could solve our problems by deflation except by carrying deflation to an extent which would be self-defeating and would cause far more damage than the advantages which could be gained. I am not envisaging, therefore, that amount of under-employment of our economy.

I do not believe that the "stop and go" policy which we have had since the war—if we are honest, we must admit that we have had this policy under all Governments since the war—produces steady growth. I do not think that spurts at maximum capacity or at what is above normal maximum capacity, followed inevitably, as they must be followed inevitably, by a reduction in effort to well below maximum capacity, lead to the highest average growth in the long run. If we were to concentrate on keeping the economy running at somewhere between 95 and 98 per cent. of capacity and at the same time concentrate on measures to increase that capacity, we shall in the long run get a higher rate of growth with a lower degree of inflation and a higher degree of useful employment throughout the economy.

It is futile for Governments to make Canute-like gestures against the current economic tide. What is the good of saying to companies, "Keep down your dividends", when they have a booming home market and can sell everything, even at a relatively low level of efficiency, and make profits in the bargain? What is the good of saying to trade unions, "Do not make claims for wages", when there are far more jobs than people to fill them? Even if the trade unions were to take that advice not to make formal claims for increases in wage rates, in the nature of things employers would, in conditions of such shortage of labour, bid up wages and effective earnings in order to attract the labour that they wanted.

It is, therefore, no good making appeals for restraint when the tide is running against us. First, we must get the tide running in the direction in which we want the economy to move. I believe that a steady control at somewhere below maximum capacity is what the Government should seek and what Governments have not succeeded in achieving in the post-war years.

There is not time this evening for me to deal with the methods of control. I should, however, like to say a few words about timing, because this is as much a matter of timing of Government action as of method of Government action.

It seems to me that since the war brakes have been put on too late and, therefore, too fiercely. Then, because they have been put on fiercely, the pressure to take them off too soon has been irresistible. This is the cause of the "stop-go" policy of which we all complain. Government action has often been out of phase with the ebb and flow of the economic tide. Looking at it from the industrial viewpoint, it has often seemed to me that the Government have been slapping us down when the peak of a boom was already passed and we were going down anyway and then a little later have been stimulating us when trade was already reviving fast enough. It is more a matter of improving the Government's economic visibility, of making their "Bradshaw", which the Prime Minister, when Chancellor of the Exchequer, described as so out of date, even more up to date than it is today.

I think that my right hon. and learned Friend the Chancellor of the Exchequer and his Treasury advisers do not pay enough attention to two of the simplest but I believe most important indicators in our economy from the practical point of view. First, labour supply is one of the things which my right hon. and learned Friend should be considering and acting on more immediately than has happened in the past. Whenever the ratio of vacancies to unemployment exceeds one in any of our major industrial areas, such as the Midlands, the South-East or the West Riding, I believe that we are on the verge of economic trouble, and that that is the time to apply a gentle brake.

Similarly, I should like my right hon. and learned Friend to look ahead more in forecasting labour supply. For several years, the Federation of British Industries has been undertaking its trend inquiries, which, admittedly, are no more than a testing of people's judgment of industry about what they think will happen in the next few months. By and large, however, the results of those trend inquiries have matched up fairly well with what has happened. Here again, I should like to see action taken when the trend is moving in a certain direction instead of waiting until it has already passed a dangerous point.

The other indicator which my right hon. and learned Friend should take much more into account is the trend of earnings. I specify earnings because we get far too obsessed with wage rates. What happens when there is an overheated economy in any area is that earnings go up out of all proportion to wage rates, partly because of overtime when people are working at full stretch, and partly because of excess shortage of labour when employers bid up the rates to attract labour backwards and forwards from one factory to another.

Photo of Mr Charles Loughlin Mr Charles Loughlin , Gloucestershire West

I hope that the hon. Memberwill not overlook one other factor in the high earnings issue; that is, that many rates are linked to the productivity effort of the work people involved. On the basis of the Government's own statement that wages should be linked to productivity, that is a good thing.

Photo of Mr Robert Carr Mr Robert Carr , Mitcham

Where those schemes are properly worked out, I would not disagree in any way. Generally, however, because they indicate the spending money in the economy, total earnings ought to be watched much more closely than they have been.

I hope that my right hon. and learned Friend the Chancellor will press the Ministry of Labour to improve the earnings statistics which are provided to him. Unless things have changed since I was at the Ministry of Labour, these earnings statistics are produced only twice a year and are published six months after the inquiries. I know well the difficulties, but I refuse to believe that with the use of modern statistical methods, mechanical computing devices and so on, useful figures about the trend of earnings could not be produced much more quickly and frequently. They are far more important to watch than the movement of basic rates.

Photo of Mr Ellis Smith Mr Ellis Smith , Stoke-on-Trent South

What is the purpose of watching?

Photo of Mr Robert Carr Mr Robert Carr , Mitcham

In order to take action in time rather than too late. My main thesis is that we have had this "stop-go" policy because Governments, the Labour Government as well as Conservative Governments in the last ten years, have tended to act too late and have, therefore, had to act too violently with consequential disruption of the economy. [An HON. MEMBER: "There has not been a Labour Government in the past ten years."] I am going back to the immediate post-war period.

Photo of Mr Ellis Smith Mr Ellis Smith , Stoke-on-Trent South

I have great respect for the hon. Member because of his record in industry. Will he, however, bear in mind that the national engineering employers, for example, pleaded with us for many years to accept systems of payment by results? They said that if we accepted those conditions, the sky was the limit. Now that our people are working as hard as they can to get the maximum output, their earnings must be taken into consideration.

Photo of Mr Robert Carr Mr Robert Carr , Mitcham

I am glad of the hon. Member's intervention, because I should not like to be misunderstood. I am begging that my right hon. and learned Friend should watch the movement of earnings. Of course, he should also watch the movement of earnings in relation to the total movement of national production. As long as earnings are within the increase of production, I for one welcome that. The problem with which we are trying to grapple is the tendency, not only in this country, but in other democratic countries which have full employment, of incomes to rise faster than production. Where incomes rise within the movement of production, I see nothing wrong.

I, therefore, go back to my first point that the Government must control the total of demand in the economy. In doing that, I believe that the labour supply and the earnings position are the two indicators which they should watch more than any others in order to take action in good time rather than too late.

To control total demand in the economy need not inhibit growth. Concurrently, therefore, I want to see action under my second heading, namely, the encouragement of growth. I welcome the Government's proposal to set up a National Council for Economic Development. I was delighted that in the original statements, the purpose of the Council was described as being to study and to remove the obstacles to growth. That is excellent. I hope, however—and I was encouraged in this by what my right hon. and learned Friend said today—that it will not be expected directly to settle our wages problems. To ask it to do that would lead to failure and would prevent the Council from doing the things which it ought to do. Equally, we must be careful not to think of the Council as a substitute for other Government action, but rather as an aid to it.

The other Government action—the policy for increasing the capacity of our economy—must fall under the following three headings. The first is the supply of labour, because the shortage of labour has several times since the war been the limiting factor, bringing expansion to a halt. I hope, therefore, that while the Government control immigration, they will make sure that it is adequate to meet our growing needs for labour. I hope that they will look at the supply of skilled craftsmen, because within the overall need for labour the need for more skilled workers is particularly acute.

While I welcome the signs that the supply of apprenticeships is increasing, I still do not consider it adequate. More forceful action will have to be taken. The right action will probably be to impose a training levy on industry, giving a rebate to those concerns which undertake an adequate amount of training.

The Government must also look at the supply of labour from the point of view of its distribution. At a time of inflationary pressure, it is more important to be assisting the even spread of industry and the available labour than in a time of slump. Since the war, we have had tendencies for the Government in time of inflation to go easy on their location of industry policy, only to step it up at a time of recession. That is getting it the wrong way round.

It is difficult to speed up the distribution of industry when things are hanging back a bit in the economy. It is much easier when they are going forward. The nearer we can get to an even distribution of labour and industry, the nearer to 100 per cent. capacity can we run our economy without any ill effects of inflation.

Photo of Mr John Jones Mr John Jones , Rotherham

The hon. Member himself, when Parliamentary Secretary to the Ministry of Labour, was chairman of the Committee which dealt with apprenticeships in industry. He is now talking about an adequate source of supply of competent young apprentices. Would he care to tell us his opinion of the Government in view of their actions towards education authorities, school teachers and headmasters, who are the persons responsible for bringing about the opportunity to enter industry?

Photo of Mr Robert Carr Mr Robert Carr , Mitcham

I would very much like to tell the hon. Member, but I should be trespassing on the good will of the House and I want to keep to my brief.

The taxation system is the other heading which the Government must watch closely if we are to encourage an increase in capacity in our economy. Whatever the total burden of taxation may be, it is important that we should reform the structure of taxation.

The objects of doing this should be quite clearly the following—to encourage new investment; to do something which is very similar but not quite the same, to encourage the scrapping of old plant and its replacement by new, more modern plant; to encourage economy in the use of labour; and to level out profitability between home and export business.

One could make a speech about each one of those factors in relation to taxation, but I would say to the Chancellor that he really must look, regardless of the total burden of taxation, at our structure of taxation and see what its effect is on those factors, and compare them with what is the case in other countries. I suspect that if we look at some of those industrial countries which seem to be getting ahead faster than we are we shall find that, regardless of the relative burden of taxation, they have a structure of taxation which is less impeding to their growth and efficiency than is ours in this country.

There are other factors, too, which I cannot go into tonight, about how we might encourage growth in the productive capacity of our economy. But what I want to stress is that it is only when we have demand consistently controlled within the total capacity of our economy, and when we have also set in motion policies to increase that capacity that we can hopefully turn to reform of our wage negotiating system. Our wage negotiating system is one of which we are proud, and rightly proud, but we should be foolish if we were to allow our pride in it to blind us to the fact that it is growing increasingly old-fashioned and out of date in the light of modern needs. It was built up in entirely different conditions. We have to meet new problems today.

I do not know how these changes which are needed can be brought about, but certainly it cannot be done by direct Government action: it must be done, in the end, by industry. But, with respect, equally to both sides of industry, I doubt whether the Trades Union Congress and the British Employers' Confederation can do this on their own. They are too enmeshed in the working of the system as it is today, and I do not feel hopeful of their bringing about the necessary changes. I believe that this is a field in which an inquiry is necessary.

I think that the membership of the committee of inquiry ought certainly to be composed to a considerable extent of representatives from the T.U.C. and the British Employers' Confederation. We need the best brains of each on such an inquiry, and in that connection I should like to underline what the Chancellor said about the great loss which the trade union movement and the country have suffered in the early death of Sir Alan Birch, probably one of the most imaginative and creative thinkers we have had for some time, about the changes which are needed. But we also need some independent brains as well to stimulate and help those experienced in the working of our existing system to consider what changes might be made.

I think the main subjects of that inquiry should include the following. First of all, the problem of leap-frogging. What is the good of settling the anomalies in one industry, as we settled anomalies, at least to a large extent, in the railway industry last year, if the system then allows everybody else to leap-frog over them, so that we are once again back where we were when we started? This question of leapfrogging is vital and must be looked at closely.

Related to that is the question of how we find room in our economy for giving fair wage increases for those in the non-productive services such as the Government service and the like. Here I come on to the question mentioned by the hon. Member for Rotherham (Mr. Jack Jones) in an interruption. Thirdly, the inquiry must look at the role and methods of arbitration. I think that is essential. I think it should also study the merits—and there are pros and cons—of fixed-term agreements and legally enforceable agreements which are the practice in some other countries but have never been the practice here. I think that the inquiry should also look at the advisability of having sliding-scale arrangements for automatic adjustments with changes in the cost of living. This should either cover all wages or none. That is a subject which ought to be looked at.

I think that the inquiry ought to look—and this is one important reason why we need outside help on the inquiry—at the structure of both the trade union and the employers' organisations. They grew up when industry was quite differently divided from the way it is now. Both organisations need some changes in structure. I think this inquiry ought to look at new definitions of sectors of industry for which wage negotiations take place. Is it sensible to negotiate about, say, the engineering industry when the engineering industry comprises all sorts of different industries which are not all prosperous at one and the same moment?

I think that the inquiry ought to consider whether there is some way of providing both sides to a negotiation with factual, independent information about the effects of a claim. At the moment we have employers saying that a claim would be disastrous—that order books and competition do not permit an addition to the wages bill. Trade unionists tend not to believe that but to think it partial. They, in their turn, make their claim which seems partial and incredible to the employers. I think that both sides to the negotiation would be greatly helped if some machinery could be found to provide them with a factual assessment of the position about orders, the cost of the claim under consideration, and so on.

I would conclude by saying that unless we change—evolution, not revolution—our present wage negotiating machinery, we shall not solve the problem which is before us today, and that before we can do that we have got to get action under the other two headings I have mentioned—namely, regular control of the economy, so that demand is kept within total productive capacity, and steady, consistent measures to increase that capacity.

8.27 p.m.

Photo of Mr Daniel Jones Mr Daniel Jones , Burnley

I rise to support the Amendment. I should like to say immediately that I believe that in doing so I am supporting the broadest interests of the economy of the country. Before I give the reasons which, I hope the House will agree, are practical I should like, first, to answer a question which was not put to me, but which remained unanswered. The question was: how many unemployed would you like to see?

There was demur, but I will give the answer to that question. Not one. I have myself been unemployed and I know what it means both in the financial sense and also in the industrial and social disintegration which is involved. I would say that if the hon. Member on that side had suffered unemployment himself he would not ask such a thoroughly un-Christian question.

I believe that the question can be answered in a strict economic sense if there is a planned economy. I do not know that we need fear full employment, or the dangers of inflation which are undoubtedly involved in it. I want to make myself quite plain on this issue. Having had experience of unemployment, I would certainly not legislate for one man or one woman who desired to work to be prevented from thus doing so.

I say again that I speak on this issue of the pay pause almost exclusively as a trade unionist. I think that I can say for those trade unionists whom I have met, not all of them trade union officials but quite a number of the rank and file of our movement, that we hold to the opinion that when the pay pause was introduced it might have been in the interests of the country if a dividend pause had also been introduced.

I have here an A.E.U.'s journal, which circulates among 1 million of our members and is read by an even greater number of people. The facts given in the journal are taken from the Stock Exchange Gazette, which is not a periodical that tends to support the trade union movement. The facts show that 1,138 quite sizeable companies with profits after tax of more than £100,000, have increased their distributive dividend by over 200 per cent. during the last ten years. The market value of the ordinary shares of these companies has risen by about 312 per cent. Judged by any standard that is not bad going.

The Ministry of Labour Gazette shows that during the same period wages increased by 87 per cent. to a total of £8,630 million but its figures show equally clearly that there has been an increase in the working population and that the real increase in wages during that period was 67 per cent. One could be forgiven, therefore, for coming to the conclusion that employers have done very much better than trade unionists during these ten years. Some reliance ought to be placed on these figures coming from two reputable sources, neither of which owes any allegiance to the trade union movement. I therefore believe that the trade union movement was right, at the time when the demand was made that it should accept a wage pause, in saying that a dividend pause would have served the interest of the country much better.

The figures in the A.E.U. journal will be read and understood by millions of working-class people. During the third quarter of 1961, after the demand for a pay pause had been made, and despite appeals from the Government, 546 companies have increased their dividends by 10 per cent. My hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) mentioned the names of hon. Members who should owe some loyalty to the Government, but who have taken it upon themselves to ignore entirely the Government's appeal for some measure of restraint. One hon. Member opposite justified what he had done on the ground that he had promised it.

The Government have made promises which they have chosen to break and in the process of breaking them they have injured one of the finest safety valves in the country, that is, the safety valve of arbitration. Speaking without any bitterness, but with a certain amount of righteous indignation, I say that when it comes to consolidating their own interests some hon. Members opposite take absolutely no heed of the Government's voice, but they take steps in the House to consolidate the iniquitous pay pause for the working classes.

Photo of Sir John Barlow Sir John Barlow , Middleton and Prestwich

The hon. Member said that 546 companies had increased their dividend by 10 per cent. Can he say how many have not done so?

Photo of Mr Daniel Jones Mr Daniel Jones , Burnley

I am not at all certain that that is the point. It may well be true that some have honoured the Government's request, but I am saying that 546 have not done so, and that is a substantial number.

As to the condition of the working-class, a great deal is said about alleged financial affluence. Last week some of us met a deputation of shop stewards in the Central Lobby. One of our more elderly Members wisely took them to a Committee Room rather than have them make a nuisance of themselves in the Lobby. A number of them had come from Tothill Street, where they had heard that an application for increased wages by certain engineering workers had met with a blank refusal. A skilled engineer receives £9 15s. 2. a week, a labourer gets £8 4s. 10d., and a woman operative £6 13s. 6d.

I know perfectly well that some hon. Members will argue, as indeed the Government and employers argue, that these are not total earnings. As a trade union official who has negotiated these earnings over a period, I know that that is the case and that there are such things as overtime and piece-work. But I would never be prepared to regard those two factors as anything like decisive in adjudicating the standards of working-class people, because trade unionists, shop stewards and the workers generally have no control over those two factors. They can be snatched away from them at a minute's notice without any question of a right to protest.

Are the House and the Government asking trade unionists to negotiate standards of wages for workers on the basis of factors over which they have no control and which are frequently removed? I have in mind a man who said to me, "I am buying my house. I am not working overtime. I get no piece-work and I find that the interest rates are simply overwhelming me." Interest rates are another instrument which the Government have used. They have increased them, yet they expect skilled engineers, who are doing a far finer job for the country than some of the people to whom the Government have given £83 million, to live on this wage.

Another person who made an impact on me was the young girl of 27, earning £6 13s. 6d. a week. She said, "I would get married tomorrow if you found me a man, Mr. Jones". Of course she would. It is only natural. She is a human being, and has a right to live a full life. The tragedy is that she has to live it on that meagre wage. I suggest that if the people who are imposing this wage pause had to live on the money that she receives, there would soon be a change of policy.

Photo of Sir Edward Boyle Sir Edward Boyle , Birmingham Handsworth

I have listened with interest to the hon. Gentleman. When he is considering distribution of the national income—which is what he has been doing with great eloquence—surely it is relevant to remember that social expenditure under Her Majesty's Government has gone up by 48 per cent. in real terms. I disagree with the hon. Gentleman when he says that the distribution of national income, taking everything into account, is less fair today than it was in 1951.

Photo of Mr Daniel Jones Mr Daniel Jones , Burnley

That is not the point that I am seeking to establish. Does that help a man who is earning £9 15s. 2d. a week?

Photo of Sir Edward Boyle Sir Edward Boyle , Birmingham Handsworth

Yes, because of the increase in social benefits.

Photo of Mr Daniel Jones Mr Daniel Jones , Burnley

But the woman to whom I referred has no children. I do not think that that is a fair point, and I did not expect the Minister to make it.

Photo of Mr Arthur Lewis Mr Arthur Lewis , West Ham North

Is my hon. Friend aware that the Surtax payer also gets those social benefits to which the Minister referred, and that in addition he has had two or three rebates on his Surtax payments?

Photo of Mr Daniel Jones Mr Daniel Jones , Burnley

I am very much indebted to my hon. Friend, but I was contenting myself with the fact that skilled engineers receive these low wages. Their position would not be materially affected by the observations of my hon. Friend.

I say this by way of warning to the Government. In the coming year they will be faced with the allied might of the engineers, the railway workers, the Post Office workers and the miners. The Government are making the greatest mistake of their lives if they think that they will out-manœuvre these people as easily as they out-manœuvred the teachers. I do not say this with any relish. I would much rather have industrial peace, so that both sides of industry could contribute to the economic well-being of the country. The Government have brought about this state of affairs, and it is now not so much a question of what responsible trade union officials will want to do but what trade unionists will demand that they should do.

If the Government are not prepared to consider their policy, the workers to whom I referred might bring the country to a situation which I think every non. Member desperately wishes to avoid. However, this is a matter more for the Government than for hon. Members on this side. I believe that if the Government allow arbitration to function once again, and put a pause on dividends, they have a fair chance of winning peace with the great trade union community and solving our economic problems.

8.43 p.m.

Photo of Sir John Barlow Sir John Barlow , Middleton and Prestwich

I do not propose to follow very far the hon. Member for Burnley (Mr. D. Jones). Obviously I do not agree with many of the things he said. I disagree with him when he says that the distribution of national wealth since the end of the war has been grossly unjust to certain sections of the Community.

The hon. Member for Cardiff, South-East (Mr. Callaghan) seemed to lay great stress on the use of inflation by the present Government when they get into difficulties. I think that he said more than once that the remedy used by the Conservative Government for industrial ills had been that of inflation. I am surprised that he did not remember the Question asked a short time ago by the hon. Member for Gloucester (Mr. Diamond) about the value of the £ in terms of 20s. in 1914. If the hon. Gentleman refers to that Question, he will get a pretty good idea of how inflation has worked since the war.

The £ that was worth 20s. in 1914 was worth 7s. 7d. in 1946 and 5s. 9d. in 1951—a diminution of Is. 10d. in five years. In the last ten years its value has fallen from 5s. 9d. to 4s. 6d.—a difference of 1s. 3d. It would therefore appear that the rate of inflation was higher in the five years of Socialist Government than in the ten years of Conservative Government. I agree that imported commodities have in some cases fallen in price, but the fact remains that in general terms there has been less inflation in the past ten years. Hon. Members will find that fact emphasised in other statistics if they look for it.

I now turn to the question of costs of production and our difficulties in exports. There is no doubt that we are getting out of step with other countries. We are finding difficulty in maintaining our exports, let alone increasing them. We all deprecate the stop-start method used by all Chancellors since the war—and the present Chancellor has been one of the worst in this respect. If a person drives a car with one foot hard down on the accelerator or the brake, it does not make for good driving. The same consideration applies in industry. If we can anticipate difficulties as they come along, and coast along at a reasonable speed, we can get a far better job done in industry, as we can in driving a car. I hope that in the future our Chancellor, with the greater amount of information and advice at his disposal, will be able to do that. It will be a great deal better for him, for industry and for the nation.

We have largely priced ourselves out of many world markets, apparently because our wages are too high, and because our overheads, materials and profits, will not allow us to sell abroad at a profit. That is quite apart from the large amounts which the Government take out of profits—and sometimes do not spend too wisely.

It is suggested that vast profits are made by selling abroad. That is not very often the case. It does happen, but I know only too well that certain industries have been completely priced out of world markets because they have found it quite impossible to sell at any figure approaching world prices. In many cases firms have gone bankrupt or have gone out of business before going bankrupt.

We are often told that our salesmen and sales organisation abroad leave much to be desired. In my younger days I did a certain amount of selling abroad, and I know the difficulties. If a salesman has a good product and is backed by a manufacturer, he can sell reasonably well, but if he has something which is virtually priced out of the market he finds it absolutely impossible to sell. No amount of organisation and no change in the method of approach will enable him to sell those goods.

Photo of Mr Archibald Manuel Mr Archibald Manuel , Central Ayrshire

The hon. Member has been talking about wages. Does not he agree that one of the determining factors is that not enough of the profits being made are ploughed back, and that another factor is that our firms are competing with new and modernised industry, such as exists in Western Germany, which makes it virtually impossible to sell?

Photo of Sir John Barlow Sir John Barlow , Middleton and Prestwich

I am all for ploughing back profits and modernising plant and machinery in every way. That is of vital importance. But if we examine the figures we find that wages and salaries have increased considerably more than have profits. The Economist of 9th December says: On the latest official count of the national income figures at mid-year wages and salaries were 9 per cent. higher than a year before and profits 8 per cent. lower than a year before. If one examines the reports of profits and losses appearing each day in the Press one finds ample indication that profits have been falling rather than rising. Obviously, in those circumstances there will be a lowering of dividends rather than an increase. The time lag also has to be taken into account. Many companies end their financial year at the end of December, and their accounts are not available until March or April. We must make allowances for that time lag.

Similarly, if we take the U.K. Index of Retail Prices as standing at 100 in 1956, we find that it has risen only to 115·7 in October of this year. On the other hand, the index of weekly wages, excluding overtime and all other similar factors, shows that these wages, in respect of all workers, have increased to 126·2 in October, 1961. In those five years the level of wages and salaries has risen much more than the level of retail prices.

I want to give a third illustration to show how dividends have suffered in comparison with wages, and I take the figures from the Economic Survey. From 1938 to 1960 the percentage of change in dividends was 180 per cent., whereas the percentage change in wages and salaries was 438 per cent. If that is translated into real money value, ignoring taxes completely, the increase in dividends from 1938 to 1960 was 2 per cent. and the increase in wages and salaries was 96 per cent. That shows in terms of real money how wages have gone far ahead of the real return from dividends. Unfortunately, it is often the rather old and poor people who suffer most from the loss in the real value of dividends. [Interruption.] If hon. Members opposite have not found that, I am agreeably surprised, because I know many people who saved enough to retire before or after the war and who, owing to the change in the value o' money, are having a very thin time indeed.

One sees in the pipeline demands for wage increases in many industries. There was a list in the Financial Times in November. At that time workers in the engineering and the shipbuilding industries, the mineworkers and the railwaymen and workers in half-a-dozen other industries had put in for increases on behalf of about 6 million people. Obviously if all those people got anything like the amount they were requesting, or even a little less than that, it would put us completely out of the export market. As hon. Members opposite know well, without exports we cannot buy raw materials and about half the food which we require in this country.

We have a limited cake to divide among the various sections of the community, including wages and profits, out of which the Government take a big slice. It is up to the Government, and the Chancellor in particular, to see that the cake is reasonably well divided. If different sections of the community demand more than is reasonable it will bring us to the unhappy state suggested a few minutes ago by the hon. Member for Burnley, in which there might be very serious incidents in the country. We all want to avoid that, but it is a question whether each section thinks that it is getting a fair deal.

In wartime the people are willing to fight and die for their country but apparently in peace time—and this applies to both sides of industry, and I do not pick on any one section—they cannot agree on a division of the cake. They will not work for the country. It appears that many people are willing to see the country sink economically and industrially because they cannot divide the cake in a way to satisfy themselves. That is an extraordinary situation.

We all wish to see people paid high wages for high output and efficient work. I believe that greater encouragement should be given to people who do good work, rather than minimum wages, with a large number of people receiving them. There ought to be more incentive for hard work.

Output in this country is not going ahead nearly as fast as in many other European countries. If we take the index of output per man-hour as 100 in 1953, Germany now has a figure of 156, France 151, Austria 145, the Netherlands 140 and the United Kingdom 125. Without adequate output we cannot pay high wages and maintain our exports, which are vital to the country.

The Chancellor told us of the large new sums which the I.M.F. is to have at its disposal shortly. I am told that this new fund, amounting to 6,000 million dollars, may have strings attached to it of which we have not heard before. It is suggested that severe terms may be imposed which have never been imposed before by the I.M.F. I hope that that is not true, because it might be very serious for Britain. We in Britain have got away from the gold standard but we are under gold standard discipline. If the Continental financiers think that we are not productive and efficient they will sell sterling a bear, and that will be very embarrassing for us. We must show that we are working properly and convince them that we are—they are on the look-out the whole time—because unless we convince them that we are productive they will harass sterling all the time.

9.0 p.m.

Photo of Mr Raymond Gunter Mr Raymond Gunter , Southwark

May I, first, thank the Chancellor of the Exchequer very much for his kind reference to an old friend of mine and of the trade union movement, namely, the late Sir Alan Birch. As the right hon. and learned Gentleman said, we shall miss his integrity and wisdom very much indeed.

I do not know that the Financial Times is a very appropriate place to go to for a text, but I was reading it the other day. In the last Annual Industrial Review issued by the Financial Times, Dr. Barna wrote: It is difficult to avoid the conclusion that British industry has failed to adapt itself rapidly enough or fully enough to new conditions. Behind all the statistics which have been produced and behind all the arguments of the economists and industrialists this afternoon, our basic trouble is that the nation as a whole has not adjusted itself to a new world. We were the founders of the first Industrial Revolution. We gave the world its strength in an economic sense. Perhaps it is something in the nature of a tragedy that in what is sometimes called the second industrial revolution the springs of the initiative of the British people have not been released. The great task of the Government and of the House is to ensure that circumstances are created in which the native genius of our people is restored and the dread world of apathy and inertia in which so many of them live today can be relieved.

I believe that there is something wrong with the nation. I began to wonder during the first half of the Chancellor of the Exchequer's speech whether there was. He seemed to be painting a rosy picture. He seemed to be giving the impression that only a trifling thing was wrong with the people ant with the nation. I believe that there is something wrong, and that it stems from the absolute lack of leadership on the part of the Government.

I have spent many years in industry. Before the Chancellor of the Exchequer announces his plans, and before we can settle down to solve the problems now confronting us, it is essential that we turn our attention to industrial relations. We are going through a period when new techniques are being introduced and when all the products of our technicians and scientists ought to be available to industry. We are in a period when our great basic industries are contracting. These are the great basic industries which gave rise to the conditions under which our trades unions were created. They are contracting. We are now facing a new world.

Within this setting it is essential—imperative—that our industrial relations should be not only good, but better than they have ever been before. There should be much better industrial relations, so that employers and men can together face the problems of the emerging revolution and together grapple with the problems of redundancy and similar problems which arise from new techniques. The first thing we should be considering, more important than all the arguments about economics, is how we can get the right spirit back into industry. That is the spirit that has been so brutally multilated since 25th July last.

Many of us have tried for many years to improve industrial relations. There are many like myself who have always felt that there might come a time when the argument that there must be two sides to industry would disappear. I have always felt that there might come a time when employers and trade unions would have identical objectives. We never believed that the total harshness of industrial relations would disappear, but we believed that an atmosphere might be created in which men and employers would work together.

As the Chancellor, and as, in particular, the Minister of Labour, knows, over the last few years many learned books have been written on joint consultation. We have written into Acts of Parliament and into national agreements the relationship that should exist between employers and men, but we may as well face the fact that in large areas of industry today the machinery for it is there but the spirit to work it is absent. In them there is not that feeling and purpose.

Our objective should be to restore that identity of purpose, and to restore good will so that the plain facts of the present situation may be faced together. I believe that, in reality, there is no resistance from the trade unions to the using of modern techniques. The introduction of work study methods has been successful in many areas of British industry, but its implementation in others has been equally unsuccessful.

The introduction of modern industrial techniques, upon which increased productivity depends, is related to the good relationship that exists within an industry. It should be a primary task—and I shall address the Minister of Labour on this in a moment—to sow such a spirit in industry that the best and most modern techniques are used in order that productivity may rise and prices may be reduced. Instead, as we all know, our trade unions are attacked from every quarter. Indeed, if our newspapers spent half as much time analysing the real problems of industry instead of so venomously and viciously attacking the trade unions they would render a far greater service to the nation.

We are confident that the country could emerge from its difficulties with not even too great an effort if there was a better spirit abroad in industry. One of our dilemmas, as I am sure the Minister of Labour will appreciate, is the rigidity existing within the present system. That, again, is allied to the fact that we have not faced up to the revolution swirling around us. One of the best things that could occur today would be greater mobility of labour, with quicker movement from contracting to expanding industries. But what is the position? The old fears of redundancy and unemployment are there—

Photo of Mr Raymond Gunter Mr Raymond Gunter , Southwark

I am coming to that in a moment.

As I say, there is still fear of redundancy. Further, as my hon. Friend the Member for Stoke-on-Trent, South (Mr. Ellis Smith) has just said, mobility of labour is retarded as a result of the Government's housing policy. If the Government want to arouse a new spirit and a new energy in industry today, the best thing that they can do is to turn their attention to these problems, and to accept the responsibility for the social consequences that flow from some of these great changes.

The mining industry is an outstanding example. Here, we have a contracting industry. It is one in which men are redundant in one area and labour is short in another, yet all the Government can do, time after time, is to say, "The responsibility for redundancy, for replacement, is not ours. It belongs to the National Coal Board." In all these matters I submit that the Government must accept a great measure of responsibility. I firmly believe that if we can engender a new spirit into industry—if, together, we can appreciate the real problems—we can get out of our difficulties. But I repeat: it is a question of good relations in industry and I must, therefore, urge hon. Members to consider what the Government have done to these relations in the past few months.

I wish that hon. Gentlemen opposite would sometimes realise that the trade unionist, the average working-class man, knows very well that he cannot spend more than he earns, or that if he does it will not be long before he gets into trouble. That is elementary. Anyone who has heard the rent man's tap on the front door knows what it means if the rent is not ready for collection. I believe, therefore, that the trade unions—formed of ordinary working-class men—understand the idea of the back ground of the problem, our need to ensure that we earn sufficient to maintain our standards of life.

The Government have, in a sense, frightened the trade unionist. They have destroyed his confidence. There is nothing sacrosanct about the present system of collective bargaining. I have argued for a long time that the way in which some of our wage structures have been created were worthy of the 1870s, but are unworthy of the 1960s. There is nothing sacrosanct about our wage structures, but, nevertheless, this system of collective bargaining has been created over the past century. It has been the foundation, the strength, of the trade unions to know that through the processes of negotiation and collective bargaining they could—even though at times they have had to use their strength—arrive, generally speaking, at satisfactory conclusions.

There was, therefore, a direct and brutal interference with that machinery of negotiation and system of collective bargaining before the Chancellor of the Exchequer made up his mind what he intended to put in its place. The Government could have carried organised labour and the trade unions with them—and, as I say, these men appreciate the anachronisms there are in certain methods of bargaining—if they had been clear in their mind about what was to take its place.

Responsible leadership in the trade unions—and I am not talking of wild men of the Left, but of the most responsible trade union leaders—has been dismayed at what has occurred since 25th July. These men have grasped the implications of the 1960s. They have not believed, and do not believe, that the weapon of the strike—of brutal force—is any good to themselves or to the country. These men have deplored unofficial strikes and have sought, by every means in their power, that the trade unions should play a responsible part and should never jeopardise the economy of the country if it could possibly be avoided. These people have been affronted by the Government, since their strength and preaching to their members has always been based on the machinery of negotiation.

Agreements are sacred to these people and it is their faith that has been destroyed. It is the brutal injustice of the pay pause that has been uppermost in the minds of these responsible men. I make it clear to the Chancellor that when he argues that the nation's overriding interests must be paramount, that whatever agreements may exist, whatever system of collective bargaining there might be, the peril to the nation is so great that they must be overridden, I would agree with him. Nevertheless. in the circumstances which have prevailed since July, he has not appreciated the delicacy of his task and has not understood the attitude of mind of the trade unionists.

A pay pause can be imposed only with the greatest delicacy. If, at a time which cannot be called a time of great national peril, the Government wish to interfere with agreements and with long-established machinery, they have got to impress upon the workers that they are being dealt with in equity. We can do it with the workers if they feel that there is equity and that the objectives which the Government have in mind are right, proper and in the national interest.

The Chancellor almost went out of his way to offend these people, putting forward the excuse that he could not talk to them because he was afraid that he would have to mention the rise in the Bank Rate. Consultations ought to have taken place. The Chancellor ought to have called together the leaders of the trade unions and put before them the position bluntly and frankly. He might then have been surprised at the response, because the trade union leaders, despite what is said about them, are a responsible and patriotic body. They would do nothing to injure the country's economy. What they are afraid of is that such disillusionment and suspicion have been created in the minds of the men whom they lead that greater and greater difficulties will arise.

May I say a word to the Minister of Labour on this aspect of the situation? I do not know what consultations took place between the Chancellor and himself before the latter's statement of 25th July. It sometimes appears to me from the way that history has unfolded that consultations did not take place. I sometimes think that the officials of the Ministry of Labour were never asked to prepare a memorandum on the consequences flowing from the Chancellor's statement.

I remind the Minister of Labour that he holds a very high office indeed, in the minds and hearts of the trade unions. It has already been said in this debate that for many years we have been accustomed to having an occupant of that post who, in a way, is aloof and above party strife. There have been some great names in the Department. We have had the feeling on the trade union side, if I may say so, that we may have some "daft" Ministers but that. on balance, when we are in trouble and we go to the Ministry of Labour, there is always an honest endeavour to do justice.

I do not know what the conciliation officers of the Ministry will say in the next few months, when they are faced with problems arising from wage negotiations in January and February. I do not know how they will handle the situation. Conciliation is impossible. Negotiation is impossible, because the answer has already been given by the Chancellor. Therefore, many of us feel that the Ministry of Labour has lost a lot of the honour that it held in the minds of prominent trade unionists over the past few years. I only hope that the present Minister will exert any influence he can in the next few days to see whether the position can be retrieved.

It has been argued from the Government side so speciously that there has been no interference with the machinery of negotiation. The Prime Minister has said, "Only in a totalitarian State could we interfere and control." What else he has done I do not know. He has said to the miners and to the railwaymen, "You can go to 46 arbitrations if you like, but you ain't getting the lolly". That is what he has said, in effect. There has been direct and brutal interference with the machinery of negotiation.

I turn now to the proposed National Council for Economic Development. The Chancellor of the Exchequer has presented us with a vision of a new kingdom, the sudden discovery by the Conservative Party that there may be something in planning. He has invited us all, trade unions and employers, to come to the pearly gates with him and walk through. He is a bit surprised that some people want to know what is inside before they enter. They want to know just what he means by this kingdom.

I thought the other night of one of old Sankey's revival hymns. The Chancellor will remember it from the days when we were pure and young, though the orthodox, of course, will not: Not far, not far from the Kingdom,But still under the shadow of sin—See them all coming and going,But few there are entering in". Can the Chancellor wonder that we are a little hesitant? I declare my interest at once and say quite frankly that I want us to go in. I believe that it could be of tremendous importance, if the Chancellor means what we mean by planning. I believe that it could do only good if the trade unions and the employers went in. Nevertheless, I think that it only right to put to the Government tonight what is, generally speaking, the attitude of the Trades Union Congress upon this matter.

Recently, Mr. George Woodcock wrote: We"— that is to say, the T.U.C.— do not regard economic planning as a gimmick or as one more expedient to meet a temporary economic problem. We take it very seriously indeed, more seriously perhaps than the Chancellor realises or than he takes it himself. It is our view that all the parties to a joint endeavour of that sort—trade unionists, employers and the Government—must be prepared to enter into mutual commitments where it is proper for them to do so, and to carry those commitments back as commitments to the bodies they represent—to the trade union movement, to the employers' organisations and to the Cabinet itself. We shall have to face the fact"— this is what I hope the Chancellor understands by it— that this means, for each of us, putting some limit on our unilateral freedom of action. Bargains will have to be struck and honoured. It is impossible to define in advance with any precision what the nature or even the subject of those bargains will be, but the fact that bargains and perhaps compromises will have to be struck means that there will be no function in the planning council for people who represent no one but themselves. That is our attitude.

Photo of Mr William Robson-Brown Mr William Robson-Brown , Esher

That is statesmanship.

Photo of Mr Raymond Gunter Mr Raymond Gunter , Southwark

Yes, that is statesmanship.

A Council of that sort would, we hope, have some teeth. Our difficulty is that other people with different ideas will be invited to join the Council. The chairman of one employers' federation says very loftily that, of course, the prime objective of such a Council must be educational. Anyone who thinks that the Trades Union Congress is likely to attend a series of night classes had better think again.

I believe that the Trades Union Congress will enter a planning council which means something and which will do something. Moreover, we are not afraid of the Chancellor being tough about it.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

When I met both sides of industry I said that I realised, in making this proposition, that each of us—the trade union movement, the employers and the Government—would have to lose something of our sovereignty. That was the basis on which I was asking them to come in.

Photo of Mr Raymond Gunter Mr Raymond Gunter , Southwark

I should be quite happy to accept that. I only wish that the right hon. and learned Gentleman's public relations were better and that the country understood what he said. However, that does not detract from the point I have made about what the employers were thinking. I trust that we shall be able to take part in the Council when the circumstances are right, but I must emphasise again that everything that could have been done to make matters difficult for the T.U.C. has been done.

I hope that tonight the Minister of Labour can tell us that the Government will think again on the pay pause. I am not asking them to open the floodgates at all, but to say to the T.U.C. and to the public, "We have had second thoughts about this interference with the machinery of negotiation. We want restraint, but we want it done in the spirit of co-operation and good will, and, therefore, we are starting again by calling the trade union leaders and the employers together to see whether a better policy can be worked out."

I would say one last word on the fear that we have about the Council. There has got abroad the idea that its main purpose is to impose a wages policy on the trade unions. I accept the Chancellor's assurance that that is not his purpose. I believe that the most thoughtful of the trade union leaders are quite prepared to think deeply about wage policies and structures. I was gratified that the Chancellor used the phrase, "income policy". That, in fact, covers everybody. If that covers everybody, there will not, I think, be a great deal of difficulty—but it has got to be everyone.

I say to the Chancellor that one of the things that bedevils good relations—one of the things that gets into men's bellies—is that a man can spend forty-five years driving a main line railway engine, and retire on a pittance after working responsibly and with ability for all that time, while a grubby little land speculator can make more in a week than the engine driver can earn in the whole of his working lift. Therefore, when we talk about an income policy, let us remember that it embraces the whole.

I conclude by saying that if we can have a new spirit, a new identification of purpose, and, above all, if we can have leadership at last from the Government, we may be able to get somewhere. I appeal to the Government to stop exhorting. The British people have never been very good at responding to exhortation in peace time. They respond better to tough talk than to exhortation, and I therefore hope that we shall have no more of the flabby nonsense that we have had for the past ten years. I appeal to the Government to give the nation leadership, but, of course, that is impossible; they cannot give us leadership, so I leave it there and invite the House to support the Amendment. I have a deep and profound faith in the ability and initiative of the British people. If they are given the facts and the leadership, we can not only survive; we can restore much of our diminished glory.

9.29 p.m.

Photo of Mr John Hare Mr John Hare , Sudbury and Woodbridge

I know that I shall be following the wish of the whole House when I warmly congratulate the hon. Member for Southwark (Mr. Gunter) on the speech that he has just made. We were deeply impressed by his knowledge and his sincerity. We wish him well in his new job—not too well, but very well.

This has been, I think, for anyone who listened to it, a really constructive and thoughtful debate. We have listened to a number of very notable speeches. I have had the good fortune to hear most of them, but I am sorry that I was not in my place when my hon. Friend the Member for Mitcham (Mr. R. Carr) made his contribution. Hon. Members on both sides of the House have not only concentrated on the vexed question of the pause but have wished to deal in addition with the basic problems of our economic situation and of how we can work out ways and means together of securing a better future.

The Amendment does three things. It deplores the handling of the pause, states that the Government have undermined negotiating machinery, and accuses the Government of having failed to provide the key to the future.

The pause is what I should like to describe as phase one of a three-phase operation for securing a generally accepted incomes policy. The Chancellor of the Exchequer has emphasised throughout that the pause was a temporary expedient designed to deal particularly with the adverse situation which we faced in July. The hon. Member for Southwark referred to times of national peril. In some ways, we were in a condition of national peril in July. I believe that our hopes of increasing exports would have been shattered if the Chancellor had failed to take the drastic steps which he took in July. The prospects of arresting a further deterioration in the purchasing power of money would have been lost in the course of this winter. The Chancellor has promised to consult the unions and employers very early in the new year.

As the pause ends, we shall move into the next phase—

Photo of Mr William Williams Mr William Williams , Manchester Openshaw

I should like the Minister to be specific on a particular case. It will be within his knowledge that there are very serious difficulties pending in certain sections of the Post Office and that these are to come into effect on 1st January. I was wondering whether the Minister of Labour will ask the Postmaster-General to invite the leaders of the trade unions concerned to discuss the situation with him in the light of the declaration made by the Chancellor of the Exchequer this afternoon. If he does not do it between now and the beginning of the year, there will be great difficulties, and it is the right hon. Gentleman's responsibility as Minister of Labour to prevent those difficulties.

Photo of Mr John Hare Mr John Hare , Sudbury and Woodbridge

I do not know whether the hon. Gentleman was here when my right hon. and learned Friend the Chancellor of the Exchequer spoke.

Photo of Mr John Hare Mr John Hare , Sudbury and Woodbridge

My right hon. and learned Friend said that he wished to have consultations with the staff side of the Civil Service.

Photo of Mr William Williams Mr William Williams , Manchester Openshaw

Cannot the right hon. Gentleman give a specific promise here and now?

Photo of Mr John Hare Mr John Hare , Sudbury and Woodbridge

I cannot give a specific promise. The Chancellor was perfectly clear in what he said earlier.

Photo of Mr James Callaghan Mr James Callaghan Shadow Chancellor of the Exchequer, Member, Labour Party National Executive Committee

What does that mean? [HON. MEMBERS: "Oh."] Some of us are trying to avoid industrial trouble. What the Chancellor said this afternoon was that he would arrange a meeting with the staff side of the Civil Service. What my hon. Friend the Member for Manchester, Openshaw (Mr. W. R. Williams) is putting to the Minister of Labour is this. There is a danger of industrial trouble in the Civil Service on 1st January. Is it not possible for the Minister of Labour to say to the Postmaster-General that, in view of the Chancellor's declaration, it would be wise and advisa1ble if he were to meet the leaders of the Union of Post Office Workers and the other unions concerned before 1st January?

Photo of Mr John Hare Mr John Hare , Sudbury and Woodbridge

My right hon. and learned Friend made his position quite clear. He is willing to have talks with the staff side, but I think that the hon. Member would make a great mistake if he tried to press this, so to speak, under threat of a strike. [HON. MEMBERS: "Oh."]

As I was saying, as the pause ends, we shall move into the next phase which inevitably must be a period of continued restraint. The object of this will be to ensure that we do not lose during 1962 the very considerable advantages we have gained since July, particularly in the strengthening of our competitive position.

Meanwhile, we shall be laying the foundations for the third phase in which we propose that the Government, employers and trade unions will combine to plan for increased growth from which larger incomes can be afforded. As my right hon. and learned Friend made clear to the hon. Member for Southwark, this would be a real partnership in which each of us would be prepared to part with some sovereignty. This is the background against which we should assess the results of the pause. In spite of the spate of criticism, much has been achieved. The facts are these. The £ is firm, our rising costs are levelling out and our competitiveness has increased. We move into 1962 with a much better chance of being able to seize the great opportunities of increasing our export trade than could have been thought possible six months ago.

The hon. Member for Cardiff, South-East (Mr. Callaghan), in a very able opening speech, as well as the hon. Member for Accrington (Mr. H. Hynd), the hon. Member for Leigh (Mr. Boardman) and the hon. Member for Devon, North (Mr. Thorpe), all stressed that the pause policy had not worked with equal fairness. It is true that all temporary policies designed to deal with an emergency do not work with equal fairness. Certain groups have been hit harder than others. The decision was obviously bound to affect negotiations on pay and conditions which were in progress or pending at the time.

As a major employer, the Government clearly had the heavy responsibility to set an example to others. If the Government had not practised what they preached, why should anybody else have taken our policy seriously? Therefore, it is true—I admit it openly—that the first sections of the community to be affected were those whose wages and salaries are directly controlled by Her Majesty's Government—the civil servants and, as far as the date of increases is concerned, the workers covered by wages councils, In the case of lower-paid workers, some decisions have been particularly painful, but much less painful than if inflation and rocketing prices had been allowed to run their course.

Although this has been a debate moderate in tone, a great number of charges have been made about the damage that is being done to free negotiation and arbitration. I assure the hon. Member for Southwark that I do not want to make any specious excuses. I feel that I should declare the position of the Government in this respect. Given the primary need to sustain the pause in the Government service, the Government have taken the greatest care to do as little damage to negotiating and arbitration machinery as possible. Pre-pause commitments have been honoured. Consideration has also been shown in a number of cases where it could be maintained that, although no full commitment had been entered into before 25th July, there was a clear element of commitment.

In that category are a number of instances that were given by the hon. Member for Cardiff, South-East and the hon. Member for Devon, North. They cited examples of pay increases after 25th July which were pre-pause commitments. One very big one was that for the building industry, affecting hundreds of thousands of work-people, which was negotiated in January to come into effect on 1st October.

We have endeavoured not to prejudice the position of arbitrators. The withdrawal of the date from the terms of reference to the Civil Service Arbitration Tribunal helped to protect and preserve the position of arbitrators. The House would, I think, agree that arbitrators would have been put in an impossible position had they received terms of reference in which the Government asked them not to give an operative date and, at the same time, the unions asked for a date. They would have been faced with the need to pass judgment on what the Government consider to be an issue of major public policy. Therefore, within the temporarily limited scope of the present terms of reference, arbitrators have freedom to act as they think fit. [HON. MEMBERS: "Really!"]

Nor have I in any way infringed the independence of wages councils. I arranged for the Chancellor's statement on the economic situation to be brought before those councils which were considering wage increases. Other Ministers of Labour, both Labour and Conservative, have thought it right to ask wages councils to take account of the general economic situation. I think this is a perfectly proper and sensible thing to do.

During the pause, councils have continued to make proposals to me for wage increases. I have continued to make orders giving effect to them. I have imposed some delay before wage increases come into effect, but this question of the operative date is entirely one for the Minister of Labour himself. Wages councils are not concerned with the date, and my action on date is clearly, therefore, not undermining their independence.

The Government have not interfered with the negotiating arrangements or the terms of reference to arbitration in the private sector where they do not have direct responsibility as the employer and where they have no statutory responsibility for the enforcement of wage rates. Joint industrial councils and other negotiating bodies have continued to work freely. There is no evidence that this machinery of negotiation has in any way been undermined.

We all of us recognise the great merits of the present system of collective bargaining and arbitration. I accept entirely what the hon. Member for Southwark said on that, and I appreciated also the fact that he was not rigid. But to many of us—I think he will agree with me on this—one particular weakness stands out: all too often the public interest is left on one side, and the effect which one particular wage settlement would have on the rest of the economy can be, and sometimes is, ignored. Here is a problem which requires the attention, not only of the Government, but also of both sides of industry.

Free negotiation and independent arbitration are great assets as long as the public interest is not jeopardised. Again in the spirit of the hon. Member's speech, I think we should work out means of preventing their results from running counter to the national interest. The Chancellor has this afternoon invited both sides of industry to meet him early next year to examine the arrangements which can be made to enable us to move into the next phase.

The problem is to ensure that inflation does not break loose again in the period between the end of the pause and the working out of the new partnership growth project, which I described as phase three. We clearly cannot afford to put up costs at the rate we were doing earlier this year and throughout 1960. There will be little extra either for profits or dividends, or for wages and salaries, till productivity really goes ahead. Considerable restraint by both sides of industry, and indeed the Government, is an absolute prerequisite if we are not to throw away the advantage we gain from the pause and retain our competitiveness in exports.

I think the Daily Mirror has seized very well on this point. I think hon. Gentlemen opposite will agree that the Mirror can hardly be described as a pro-Conservative paper, but on matters of great international importance it can often take a completely non-party line. This is what it said on 30th November: But whatever you may think of the Tory record, the harsh economic fact is that something must be done to keep prices from rising, to expand Britain's production and to make our goods easier to sell in the world markets. That goes whatever the political complexion of the Government in power. It would still he true if a Labour Prime Minister were to move into Downing Street tomorrow. Therefore, during this phase two we shall have to rely for success on the good sense of everyone. The only alternative open to the Government, and this has been recognised by speakers on both sides of the House, would be to use harsh deflationary policies which would certainly threaten full employment and would impede the very growth that we are all seeking to encourage.

I agree again with much of what the hon. Member for Southwark said about the need for improvement in industrial relations. I agree entirely with him that there are a large number of things within my own Ministerial field which would make a considerable contribution towards increased growth and productivity. The position here is very much better than many of our denigrators wish to make out. I agree with what he and other hon. Members have said about how the only news we read of industrial relations is news of sensational things, of strikes and incidents of a disturbing nature, and how we never seem to get reported the vast number of agreements which go through day in day out throughout the year and the large amount of excellent work done by the unions and employers working together.

I welcome the response from leaders on both sides of the motor car industry and the shipbuilding industry in sitting down together to tackle their respective problems. I also welcome the report, which has been hardly mentioned in the Press, from the port transport industry. This was signed by Mr. A. J. M. Crichton for the employers and Mr. Frank Cousins for the workers. If the recommendations of this report are urgently followed up we shall see a major step forward in relationships in the docks which would also include arrangements for greater efficiency of working.

In addition to the specific items I have mentioned, which are all encouraging and working in the direction which both sides of the House want, my National Joint Advisory Council is doing a great deal of work in endeavouring to secure improvements in communications and joint consultation, in redundancy arrangements, and in action to remove harmful restrictive practices.

I am also heartened by the interest which has been shown, not only by hon. Members but throughout the country, in the importance of the growing need for more apprenticeships and industrial training of all kinds, together—and this was mentioned by my hon. Friend the Member for Mitcham—with a growing appreciation of the need to look at the quality and scope of our training arrangements. In all this, both employers and union leaders are thinking more and more in terms of the 1960s. It would be unfair to say that the prejudices which we know have existed in many people's minds are to be found throughout industry. I am certain that many progressive leaders of industry on both sides could not be accused of some of the outlooks of which the hon. Member for Southwark complained, which are based on prejudices and experiences derived from the 1920s and 1930s and from even before the 1914–18 war.

There is a growing realisation of a need to get away from past prejudices and to look to the future. The great problem is how to secure that this modern thinking exists throughout industry from the top down to the level of the factory floor. This will take time. It will not be easy, but I am certain that with good will and determination it can and will be done.

I turn now to the final objective of our policy. I have called this phase three. We have asked both sides of industry to join us in planning together the best ways and means of securing real industrial growth. This can be done only if costs can be controlled so that expanding exports may provide the essential basis for growth.

It was very satisfactory that the Chancellor of the Exchequer was able to intervene as he did in the speech of the hon. Member for Southwark to show that the Government most certainly and most sincerely mean business in what they are saying about planning. My right hon. and learned Friend has made that abundantly clear to both the employers and the unions. I am certain that unless, in going into partnership, there is a preparedness on both sides to accept responsibilities on which it may be difficult for them to carry their constituent members, planning will be of no avail. But that is not the spirit in which we intend to approach this problem.

Photo of Mr Raymond Gunter Mr Raymond Gunter , Southwark

I am following closely what the right hon. Gentleman is saying, but does not he appreciate that when he talks about good will and co-operation he must remember the poisoned background which has been created by his colleague the Chancellor of the Exchequer?

Photo of Mr John Hare Mr John Hare , Sudbury and Woodbridge

I cannot accept that allegation. My right hon. and learned Friend had an unpleasant, harsh, and difficult duty to do, and he did not hesitate to carry it out. I have endeavoured in my speech to show that, painful and harsh though some of the things were which my right hon. and learned Friend had to do, the results have benefited the national economy.

In moving forward into this planning project, we must realise that the problem is not purely statistical; that it is not purely economic; but that it involves vital human factors. I think we all realise that the one question we have to answer is, how can we maintain full employment, stable prices, and a free society? Few of us believe in dictatorial methods, and few of us believe in totalitarian control.

The way in which we wish to go is not entirely uncharted. In Holland and Sweden systems of partnership have been worked out over the years—somewhat differently in each country—which have brought economic gains to both these countries. But basically both these systems have relied on the mutual agreement of employers and workers. Without that agreement neither system would work.

Our traditions are somewhat different. As the hon. Gentleman said, they have grown up over many decades, and our whole industrial system is far more complex than it is in either Sweden or Holland. But I do not think it impossible that we here at home can work out in agreement methods suited to our own circumstances and national outlook.

It has been said that the trade unions will not join the partnership we seek. I cannot prophesy, but I know—and the hon. Member for Southwark was frank enough to say that he was one of these—that many trade unionists feel that to shirk this responsibility would not accord with the standing and importance of the trade union movement in our national life. I am certain that they would ponder long and hard before rejecting this opportunity of playing such a vital part in the nation's future. As far as Her Majesty's Government are concerned, we would wish to consult at every step.

I have mentioned the trade unions, but everything I say applies equally to the employers, and indeed to the Government themselves.

The essence of this plan is partnership between Government and industry as a whole. I have no doubt about the opportunities that lie ahead for us in world trade if we are prepared to grasp them. Are we sufficiently determined, sufficiently sensible and sufficiently self-

disciplined to succeed? I believe that the answer is "Yes". I therefore ask the House to reject the Amendment.

Question put, That the words proposed to be left out stand part of the Question:—

The House divided: Ayes 306, Noes 214.

Division No. 37.]AYES[9.56 p.m.
Agnew, Sir PeterDeedes, W. F.Iremonger, T. L.
Aitken, w. T.Digby, Simon WingfieldIrvine, Bryant Godman (Rye)
Allan, Robert (Paddington, S.)Donaldson, Cmdr. C. E, M.James, David
Allason, JamesDoughty, CharlesJenkins, Robert (Dulwich)
Amery, Rt. Hon. JulianDrayson, G. B.Jennings, J. C.
Arbuthnot, Johndu Cann, EdwardJohnson, Dr. Donald (Carlisle)
Ashton, Sir HubertDuncan, Sir JamesJohnson, Eric (Blackley)
Atkins, HumphreyEccles, Rt. Hon. Sir DavidJohnson Smith, Geoffrey
Barber, AnthonyEden, JohnJones, Rt. Hn. Aubrey (Hall Green)
Barlow, Sir JohnElliot, Cant. Walter (Carshalton)Joseph, Sir Keith
Barter, JohnElliott, R.W. (Nwcastle-upon-Tyne, N.Kerans, Cdr. J. S.
Batsford, BrianEmery, PeterKerr, Sir Hamilton
Emmet, Hon. Mrs. EvelynKershaw, Anthony
Baxter, Sir Beverley (Southgate)Erroll, Rt. Hon. F. J.Kimball, Marcus
Bell, RonaldFarey-Jones, F. W.Kirk, Peter
Bennett, Dr. Reginald (Gos & Fhm)Farr, JohnKitson, Timothy
Berkeley, HumphryFell, AnthonyLagden, Godfrey
Bevins, Rt. Hon. ReginaldFinlay, GraemeLancaster, Col. C. G.
Bidgood, John C.Fisher, NigelLeather, E. H. C.
Biffen, JohnFletcher-Cooke, CharlesLeburn, Gilmour
Biggs-Davison, JohnFoster, JohnLegge-Bourke, Sir Harry
Fraser, Hn. Hugh (Stafford & Stone)Lewis, Kenneth (Rutland)
Bingham, R. M.Fraser, Ian (Plymouth, Sutton)Lilley, F. J. P.
Birch, Rt. Hon NigelFreeth, DenzilLindsay, Martin
Bishop, F. P.Gammans, LadyLinstead, Sir Hugh
Black, Sir CyrilGardner, EdwardLitchfield, Capt. John
Bossom, CliveGeorge, J. C. (Pollok)Lloyd, Rt. Hn. Geoffrey (Sut'nC'dfleld)
Bourne-Arton, A.Gibson-Watt, DavidLloyd, Rt. Hon. Selwyn (Wirral)
Box, DonaldGilmour, Sir JohnLongden, Gilbert
Boyd-Carpenter, Rt. Hon. JohnGlover, Sir DouglasLoveys, Walter H.
Boyle, Sir EdwardGlyn, Dr. Alan (Clapham)Low, Rt. Hon. Sir Toby
Brewis, JohnGryn, Sir Richard (Dorset, N.)Lucas, Sir Jocelyn
Bromley-Davenport, Lt.-Col. Sir WalterGoodhart, PhilipLucas-Tooth, Sir Hugh
Brooman-White, R.Goodhew, VictorMacArthur, Ian
Brown, Alan (Tottenham)Gough, FrederickMcLaren, Martin
Browne, Perey (Torrington)Gower, RaymondMcLaughlin, Mrs. Patricia
Bryan, PaulGrant-Ferris, Wg. Cdr. R.Maclean, Sir Fitzroy (Bute & N. Ayrs.)
Buck, AntonyGreen, AlanMcLean, Neil (Inverness)
Bullard, DenysGreeham Cooke, R.Macleod, Rt. Tn. Iain (Enfield, W)
Bullus, Wing Commander EricGrimston, Sir RobertMacLeod, John (Ross & Cromarty)
Burden, F. A.Gurden, HaroldMcMaster, Stanley R.
Butcher, sir HerbertHall, John (Wycombe)Macmillan, Rt. Hn. Harold (Bromley)
Campbell, Cordon (Moray A Nairn)Hamilton, Michael (Wellingborough)Macmillan, Maurice (Halifax)
Carr, Compton (Barons Court)Hare, Rt. Hon. JohnMacpherson, Niall (Dumfries)
Carr, Robert (Mitcham)Harris, Reader (Heston)Maddan, Martin
Cary, Sir RobertHarrison, Brian (Maldon)Maginnis, John E.
Channon, H. P. G.Harvey, Sir Arthur Vere (Macclesf'd)Markham, Major Sir Frank
Chataway, ChristopherHarvey, John (Walthamstow, E.)Marlowe, Anthony
Clark, William (Nottingham, S.)Harvie Anderson, MissMarples, Rt. Hon. Ernest
Clarke, Brig. Terence (Portsmth, W.)Hastings, StephenMarshall, Douglas
Cleaver, LeonardHay, JohnMarten, Neil
Cole, NormanHeald, Rt. Hon. Sir LionelMathews, Gordon (Meriden)
Cooke, RobertHendry, ForbesMaudling, Rt. Hon. Reginald
Cooper, A. E-Hiley, JosephMawby, Ray
Cooper-Key, Sir NellHill, Dr. Rt. Hon. Charles (Luton)Maxwell-Hyslop, R. J.
Cordeaux, Lt-Col, J. K.Hill, Mrs. Eveline (Wythenshawe)Maydon, Lt.-Cmdr. S. L. C.
Corfield, F. V.Hill, J. E. B. (S. Norfolk)Mills, Stratton
Costain, A. P.Hirst, GeoffreyMontgomery, Fergus
Coulson, J. M.Hobson, JohnMorgan, William
Courtney, Cdr. AnthonyHocking, Philip N.Morrison, John
Craddock, Sir BeresfordHolland, PhilipMott-Radclyffe, Sir Charles
Critchley, JulianHollingworth, JohnNabarro, Gerald
Crosthwaite-Eyre, Cot. Sir OliverHopkins, AlanNeave, Airey
Crowder, F. P.Hornby, R. P.Nicholls, Sir Harmar
Cunningham, KnoxHornsby-Smith, Rt. Hon. Dame P.Nicholson, Sir Godfrey
Currie, G. B. H.Howard, John (Southampton, Test)Noble, Michael
Dalkeith, Earl ofHughes-Young, MichaelNugent, Sir Richard
Dance, JamesHulbert, Sir NormanOakshott, Sir Hendrle
d'Avigdor-Goldsmid, Sir HenryHutchison, Michael ClarkOrr, Capt. L. P. S.
Orr-Ewing, C. IanRodgers, John (Sevenoaks)Thomas, Peter (Conway)
Osborn, John (Hallam)Roots, WilliamThompson, Kenneth (Walton)
Osborne, Sir Cyril (Louth)Ropner, Col. Sir LeonardThompson, Richard (Croydon, S.)
Page, John (Harrow, West)Royle, Anthony (Richmond, Surrey)Thorneycroft, Rt. Hon. Peter
Page, Graham (Crosby)Russell, RonaldThornton-Kemsley, Sir Colin
Panned, Norman (Kirkdale)St. Clair, M.Tilney, John (Wavertree)
Partridge, E.Scott-Hopkins, JamesTurner, Colin
Pearson, Frank (Clitheroe)Seymour, LeslieTurton, Rt. Hon. R. H.
Peel, JohnSharples, Richardvan Straubenzee, W. R.
Peyton, JohnShaw, M.Vane, W. M. F.
Pickthorn, Sir KennethShepherd, WilliamVaughan-Morgan, Rt. Hon. Sir John
Pike, Miss MervynSimon, Rt. Hon. Sir JocelynVickers, Miss Joan
Pilkington, Sir RichardSkeet, T. H. H.Vosper, Rt. Hon. Dennis
Pitt, Miss EdithSmith, Dudley (Br'ntf'd & Chiswick)Walder, David
Pott, PercivallSmithers, PeterWalker, Peter
Powell, Rt. Hon. J, EnochSoames, Rt. Hon. ChristopherWard, Dame Irene
Price, David (Eastleigh)Spearman, Sir AlexanderWebster, David
Price, H. A. (Lewisham, W.)Speir, RupertWells, John (Maidstone)
Prior, J. M. L.Stanley, Hon. RichardWhitelaw, William
Prior-palmer, Brig. Sir OthoStevens, GeoffreyWilliams, Dudley (Exeter)
Profumo, Rt. Hon. JohnSteward, Harold (Stockport, S.)Williams, Paul (Sunderland, S.)
Proudfoot, WilfredStodart, J. A.Wills, Sir Gerald (Bridgwater)
Pym, FrancisStoddart-Scott, Col. Sir MalcolmWilson, Geoffrey (Truro)
Quennell, Miss J. M.Storey, Sir SamuelWise, A. R.
Ramsden, JamesStudholme, Sir HenryWolrige-Gordon, Patrick
Rawlinson, PeterSummers, Sir Spencer (Aylesbury)Wood, Rt. Hon. Richard
Redmayne, Rt. Hon. MartinTapsell, PeterWoodhouse, C. M.
Rees, HughTaylor, Sir Charles (Eastbourne)Woodnutt, Mark
Rees-Davies, W, R.Taylor, Edwin (Bolton, E.)Woollam, John
Renton, DavidTaylor, Frank (M'ch'st'r, Moss Side)Worsley, Marcus
Ridley, Hon. NicholasTaylor, W. J. (Bradford, N.)Yates, William (The Wrekin)
Ridsdale, JulianTeeling, William
Rippon, GeoffreyTemple, John M.TELLERS FOR THE AYES:
Roberts, Sir peter (Heeley)Thatcher, Mrs. MargaretMr. Edward Wakefield and
Robson Brown, Sir WilliamThomas, Leslie (Canterbury)Mr. Chichester-Clark.
NOES
Abse, LeoEdelman, MauriceJay, Rt. Hon. Douglas
Ainsley, WilliamEdwards, Rt. Hon. Ness (Caerphilly)Jeger, George
Albu, AustenEdwards, Robert (Bilston)Jenkins, Roy (Stechford)
Allaun, Frank (Salford, E.)Edwards, Walter (Stepney)Johnson, Carol (Lewisham, S.)
Awbery, StanEvans, AlbertJones, Dan (Burnley)
Baxter, William (Stirlingshire, W.)Fernyhough, E.Jones, Elwyn (West Ham, S.)
Bence, CyrilFinch, HaroldJones, Jack (Rotherham)
Fitch, AlanJones, T. W. (Merioneth)
Bennett, J. (Glasgow, Bridgeton)Foot, Dingle (Ipswich)Kelley, Richard
Benson, Sir GeorgeFoot, Michael (Ebbw Vale)Kenyon, Clifford
Manuel, A. C.Fraser, Thomas (Hamilton)Key, Rt. Hon. C. W.
Blackburn, F.Galtskell, Rt. Hon. HughLawson, George
Blyton, WilliamGalpern, Sir MyerLedger, Ron
Boardman, H.George, Lady Megan Lloyd (Crmrthn)Lee, Miss Jennie (Cannock)
Bowden, Herbert W. (Leics, S.W.)Ginsburg, DavidLever, Harold (Cheetham)
Bowles, FrankGordon walker, Rt. Hon. P. C.Lever, L. M. (Ardwick)
Boyden, JamesGourlay, HarryLewis, Arthur (West Ham, N.)
Braddock, Mrs. E. M.Grey, CharlesLipton, Marcus
Brockway, A. FennerGriffiths, David (Rother Valley)Loughlin, Charles
Broughton, Dr. A. D. D.Griffiths, Rt. Hon. James (Llanelly)Mabon, Dr. J. Dickson
Brown, Rt. Hon. George (Belper)Griffiths, W. (Exchange)MacCott, James
Butler, Herbert (Hackney, C.)Grimond, Rt. Hon. J.McInnes, James
Butler, Mrs. Joyce (Wood Green)Gunter, RayMackie, John (Enfield, East)
Callaghan, JamesHale, Leslie (Oldham, W.)McLeavy, Frank
Castle, Mrs. BarbaraHall, Rt. Hn. Glenvil (Colne Valley)Macpherson, Malcolm (Stirling)
Chapman, DonaldHamilton, William (West Fife)Mahon, Simon
Chetwynd, GeorgeHannan, WilliamMallalieu, J.P.W. (Huddersfield, E.)
Cliffe, MichaelHart, Mrs. JudithManuel, A. C.
Collick, PercyHayman, F. H.Mapp, Charles
Corbet, Mrs. FredaHealey, DenisMarsh, Richard
Craddock, George (Bradford, S.)Herblson, Miss MargaretMason, Roy
Cronin, JohnHewitson, Capt. M.Mayhew, Christopher
Crosland, AnthonyMendelson, J. J.
Cullen, Mrs. AliceHill, J. (Midlothian)Millan, Bruce
Darling, GeorgeHilton, A. V.Milne, Edward J.
Holman, PercyMitchison, G. R.
Davies, G. Elfed (Rhondda, E.)Holt, ArthurMonslow, Walter
Davies, Harold (Leek)Houghton, DouglasMoody, A. S.
Davies, Ifor (Gower)Howell, Denis (Small Heath)Mort, D. L.
Davies, S. O. (Merthyr)Hoy, James H.Moyle, Arthur
Deer, GeorgeHughes, Emrys (S. Ayrshire)Mulley, Frederick
Delargy, HughHughes, Hector (Aberdeen, N.)Neal, Harold
Dempsey, JamesHunter, A. E.Noel-Baker, Rt. Hn. Phillip (Derby, S.)
Diamond, JohnHynd, H. (Accrington)Oliver, G. H.
Donnelly, DesmondHynd, John (Attercliffe)Oram, A. E.
Driberg, TomIrvine, A. J. (Edge Hill)Owen, Will
Dugdale, Rt. Hon. JohnIrving, Sydney (Dartford)Padley, W. E.
Ede, Rt. Hon. C.Janner, Sir BarnettPaget, R. T.
Pannell, Charles (Leeds, W.)Silverman, Julius (Aston)Ungoed-Thomas, Sir Lynn
Pargiter, G. A.Silverman, Sydney (Nelson)Wade, Donald
Parker, JohnSkeffington, ArthurWainwright, Edwin
Pavitt, LaurenceSlater, Mrs. Harriet (Stoke, N.)Warbey, William
Pearson, Arthur (Pontypridd)Slater, Joseph (Sedgefield)Weitzman, David
Peart, FrederickSmall, WilliamWells, Percy (Faversham)
Pentland, NormanSmith, Ellis (Stoke, S.)Wells, William (Walsall, N.)
Plummer, Sir LeslieSnow, JulianWhite, Mrs. Eirene
Popplewell, ErnestSorensen, R. W.Whitlock, William
Prentice, R. E.Soskice, Rt. Hon. Sir FrankWigg, George
Price, J. T. (Westhoughton)Spriggs, LeslieWilkins, W. A.
Probert, ArthurSteele, ThomasWhitey, Frederick
Pursey, Cmdr, HarryStewart, Michael (Fulham)Williams, D. J. (Neath)
Randall, HarryStorehouse, JohnWilliams, LI. (Abertillery)
Rankin, JohnStones, WilliamWilliams, W. R. (Openshaw)
Redhead, E. C.Strachey, Rt. Hon. JohnWillis, E. G. (Edinburgh, E.)
Reid, WilliamStress, Dr. Barnett (Stoke-on-Trent, C.)Wilson, Rt. Hon. Harold (Huyton)
Reynolds, G. W.Swingler, StephenWinterbottom, R. E.
Rhodes, HSymonds, J. B.Woodburn, Rt. Hon. A.
Roberts, Albert (Normanton)Taylor, Bernard (Mansfield)Woof, Robert
Roberts, Goronwy (Caernarvon)Taylor, John (West Lothian)Wyatt, Woodrow
Robertson, John (paisley)Thomas, Iorwerth (Rhondda, W.)Yates, Victor (Ladywood)
Robinson, Kenneth (St. Pancras, N.)Thomson, G. M. (Dundee, E.)
Rogers, C H. R. (Kensington, N.)Thornton, ErnestTELLERS FOR THE NOES:
Ross, WilliamThorpe, JeremyMr. Charles A. Howell and
Short, EdwardTomney, FrankMr. McCann.

Main Question again proposed.

It being after Ten o'clock, the debate stood adjourned.

Committee Tomorrow.