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Industrial Situation

Volume 524: debated on Wednesday 3 March 1954

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4.5 p.m.

It is, perhaps, rather a peculiar thing that we should in this Committee be considering today a sum of no less than £900 million, which the Government wish to be allowed to spend, without discusing it in any detail. I must confess that sometimes this procedure of ours has seemed to me to be rather unfortunate.

I think that there is a case for closer examination in Committee of this House of the details of public expenditure than we usually find time for. After all, this year's figure, the total Estimate in the Vote on Account, is no less than £2,741 million, as against last year's Estimate, on the same basis, of £2,450 million. That is to say, we have, in what is almost entirely civil expenditure, in one year an increase of nearly £300 million.

I think that hon. Members opposite must find it strange, in view of everything that was said before the General Election about bringing down public expenditure, that the Chancellor of the Exchequer should be indulging in this wild extravagance. Indeed, if the Prime Minister was sitting on this side of the Committee, I am sure that he would have given of his best by way of adjectival protest against the appalling squandermania which is taking place on the part of the Government. I do not propose to pursue this matter further this afternoon, but I give notice that we shall return to it in great detail in the Budget debate, and suggest to hon. Members opposite that they might pay a little attention to the general level of public expenditure.

Meanwhile, following custom, we have chosen as the subject for debate something which, I think, the whole Committee will agree is of outstanding importance—that is, the present industrial situation. I must make it plain at once that it is not our intention that the House of Commons should intervene in any way in wage disputes, and it is no part of my purpose to plead from this Box the cause of any particular section or group of workers—not even the cause of Members of Parliament, although I cannot forbear from saying that I should be very surprised if there were any group of workers with a net income, after expenses on an average, of only £250 a year, who had had no increase in pay since 1946. If there were such a group of workers, I have little doubt that, even in this debate, somebody would get up to plead their cause.

We believe in the system of collective bargaining and that wage rates and conditions should be settled by the trade unions and employers' associations. It is not the job of the Government or of the House of Commons to try to usurp these functions. There are, nevertheless, three ways in which the Government and, therefore, Parliament are concerned.

In the first place, Parliament has passed a very large number of statutes and regulations which supplement the efforts of the trade unions in matters such as safety and welfare, minimum wages in certain industries and a very large number of other similar matters. Secondly, it is clearly the duty of the Government, through the Ministry of Labour, to do everything in their power to secure the peaceful settlement of disputes, and we all know and appreciate the valuable techniques which have been developed and the experience which has been gained over the past 20 years in handling disputes in industry.

Thirdly, we take the view that the Government can and must carry a great deal of responsibility for the general economic and social framework within which the problem of relations in industry has to be faced and within which negotiations on wages and conditions take place.

I do not propose to say anything at all on the first of these functions of government, and, in effect, practically nothing on the second, though it may be that some of my hon. Friends will wish to refer to the question of the relationship between the Ministry of Labour and industry. I propose to spend virtually the whole of my time in dealing with the "third matter—the responsibility of the Government for the general economic and social framework within which this problem is set.

It is our belief that the present situation in industrial relations shows a marked deterioration and that the prospect is enough to cause serious anxiety. It is our conviction that this change owes a substantial amount to Government policy—to some things that the Government have done and to other things which they have left undone. We believe, further, that before very long unless the Government are prepared to abandon some of those laissez faire principles in which they believe, then in this field they will be running the country and themselves into very serious industrial troubles.

First, however, may I sketch out in general terms the economic situation as I see it today? I want to do this in a completely objective manner, and I hope that we shall not hear from the opposite benches the rather tiresome and hysterical propaganda that we have from time to time about the progress of this country since the war. The facts are these. Between 1946 and 1951 we had an expansion of industrial production, according to the official index, amounting to some 35 per cent.—that is to say, an increase in industrial production at the rate of 7 per cent, per annum. The rate, of course, was even higher in manufacturing industries.

Secondly, we had a recovery in exports as a result of which they rose to a level of some 70 per cent, in volume above the pre-war figures. This, combined with severe restrictions on imports, made possible in 1950 such a recovery in our balance of payments as to give us in that year the largest monetary surplus of exports over imports that we have ever had in our history—that is to say, £300 million. Even when one allows, as one should, for the fact that in that year there was some running down of stocks, it remains nevertheless a remarkably creditable figure.

We were then engulfed, in consequence of the Korean war, by what really was a world inflation. Import prices rose in 1951 by one-third in the course of the year, and although our export prices rose, too, the loss on the terms of trade, on the prices of our exports in relation to our imports, was no less than £500 million in that year according to official figures. In addition, partly because of the international situation and partly because of the very increases in commodity prices which were taking place in world markets, there was a very substantial increase in the amount of stocks in the country. The total increase in the value of the physical amount of stocks and work in progress in that one year was £600 million.

In addition, we had a considerable fall in the net invisible exports, and these three things taken together, not surprisingly, led us into a deficit of £400 million. Since then the terms of trade have moved steadily in our favour, and today one can say that as compared with 1951 the gain to us on that account is some £600 million. Furthermore, owing to the fact that there was so much stocking up in 1951, it was not necessary to continue that process. In 1952, there was some fall in stocks, though I suspect that in 1953 that process has again been reversed.

These two factors—the immense change in the terms of trade and the fact that there is no longer a need to accumulate stocks—have made possible a recovery in our balance of payments position. Despite the fact that in 1952 production fell, and despite the fact that the recovery this year still leaves us with only about 3 per cent, of what it was two years ago, we have now moved back into a modest surplus. I would agree that, so far as it goes, that is not an unsatisfactory position.

We have had a very favourable wind behind us in these last two years. Nevertheless, I believe that it will be generally agreed—I am summarising this as rapidly as I can—that the surplus, as far as we know, is far too small for our needs— certainly at the rate we achieved in the first six months of this year, a rate of £25 million for six months or £50 million for the year, without taking aid into account; it is too small for building up our reserves, investing overseas and repaying our debts. It may be larger than that, but it does not seem likely that it is going to exceed by any substantial amount, say, £100 million.

Furthermore, it will be generally agreed that the situation is highly precarious, for these reasons. First of all, the terms of trade are most unlikely to continue moving in our favour unless there happens to be an American recession. We are, therefore, faced with the alternatives either that the terms of trade will move against us, with import prices going up and possible export prices coming down at the same time or there will be a contraction of markets because of the effects of the American recession in the world generally.

The situation is also precarious because of the revival—to some extent an inevitable revival—of German and Japanese competition. We can agree on these things. We can agree, too, that we need a higher level of exports and a higher rate of fixed investment, because this is essential for future productivity and for strengthening our competitive position as compared with other countries.

Finally, in this rapid survey I should like to say a word cr two about what 1953 may have contributed to these aims. The figures are not yet all available, but I should like to emphasise that in 1953 the conditions were outstandingly favourable to this country. It is the only year since the war in which the terms of trade have moved in our favour, and we have had rising production at the same time. The latter, of course, was largely due to the fact that we started the year with a certain amount of unemployment from the slack that had been created during 1952.

But it means that in this year the increment available—the extra resources available for consumption, or defence, or investment or exports—were unusually large and I should put them somewhere around £700 million. It seems quite clear that very little of these extra resources made available have gone towards an increase in the export surplus. I do not know whether the Economic Secretary to the Treasury can tell us anything about that.

In passing, may I say that I fully understand why the Chancellor of the Exchequer is so diffident about speaking this afternoon. He is, of course, in the closed season. He can plead the excuse that he might say something which would give away Budget secrets, and we should not wish him to do that. There is the further point that he has some reputation in this House for being rather vague at times, and I feel that in these circumstances to^ day he might be even vaguer. I know he will not misunderstand me when I say that we are quite happy with the admirable substitute that he has provided in the Economic Secretary. We expect him to be a great deal less vague and not to be too frightened about giving away Budget secrets.

I have said that I thought that very little of the gain in 1953 had gone towards a higher export surplus, and, as far as I can see, extremely little has gone to any increase in fixed investment. Therefore, the two major aims of higher exports and higher investment do not seem to have benefited by the situation. It seems probable that about half the gain has gone to higher consumption, and I would guess that a large part of the remainder has gone into replenishing stocks some of which have been run down. If the Economic Secretary can throw further light on this matter we shall be grateful to him.

I do not think it is surprising, in these circumstances, that the Chancellor of the Exchequer should recently have expressed fairly serious anxieties about the prospect in exports. I do not wish to repeat what he said, but the heading, for instance, in "The Times" report is: "British exports losing ground. Growing German competition. Chancellor's warning." And I note, too, with some interest his remark that much of the progress in 1953 had been due to a few industries, such as refined petroleum, aircraft, and arms and ammunition, which did not face German competition.

I cannot fail to point out that this improvement, for instance, in refined petroleum, is the direct result of the great programme of oil refineries carried out under the Labour Government. As for aircraft, that, again, is something which was closely fostered and encouraged by the previous Government, as I have no doubt it is by the present Government. As for the arms and ammunition, I imagine that is associated to a large extent with offshore purchases which may or may not continue.

It is against this background that we have to look at the wage situation in industry, and I venture to say that we have been facing in this last winter, and in a sense still face, the most disturbed situation which has arisen since the war. It is not necessary for me to remind the Committee that shortly before Christmas we were within an extraordinarily narrow margin of a national railway strike. It is hardly necessary to point out that the engineering dispute, which, unfortunately, has lingered on for a year, still remains unsettled, that it has provoked at any rate one 24-hour token strike, and that the threat of a ban on overtime and output bonuses still remains.

There is a strike of electricians taking place and there is the fact that at a recent hearing the general secretary of the Post Office Workers' Union felt obliged to withdraw from the tribunal because of the statement—a rather unfortunate one— made by the tribunal that there was no case. There have been recent leaders in "The Times" pointing to the danger that all this means for our negotiating and arbitration machinery.

We can all agree that industrial stoppages on a large scale, if they take place, are bound to have the gravest effect on our capacity to solve our economic problems, and if we agree that we are in a precarious condition, the danger is obvious enough. There may not be so much agreement on the effect of wage increases which, in a sense, are clearly an alternative in certain cases to industrial trouble. For instance, some people would ask whether higher export prices were necessarily a bad thing. I do not doubt that there are occasions—there certainly have been since the war—when higher prices for our exports were an advantage.

The question also will be put, must there be higher prices? Is it not possible to have higher wages without any increases in prices? I shall return to some of these issues a little later, but I gather from the statements of the Chancellor, and from other things that have been said, that the Government are seriously worried not only about the industrial situation, but also about the danger that rising costs in industry may sooner or later price us out of export markets.

It is right that we should ask what are the causes of this situation. I say straight away that it is in no sense a case of the trade union leaders stirring up workers for political or other ends. Nobody could have behaved with a greater sense of responsibility than the trade union leaders in the difficult situation in which they find themselves.

Is it, then, the cost-of-living position? I do not doubt that the hon. Gentleman and his friends will say emphatically that it is not. I do not doubt that they will point to the recent movements of wage rates and prices. I think it was the right hon. and learned Gentleman the Minister of Labour who answered a Question the other day in which he gave the relative increase in wage rates and the interim index of retail prices from October, 1951, when the Government came into power, to the present day, and also from June, 1947, to October, 1951.

The right hon. and learned Gentleman said that from June, 1947, to October, 1951, wage rates had risen by 22 per cent, and prices by 29 per cent., and that since October, 1951, wage rates had risen by 13 per cent, and prices by 9 per cent. At first sight that sounds as though it was an answer to the question, but I must ask the Committee to look a little closer at these figures and at the situation generally.

As I do not doubt that the Question was put down for propaganda purposes, it is necessary to explain what is wrong with it. In the first place, those figures depend on the month selected. If, instead of October, November, 1951, had been taken there would have been the following figures. Wage rates rose from June, 1947, to November, 1951, by 26 per cent, and prices still by 29 per cent., but from November, 1951, wage rates rose not by 13 per cent, but by just under 10 per cent.—only a fraction greater than the rise in retail prices of 9 per cent. So I think we should be clear that the figures produced by the Minister rest simply on that one month. [An HON. MEMBER: "They are correct."] Of course they are still correct as they stand, but it is a question whether the Government wanted to give a fair picture of the position in the last five years.

It also shows that during the term of office of the Conservative Government wages have more than kept pace with prices, but that in the term of office of the right hon. Gentleman it was not so.

That, of course, was what the original answer was meant to convey. [HON. MEMBERS: "It is true."] But if the month of November had been taken it would have thrown a different light on the figures. [An HON. MEMBER: "It is still true."] Wait a minute. It would have shown that the rate at which wages and prices have moved since November, 1951, is practically the same. [HON. MEMBERS: "Nonsense.".

Now I come to one or two other points of greater importance in looking at this matter of wages and prices. First, it is obvious that while the wage rates of some workers may have moved in this way, others may have lagged behind. We must always bear that in mind. Secondly, food prices have gone up more, as we know. Their increase since November, 1951, is about 14 per cent. We all know that the index is an average and that we must accept it. I am not criticising that. It is an average of the way in which people at different levels of wages spend their money. We know quite well that the poorer workers must spend proportionately more of their incomes on food.

It is valid for the whole of industry, but I am saying that it does not and cannot exactly reflect the position of the poorer workers.

It is a fair average. 1 have said that, but what I am saying is that in these circumstances it does not correctly reflect the change in the real income of the lowest paid workers, and it happens that these are also the workers who, of course, have gained least, if at all, from any tax concessions that may have been granted.

I was only going to say—and perhaps this will convince the hon. Gentleman—that the point I am making is made quite admirably in a leading article in "The Times" this morning, and, for what it is worth, I think it is of some importance and goes some way to explain the feelings of the workers on this matter.

I thank the right hon. Gentleman for giving way. All I want to establish is whether he stands by a statement he made in 1950, when he then said:

"I am bound to say that despite all the criticism, and looking at it objectively, the index is not likely to be far wrong in its attempt to give us an accurate picture of changes in the trend of retail prices."— [OFFICIAL REPORT, 2nd November, 1950; Vol. 480, c. 339.]

Of course I stand by it. I was making an entirely different point, which the hon. Gentleman must take into account, that, unfortunately, with rising food prices, we do find that the lower paid workers are adversely affected.

The further point to which I must draw attention is this. Whether or not the change in prices explains the workers attitude, it cannot possibly be doubted that the rise in prices that has actually occurred—with consequential effects on wages—despite falling import prices, has raised costs here compared with other countries. That may not be particularly relevant to the feelings in industry, but I submit that it is very relevant to our com petitive position. I wish to draw the attention of the Committee to the fact that in these last two years the cost of living has gone up more steeply in this country than, as far as I know, in any other European country, except Greece and perhaps Norway. In Belgium, for instance—.

Could the right hon. Gentleman quote the figures for 1953?

These are the figures for 1953, taken from the E.C.E. Report which came out a few days ago. [HON. MEMBERS: "He has not read it."] He probably has read it. The cost-of-living index shows, on our figures, a rise of 9 per cent.—that is the figure given by the Minister of Labour—in Belgium, between these two years 1951 and 1953, a rise of 2½ per cent., of 2 per cent, in Denmark, 8 per cent, in France, 6 per cent, in Italy, and no change in Western Germany and Holland., I think that shows clearly that we have been getting somewhat out of line with other European countries, and there is no doubt whatever that the rise in food prices resulting from the cuts in subsidies has been a major cause of the greater increase here.

I now turn to another matter which must also be taken into account, and that is the fact that in this period we have had a very striking change in import prices. Between 1947 and 1951, we were continually facing the difficulty of rising world prices against us. The Trades Union Congress and the trade unions were aware of that, and equally aware of the difficulties that arose, particularly in 1951. Indeed as the recent statement by Mr. Tanner makes plain—it is published in the report of the inquiry by the Ministry of Labour—the unions, of course, take into account the circumstances of the country in presenting wage claims.

In the last two years, far from any further increase in import prices, there has been a fall of 20 per cent.

In all import prices, and it is very natural that in those circumstances, and with the country in a much easier position than it was, the unions should adopt a rather different attitude from what they did earlier. It would indeed be an astonishing thing if, in these circumstances, the relationship between wages and prices had not improved somewhat compared with the earlier situation.

I come now to another matter which I personally believe has a good deal of bearing on the situation in industry, and that is the increases in dividends which we discussed not long ago, and to which I must now come back. I want, first of all, to get the facts straight. I take the Government's argument put forward by the Chancellor of the Exchequer both here and in a recent speech. His argument is that although there was an. increase of 10 per cent, in dividends net of tax in 1953 as a whole as compared with 1952 as a whole, that, of course, is not a fair picture of the true increase because of the reduction in taxation. Therefore, we have to take the figure of gross dividends before tax is deducted in order to get a fair picture. I accept that argument.

The increase of gross dividends in that period is 6 per cent. The increase in wage rates during the same period is 4½ per cent. But, once again, we must look more closely at the details, and, in particular, I suggest that we must look more closely at the trend of wages and dividends in the last 12 months.

If we take the four quarters of 1953, we find that in the first quarter there was a rise in wage rates of 5 per cent, compared with the corresponding period in 1952. I will take the corresponding period in each case. There was a rise of 5 per cent, in gross dividends. In other words, they were moving together. In the second quarter, wages went up 4 per cent, compared with the previous year, and dividends by 6 per cent. In the third quarter wages again went up 4 per cent, compared with the previous year, and dividends by 7 per cent. In the fourth quarter, the last full quarter that we have, the rise in wage rates was only 3 per cent, compared with the last quarter in 1952, whereas the rise in dividends was 9 per cent., an increase three times as big.

Finally, if we take the January figure for dividends as given by the "Financial Times," again on the basis of gross dividends—there is no question of tax entering into this—the increase compared with January last year is no less than 15 per cent. I realise that the sample on which that figure is based is a small one, but I have no reason to believe that it is wrong in any way. If the Economic Secretary can throw any light on it, we shall, of course, be glad to have his information.

I am not surprised that in the light of these figures the "Financial Times," commenting on the take-over bids debate, should say:
"Mr. Butler was perhaps a little disingenuous in concentrating on the rise in dividends last year as a whole, rather than on the trend which was shown from quarter to quarter. But since he is evidently satisfied with the situation, few will be found to take him up so nicely.

One person, at any rate, is prepared "to take him up so nicely. "I think it is an extremely important factor in throwing light on the present situation, and I must say that the trend I have described corresponds very closely with one's own impression.

To keep the two things in proper perspective, would the right hon. Gentleman not agree that he ought also to make it quite clear that if the total dividend increase in 1953 had been distributed to the wage earners, it would not have amounted to more than 5½d per worker?

I am quite familiar with that argument, and, of course, I do not dispute the fact that the global amounts involved are very different, but, with great respect, I do not think that that is an excuse for an increase in dividends on the scale I have suggested.

It is worth noting that while dividends in 1953 were rising in the way I have indicated, profits were falling. There was, in fact, a rise in dividends for the year of 6 per cent., and a fall in profits of 8 per cent. In January this year profits began to rise again. I mention this only because I feel that it is extremely probable that the rise in profits, which will probably continue, will provoke substantial further increases in dividends.

The Chancellor's latest argument in defence of these dividend increases is that as a percentage of capital employed there is no increase and, indeed, even a fall. I cannot accept the relevance of that argument. I said at the time that I thought it was a dangerous argument. I meant dangerous to the cause of moderation in wage demands and I still think that it is dangerous. Suppose a firm invests £100,000 and makes, after tax, gross earnings of £30,000 of which we will say £10,000 are paid out in dividends at 10 per cent, and £20,000 are ploughed back into the business. Whether it is in the form of liquid reserves or reinvestment does not matter to the argument.

This takes place during a period of wage restraint. The workers have been told that we need higher saving and investment, that we must not increase prices and that if they were to have higher wages at the expense of company reserves that would reduce saving and investment, which would be bad for the country. So they accept it and moderation has been the rule in wage demands.

But this goes on, we will say, for five years. After five years, the capital of the company is worth £200,000 because £20,000 each year has been put back in a business, and on the Chancellor's argument the dividend may now go up to £20,000 a year. What sort of sacrifices, in those circumstances, have the shareholders made? How is one to present that kind of argument to workers when one asks them to be moderate in their wage demands and the shareholders have doubled their capital and doubled their dividend.

Two other arguments are put forward in defence of the rising trend of dividends. It is said that they have gone up much less than wages and salaries compared with pre-war and that the balance must be redressed. The facts are true, of course. Dividends have not gone up as much as wages and salaries compared with 1938 but, as the previous argument makes perfectly plain, reserves have gone up. In fact, since 1946 company reserves have doubled and that additional capital is in existence, and it is really quite impossible for the Chancellor and the Economic Secretary to the Treasury to use both those arguments. Moreover, I cannot from our side of the Committee accept the calm argument that the 1938 basis of division of the production of industry between earned and unearned income is something sacred and must never be altered.

I notice that in a recent speech at Glasgow the Chancellor said that the average shareholder is a small saver. Really that is very difficult to understand. It is true, of course, that the average share holding is not very big, but that is an entirely different thing from saying that the average shareholder is a small saver. The figures are well known. Ordinary shares are held by about 1,250,000 people. Whether one says that that is something like 3 per cent, of the total population or 5 per cent, of the adult population does not matter. The point is that that is a small proportion indeed.

If there is any doubt in this matter I ask hon. Members to look at the figures of Estate Duty published by the Inland Revenue. They are very interesting. For instance, in 1951–52, which is the latest period for which I have figures, there were 76,000 estates of £2,000 or more. At that time about 600,000 people died. Assuming that as many as half of them were young and not people who would ordinarily qualify to have any property that still leaves a very small proportion paying any duty at all.

If one takes out of the 76,000 all those who left more than £25,000 they amount to about 7 per cent, of the total. They in fact left nearly half the total value which was passed on. When it is remembered that a vast majority of people never come within the range of Estate Duty because the Labour Government took it off on all estates up to £2,000, and one realises that 7 per cent, of those who paid duty left half the property, how can anyone suggest that these are small savers? It is too ridiculous.

It is said that there is a shortage of capital and that it is desirable that dividends should be increased to stimulate the supply. I cannot accept that argument. I will not go into the matter in detail now, but I should like to quote from the "Manchester Guardian Survey of Industry," published two days ago. It contained a very interesting analysis of questions asked in industry about a number of different things, including this very matter.

This is what the article stated:
"Finance is at present no serious problem.
In other words, shortage of capital is not the problem.
"This is the almost universal experience in all industrial areas.

Then again:
"A final point. We asked the firms whose capital outlay is declining whether shortage of finance was a motive. Not a single firm replied, 'Yes.'".
That bears out to the hilt what we have always said—that the fears of hon. Members opposite, when they were on this side of the Committee, about the shortage of capital were greatly exaggerated.

It is not my purpose to argue the case for wage increases, but I should like to conclude with some general reflections on this very vital problem.

Would the right hon. Gentleman say at what level the result of continued thrift becomes wrong in his eyes?

I am not prepared to answer that because it depends on all sorts of things, such as what alternative capital supplies are available.

Wage increases may be associated with many different consequences. There may be a rise in productivity and a wage increase itself may even cause that. Undoubtedly, there are many people in America who hold a very strong view that higher wages stimulate productivity. I was there in the summer and found myself in discussion with a man who, politically speaking, was very far to the Right of me. He held that 'view very vehemently. "What you want is higher wages," he said. I am not saying that that is not one possibility. There is something in it and, of course, if one can get a rise in productivity that offsets a rise in wages in terms of costs.

Secondly, one may get a fall in import prices, which also neutralises a rise in wages. That has largely happened in the last few years. And if raw materials fall in price, as cotton did by 20 per cent., it makes an enormous difference. Thirdly, one may also have a fall in dividends as a result of a rise in wages. That is a simple transfer from the dividend holders to the workers and no change in price is involved. Fourthly, there may be a rise in wages because of a decline in company reserves, which means less saving and possibly less investment. Fifthly and finally, one may have a rise in prices. There may possibly be other possibilities, but those are the five most obvious ones.

The last two give rise to anxiety. We should be happy if productivity increased, we should not worry if the terms of trade improved, and I should not worry if the rise in wages was at the expense of dividends. But we worry if it is at the expense of reserves or has at its consequence an increase in price. I should like to say a word or two about the latter. There is, of course, a sectional gain to the particular group of workers involved for the time being. But, in time, as one group of workers after another secures a rise in wages—assuming that prices go up—a great deal of that gain is eliminated. I do not want to say, and it would be a mistake to try to say, that every gain disappears, that at the end of it all the workers are not better off.

The fact is that even with such a wage price inflation some transfer does occur from fixed incomes in favour of variable incomes. Nevertheless, I would never support and have never supported the policy which, I believe, would lead to that result. It may cause trouble before long over exports and the balance of payments and, if continued for any time and not going on elsewhere, it would be almost certain to do that. The instability of prices at home which follows such an inflation is, in my view, a serious social evil. I do not think there can be any doubt about it. I said this to the Trades Union Congress in 1951 and still firmly believe it.

As to company reserves, I must again say that it is no use asking the workers for wage restraint if capital accumulates in the hands of shareholders because of their very act of restraint. In other words, it is no good saying to the workers, "Keep down wages, it will all go to reserve; we will not take it in dividends" if, later, the shareholders are to get all the benefit. But, I must say at once that we do need the saving. In my view, the country cannot afford a reduction in reserves and corporate saving. A solution must be found to this difficult problem. It is not in any way surprising that the report of the courts of inquiry—which is a very interesting document and much credit is due to the persons concerned— devoted a great deal of space to this very problem of the relationship of wages to reserves. I still believe that the solution can only be found by some system whereby the workers are given a fair share of the reserves accumulated thanks to their moderation.

This is a very real and vital problem. I know, of course, that one can claim it can be solved if we give up full employment and that if it weakened the bargaining power of the unions sufficiently there would be no problem to deal with. For our part we will have nothing to do with any such solution and I hope that we shall hear from the Government that they will rule that out.

In conditions of full employment, however, it must be recognised that it is possible for a group of workers, if they are so minded, to hold the country to ransom so as to secure an improvement for themselves. The fact that they have not done so is a very great tribute to the patriotism and good sense of the union leaders and the workers. But that would not have happened unless they had the feeling that it was not only they who had to exercise restraint.

If we are to replace this conception of restraint and moderation on all sides by a free for all philosophy—by the philosophy which says, "Well, the shareholders are entitled to manage the business and take out as much as they like; that is up to them "—we shall not get the same response as we have had in the past on the trade union side, and we cannot expect it. If we were lucky in terms of trade and productivity for a time we might get by, but the serious feature of the situation is that, despite those very favourable external circumstances in 1953, we have yet run into the verge of serious industrial trouble.

I am convinced that in the long run some kind of understanding on all this is needed. The proposal of the court of inquiry is an interesting one. The proposal is at the end of the report, where they suggest that an authoritative and impartial body should be appointed to consider these problems and the complex, sometimes conflicting, economic arguments which surround them. I am quite sure that such a body could only be set up by both sides of industry. It is no use the Government imposing something on them, because they will not accept it I am also quite clear that it would need some patience and thorough discussions with both sides before anything could come of it. I shall be glad to hear from the Economic Secretary or the Minister of Labour what are the reactions of the Government to that. I am not clear whether a specific inquiry or whether a permanent body of some kind to give information about the implications of wage increase, and so on, is envisaged.

I want to make a further point on this. We sometimes hear the whole problem discussed as though it were a matter of a squabble and a dispute, ultimately, between different groups of workers only. There is one aspect of the problem which corresponds to that, but—make no mistake—underlying this there is a great social problem and dispute about the share of earned and unearned income. This dispute is caused largely by the bad and unfair distribution of unearned income. Therefore, if there is to be any such inquiry, or such an impartial body set up, I submit to the Minister that it must cover the dividends and profits issue as well as the wages issue.

In the last two years the policy of the Government, I am afraid, has been moving more and more towards a free for all economy. By one step at a time, here and there, they have gone further and further back towards the pre-war situation. I believe that the dangers of that have only been masked and held in check by the exceptionally favourable external conditions we have enjoyed. If the Government continue with these policies we shall have a price level out of line with other countries, or industrial trouble, or we shall have unemployment. The fact is that full employment, stable prices and industrial peace are not all to be had in an unequal laissez faire society. That is the dilemma which faces the Government. They can only solve it by abandoning their own philosophy and accepting the orinciples and policy for which the Labour Party stand.

4.57 p.m.

I am sure that the Chancellor will be grateful to the right hon. Member for Leeds, South (Mr. Gaitskell) for his understanding remarks about the position of a Chancellor at this moment. My right hon. Friend is going into purdah at present. I think the position of all Chancellors of the Exchequer at this time can rightly be described as being that for a few weeks before the Budget they cannot talk to their friends and for a few weeks after the Budget their friends will not talk to them.

In the concluding passages of his speech, the right hon. Member dealt with one or two matters which had particularly close reference to industrial relations, and referred to the most interesting and valuable reports of the courts of inquiry to which the Minister of Labour will be making reference when he replies to the debate. I am sure that my right hon. and learned Friend can refer to those matters with far more authority and knowledge than I can claim.

The right hon. Member dealt with the economic background to the present industrial situation and that, I understand, is the matter which we are primarily discussing this afternoon. I am sure that everyone will agree with him that it would be quite wrong for the Government or the House of Commons to try to intervene in wage negotiations or wage disputes. That is, I think, common ground between us. I think it is equally common ground between us that it is the responsibility of the Government to create the right economic framework for our industrial society. As I understood the speech of the right hon. Member, its burden was that we have failed to do that.

The right hon. Gentleman said that the present Government have failed to create the right economic situation for our industrial society. That is a challenge which I very gladly accept from the right hon. Member. It is one with which I shall try to deal in the course of my remarks this afternoon. I wish to start with one or two comparisons between 1951—the last year of the tenure of office of the right hon. Member—and 1953, to consider one or two salient matters of importance to our industrial society and to see how those matters stood in 1951 and in 1953. That is not an unfair basis on which to judge the performance of the present Government as against the Government of hon. and right hon. Gentlemen opposite.

Take, first, what underlies, as the right hon. Gentleman would be the first to admit, all our economic problems: our balance of payments, our reserves, and the strength of sterling. In October, 1951, the strength of sterling was at a low ebb. The quotation for transferable sterling was 2·l40 dollars to the pound. The reserves were running out faster than at any time since 1945. The balance of payments was strongly against us. Commodity shunting and transactions of that sort were causing us damage all over the world. That is the situation which the right hon. Gentleman left to us.

What was the position in 1953? The reserves throughout 1953 have been climbing. The balance of payments is favourable. The official rate of sterling has been knocking up against the upper limit for a year. The transferable rate is 2·75 dollars, not 2·40. Commodity shunting has practically disappeared. The strength of sterling, and the confidence of this country and of the world in sterling, is utterly different from what it was in 1951.

That is not a minor achievement or a minor contribution to the standard of living of everyone employed in British industry. Let us not forget that. [Interruption.] I am sorry that hon. Members opposite find these facts disagreeable, but I shall try—

In stating the basis of his comparison, did not the hon. Gentleman neglect one fundamental item: that is, world prices in 1951 and those in 1953? Was there not a substantial drop in 1953 compared with 1951?

I propose to deal with that important point in the course of my speech. I should observe, however, that while rising prices bring disadvantages, they also bring advantages. Why is it difficult for us to sell goods in Brazil and Turkey, countries that produce cotton? The reason is that the price of cotton has slumped. If prices fall, the prospects for British exports fall. We must take the rough with the smooth.

The trouble is that under the dispensation of hon. Members opposite, we had to take the rough with the rough.

I cannot allow that to pass unchallenged. Is the hon. Gentleman really suggesting that it is a net disadvantage to this country to have more favourable terms of trade?

It is impossible to make a generalisation in one direction or the other. The right hon. Gentleman, who knows these subjects well, is perfectly aware that a movement of the terms of trade in one direction helps the United Kingdom balance of payments, and in the other direction helps the sterling area balance of payments. What is interesting on the export side is that despite the boom in 1951, and despite the great increase in prices and purchasing power throughout the world, our competitive export position showed a serious drop in 1951.

Taking the manufactured exports of the main exporting countries in 1950, this country had 26·5 per cent, of that export trade. In 1951, we had 22·7 per cent.; in 1952, 22·3 per cent.; and in 1953 the decline had stopped. Therefore, in 1951, our share of the world trade in manufactured goods was falling rapidly. In 1953, the fall had been stopped. That, surely, is an important fact for the people who make our goods for export.

At what level has our share in the export of manufactured goods stopped, at the 1951 level or at a much lower level?

Our share of the market has ceased to decline, and in 1953 the volume of our exports increased. I shall come to that presently.

Let us consider the situation of the industrial sector of the economy—first, production. In 1951, and particularly in the latter half of the year, production, which had been rising strongly—as one would expect after a war—from 1945 onwards, for the first time started to tail off. The curve began to flatten out in the second half of 1951. What is more important is that in 1951, for the first time since the war, there was a definite fall in consumers' expenditure. It was this fall in consumers' expenditure, particularly on clothing, household goods and textiles of all kinds, that had its effect on the level of production in 1952. In 1951, the production curve was levelling off and consumption fell. In 1953, both production and consumption rose to record levels.

Take the question of wages and prices; the relation between the two can be described as real wages. In 1951, real wages were falling. In 1953, they were rising. I am quite aware of the right hon. Gentleman's interesting point about October and November, 1951. My figures take that into account. They take the calendar years and they give the right hon. Gentleman the credit for the 4 per cent, increase in wages after his Government went out of office, which, I think, is quite fair.

In 1951, wages rose by 12 points and prices by 14 points, which meant a decline in the level of real wages. In 1952, both wages and prices rose by the same amount. In 1953, wages went up by 4 points and prices by 2 points. The fact is—and on the figures it cannot be disputed—that in 1951, under the right hon. Gentleman's dispensation, real wages— the purchasing power of wages—were falling. In 1952, the purchasing power of wages steadied, and in 1953 it rose. These are facts which ought to be known.

Is the hon. Gentleman talking about earnings or wage rates when he gives the comparison of wages and prices?

I expected that question. That is why I chose wages and not earnings. Had I chosen earnings, I should have had a more favourable figure. I also have read the report of the Court of Inquiry.

In 1952, the main purpose of the Government's policy was to put right the balance of payments, to restore confidence in the £ sterling, and to eliminate the inflation in the economy. Measures of a restrictive character were obviously needed. We had to tighten up on credit, for example. Those measures, combined with the effects of the fall in consumer purchases, which had started in 1951, and combined with the effects of having to deal with the inventory inflation of 1951, which the right hon. Gentleman still seems to think was a good thing, although I cannot imagine why, had the effect of restricting production in 1952, a phenomenon which was general in most European countries.

What we did was to change an adverse balance of payments of £410 million in 1951 to a favourable balance of £269 million in 1952. I cannot emphasise too often that that is the most important thing for the workers of this country. If the spinners and weavers of Lancashire cannot get cotton, if the industrial workers in the Midlands cannot get their non-ferrous metals, if we cannot afford to buy them abroad, what is the good of all the right hon. Gentleman's plans, policies and arguments?

I did not expect the hon. Gentleman to quote misleading figures. He knows perfectly well that the surplus on the balance of payments in 1952, apart from defence aid, was, not £269 million, but £148 million; he will not deny that. Therefore, that makes some difference. Secondly, will the Economic Secretary deny that the improvement in the balance of payments was almost wholly due to the change in the terms of trade in our favour and to the fact that his Government had not to build up stocks, as we did?

On the first point, the figures which I quoted are quite accurate. On the second point, I have already dealt with the terms of trade but I may do so again later, if I have the opportunity.

In 1953, we were able to pursue a policy of deliberately expanding industrial activity to the extent that was possible without a recurrence of inflation. That was the whole purpose of the 1953 Budget, which was intended to take up some of this slack in the economy, to restore the levels of production and consumption and to try to do that without a recrudescence of inflation.

The Budget of 1953 was criticised by some people on the ground that it was too inflationary and was giving too much money away as consuming power. Some people criticised it because it did not give sufficient consuming power. The right hon. Gentleman was rather inclined to say both these things at times, but that is not altogether unusual. What in fact has happened is that the 1953 Budget— and the Budget enshrines the Government's financial and economic policy— has been conspicuously successful, both in its effect on production and in its effect on consumption.

Let me take the index of production as good evidence of the industrial situation at the present moment. The all-industries index shows that production in 1953 was 5½ per cent, above what it was in the previous year, and 2½ per cent, above 1951; and at the end of 1953 it was going up: it was 7 per cent, or 8 per cent, up, and running at a record level. In January, 1954, this rise continued. The figure for manufacturing industry for the year as a whole is 6½ per cent, up on that of 1952, and in the last quarter was 9 per cent, up on that of 1952. That does no I seem to me much evidence of an industrial situation that has been gravely prejudiced by Government action.

Apart from production, productivity is at record levels. That does not seem to me to suggest a very dangerous or alarming industrial situation. Take the number of days lost owing to disputes. In 1953, this figure was at a very low level. Half the figure for the year, I think, was attributable to the one-day token strike. Apart from that it was at a very low level.

The hon. Gentleman has mentioned the one-day token strike. Surely, it was a very significant thing, the first official strike since the war that the unions have ordered? This one ordered people out in the engineering industry. The hon. Gentleman cannot brush it off as a matter of. no importance.

I entirely agree. It was a most important matter. Of course it was. My point is that it is indicative of how low the number of days lost was that a one-day token strike in the engineering industry should have doubled the figure for the year.

Now let me take the figure for overtime work. In November last year, the amount of overtime being worked was at its highest level ever. In the Budget debates in 1953 the right hon. Gentleman made some very telling points about the movement of labour in 1952. In 1953 there was a very satisfactory movement of labour. The total labour force in the country increased by 238,000, of whom 234,000 went into manufacturing industry. All these are facts about our industry, and they do not seem to me to indicate that there is any truth in the suggestion that the Government's policy at the moment is undermining or destroying the basis of our industrial society.

Let us consider consumption in 1953. I should like to give one or two figures that I think are worth knowing because it is important that we should know the facts of what the people consumed, just as we should know the facts of what this country produced. In the first three quarters of 1953 personal consumption was 3½ per cent, up on what it was in 1952and 1 per cent, up on that of 195 L Taking 1953 as a whole, the level of personal consumption, at constant prices— that is, allowing for price changes—was the highest since the war. We have now recovered entirely from the fall in consumption that took place in 1951. Food consumption in particular was 4½ per cent, up on the previous year, and was also at the highest level recorded since the war.

These consumption figures are true, broadly speaking, of all types of shops, including Co-operative stores. I think it is interesting—and perhaps hon. Gentlemen opposite will reflect upon this matter—that Co-operative shops have, I understand, achieved a 10 per cent, increase in the past year in the value of their sales of furniture, furnishings, hardware, radio and electrical goods. I do not think that all that has been bought by the "wicked capitalists."

All these figures surely show that the widespread increase in personal consumption of food, household goods, and generally of things in ordinary daily use, was substantial in 1953, and the figures that I have already given show that in 1953 the value of real wages of people increased, as against the decline in 1951.

Surely hon. Gentlemen opposite welcome this increase in consumption? Surely, the whole point of having an economy is to allow people to have consumption.

A question which the right hon. Gentleman had in mind was whether this increase of consumption is in any way bound to lead to a return of inflation. I would say emphatically it is not. Take two salient facts. The cost of living has not increased in the last 11 months. I shall come to this in detail presently. The balance of payments has shown a continually favourable situation.

The right hon. Gentleman asked two questions about the proportion of increased output going into various uses. I have not the exact figures. They will appear in the Economic Survey which is to be published in due course. However, curiously enough, in 1953 personal consumption was a smaller proportion of the gross national product than in 1951 and 1952. There was a certain increase in stocks; there was a big increase in fixed investment in houses and an increased outlay on defence.

What the hon. Gentleman says seems to be rather contradictory. Does he know what part of the increase in output and available resources in 1953 went to consumption? Does he know the proportion of it? Was it half, for instance?

I am afraid I could not give the exact figures. I do not think the exact figures for last year have been worked out yet. However, the gross national product rose considerably, and consumption rose considerably, but actual consumption was a smaller percentage of the gross national product than it was in 1951 or in 1952. Although consumption rose, other things taken together rose slightly more. However, these are rather statistical questions.

All this does not deny that there are two factors in the economy to which we must continue to pay very serious attention. Both of them were mentioned by the right hon. Gentleman. The first is the level of investment in industry, and the second is the balance of payments. Let me deal with what has happened to investment in industry in the last few years. In 1951, when the right hon. Gentleman was Chancellor of the Exchequer, investment in private industry was rising strongly. In 1952 there was a decline. Why? Because the right hon. Gentleman pursued the policy, in 1951, of abolishing, as from 1952, the initial allowances.

He did that, he said in his Budget speech in 1951, because.
"I suggest to the Committee that it is for us to take action now so as to restrain investment in 1952 and later years."—[OFFICIAL REPORT, 10th April, 1951; Vol. 486, c. 842.

That may have been right at the time. There was something to be said for his argument, but, naturally, investment was down in 1952 because people had wanted to get equipment before the initial allowances were abolished. The right hon. Gentleman should not be too modest and under-estimate the effect of his own policies.

Since the Budget of 1953, which restored in part the initial allowances and made other substantial concessions, we have seen a quickening of activity and a substantial increase in the licensing of new factory buildings, and the fall in the demand for investment by private industry has shown signs of stopping. I agree, as everyone will agree, that there is still great disparity in the amount of capital available for investment in industry, as between our own British industry and our competitors, for example, in the United States; and the promotion of a greater level of industrial investment is obviously a very great problem indeed. I do not think that it will be greatly advanced, however, by some of the right hon. Gentleman's ideas on the subject of the taxation of industry.

I wish now to consider the balance of payments for 1953. There has been a surplus in 1953—the exact figure is not yet calculated—at a diminished level this year, compared with 1952, but, nevertheless, a substantial and healthy surplus. Imports rose in volume but declined in value, while exports rose over the year in volume by 3 per cent, and in the last quarter of the year were 12 per cent. up. The rise has continued in 1954.

For the year as a whole, as I said earlier, the decline in our share of the world market in manufacturing goods ceased, and we held our position, but that is not to say that we have not still very considerable difficulties to face, particularly in the most important sector, our exports of capital goods and engineering equipment. Competition, particularly from Germany, as the right hon. Gentleman mentioned, is becoming very fierce indeed. There have been many reports of orders and contracts not coming to British industry because of German and other Continental competition.

I think it is quite true to say, as has often been said, that many orders are lost because our order books are full for some time ahead and we cannot give definite dates for deliveries, whereas in Continental countries quicker deliveries can be quoted. But that is becoming less a factor as price competition increases to full force. There are disquieting signs of our being undercut in price by our Continental competitors, and we must face the fact that to a growing extent it is on price, and on price almost alone, that we are going to have to face competition.

As to quality, we have nothing to fear from anybody, but I think we must recognise that in quality there are competitors of ours on the Continent of Europe who can make goods as well as we can. I do not think they can make them better, but they can make them as well.

I want now to turn to the cost of living, to which the right hon. Gentleman paid some attention. First, I wish to refer to some remarks he made. He talked about experiences in Europe, and I asked him if he was referring to 1953. He was, in fact, referring to the rise from 1952 to 1953, which is a different matter. In 1953 the cost of living in the United Kingdom went up by one point, in Sweden there was no change, in Italy it rose by one point, in Germany it went down two points, in France down by four points, and in America it went up one point. Broadly speaking, we can say that our experience in this country was no different from that of other countries.

For the greater part of 1951 the right hon. Gentleman was responsible and the consequences of his policy continued after him. He talked about a great fall in import prices but he was not talking about food prices, and it is, after all, food which affects the cost of living. Raw materials do not do so to the same extent. The cost-of-living index shows no change compared with 11months ago, and the food element in the index shows no change compared with 14 months ago.

Has the hon. Gentleman seen the cost of living index of the Ministry of Labour for February, and if he has is he still persisting in submitting these figures?

May I ask the hon. Gentleman where is this cost-of-living index to which he refers? There is no cost-of-living index in this country.

I am sorry. I am referring to the Interim Index of Retail Prices prepared by the Ministry of Labour, and I certainly should not participate in a debate of this kind without conferring on the subject with my right hon. and learned Friend the Minister of Labour.

That is a point about which I think it is important that the Committee should be quite clear.

Would the hon. Gentleman answer the question put to him by my hon. Friend the Member for Coatbridge and Airdrie (Mrs. Mann)?

I think we should be quite clear where we stand on this matter of the cost-of-living index, because this is a serious matter not only to ourselves but also to industrial relations. Hon. Members are very well aware that the Interim Index of Retail Prices is an integral part of many of the wage negotiations and the wage settlements about which we have to think.

I see that the right hon. Member for Belper (Mr. G. Brown), who is to wind up this debate, said a little time ago:
"What outrageous nonsense Ministers and their supporters continue to talk about the cost of living. Old-age pensioners and others with small fixed incomes know that it costs more to live.

Does the right hon. Gentleman accept the cost-of-living index as a fair measure of what is happening to the price of things that are bought by working class households? I hope we will get a clear answer to that question. It is quite clear that the right hon. Gentleman the Member for Leeds, South does accept it.

Is the hon. Gentleman not misleading the House, and have there not been clear indications that the index does not give a true picture of the cost of living of old-age pensioners and others on small incomes. If the hon. Gentleman wants any evidence of that I suggest that he studies the speech which the present Financial Secretary to the Treasury made in 1950 on that very subject.

I am afraid that the hon. Gentleman is confusing two things. The index level of prices is the same for everyone who buys anything, whoever it is.

I am afraid I cannot give way, for I have done so a great deal and I do not want to detain the Committee too long.

I hope that the right hon. Member for Belper will tell us whether he accepts the cost-of-living index as a fair indication of the movement of the level of prices. Certainly the right hon. Gentleman the Member for Leeds, South did in 1950, as was pointed out by my hon. Friend the Member for Peterborough (Mr. H. Nicholls). Since then the index has been improved in detail by an expert committee, including representatives of the trade unions, the committee having been set up by the Government of which the right hon. Gentleman the Member for Leeds, South was a member.

We all know perfectly well that when the facts do not suit our argument there is a great temptation to argue with the referee or try to change the rules. But facts are facts nevertheless, and I would quote from a speech by the right hon. Gentleman as one reason why hon. Members are not very happy about the cost-of-living index when they are on the other side of the Committee. In a debate in November, 1950, he said this:
"Another reason, I believe, for the general attitude towards the cost of living is the very human and natural tendency to ignore any cases where prices fall and to think only in terms of price increases."

Perhaps the hon. Gentleman would also quote something from the speeches of his hon. Friends in that debate.

He also made some pertinent remarks, if I may so describe them, on another aspect of this question when he said:

"When more things that we all want to-buy come on the market—well, my experience, at any rate, is that my wife presses me for more money to replace things—for instance, clothing, and says we ought to spend a little more money on clothes, and we find the temptation, of course, to spend more ourselves, very much greater; and this creates a feeling —a very natural feeling—of stringency, that money is tighter and that somehow or other the cost of living is going up."—[OFFICIAL REPORT, 2nd November, 1950; Vol. 480, c. 344–345.
Without a doubt there are more things to buy today, and under this Government there is a great deal more food to buy. That creates the impression, as the right hon. Gentleman said in 1950, that prices are going up.

Broadly speaking, the facts are as I have stated them. The index shows that the cost of living is the same as 11 months, ago, and the food element in the index is the same as 14 months ago. If we look at the weighting in that index we find that a larger proportion is now given to food than in the index of expenditure by the consumers as a whole.

Is that not because of the increase in the price of food? Is not the additional weighting from 359 to 399 compared with August, 1951, introduced into the index because the cost of food has increased? That has given an additional weighting.

There are many answers to the question of why that increase took place, what was responsible for it, whether it relates solely to food and whether the reason for it is more expensive food. The point that I am dealing with is the accuracy of the index, and I do not think any responsible Member of the Committee on either side questions its accuracy.

I am grateful to the hon. Member for that.

I now come to dividends, to which the right hon. Gentleman made some reference. What happened to dividends in 1953? Let us get this matter into perspective. The total amount of increase in dividends in 1953 was £25 million, which, as my hon. Friend the Member for Louth (Mr. Osborne) pointed out, would mean something over 5d. a week for each person if divided among all employed persons in the country, and Is. a week if divided among all employed in companies.

No, I cannot give way.

That is a measure of the absolute size of the dividend increase—1s. per week for every person employed by companies and a little over 5d. for everyone employed in the country. Now for the return on capital. I will not repeat the figures which my right hon. Friend gave in a recent debate, which showed that the net return to shareholders on capital has been declining, but I must say to the right hon. Gentleman that I think that when we are considering the level of dividends the total amount of savings invested is a relevant consideration, as is the total number of people employed and the total size of the wages bill. It is largely a matter of mathematics. Surely when—

The hon. Member must not continue to speak if the Minister does not give way.

I am sorry, I had not given way, and I am conscious that I am taking a long time to make my speech.

The right hon. Gentleman talked about the importance of greater investment in industry, and that is absolutely true. But what do profits ploughed back represent but investment in new and better plant, which provides more chances of earning money, more chances of employment, more chances to compete with our competitors. I think sometimes that the right hon. Gentleman suffers from the fallacy of his predecessor, who once talked about people spending their money on more plant instead of chucking it round in bonus shares—

No, I am sorry. I have given way too much.

If the right hon. Gentleman does not like net dividends let us take the movement of gross dividends. In 1952, the amount of gross dividends was 6 per cent, up on 1951—

Curiously enough it is 6 per cent, as between 1951 and 1952 and 6 per cent, as between 1952 and 1953. In 1951, when the right hon. Gentleman got disturbed about it, the increase was 18 per cent., so that there is no comparison of any kind there whatever. I do not think that on these figures there is any possible ground for suggesting that in 1953 there has been a breakaway in dividend policy. I think it necessary to make that clear. Dividend restraint means what it says—restraint and not freeze. Dividend restraint does not mean dividend freeze any more than wage restraint means wage freeze. We must be clear about that.

I know that many hon. Gentlemen opposite think that all dividends are wrong. That is a point of view, but it is not the point of view on which the prosperity of this country at present is based. Let us take one or two figures as a background to the relative position of shareholders and wage earners in recent years. Between 1938 and 1952, earnings increased by 184 per cent., prices by 122 per cent, and dividends by 40 per cent. In other words, in real terms while the wage earner was 28 per cent, better off, the shareholder was 35 per cent worse off.

Taking a shareholder and a wage earner who in 1938 were each receiving £100, the shareholder now receives £140, which in pre-war terms is worth £65, and the wage earner £280, which in pre-war terms is worth £128. That is a measure of the comparative shift in the purchasing power of wage earners and dividend receivers. I accept the argument of the right hon. Gentleman that it would be wrong to put back the clock, and no one has suggested that we should adopt such a policy. But I think it right and fair, when we are endeavouring to consider these very important matters in our economy, that these comparative statistics of what has actually happened should be made known, because they are relevant.

I think that the Minister has missed a fundamental point in the argument which he is building up and the conclusion which he is trying to reach. He is making a comparison between the income of a wage earner and of a shareholder. He seems to miss the point that the fundamental difference in such a comparison is that the wage earner is earning one wage, whereas the shareholders may appear many times in the lists issued in respect of companies and, therefore, be receiving not the income of one shareholder but of many shareholders.

Frankly, I did not think it necessary to mention it.

I have been dealing with the development of the whole economy. I have tried to show that our economy is immensely strengthened, that our production has risen, that our consumption has risen and that confidence in sterling has greatly increased. I have endeavoured to deal, by way of statistics, with the criticisms contained in the speech of the right hon. Gentleman on the subject of prices and dividends. I wish now to look at the future.

I think we may look at the future with great confidence. There are uncertainties and difficulties ahead but I think that we can face them with confidence. It is an interesting fact that already the recession of business in the United States has gone as far, and much faster, than in 1949. It is an extraordinary thing that that should have taken place while our reserves have continued to mount and while sterling has remained extremely strong.

There are, of course, many and complex reasons for this, including the stock position in America, their financial position and the outflow of American dollars, but there are two factors for which we have been responsible and which have contributed greatly to our situation. One is that our economy is now on a sound basis, and the other is that the world has confidence in the financial conduct of our affairs.

Of course, there is no room for complacency. I am not making predictions about the future course of trade either in the United States or in the world, because it would be rash to do so, although by temperament and conviction I am an optimist. We have grounds for being proud of what we have achieved so far and we must increase our efforts toward more output and greater efficiency.

We have to face growing competition from Germany and other industrial nations, as well as from America—still our most important competitor. It is of the utmost importance to every employer, every worker and every citizen of this country that production should continue with the maximum efficiency and at the lowest possible cost. Surely that is what we should be concentrating upon. Our problem is how to produce more and do it more efficiently. We should work together to see that costs and prices do not get out of line, instead of doing what right hon. and hon. Members opposite are doing, trying to exacerbate existing grievances and creating grievances where they do not exist. [Interruption.]There are plenty of examples to show that hon. Gentlemen opposite try to create grievances about an increase in the cost of living which are utterly unjustifiable.

Everyone knows that the cost of living is a serious problem, particularly for people with fixed incomes, and we are doing all we can to deal with it. But it does no useful service to anyone to exaggerate matters.

We have made a degree of progress of which those who live in this island are entitled to be proud. Let us concentrate our efforts on trying to solve the difficulties instead of exacerbating grievances. Let us concentrate our efforts on increasing our production and our efficiency and in meeting the challenge of the years ahead.

5.39 p.m.

We have had a very remarkable speech from the Economic Secretary to the Treasury, though his closing remarks were not worthy of him. His observation that we were attempting to make capital out of a given set of circumstances undermined any good points which he might previously have made. Many of the figures which the hon. Gentleman used were nothing but humbug and were produced to befog the Committee. I shall use another set of figures relating to the same period that was referred to by the Economic Secretary and I think that after hearing them the Committee will arrive at a very different conclusion.

We are attempting to cover a very wide field in a debate which is long overdue. It is as well that we should take stock of what has happened in the industrial field. Much has so far not been reviewed, and it is important that it should be in regard to the deployment of our manpower. I suggest that we should give serious attention to the manpower position. A careful study of the overall picture of civil employment indicates some most serious dents and bulges in the wrong places.

The Minister used a set of figures about civil employment to suit his own purpose. He used the figures for 1952 and said that the increase was about 238,000. It is as well to go back a little further. I ask the hon. Gentleman why he did not correlate his figure to 1951 in the same way that he correlated many of his other figures. The increase in the number in civil employment from 1951 to date has been 135,000, which is exactly 100,000 more than the low figure to which we had drifted in 1952.

Also, if we analyse the types of employment we find a serious position. The increase in the number of males employed in that period was 28,000, and the increase in the number of females employed was 107,000. In industries which are mainly dependent upon male labour there has been a considerable decrease in the number employed. In agriculture there has been a reduction of 92,000 between 1951 and today. In building and contracting, another activity in which male labour is mainly employed, a considerable reduction has taken place. In the non-productive types of employment, such as the distributive trades, there has been a considerable increase of 114,000. This shows the pattern of our civil employment. It shows where we are drifting.

In the manufacturing industries we find that there has been an increase of about 200,000 since 1951, but if we carefully break down the figures to the respective industries—and I frankly confess that 1 have not been able to do that—I am sure that we shall find that the increase is more on goods for personal consumption at home instead of on goods best calculated to help us in our export difficulties.

We are most interested in these figures. Can the hon. Gentleman quote the source?

The source is the Board of Trade Monthly Digest of Statistics for January, 1954. They come mainly from Table 5.

We must carefully consider how our manpower is employed and whether it is deployed in our best interests. There is one good feature and that is the success of our nationalised industries in this connection. In coal mining manpower has been increased by about 11,000, with a consequent increase in output. On the other hand, there has been a reduction of 47,000 in transport. That is a very good sign. With that reduction in the number employed in transport there has been a considerable reduction in overhead expenses and an increase in efficiency.

This analysis indicates a disturbing trend which is fraught with danger. We have the right to ask the Government what they are doing about the deployment of manpower. Are they prepared to enter into some arrangement to control manpower, or do they propose to continue the present laissez faire method of allowing people to drift here and there without any consideration of our export needs.

The Parliamentary Secretary to the Ministry of Labour and National Service
(Mr. Harold Watkinson)

I take it that the hon. Gentleman knows that the Notification of Vacancies Order is still fully operative.

For instance, in agriculture there has been a decrease of 92,000 in the labour force and in building contracting there has been a considerable reduction. If we consider the situation in industry generally we find that it gives cause for serious concern. It was no use the Economic Secretary to the Treasury brushing to one side the one-day strike of engineers with a sweep of his hand as if it did not matter. That was an official strike. We must take note of that. The position is most serious.

The number of days lost through industrial disputes has gone up, since 1951, from 1,694,000 to 2,169,000, an increase of 475,000. But that is not the full story. If we analyse the figures issued by the Ministry of Labour we find that in 1953 we had by far the largest number of days lost through industrial disputes that we have had in the last 20 years, with the possible exception of 1937. Probably there wore more days lost than in any year since 1927.

That is why the Minister wanted to take out the engineers' strike.

I am glad that the hon. Gentleman mentioned that. The figures show that between 1945 and 1950 there were unofficial stoppages which were not recognised by the trade unions, but most of the stoppages in 1953 were recognised by the trade union movement. That indicates the general uneasiness.

The Parliamentary Secretary to the Ministry of Labour said in the House recently that we had returned to hard bargaining in the industrial field. He also made a broadcast speech to that effect. He said that in the past six months over 70 pay claims, affecting over four million workers had been dealt with. I agree with the hon. Gentleman: these stoppages indicate the hard nature of the bargaining to which we are returning.

I cannot allow the hon. Gentleman completely to misrepresent what I said. I said that more than 70 pay claims—the number is now a great deal larger—had been settled through the normal machinery of negotiation without any recourse to strike or other industrial action whatsoever.

I am tying up what the hon. Gentleman said in the House with what he said in his broadcast. The two things must be correlated.

What I have quoted is what I said in my broadcast. I also said in the House, and in my broadcast, that it would not be at all surprising if in the more realistic conditions of the day we returned to a tougher kind of bargaining than we have experienced in the years since the war.

I do not dispute that. That is what I have already said. I wanted to show that the stoppages which are taking place indicate the hard nature of the bargaining. The number of days wasted by stoppages during 1953 represents a very unenviable record for the Government. The Chancellor of the Exchequer may well boast of the success of his financial policy, and he and the Government can make all the propaganda points they like out of it, but the real position in industry is as I have shown, and it is a very serious one.

It is interesting to note that there has recently been some "kite flying" by officials in the Ministry of Labour in an attempt to get trade unions voluntarily to accept the findings of courts of inquiry. I advisedly say "kite flying," because I do not think the Minister of Labour would ever think that he would be likely to get trade unions to pledge themselves automatically to accept such findings. Indeed, he would be the last person to do so. This "kite flying," in view of the quarter from which it has come, may create a disturbing feeling and lack of confidence, and it ought not to be pursued very much further.

It is interesting to note what has occurred in the industrial field recently. The awards of the courts of inquiry have represented an advance of about 3s. 6d. or 4s. a week. It was left to an independent court of inquiry in the engineers' dispute to point out how unrealistic this type of award has been. It was left to the National Union of Railwaymen, an organisation which has had to fight many battles for the trade union movement, to break through the industrial court award of the 3s. 6d. or 4s. type. Since the railwaymen said that they would not accept the award and were prepared to strike, the awards by the courts have approximately doubled. These are very serious trends indeed, which cannot be dismissed by a mere group of airy-fairy figures. It is a practical aspect of industry.

Industry receives many exhortations to increase productivity. The men in industry are somewhat tired of pep talks and observations by theorists.

Yes, on both sides. There is a determining factor which will play a far more important part than mere "pep" talks. When an increase in productivity takes place, greater financial reward should be given to the actual men who increase the production. It is no use talking about incentives for this and incentives for that, for the men are tired of it. They want practical results.

The men know that we have a long way to go before we reach maximum production in industry and that we can still go a tremendous distance in that direction, but they are not convinced that management is pulling its full weight. I shall refer to that matter later, because it has a very important bearing on this subject.

To deal with production itself, there has been an increase of 2½ to 3 per cent, above the 1951 level. That is a welcome change, for there was a steady decrease from 1951 until the latter part of 1953. Nevertheless, this rate of increase is far smaller than that which the Labour Government achieved year after year. While this is a welcome sign, great weaknesses are revealed when we break the figures down.

Where does the main increase take place according to the figures of the Ministry? The largest proportion of the increase is in housebuilding. We are sorry that the standards have been brought so low, but we are all pleased about every house which goes up. The next largest increase is in vehicles for the roads. When we analyse the rest of the increase in production, where is it? Is it in good capital goods? Is it in good engineering products which will be available for export? No, that is not the answer, and the Economic Secretary knows that it is not the answer. Indeed, we find that there is very little increase in that direction.

We are all pleased to note that the fall in factory expansion has at last been arrested. Up to 1951 the Labour Government gave every encouragement to factory development.

In 1951, the Labour Government deliberately introduced a Measure designed to stop that in 1952.

We are talking about the building which took place, about the additional area of floor space provided. These facts cannot be denied. A considerable reduction took place, and we are glad to see that that has now been arrested and that some development is taking place, although it is not as great as we should like it to be. There has really been very little increase, and it is shocking that the plant and machinery development in respect of the home market itself has fallen to such a low level. All hon. Members must be alarmed by the fact that, with events as they are, there has not been more capital development of plant and equipment to enable our factories to give us the goods that we must export so that we can survive.

The right hon. Member for Leeds, South (Mr. Gaitskell) was complaining earlier in the debate that industry was putting too much money to reserve. How does the hon. Gentleman think we can modernise our factories if we do not put some of the money to reserve?

If the hon. Member will only be patient, I will deal in my own speech, in my own time, a little later, with the amount of cash that has gone to reserve.

There has been some increase in the export trade, but no matter how the Minister tries to wrap the figures up we are still 3 per cent, below the level of 1951. We have not yet got back to that position. The metal and engineering trades have shown some improvement, particularly in the last quarter, but the shipments are still below even the 1952 low level and are well below 1951. We cannot say, therefore, that the policy of the Chancellor has so far been good for industry. We see what is taking place in the textile, silk, wool and pottery industries. They are well below the 1951 level. There has been a slight increase in engineering exports over the level of 1952, I agree, but that, as the Minister rightly pointed out, is far below the increase in German exports.

In the Middle East we are losing a tremendous lot of trade for our engineering products to Germany and Japan. One could quote the order that was placed by Yugoslav Invest Imports with Dobson and Barrow's, amounting to £5 million, for artificial fibre plants. Negotions were all completed, and then the Export Credits Guarantee Department Fund would not cover the credit. When the President of the Board of Trade was asked a Question about it he said he had no control over that fund. We therefore lost the £5 million order to Japan. That incident does not make very happy reading.

Take our exports to O.E.E.C. countries. They showed very little increase in 1953. The general position with O.E.E.C. has worsened considerably. In the first part of 1953 we have a surplus trading. In the second half of that year we had a deficit. Now, in 1954, we are commencing to increase again.

In the first part of 1953 our exports to the sterling area showed a very great increase.

I am talking about our trade with the O.E.E.C. countries.

Our gold and dollar reserves are increasing today, and everybody is very proud of it, but while the hon. Gentleman makes a good speech on that subject he very carefully refrains from saying what our dollar reserves were in 1951 and what they are today, beyond saying that they were on a slippery slope. In actual fact, when the present Government took office those reserves were very much higher than they are at the present time. If there is a trend, surely we are entitled to know something about it. This only shows the gross mismanagement of the present Government.

The hon. Member for Louth wanted me to deal with the question of shares and what is taking place in regard to reserves. We recently had a debate on take-over bids, when we pressed the Chancellor very strongly for an investigation into what is taking place in the share market. We gave certain figures, and my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) and my hon. Friend the Member for Stechford (Mr. Roy Jenkins) gave instances and specific cases on the basis of which they asked for the investigation. Hon. Members who support the Government accepted those instances as part of normal trading relations. It is regrettable that the Chancellor refused to do anything about it.

Under the Labour Chancellor, Sir Stafford Cripps, we were able to get both sides of industry together and come to an arrangement for what was called a "wage freeze" and for dividend limitation, with a view to achieving some stability in prices. The trade unions could have capitalised on that, had they been so minded, but they were faithful and did not make use of their power to get the advances in wages that they could have obtained.

What happened on the employers' side? Dividend limitation became irksome by 1951, and when we were in office we had to threaten to take stronger measures. With the advent of the Tory Government the lid came off altogether. Dividend limitation became a mere word. Industry was pressing forward and increasing the rates of dividend. Many industrialists had to meet savage attacks by financiers who wanted to get hold of their companies, and, therefore, the industrialists had to increase the issue of bonus shares and use their reserves for increasing dividend payments to a regrettable degree.

It comes back to the question which the hon. Gentleman put to me. This is a type of thing which can happen under the free exchange of the Tory Government. Instead of reserves being ploughed back into industry they are kept there as a savings bank. Now that dividend limitation is taken away they are used either for the issuing of bonus shares, in case the financial "sharks" should be after them or for increasing the amount of dividend in order that they might still retain control of their companies.

It was very unworthy of the Chancellor, during his speech on take-over bids, to refer to the over-all dividends on shares and investments as being 2·8 for 1953 as against 3·4 for 1949. It would have been honester when giving those figures if he had also given the amount of the bonus shares which had been issued in that time and the amount that had been put to reserves.

The hon. Gentleman should not accuse the Chancellor of dishonesty. The plain fact is that the question of bonus shares is utterly irrelevant. The figures which the Chancellor gave were quoted on a basis of normal capital plus reserves. Whether the reserves are capitalised or not makes no difference.

Exactly. I am saying that it would have been more honest if the Chancellor had given the facts about bonus shares in the same statement. He did not do so. We have had to split the figures up to see what has been paid and what is being paid out by way of dividend on bonus shares and such like.

Perhaps I am speaking for much too long. I know that several other hon. Members want to enter into the debate, but I want to refer to another point. I want to be brief, although I could quite well develop the subject to a considerable degree. I want to refer to the Index of Retail Prices, which is known as the cost-of-living index and is accepted as showing the cost of living. The hon. Gentleman and the Government have been making a great deal of capital out of the stabilisation, as they claim, in the cost of living. I will quote a set of figures contained in the last issue of the Ministry of Labour Gazette.

If we take the cost of living in June, 1947 as 100, by August, 1951, it had gone up to 127. By March, 1953, it had gone up to 140. Since then it has kept steady at that figure, except in two months when it reached 141. Taking the standard of wages over the same period and June, 1947, again as 100, we find that, for all workers the wage in August, 1951, was 126 as against—I repeat the figure—cost of living at 127. The two figures kept in very close relationship.

After this Government came to power, in the period from August, 1951, to March, 1953, when the cost of living had reached 140, male wages had only increased to 134. Wages were lagging by 6 points. From March, 1953, to the present time male wages have only gone up another two points, so that they are still four points below the cost of living figures.

This is the background of the industrial situation now facing us. It is causing a lot of the present industrial unrest. It is greatly concerning many people as to what is likely to happen, particularly if this American recession really develops.

We feel that our industry is not being equipped to meet the difficulties which may lie ahead, that the present expenditure is a false expenditure, and that some of these reserves might be utilised to make us more efficient. We fear that should the world position go against us there will again be a call from industrialists that the only way for us to survive is by cutting still further the standard of living of our people.

6.14 p.m.

It is a good many years since I was at the Ministry of Labour. I do not think I have spoken since in any Ministry of Labour debate, and I do not propose to detain the Committee very long now. Before going further, I do want to say that I think that the Ministry of Labour has been very fortunate under the administration of the present Minister and his Parliamentary Secretary. I do not always pay compliments to Ministers, but that is a genuine one.

I had the privilege of serving in the Ministry of Labour for more than two years as Parliamentary Secretary to the late Ernest Bevin. I learned a very great deal in that time-—and a great deal that I have not forgotten. One thing was that most employers—like most workers—are very anxious to do the right thing. It is only a small minority on either side who do not.

Would the right hon. Gentleman say that that remark applied to the engineering employers?

I am not going into detail. I am stating the general proposition that by far the greater proportion of employers and workers want to do the right thing and the fair thing.

There is an enormous amount of common ground—far more than there are differences. When there are differences, they arise from one of two reasons. Either there is something wrong, or the workers think there is something wrong. If there is something wrong, it must be put right. If it is thought that there is something wrong but there is not, the misunderstanding has to be removed in some way. I believe that there are a great many misunderstandings today.

I do not take the view of some hon. Members opposite, who say that there is a great deal of industrial unrest. Looking back over the last 30 years, it cannot be said that the present time is a time of great industrial unrest, although there are very considerable grievances, whether justified or not, which have to be carefully considered, and, if found to be justified, attended to.

One misunderstanding which causes much trouble and difficulty concerns the relationship between wages and dividends. This problem is not fully understood. I thought that the right hon. Member for Leeds, South (Mr. Gaitskell) put the matter slightly out of proportion. I wish to quote only one set of figures, because figures do not help many people when they are trying to work things out. In many cases they puzzle people, and they also tend to be unreliable and difficult to analyse. The figures I shall quote are agreed, and need cause no controversy.

According to the official figures, the amount of money paid in salaries and wages, in the last full year for which we have particulars, was £8,215 million, and the amount paid in ordinary dividends was £472 million. Hon. Members on different sides of the House may disagree on the question whether the money paid in wages and salaries was too little, or the money paid in dividends was too much—that is a matter for argument—but the proportions ought to be remembered. There were £8,200 million paid out in wages and salaries and £470 million in ordinary dividends, of which a very considerable amount went back in taxation to sustain the social and defence services.

I would say that, in proportion, more came out of dividends, because if hon. Members opposite were right in thinking that the dividends found their way, in large degree, into the pockets of those who had larger incomes, the rate of taxation on those individuals would tend to be higher—but I do not want to argue that point.

The right hon. Member for Leeds, South failed to make clear the true difference between the pre-war days and the present day. For every £1 of ordinary dividends paid out in pre-war days about 30s. or rather less, is being paid out now. That means that the dividend receiver is getting 30s. instead of £1, but that 30s. is worth much less than the £ was worth in pre-war days. In addition, he is paying a higher rate of tax upon it. That also applies to the wage earner, so that his money is not worth what it was either. The wage earner is now getting about three times what he got before the war. I am giving these figures to the Committee so that hon. Members may have a true sense of proportion in this matter.

Can the right hon. Member relate that argument to the lower-paid worker getting £7 a week? Is he saying that that man is getting three times what he was before the war?

I should say that most of the lower-paid workers are getting three times what they got before the war. Perhaps the hon. Member will be able to quote his figures, but my experience as a fairly large employer of labour supports the argument which I am advancing.

The right hon. Member for Leeds, South also talked about unearned income. Hon. Members opposite often refer to unearned income in a rather denigrating way, but unearned income is income from savings. It is a great pity that the Board of Inland Revenue always refer to it as unearned income. It is really the income on savings made either by the man who is receiving it, or, his predecessor, who left it to him. Many misconceptions would be disposed of if we talked about "income on savings" rather than "unearned income," which is rather a prejudicial phrase. If that were done a misunderstanding would be removed. I know that many hon. Members opposite, especially those Members who are trade union leaders, spend a great deal of time in trying to remove the misunderstandings of their constituents.

Another misunderstanding exists about bonus shares. It is very difficult to understand what they are. Those who do not have a great deal of experience with company balance sheets do not always appreciate what they are. An issue of bonus shares is a capitalisation of reserves. When a bonus share issue is made the directors of the company concerned decide that so many thousands of pounds shall never be distributed to the shareholders as dividends, but shall be placed to capital. Therefore, any arrangement which deters the issue by law of bonus shares is damaging savings; it means leaving more money available for distribution by the directors, and tying up less as permanent capital. That is another misunderstanding which ought to be removed.

Do not let us assume that we are in a period of great industrial unrest; let us assume, rather, that we are in a period of upsurge of intellectual interest. People are thinking more for themselves than they have ever done before, but many of them are not fully instructed. Many have not had the opportunities for studying so many problems as we hon. Members have. One may enter the Chamber and hear an hon. Member speaking about something of which one is quite ignorant, and go away thinking, "I have learned something. "We have a great deal to learn from each other and, if we continue to do so, understanding will improve and industrial unrest will be avoided.

6.25 p.m.

We had a cascade of figures from the Front Benches at the beginning of this debate. That cascade has gradually dwindled and, if the Committee does not find any other merit in what I have to say, it will at least find some in the fact that I do not intend to quote a single figure. I shall concentrate on the question of industrial relations between employer and employee, and various matters related to it. I do not wish to appear dogmatic, to exaggerate the present situation, or to overstress any aspect of it. I just want to air some ideas which my party has recently been considering.

People in other parties, and those with no political attachments, have recently been concerned at some of the problems inherent in our present industrial situation, and have been giving anxious thought to the matter. On both sides of the Committee the feeling has been expressed that these are delicate matters, and that we must be careful how we tread, but the time has now come for us to speak our thoughts as objectively as possible and to hope that satisfactory and acceptable solutions will be found.

From what has already happened, we can take various assumptions for granted. We want to keep business efficient and competitive; we want to keep down costs and even to reduce them, if possible. Today, our economy is a mixed one, and we have to recognise that rates of return which are reasonable and proper have to be offered to risk capital and, most important of all, we have to consider the methods by which labour obtains the full fruits of its work, and whether they are as good as they should be.

When considering this we are concerned to keep a continuous state of harmony in industry. It is apparent from what has already been said that there is concern about the results that may ensue from the present rather rigid methods of mass wage negotiations. The continual pressure for wage increases on an industry-wide basis has, until recently, led to no serious trouble, because industry has not found it too difficult to pass on those increased costs to the consumer. There has been no catastrophe, but the difficult questions have been shelved rather than solved.

Only those who are supporters of central planning and the control of wages have been prepared to formulate the problem of wages in a state of full employment, and to attempt to find a solution. The schemes which they have put forward certainly do not meet with my approval or with that of my party. In fact, I do not believe that they meet with anyone's approval. They have been completely rejected by both employers and trade unions and it seems improbable, to say the least, that any formal scheme for a national wages policy could be operated without regulations and controls which would cut right across the whole tradition of industrial relations in this country.

Nevertheless, those who oppose a national wages policy are, I suggest, under an obligation to find an answer to a problem which can no longer be ignored. May I put one or two ideas on the matter before the Committee? In considering any Government's attitude towards the problem, there are four closely related objectives to be borne in mind. The first is to safeguard a reasonable standard of living for all employed persons and their dependants. The second is to maintain and, if possible, increase economic production. The third is to avoid inflation. The fourth is to preserve industrial peace and to safeguard the tradition of freedom and self-government in industry.

If we think hard about this matter, it is clear that none of these objectives will be adequately fulfilled by a continuation of the present practice of granting wage increases by raising the time-rate throughout an industry. This method is unsatisfactory, for reasons which I will give. First, it temporarily increases the purchasing power of the lowest paid workers but it normally benefits all other workers in the industry, as well, and is, therefore, an unnecesarily expensive way of assisting a minority to maintain a reasonable human standard. It ultimately defeats its purpose in so far as it leads to price increases.

Secondly, a relatively small increase in the basic rate in a high priority industry is unlikely in times of full employment to lead to a significant alteration in the distribution of manpower. Thirdly, there is no reason why wage increases of this type should increase economic production. Fourthly—and this is a matter on which the hon. Member for Newcastle-upon-Tyne, West (Mr. Popplewell) dwelt at some length—the more such claims are passed to arbitration, the more serious are the strains placed on the national arbitration machinery.

Every time an unpopular award is given, the important habit of voluntary acceptance of arbitration decisions is threatened. The present tendencies are leading to a dangerous alteration in the nature of British industrial arbitration which is being tacitly expected to fill the rôle of a national wages board. That matter, too, was mentioned by the hon. Member for Newcastle-upon-Tyne, West. The purpose of our arbitration tribunals is essentially the maintenance of industrial peace. The method is informal and each case is judged on its merits.

Is the hon. Gentleman right in that definition of the purpose of an arbitration tribunal—the maintenance of industrial peace? Is it not the achievement of social justice?

I should have thought that essentially arbitration was a question of finding out how we can get the two parties together. If it were a question of social justice, surely different directions would be passed to the arbitration machinery directing it to lean one way or the other.

I think the hon. Gentleman is confusing the general conciliation duties of the Ministry of Labour with the official arbitration boards. I can assure him, as no doubt he will agree, that their job is merely to examine the facts and, if they are required to do so, to make an award on the facts.

I am sorry if there has been some confusion on this issue, but I think that the main point I made still remains.

If these tribunals have frequently to give decisions on the minimum wage in a number of large and important industries, they will be forced into assuming a position very like that of a national wages board. There is a danger that in attempting to make the arbitration machinery perform a job for which it was not intended, we may destroy its ability to do its proper work.

Since the objectives to which I previously referred will not be achieved by the present methods, the methods themselves must be improved. These measures can be divided, on the one hand, into those which are covered by the Government's general economic and social policy, and, on the other hand, those which involve adjustments in the present methods of negotiation and arbitration. The first aspect has been discussed earlier in the debate and I will not deal with it.

I will say, generally, on social and economic policy, that for a long time my party has emphasised the fundamental importance of maintaining and improving the purchasing power of money, thereby removing any case for repeated wage claims on the ground of the depreciation of money.

In addition, our social policy has stressed the distinction between the low-paid worker and the low-paid family man and has proposed social payments in the form of improved family allowances to guard against hardships in the lower-paid personnel. That is common ground between the parties; the familiar question is, "How much and when?" But that is on the political side of the problem and I want to keep to the industrial side.

One of the steps which we should now take is to try to shift the emphasis in the way in which industrial negotiations are conducted. To begin with, I suggest that for the purpose of obtaining the highest amount of money which can possibly be paid to any worker for his job, we should encourage negotiations on a company level. This, as the hon. Member for Leeds, West (Mr. Pannell) knows, is—

It is not something which is not done now; in fact, as the hon. Member well knows, it is done now. It is not something radical, revolutionary or new which I am suggesting but merely a development of that which already takes place. Where the unions have the trained staff to deal with these companies on a proper basis, with consultation to find out what they can afford to pay their employees, I suggest that this is an extremely satisfactory method.

I believe it should be considered and that the House and the Government should encourage that system of negotiation by unions with companies. Undoubtedly, it cannot spread wildly like a prairie fire because the unions will require considerably to increase their expert staff in different sections of industry in order to carry out such negotiations. As a result of these negotiations, those companies which can afford to pay higher wages will pay them.

Those companies which cannot afford to do so will not be called upon to pay them. I will come later to what happens to the other workers. What will happen is this. There will be differentials between the successful companies who are extending and developing —differentials in wages as between that type of company and the type of company that is going out. I would have thought that, provided there are minimum safeguards, there is nothing that any trade unionist could object to in that.

As the hon. Member probably knows, the unions in the engineering industry do negotiate with firms outside the employers' federation. The body most likely to prevent what he is suggesting coming into operation is the Engineering and Allied Employers' Federation and not the trade unions.

I quite agree. This will require alterations in the constitution of some unions and also in the constitution of some employers' federations.

I do not see why we should have to wait all that time. If the House of Commons can create a body of opinion that considers that this is the right direction in which to go, then, clearly, certain progress can be made.

There is one point which I should like the hon. Gentleman to make clear. Is he advocating that fixed standard rates of wages should be abandoned and that we should revert to individual negotiations between employers and employees and individual companies? If that is so, it is the most reactionary suggestion I have ever heard in my life.

Perhaps the hon. Member will listen to the end of my speech, and he will then know whether he thinks that that is what I am saying. It depends on what he means by his words.

It is not sufficient merely for a trade union official, who is skilled in the job, to negotiate the highest rate of pay he can for the union members in a firm, because the whole time there is the resistance of that firm, particularly from the sales side, to put wages up to the top, even on a company basis. It is a different matter at the end of the year, when the profits have been made.

At the end of the year when the profits have been made, and if the year has been better than the sales department thought that it might be, a firm is often very willing, if the workers wish to participate more in the firm and so to share some of the profits, for them to have something extra. If these two things are done, I suggest that the level of wages can go up considerably without their affecting the economic solvency, shall we call it, of our business community.

I now come to the next part of my speech, which may arouse some objections in the minds of hon. Members on both sides of the Committee. I think that the consequence, if one considers the drift of traditional industrial relations, of what I have suggested is that there must still be national wage negotiations to safeguard, what I choose to call, minimum wages. This provides the background of bargaining on a national basis to provide easily for minimum wage rates.

I have called it, for want of a better name, the national minimum wages adjustment board, to cover all industries, in place of the existing arbitration machinery which can be altered and developed to settle disputes on a company basis, on the method of negotiations which I have mentioned. This board would approve of an industrial award for an increase in the basic rate of wages, but would only approve it if the basic rate were below a reasonable living standard, having regard not only to the existing basic rate but to the average earnings in the industry. I appreciate that this offers many difficulties in the present situation, and I suggest that there may have to be alterations. I am endeavouring in no way to be dogmatic. I am trying to put forward some ideas which, I hope, will be discussed in this debate.

I think, with respect, that the hon. Member is wrong. Already there are basic minimum wages negotiated freely by the unions and if any individual firm wants to go above those there is nothing to stop it. There is no need for Liberal Party policy to tell us that if firms are willing to pay more the unions would be only too glad to take it.

If the hon. Member reads the document which has just come up, he will see that what is happening is that there is an urge all the time on the part of the firms which say they cannot afford to pay any more to hold back other firms for the sake of unity There is unity and loyalty among the employers' federations just as much as there is among the trade unions.

I suggest that it is quite unrealistic to discuss wage rates without consideration of average earnings, since average earnings are, obviously, affected by every change in these rates and only a very small proportion of employees may, in fact, be drawing the minimum rate. The decisions of the adjustment board, if of any value at all, must be legally enforceable.

This will be objected to perhaps more by the employers than the unions. All other claims for wage increases on grounds of increased productivity or higher profits should be determined by negotiations between unions and companies. So long as any element of compulsory arbitration remains, the Government are sanctioning and even encouraging industry-wide negotiation.

It seems, therefore, that there is some reason for the Government considering whether they should withdraw the Industrial Disputes Order No. 1376. I should be very glad to have the comments of the Minister on that later. This would encourage the return to the system of voluntary arbitration in cases in which the negotiating procedure between unions and companies did not lead to a settlement.

I, personally, like the Economic Secretary, am an optimist. That is probably the only thing that I have in common with him. But we have one or two particularly awkward problems to solve, some quite natural prejudices which have been shown in the Committee this afternoon to overcome, before we can move to what is absolutely necessary—a more flexible and resilient industrial system. I am, however, convinced that these problems can be solved. I have endeavoured to offer some suggestions this afternoon from my party of the directions in which we might move to the advantage of all.

They may be completely wrong and they may seem quite nonsense to some people, but all I say is that if they do anything to stimulate discussion the time may not have been entirely wasted. I am hopeful that if both employers and unions will objectively speak their own thoughts on the difficult matters of wage negotiations, then, with the diplomatic skill of the Minister of Labour, we may be able soon to achieve a considerable improvement in the present methods of wage negotiation.

6.49 p.m.

Having heard the speech of the hon. Member for Bolton, West (Mr. Holt), I think it would be far better for all hon. Members if they left the trade unions out of this debate. The trade unions have their own work to do, and if they could do the work of hon. and right hon. Members there would be no need for us to be here in the House of Commons. If we could do the work of the trade unions there would be no need for the trade unions. Let us, therefore, apply ourselves to the debate.

The debate is on the subject of the industrial situation. Listening to the cascade of figures earlier, one would have thought that it was a debate on high finance, but it is not a debate on high finance only. I must congratulate my right hon. Friend the Member for Leeds, South (Mr. Gaitskell), a former Chancellor of the Exchequer—he was a Chancellor of the Exchequer for a short time this afternoon—on being in fine vein. I once read of a great novelist who described Nietzsche as a mad German philosopher who reasoned himself in circles out of the realm of sanity into space.. I was reminded of that description when I heard the Economic Secretary this afternoon.

I am going to draw the curtain so that we can see the industrial scene and examine it. When a chemist analyses anything he breaks it down, puts it in the alembic, distils it, and then he knows what is really in it. There has been a great deal of optimism abroad tonight. Let us begin by examining agriculture, because everything springs from the land. All the wealth that we have heard about tonight is made by the workers applying themselves to the machines and the raw materials.

According to the Digest of Scottish Statistics, from 1948 to 1952 we had a decline of 9,000 workers in Scotland. The reason is very simple. One reason is the tied cottage, because the man who owns the cottage owns the occupier. Then there is lack of transport to rural areas. Next is dragging wages, because the Scottish agricultural worker's wages are always dragging behind those of his English brother. In fishing there is still a marketing shambles in an effort to get rid of the commodity. No wonder we have a shambles, because there are no facilities for our people in the fishing industry to carry on their business in a progressive fashion.

Today, in Scotland, the name of my right hon. Friend the Member for Don Valley (Mr. T. Williams) is held in the greatest respect, because the Scottish farmers know that he is the only man who tried to approach the problem of agriculture scientifically. In the Scottish farming industry there is today much concern and apprehension, because the Scottish farmer does not know where the Government's agricultural policy is leading to.

Then there are the mines. Again, the accent is on manpower. During October, November and December last year there was a decline of approximately 5,000 men in that industry, but in Scotland our total was 700. The real explanation lies in the ravages of private enterprise and the price that the miners have had to pay for the industry. Make no mistake, the miners of this country bought the industry. It is all very well talking glibly of nationalisation, but the fact is that the cost of the industry was placed against the miners' potential earning capacity, and it is too much to carry.

I suggest that the cost of purchase of the mining industry should be placed against the National Debt, because the mines do not belong to the miner. Every hon. Member would dispute the suggestion that the mines belong to the miners, because that would be syndicalism. We say that the mines belong to the nation. If that is so, the nation should be responsible for them.

Taking the position in Lanarkshire as one example, it is true to say that here is a man-sized problem by itself. If we were getting justice in Scotland, Lanarkshire would be dealt with as a development area. But nothing like that is happening in Lanarkshire. Men have been transported across to Midlothian and reshipped to the Midlands. Take Fife, which has had to absorb a large number of Lanarkshire's miners. Not one alternative industry has been introduced into the new town of Glenrothes or in Midlothian where we have developed on our own without Government help. The Government have ignored us. The unemployment figures in this area are alarming. That should arouse the interest of the Minister of Labour in alternative industries for Midlothian and Lanarkshire.

I now want to refer to electricity and gas. In both industries there is a tendency to increase prices. That tendency is illustrated by the fact that the electrical engineers are today fighting for an increase in wages. I listened recently to the Parliamentary Secretary to the Ministry of Labour speaking on the wireless. A number of women were present, and they said to me, "Why is he laughing?" He laughed several times during the broadcast. I said, "He is laughing at the thought of being able to convince you people that the prices of food have not risen." They said, "He never went to the store for the messages. Otherwise, he would know how food prices have risen." I wonder at men coming to this House and trying to convince anyone that there has not been an increase in prices.

The Government now proposes to bludgeon the housewife into a weaker position by imposing upon her a 40 per cent, increase in rent, plus an increase in rates, and in addition she will have to bear her share of the owner's improvements in the patching up of old property.

As to transport, there is chaos on road, rail and sea, and in the air. The Highland haulage problem still looms large. If some giant could have turned these islands east and west instead of north and south there would be no problem. Simply because Aberdeen is 500 miles north of London we are faced with a great problem of getting fish from the port at Aberdeen down to the southern markets. This Government stands transfixed, like a bird in front of a snake, failing to grasp with the problem. I tell the Government straight that until they return to a co-ordinated nationalised system of transport they will never be able to tackle the problem of transport to our Highland areas.

The building of the Forth and Tay bridges is still only a dream. The Government will not recognise that these bridges would tend to create a stabilised economy in Scotland. We talk about civil Estimates of £2,000 million, but only £13 million would build the Forth bridge. The Government cannot afford the steel to build that bridge. They require it to turn into armaments, and they are lifting the tramway rails in our big cities to meet the demand for scrap. I am not blaming this Government only, but every other Government is in the same position. Other nations are spending far too much of their national income on things which will destroy life, and not sufficient to support and protect it.

Reference has been made to the shipbuilding and engineering industries. Shipbuilding is our traditional craft in Scotland. Every Member of this Committee gets periodical information about shipbuilding prospects in the markets of the world. Everyone knows what competition from both Germany and Japan means to our shipbuilding industry. It is not true to say that only the small yards are suffering. As a matter of fact, more small ships are being built than big ships.

In the engineering industry the employees were never over-paid. In my own constituency, two miles from where I live is one of the finest engineering works in the world, where the engineers work to a ten-thousandth part of an inch. They are engaged in marine engineering. The McTaggart Scott tele-motor is the finest bit of engineering work in the world. The Germans have nothing like it, and no other nation produces anything like it. When I went to work there in 1939 I inquired from the shop steward what was the basic rate for a skilled turner and I was told it was 11¾d. That is how we paid skilled men in Scotland.

Then there is the question of unemployment. My right hon. Friend the Member for Leeds, South mentioned the American politician who advocated an increase in purchasing power for the workers. The Chancellor of the Exchequer is not here, but I am wondering whether he is thinking along these lines, because mention was also made of Members' expenses. If the Economic Secretary will take a hint, he should make representations to the Treasury, because some of the Scottish Members will have to get a "sub" if he does not hurry up.

I have given sufficient information tonight about the engineering industry to persuade the Government to have another look at it, because I remember the days when the derricks and cranes on the Clyde were idle, and one person in four in the City of Glasgow lived off the rates. I am not going to say any more on that subject, because I hope that my hon. Friend the Member for Bridgeton (Mr. Carmichael) will catch your eye, Sir Charles. Someone should deal with the position of the great City of Glasgow, where the bulk of our Scottish population is centred.

I said that I would deal with the alarming rise in the unemployment figures. I would like to point out how insecure are the people in the central belt of Scotland. Lanarkshire and West Lothian where the people are dependent upon shale mining. The sword of Damocles is hanging over their heads all the time, because it is cheaper to bring oil from Persia and from other parts of the world and refine it in Grangemouth than it is for our people to mine the shale and retort it in West Lothian.

All the time our people are living under the shadow of that sword. In my own constituency, during the last two or three months, there has been rising unemployment, even though some of the girls travel 20 to 30 miles to work. A small employment exchange has 255 unemployed where, three months ago, there were only 30. We have nearly 1,000 unemployed registered at five small exchanges where, six months ago, we had only 130 so registered.

I am continually asking that notice should be taken of the fact that if we are to have movement of labour—and the Economic Secretary to the Treasury mentioned this—we cannot lift a family from one part of Scotland and dump it in another, even in a new house, without providing certain amenities. There is a social aspect of this problem, and unless this Committee takes cognisance of it, then we shall not get the industrial relationship about which one hon. Member on the other side of the Committee talked so glibly.

Our workers in Scotland are good workers. They are not afraid to work, but they like a square deal. They are not getting a square deal at all if the Government are going to rob Peter to pay Paul—if they are to give it one way and take it another. The landlord, for instance, is to get far better treatment than the worker. He is to get 40 per cent, or 8s. in the £ because he failed to do his duty, but if the worker strikes he is anathema.

I hope that the Minister will tell us that there is some hope for the mining industry in both Fife and the Lothians, and that there is hope of alternative employment there and in Lanarkshire.

7.7 p.m.

For good or ill I am not a Scotsman. I hope the hon. Member for Midlothian and Peebles (Mr. Pryde) will not ask me to follow him into the fields, because the only fields I have in my constituency are on Hampstead Heath, and Hampstead Heath does not produce food, though it furnishes many people with happiness and more with jokes.

Neither would I venture to follow the hon. Member for Bolton, West (Mr. Holt), for I want to try to keep my feet on the ground. I could not do that if I sought to rise into the somewhat rarified atmosphere to which he took us in his speech, which left me with one conviction, and one conviction only—that the policy of the Liberal Party does not offer an automatic solution for the problems we are discussing this evening.

The right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell) said he accepted the principle that the House of Commons should not intervene in industrial negotiations. I hope we can all take that as our starting point. But, if so, we have to place upon ourselves a very special restraint, not only as to the way we speak in the Chamber but when we speak in the country or write in the newspapers. We are facing dangerous and difficult days, through which we may be able to find our way by hard thought and willing effort to happier years and a prosperous future. If we are to do that we must be very careful to avoid lighting a spark which might set off a great explosion, and set back industrial progress in this country for years to come.

The right hon. Gentleman spoke about a deterioration which he thought he apprehended in industrial relations. There is tension in industry at all times. There is tension also in Parliament, and I ask the Committee to give its mind to these tensions and to what their relations are. We in these democratic countries govern ourselves by the tension that exists and has practical effect between Government and Opposition in Parliament. We speak our minds to one another, knowing that for a time one party is in power and that the time will come when the other party will be in power.

We seek the truth by the clash of mind and thought and work, but we do it all within the Standing Orders laid down for the House, and within, what is perhaps more important still, the influence of the traditional atmosphere of this place where we debate, which unfailingly has its effect upon every one of us, from whatever part of the country we come, and whatever our background.

That is the tension of a democratic Parliament. There are also tensions in industry, and in a debate of this kind we should be making an error if we assumed that the primary tension in an industrial State is between employers and employed. The primary tension—that which matters most of all—is between the maker and the buyer, because if, as a country, we live by industry, then we have so to order our affairs that we make what people want to buy at a price which they can afford to pay.

Though we have some control over those factors within this island, on both sides we know that our industrial future depends on our solving that problem not only in this country, but for export markets as well. That tension between maker and buyer, between producer and consumer, is the healthiest influence that can possibly be brought to bear on industry. It is best of all when the pull on either side is evenly balanced.

We all know troubles that have grown up through there having been so largely a sellers' market since the war. Now we are passing into the stage of a buyers' market. I submit that if there are difficulties in industrial relationships at the moment, that is not unconnected with this transitional stage in which we find ourselves, and we may more easily find the truth if we look in that direction than if we try to attribute it to the doings or misdoings of Governments or Parliaments.

That primary tension, of course, is related to the secondary tension, the tension between employer and employed. We used to call them "masters and man." That may be a more human terminology, but I suggest it is better to think, as we normally do nowadays, in terms of employers and trade unionists, because those words seem to me to convey more accurately that both the parties have a responsibility to the industry in which they work, and are not only and exclusively against their opposite number.

The industry to which they belong is, after all, the livelihood of both. In this country industry is ultimately the livelihood of us all. Employers are in the special position that they have to carry the ultimate responsibility for decisions which lead to the success or failure of the business. I say that, not arguing that it is the employer alone who matters, and not the worker. For the man whom trade union leaders represent, the industry is not only his means of livelihood, but also his way of life itself.

The fact that the man working in the lower ranges has his industry pressing in upon his life, to a greater extent than those at the top who may have to take the broad decisions, is a fact that we must never forget. Those of us who can visualise some of the drab parts of industrial England, where the Victorian expansion passed a blight over a beautiful land, will, I think, understand even more fully what I mean.

The hon. Member for Midlothian and Peebles referred to optimism. I am not going to speak as a gay optimist. I have made it only too clear that in this transitional stage I think we are playing for tremendous stakes, and unless we all weigh our words with the greatest care, as I am seeking to do and as I thought my right hon. Friend the Member for Blackburn, West (Mr. Assheton) did very markedly and wisely earlier in this debate, all our talk here might easily do harm rather than good to the cause which we all in our different ways are ultimately pursuing, the greater prosperity and happiness of the people in British industry.

Though I say that I am not a gay optimist, it occurs to me that we may unknowingly be on the threshold of a half-century of greater growth in prosperity than our country has ever known. We look back on the Victorian era as though it were something of the distant past which may never come again. It certainly will not easily come again. [An HON. MEMBER: "Thank goodness."] An hon. Member says "Thank goodness." I was thinking, not of the uglification of England which the Victorian era brought, but of the overall rise in the nation's standard of living which, fortunately, it also brought.

It brought that increasing standard of living to all classes of the community. We may legitimately argue whether the increase was fairly apportioned, but no one who knows anything of economic history can deny that the standard of living of all classes was far higher in 1900 than in 1800.

Did the hon. Gentleman ever read Charles Booth's "Life and Labour in London," and the story of the submerged tenth?

I can assure the right hon. Gentleman that I am not ignorant of the background of this city of ours. There was a submerged tenth; there were people who were unemployed and people who could never get regular work, but the right hon. Gentleman is experienced enough in industrial history to know that what I am saying is fundamentally the truth.

We have to seek the means by which we can make the potential growth of prosperity a reality in the years that lie ahead. We possess the one great advantage that technical invention now brings within the bounds of possibility improvements in the standard of life of which the Victorians never dreamed. We can also spread improvements more rapidly, through the people of the whole world and not merely of this country, than could ever be done before.

If we can find the right means of achieving that, we shall not only relieve the Chancellor's Budget problem" and the dollar problem of which we hear so much. We shall help to make up the ravages of war, and surely in this debate on the industrial situation we must not lose sight of the extent to which this country has been set back by the destruction of war, and the warping of its industries by war needs. All that we have still to overtake.

If we find the right answers, we can do more. We can deprive the Communists of the field of poverty in which Communism best thrives, and Communism is an industrial enemy to us as well as a military enemy. We shall not only be accomplishing all these things, but we shall also bring to the trade unions that advance in the standard of living of the average working-class home which, after all, is the prime raison d'étre of trade unionism in the eyes of its ordinary members.

I have sought not to be controversial in what I have said today, because I do not believe, and I have never believed, that when we debate in this Chamber matters touching negotiations between employers and trade unions we shall gain by seeking to fight their battles in the House of Commons. I would beg all of us that, whatever the outcome of this debate, whatever the lessons that may be learned from it, we should seek to avoid producing a state of affairs which will lead historians of the future to say that the British had prosperity within their reach in 1954, but jettisoned it by quarrelling among themselves.

7.23 p.m.

The hon. Member for Hampstead (Mr. H. Brooke) invited us not to begin to light any spark that would lead to industrial trouble. The indictment which we on this side of the Committee make against the Government is that their economic and financial policies are doing precisely that, and we do not think that we should be serving any useful purpose if we avoided saying so.

The right hon. Member for Blackburn, West (Mr. Assheton) said that either there was a grievance or people imagined that there was a grievance. We are trying to discover whether there is one or not.

I assure hon. Members that people certainly imagine that they have a grievance. The policies which the Government have embarked upon since the time of the present Chancellor's first Budget have been responsible for breaking down much of the serenity in industry which we witnessed in the years following the war. If we are to put this debate in the right perspective and against the proper background we must look at the conditions which obtained during the administration of the Labour Government. I believe that there is almost unanimous agreement that the efforts of the British people from 1945 to 1951 to restore an economy which was shattered in the war constitutes one of the most remarkable performances in the whole of our history.

The Economic Secretary to the Treasury finished his speech with an appeal that we should not say things that would tend to cause trouble. We certainly do not wish to do that. I know that he was not in the House of Commons at the time, but I wish that he would read some of the debates of the 1945 Parliament. I remember touring Canada in 1949 to try to secure an understanding among Canadians of what we were doing, and from Montreal to Vancouver we had to try to live down what the present Prime Minister and members of the Tory Party had said in those days—things that were deliberately designed to stop people placing orders with us, and to prevent the establishment of better trading relations.

Therefore, when hon. Members opposite talk about not causing trouble they should remember the speeches about "Weary Willies "and "Tired Tims," for those were the sort of things we heard from the Tories in those years. Never has there been a Government in British history so villified and misrepresented as was the Labour Government of those six years. During that period, despite raw material shortages due to dollar starvation, the shortage of factory space, machine tools and other essential industrial components, and whilst millions of men and women were being transferred back from the pursuits of war to those of peace, the greatest and most successful efforts at economic recovery imaginable was being mounted. Those years record a story of ever increasing production figures in our most vital industries.

The party opposite tried to make the nation believe that it was merely a coincidence that these things were happening during the period of the Labour Government. I affirm that one of the principal factors that made it possible at all was the sense of fair play which was created by the policies of that Government. There was the redistribution of the national income by the taxation policy which various Chancellors carried out, the food subsidy policy and price controls over goods in short supply. All these things brought about an atmosphere which of itself had much to do not only with the rise in production which was then obtained but with the rise in the right type of production, which enabled us to increase our exports to 70 per cent, above anything achieved in pre-war days.

Let us look back at the enormous power which rested with the British trade union movement in those days. Those conditions of full employment and the enormous demands of our industries probably gave British trade unionism the strongest position that it could ever have held in the whole of its history. How did it use that power? I suggest that the restraint displayed by it under those conditions was almost unbelievable.

Trade unionists saw that under our necessarily weakened economic circumstances the immediate demands that they could have made on behalf of their fellow members would have been in conflict with the long-term interests of the nation as a whole. That was an example of statesmanship never seen before from any type of industrial organisation in any democracy in the world. When we look a little further back and remember that very fresh and vivid in their memories was the 1927 Act and the vicious treatment to which they had been subjected not many years before, that becomes an even more magnificent performance.

During the war period they had agreed to relax their pre-war practices as a purely war-time measure. They never asked—they have never asked to this day —for the restoration of those restrictive practices which were surrendered because of the dilemma in which the nation found itself. We had the dilution agreements which meant that hundreds of thousands of men and women, inexperienced in craftsmanship, were brought into certain industries in order that the nation could survive the ordeal of war. After the war those dilution agreements were never rescinded and they are in operation today.

There grew up in that period between the Government and trade unions what I have previously described in this House as an unwritten and delicately balanced agreement that, in return for Government policies aimed at keeping the cost of living as low as overseas prices for our food and raw materials would permit, the trade unions would limit their demands to a minimum. During that period we in this House, as a Parliamentary Labour Party, did what we could to assist and back the trade union leaders. My right hon. and hon. Friends focused the attention of millions of workers on the need for increased production as the only way in which Britain could survive as a great nation.

I do not often quote from my own speeches, but I think I may be permitted to quote what I said in the debate of 11th March, 1947, almost seven years ago. This is the sort of thing we were trying to say:
"This question of productivity is vital. Now, for the first time in our history, large numbers of our workpeople are being asked to believe that full production will not bring unemployment in times of peace. I suggest that it is necessary that that point should be explained to them. People below 40 years of age have never known full employment in peace time in this country. Therefore, it is necessary that it should be technically explained why unemployment is not at all likely under these conditions. It may be a revolutionary thought, but, nevertheless, it must be hammered home that full production is now the only guarantee of full employment, and that the greatest threat to full employment is under-production.
Those were the sort of ideas we were trying to put across to the people because of the great crisis in which the country found itself in those days.

A further reason why production continued to increase was that the Labour Government were in the process of building up what amounted to a very considerable addition to the wage rates by creating "social wages" in the form of the Health Service, against which the party opposite voted on every occasion, an all-embracing National Insurance Act, and the use of food subsidies to cushion the housewife against the ever-rising cost of imported food.

It was this pattern of Government action which enabled the trade unions to perform the feats to which 1 have referred. We demanded, not sacrifice by one section, but sacrifices by all. In the speech to which I have referred I put it this way:
"…if we are to get a response from the workers,... they should fully understand that we will demand equal sacrifice—sacrifice on the basis of ability to sacrifice of all sections of the society of this nation, not merely sacrifices from the workers themselves."—[OFFICIAL REPORT, 11th March, 1947; Vol. 434. c. 1207–8.
During that period the vast majority of employers co-operated wonderfully well. A trinity was formed which enabled the nation to come through the most difficult period in the whole of our peace-time history. Whether one compares that performance with other periods of British history or with the performances of any nation in the post-war world, it was completely and utterly outstanding. I am not arguing for a return to the sort of conditions under which a fairly rigid wage restraint policy had to be adopted.

During 1950–51, whilst the Labour Government were still in power, that policy of a fairly rigid wage restraint began to be abandoned and there was a rise of about 11 per cent, or 12 per cent, in wage rates in that period. I had the honour to serve Sir Stafford Cripps in a very humble capacity at the Treasury at the time I am discussing, and 1 know that he never looked upon that sort of policy as either a permanent or a long-term policy. It was purely an expedient to get over the immediate difficulties in which the nation found itself.

I wish lo refer to what was said by the Economic Secretary. He was in difficulties because my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) had pointed out that practically the only real thing that has happened has been the turn in the 'terms of trade to the advantage of this nation. The Economic Secretary, for whom I have considerable respect, tried his best to worm his way out of that difficulty. He should read the productions of his own Chancellor. In the Economic Survey for 1952, it is stated:
"The total import Bill for 1951 was over £1,100 million higher than in the previous year. Two-thirds of this rise was due to higher prices resulting mainly from the general scramble for raw materials after the outbreak of fighting in Korea."
That was precisely the basis of the argument of my right hon. Friend against which the Economic Secretary argued in vain.

As I pointed out, we appreciate that there is no question of trying to maintain a rigid system of control merely for the sake of control. We have moved into a freer economy, but our complaint is that In the process of moving into that freer economy the Government have deliberately tipped the scales in favour of the high-income group and against the lowincome group.

We recall that the Chancellor himself, when introducing the Budget in March, 1952, could have no real knowledge that the favourable turn in the terms of trade would be maintained. What sort of case he would have to answer today if the terms of trade had reverted to the 1951 level almost baffles imagination. The rise in the cost of living, with controls thrown away and with a policy giving advantage to the higher-income group at the cost of the lower-income group, and with the 1951 terms of trade in operation, would have been utterly and completely disastrous.

Although from time to time many of us on this side of the House tried to warn him of what would happen, the Chancellor showed that he was prepared to go ahead with the policy which under those conditions would have resulted in massive industrial unrest on a scale never seen since 1926. We are shown by the Economic Survey of 1952 how much the terms of trade meant to him and, as it is, he stands indicted as a Minister whose policies have resulted in large increases in the cost of living during a period when, by every logical test one could apply, we should have had very large reductions. That is an issue which has never yet been answered from the Dispatch Box.

Reference has been made to countries in which there has already been a diminution in the cost of living. When we look at the advantages we have had from this turn in overseas prices it is preposterous that we should be arguing whether there is a 1 per cent, or a 2 per cent, change in the retail index when in fact we should be entitled to a very considerable reduction in the cost of living. During the period when we were in power we were engaged in the task of creating a peace-time economy in a nation which had been mangled in war. We were creating an orderly sane structure in which large-scale capital investment could play its part in producing modern industries whose output would benefit every section of the community.

To ask for restraint while that process is undertaken is very different to demanding it while the Government deliberately pull down a planned economy in favour of one section of the community. That was the policy on which we were trying to embark. In contrast, the present Government have, as their deliberate policy, sought to create the conditions under which the pre-war pattern of wealth distribution can take place. This point, I believe, is at the heart of the industrial trouble which we are tonight discussing. The Government have abandoned those controls which are necessary for an orderly advance to increased industrial efficiency; they have reduced the food subsidies, turned a blind eye to increased dividend distribution, reduced the value of the National Health Service, raised the cost of school meals, and shortly we are to have further subsidy cuts and increased rents.

The Government have reduced the Profits Tax on distributed dividends from 50 to 22½ per cent, and on undistributed profits from 10 to 2½ per cent. They have withdrawn the Excess Profits Levy and have put nothing in its place. When I asked the Chancellor a few weeks ago whether he intended in any way to control that proportion of profits which were previously subject to the levy, he replied, "No.

The Government have withdrawn the Excess Profits Levy from January this year. A corresponding amount of income will now be added to profits and dividends which can be paid, while the reduction of Income Tax by 6d. in the £ has mostly benefited the same class of people. In other words, our charge is that the Government are quite deliberately setting out to destroy as much as they can of that social wage which we created when we created the Welfare State.

The Economic Secretary told us in his speech that in November, 1953, overtime was at its highest level ever. It is a pity that the Chancellor did not know this on 11th February. Perhaps, however, he has been a little enlightened, because the court of inquiry into the engineering dispute has told the right hon. Gentleman and others who are interested that they must not play the three-card trick on earnings but must talk about wages. The Economic Secretary took the cue this afternoon.

When the Chancellor of the Exchequer spoke in the House on 11th February, however, he was giving the impression, by calculating the increases in earnings in comparison with 1938, that there was a positive increase in wages. He said:
"I want to mention a comparison with wages…The following figures which I am now going to give compare changes in average earnings, which are based on Ministry of Labour statistics, with the movements of the total ordinary gross dividends, which are based on figures given in the National Income Blue Book and the Consumer Price Index." —[OFFICIAL REPORT, 11th February, 1954; Vol. 523, c. 1454.
The court of inquiry has blown that argument sky high. We know perfectly well that the trade unions are prepared to argue wages; they do not object to being told how much overtime is worked or how much bonus has been earned. But let it be remembered that when bonus is earned, it is earned because of increased production; and when overtime is worked, it is done in the interests of increased production. Merely to use these components in order to say that earnings have risen to a certain height is to use the three-card trick, and we on this side of the Committee are not having anything to do with it.

All this means that the Government have quite deliberately set out to pull down the Welfare State which they were pledged to maintain. I suggest that to inject a Tory Chancellor of the Exchequer into a Treasury which has great responsibilities for financing the Welfare State is the modern equivalent of putting a bull into a china shop. Without being particularly well endowed with the gift of prophecy, one can forecast that the reactions of both types of animal would be roughly the same.

In an earlier debate, my hon. Friend the Member for Stechford (Mr. Roy Jenkins) quoted statistics from the "Financial Times" that in the first 10 months of 1953, ordinary shareholders received, after deduction of tax, 9 per cent, more than in the corresponding period of 1952. The figure has continued to rise, and I understand that it is now in the region of 10 or 11 per cent. Mr. Harold Wincott, in the "Financial Times" during October, 1953, told us:
"Month after month the picture has beer? the same. Profits down—dividends up absolutely. Dividends as a percentage of profits available, up very substantially. This is my silent revolution."
Mr. Wincott has no right to claim credit for the revolution, for it belongs to the Chancellor of the Exchequer.

It is completely impossible for trade union leaders, watching these policies develop, to convince their members that the central theme of Government policy is concern for the national interests. It is ridiculous to try to make men and women in industry believe that. While this is going on, while we are asked to maintain restraint in industry, employers are screaming about inability to compete in foreign markets and are charging workers who ask for a wage advance with creating the conditions which would bring unemployment.

I turn now to a political argument. The basic dilemma of Toryism is caused by the fact that the economic and industrial conditions under which the Tories ruled pre-war Britain no longer obtain. Their beloved law of supply and demand in relation to manpower depended on an excess of workers over the demand for them. That position changed only during a war, but in 1951 the party opposite inherited an economy in which productive levels were higher than ever before, and the world situation was such that the only condition of survival was to increase production still more. In other words, it was quite impossible for the Tory Party to recreate the pattern of pre-war days, with 2 million unemployed as a bargaining counter for regulating wage rates. Their dilemma is that until that pattern can again be produced, industrial power will continue to reside in the trade union movement.

We have had in the last two years the most complete paradox that Britain has ever known. We have had a Tory Government in political power and the trade unions in industrial power. It is anybody's guess how long this could go on. The fact is that because of our weakened economic position, industrial Toryism dare not openly attack the wage rates which had been built up under the Labour Government. Therefore, the Tories have attempted instead to pull down the social wage.

Now that, I suspect, certain elements within big business are attempting to redress this balance of power—in other words, are trying to get back to the position in which they could control the industrial situation—a new element is infused into the situation. In the last few months, when there was real danger of industrial trouble in the engineering industry, none of us who watched these things closely was surprised that the engineering employers' attitude was hardening daily. An hour before they were due to meet the Minister of Labour, they put out a statement that they had not the slightest intention of conceding a halfpenny. This means, I suggest, that we have come to the stage which may well be the end of the road in the paradox of which I have spoken.

This is the position as some of the big employers' federations see it: "Here we are in the third year of Tory power. The trade unions can still demand wage advances. Something has gone wrong in the state of Toryism. "They believe that while there is yet a Tory Government in power, they had better initiate a showdown in order to get the trade unions into their pre-war position.

In this atmosphere the only thing which has postponed—I say "postponed" advisedly—that battle taking place has been the fact that there were three nationalised industries, each of whom has conceded a wage advance. In other words, they have said, "We believe there is justice in your case," and they have proceeded to give wage advances which, I submit, completely knocked the feet from under the engineering employers in their attempt to get a show-down with the unions.

We know, of course, that in the old days—and I see some of my hon. Friends are present who could talk for quite a long time on this subject—the spearhead of industrial Toryism was the private mineowner. His job was to beat the miner to his knees in strikes, while the industry of the nation, which was merely at half-cock, used the coal stocks available. Today that cannot happen. If the miner stops work for a week British industry stops, and that has weakened the position of economic Toryism.

I suggest that we are in a very delicate situation. Merely because it now appears that many of the strikes which were threatening a while ago will not take place do not let us believe that the basic reason why they arose has been cured. There have been a few shillings added to the wage packets in some industries, but the basic problem—if I am right— is still the industrial fear which exists between the employers and the trade unions.

This, I think, is an issue upon which Parliament can help. We can argue for hours about a retail index which may or may not be right. We can argue about 1 per cent, and 2 per cent, on the cost of living, but the fact is that, because of the policies that this Government have pursued, there is now a sterile, arid outlook on both sides of industrial negotiations. Both sides are looking back, the employers hopefully and the trade unions fearfully, instead of going forward to a new age and a new set of conditions in which there could be co-operation, in which, may be, the obsolete wage structure of the 19th century could be got rid of right away and we could find ourselves entering into a new era.

That is the sort of atmosphere which we tried to create, and in those days progressive thought in the trade union movement was moving faster than ever before in our history. The indictment against this Government must be that they have broken down that state of affairs completely and we now have the two-side theory once again. There is distrust and a feeling that we may return to the days of 2 million unemployed and a 50s. a week wage packet. A small Island of 50 million people such as this cannot survive under those conditions in the 20th century. If anyone can tell me now to what situation industrial negotiations will have advanced in 20 years' time I will tell him whether Britain will survive as a great nation.

I believe profoundly that this issue is far bigger and wider than merely a question of a few shillings added here and there to wage packets in certain industries. It is a question of whether the greatest effort towards economic survival that the world has ever seen will result in success or in tragedy. I believe that because of the contradictions of Tory philosophy in an industrial nation such as ours it is a tragedy that we should have a Tory Government in power in Britain today. There is only one solution and that is to get rid of this Government as soon as possible.

7.54 p.m.

I shall not follow the hon. Member for Newton (Mr. Lee) very far in his argument, except to say that he, like myself, represents an industrial constituency, and has done so for the same period as I have. Representing Bury and Radcliffe, which is an area of mixed industries, I claim the right to speak with just as much knowledge and understanding and feeling for the working men of that area as he does.

I differ very widely indeed from the hon. Member's analysis of the situation as it is today. I believe that there is a totally different spirit in industry from that which existed in 1945. 1 have kept in constant touch with my constituency. I was there for three days last week seeing a great many people—not only of my own party but of his as well; for they come to see me, to inquire after my health, being kind-hearted fellows and good friends. I would say that the rather wicked analysis made by the hon. Member, furthering the division between employer and employed, is a complete misrepresentation.

What preoccupies both sides of industry at present is something quite different. There has been, on both sides, an enormous advance in their line of thought. People are no longer completely preoccupied with the pay packet. Though they are still, and rightly, concerned about its size, they also have a deeper understanding of industrial problems. They have been educated by their Members from both parties, who have travelled during the Parliamentary Recesses, so that today there is a better understanding of the dangers which now stand before industry than there has been for a long time.

In contrast to what the hon. Member for Newton has said, I wish to pay a tribute to both sides of industry. There have often been approaches on questions of major policy in the hope of finding new ground between both sides, rather than that we should go back to the réchauffé which we have had in so many debates, of the old arguments which are no longer valid. Industry is manned by younger men to a greater extent than before and they are thinking on new and much more enlightened lines.

It does no service to either side of industry to make the sort of speech indulged in by the hon. Member for Newton and which—as is known to every hon. Member who represents an industrial constituency—is not borne out by a careful study of what is being done. As I listened to the catalogue of scarlet sins which we are supposed to have committed in the last two years, and which were enumerated by the hon. Member, it was difficult for me to believe in the results of the recent by-elections. Like the Jackdaw of Rheims, at the end of the curse,
"Nobody seem'd one penny the worse."
During the short time that I propose to speak, I wish to deal with another subject. Every speaker has touched, but only just—

No, I cannot give way. Speeches this evening have been inordinately long, and I wish to set an example by making a shorter one.

I wish to say something which I think may be of value to hon. Members opposite. There is one question which occupies the minds of those in trade and industry, the employers and consumers of the country. It has been touched upon in speeches, but never expanded sufficiently. It is the possibility of East-West trade, which was slightly canonised by the Prime Minister in a recent speech.

As one who has traded with Russia constantly and persistently for 28 years, and for fully as long with China, I think I can make a contribution to the debate by describing to the Committee some of the difficulties that we shall encounter; perhaps I might sound a note of warning by saying that we should not be overoptimistic in thinking that when, as we hope, the doors are reopened we shall reap a rich harvest in that area. I have this specialised knowledge from the type of business in which I work and I have always felt it to be a national service to put it at the disposal of whatever Government was in power.

I may say that when right hon. and hon. Gentlemen opposite were in power, when, first of all, the right hon. Member for Huyton (Mr. H. Wilson) was Secretary for Overseas Trade, and then the right hon. Member for Rochester and Chatham (Mr. Bottomley), I discussed with both of them—they were only too glad to do so—some of the difficulties they were likely to encounter when they went to Russia as our trade representatives. It is most important to understand what the situation was and what it is, and what we shall be up against. It will be of service to industry to explain.

First, let me pay a very great tribute— which is unusual from this side—to Russia and the Russian Government. Their record of integrity in payment of their obligations is certainly quite unassailable. I do not think anybody can bring forward an instance where they have not carried out to the letter their financial obligations.

They have done so very often at enormous sacrifice to their own people. I have heard of somebody who was once told, when he was in doubt as to a payment being made, "The Russians will payment with the blood of farmers." That did not mean the payment of a couple of million gallons of farmers' blood into one of the London banks, which might have caused considerable embarrassment: it meant a grave sacrifice on their part in order that their financial integrity should be maintained.

Therefore, in dealing with Russia in future one must remember that they hold this integrity very precious indeed, and are extremely unlikely to undertake any conceivable contract which they are unable to carry out. That, in itself, is a very good thing; but it is also a very limiting factor. We were told today that there is a change-over, and I think it is true, in the economy in Russia. During the period of change it is obvious that certain difficulties on imports will be apparent.

We also have to face the fact that where, before, Russia was a very large importer of Far Eastern raw materials— tin and rubber, for example—she has now open to her, through her ally, China, quite a considerable quantity of these materials which she does not have to buy outside the area in which she works. She also has the Eastern Zone of Germany which is a big producer of synthetic rubber, among other things. Therefore, her needs in this direction are no longer the same.

There is another factor which must be borne in mind. It can be compared with what happened during the war with Germany. If we cast our minds back, how many of us remember being told that Professor So-and-so or Mr. So-and-so, in the Cabinet Secretariat, knew that the war would have to stop "on 17th July next" because the Germans would not have any oil, or any of this, that, or the other? It never turned out like that. Why? It was because Germany accumulated a large number of satellites which she conquered one after the other and used their economies and sacrificed the people of those countries to bolster up her war both by importing labour and by using the machinery available to her.

Russia is following the same pattern. She has available now a whole series of satellites. These satellites, Poland, Czechoslovakia and Rumania, are being very largely used in the same way as they were under the German economy to make unnecessary her need for imports outside the area in which her currency is good, or in which she has barter agreements. I am all in favour of seeing what trade can be done with Russia. I went to Moscow in 1933 and negotiated with the Russian Government then, so I am not one of the latest converts who has rushed there recently. I maintained good relationships of trade with Russia from 1926 onwards.

I say, however, that it would be the greatest possible mistake and miscalculation, which might lead us into grave difficulties, if we believed that there is waiting, when trade with Russia is freed to a greater extent than it is now, a sort of E1 Dorado. We shall be up against certain other considerable difficulties. One is the question of quality. It is most important that industry should understand this. There is not in Russia, as there is in other countries, any machinery of an independent trade organisation of any sort which can arbitrate on questions of quality. There is only the Russian Government, in various forms.

Therefore, there is the curious position that if any dispute is to be adjudicated upon in Russia the Russian representative is judge, prosecutor and jury. That has led to considerable difficulties. At one time, the line was taken by Russia that, "As the United States are a great nation and we are an equally great nation…" which, let us say, is not in dispute for the moment "…we must have the same terms as those under which you sell goods to the United States." The United States possesses those who are able to sample, to judge and to adjudicate as independent third parties on questions of quality. That position does not exist in Russia. That has been, and will be, a great stumbling block.

Let me be open and frank about it. Quite a number of people, especially in the Far East, sought, at one time, to take undue advantage of what they thought might be a bad and unenlightened buyer. They were soon disillusioned. Let me again make it plain that Russia is now an experienced buyer who knows full well what she is doing. There is no easy money, no easy trade, to be earned.

Eastern Germany is not entirely separated from Western Germany. There is still that flow across the frontier which means that hard competition with Western Germany, which is not always fair competition, as I have emphasised before now, will make itself felt to a very great extent. Hon. Gentlemen opposite may be getting restive, thinking that I am speaking on a subject not germane to the issue, but it is, and it will make itself felt.

I first brought up this matter seven years ago, when it was a cloud no bigger than a man's hand on the horizon. It is now a storm cloud of such magnitude, both in the case of Germany and Japan, as to give grave disquiet and anxiety to those who really consider it on the basis of what it is and have noticed the great changes that have taken place. Russia will not take on any future commitments which she cannot fulfil during the difficult period of readjustment which she is going through. Russia will be demanding and hard in her terms. Any buyer in the world today is entitled to be hard and demanding, and a buyer with a good record of payment, in some ways better than our own because she has never gone back on her contracts, as we did with Canada over newsprint, is entitled to take the line which she may take.

Through her policies, which I do not say I agree with at all, she has made available to herself synthetics and sources of supply which were not available before. Therefore, let us be quite openeyed about this and not believe that a rush either of officials or of private businessmen to Russia will have a great and immediate effect. It is well worth trying. I am all in favour of it, and I am preaching what I have practised; but do not let us build too high hopes.

I turn to the Far East and China. Here the pattern has altered very greatly. As all these private enterprise businessmen who went there recently know, trade is being conducted on quite a different basis. I speak as one who has some knowledge of China, having been in charge of certain activities there during the war. China suffered the awful effects of an inflation. It was a curious inflation. All the professors of economics were puzzled because it was an inflation inside a vacuum, which they had never previously seen, but its final effect was very much the same as any other inflation.

The Government there has made up its mind about one thing. It is obvious from what has been reported by those who have returned that China will not again allow her economics to be run on the basis of the possibility of another wave of inflation. China may not be able to fend it off, because she is a country which is not naturally very rich and cannot naturally be industrialised very rapidly, any more than her agriculture can very quickly be improved. It is a slow, gradual process.

What is happening at the moment is obvious. Although no actual booking out in the form of barter in any one contract or another is taking place, someone behind the scenes is keeping the score on a blackboard. They may find, for instance, that they are now producing a surplus of grass used for cigarette paper, liquid eggs or bristles. Incidentally, China has been hurt by the advent of nylon bristles during the period of vacuum. Someone is chalking up on the blackboard the pluses and minuses and not allowing the purchases to exceed the exports to any great extent. That is likely to continue.

Therefore, even when, as many of us hope, there is more freedom on trade in that area—that may be one of the good results of the forthcoming Geneva conference—there must not be an enormous wave of optimism about it giving our industry that extra little fillip on the export side which it so badly needs.

A good deal depends on ourselves. I am all for trying it in every possible way. I do not wish to discourage anybody. I have been a living example of this. I must be the first person in the House of Commons to have carried out that policy for many years.

I must, however, sound a note of warning, because it is realistic to do so. While this is going on, the competition from both Japan and Germany is increasing enormously. I have no doubt that the rate of increase of that competition, for a number of reasons, is likely to be felt more severely than the rate of increase on the plus side that we can expect from trade with Russia and China. We must go all out. I agree with the hon. Member for Stoke-on-Trent, South (Mr. Ellis Smith) that we must make every effort and that to a great extent it depends on ourselves.

However, we shall be up against difficulties which I know full well and which the hon. Member appreciates, difficulties of a different approach, different ideas about prices and qualities, and a lack of understanding about how some of the world machinery works. We must go all out for it, and I feel that the business men of this country have set a good example. The Government have done well in backing them up, and the previous Government also did well.

Nevertheless, let us at least not live in a fool's paradise. Let us realise that these two enormous areas, which in the end are capable of taking very great quantities of goods, even though they themselves are passing into a stage of secondary industry and will manufacture for themselves, will be a big plus in the world's economy but are not going to be so within a measurable distance of time.

While every effort should be made when we are trying to cultivate the health of industry over the next few years when both workers and employers are getting together and discussing these things, as I know they are in my own constituency, let us not think on lines other than the realistic ones that I have attempted to put before the Committee.

Before the hon. Gentleman sits down, will he answer a question? In the earlier part of his speech he said that better feeling prevailed in industry today. Will he tell the Committee, if that is so, why our engineers have been negotiating wage rates for nine months and have not yet been able to reach a settlement?

That is a complete non sequitur The hon. Gentleman has taken only one instance. I have general engineering people in my constituency. However, I stick to the considered opinion which I expressed earlier, that there is a better understanding in industry and a desire in every industry in the country to come together to find points of common interest rather than common difference.

The Minister of Labour is entitled to credit for fostering it. The trade unions are entitled to enormous credit not only for what they have done in this respect, but also for ensuring that matters which were previously not understood are now understood. The employers can also be proud of their rôle. I beg right hon. and hon. Gentlemen opposite not to say or do anything to spoil the better understanding, the better-educated understanding, which everyone is trying to foster.

8.16 p.m.

I am sure that the hon. Member for Bury and Radcliffe (Sir W. Fletcher) will understand if I do not follow him very far in what he has been saying. What he has told us has in no way been a realistic contribution to the debate. His commercial excursions to China and Russia were certainly of some interest, and I have no doubt that in their time they were matters of great personal advantage to him. I could not help feeling that we had a little of the inescapable Tory bias when he referred to his trade with Russia.

I hold no brief for Russia, but when an hon. Member begins to extol the integrity of Russia by illustrating it in the way the hon. Member did, indicating that Russia would pay, even if it had to be done with the blood of its farmers, I think that is really going too far. It merely shows how coloured the minds of hon. Members opposite become in these matters.

It has been noticeable during the debate how absolutely self-righteous and artificial the speeches of hon. Members opposite have been. The Economic Secretary peddled prosperity for all he was worth. Apparently, according to him, the conditions in the country at the present moment are better than they have ever been. Apparently, too, the satisfaction and happiness of the workers about their conditions and wages is more wonderful than has ever been known in the history of the country. That is sheer nonsense. The truth is that the most realistic speech today from the Front Benches was that by my right hon. Friend the Member for Leeds, South (Mr. Gaitskell), who really got down to the marrow of the matter on both the economic and the industrial sides. A very powerful contribution has also just been made by my hon. Friend the Member for Newton (Mr. Lee).

I should like to deal with the question of the conciliation machinery. I do not think that anyone who desires to look at the situation impartially and objectively will deny that the country is very much disturbed on one aspect of the industrial situation. It cannot be argued that there is not industrial unrest and unsettlement. There is more industrial resentment and restiveness' today than there has been at any time since 1926. The Parliamentary Secretary to the Ministry of Labour shakes his head, but that does not shake my point. The unsettlement is due entirely to the Government's policy, by which they have reduced the living standards of large sections of the people.

The cost of living has gone up and is going up, while there are increased profits, dividends, bonuses and bonus shares. In some cases these increases have been absolutely spectacular. We have the Government's policy also of increasing rents, getting rid of controls and unleashing a zest for exploiting the public in all directions. The resentment to which I have referred is shown not by mere sulking and grumbling. It has crystallised into action. I want the Minister of Labour to realise this, because it will damage all sections of interests in the country.

I am sure that the Minister, because of the reasonable attitude that he always takes in these matters, will recognise that recent action on wage claims have been a blow at the negotiation and arbitration machinery. The securing of awards by threat of strike action must eventually bring the system of negotiation and arbitration into discredit. Unfortunately, no other course has recently been available, yet if there is a return to industrial war both sides of the country will suffer. The question arises whether the loss to the trade unions by fighting would be heavier if they did not fight.

The recent engineers' case is a very disturbing one indeed. It raises in a concrete form the question of the efficacy of the negotiating machinery. Settlement by arbitration in industrial disputes is, under present conditions, heading for disaster. We need only take the recent example of the Post Office workers. It is a most terrible thing that one side, with an arbitration in progress, should withdraw from the Civil Service arbitration tribunal.

Yes, justifiably, but look at what it means in damage to the arbitration machinery. There is, as a result, a growing disinclination among workers in the country to go to arbitration at all.

The extraordinary thing is that under these conditions we should have had the Ince proposals. Certainly every sensible and responsible person agrees that trade disputes should be settled by negotiation and arbitration. Strikes and lock-outs in the end do nothing but harm. Negotiation closes the breach between the two sides whereas strikes merely widens it; at the same time there is very much room for improvement in the machinery of both arbitration and negotiation. I should like the Minister to note, because I am sure he must appreciate it, that the whole system of conciliatory machinery needs examination, not only to secure justice but to ensure that justice should be seen to be done. What is causing a lot of trouble among the men in the country is that they do not feel that they are getting justice in these proceedings, and it is very bad that it should be so.

Another aspect of the matter that ought to be considered is that the present machinery is far too slow. That not only causes hardship but leads to very great discontent. Moreover, the tests that are applied by the arbitration tribunals are often much too narrow. It must be remembered that the system of negotiation and arbitration is voluntary, and as such it has worked very well for years; but no voluntary system can survive if there is a want of confidence in it on either side. Negotiation through conciliation machinery for settling a trade dispute is to everyone's advantage, but it demands as its driving force reciprocal good will and trust, and these are being lost at the present moment.

Negotiation is a supreme task of both Government and industry, and it has been steadily replacing the strike, but that is now changing, owing to the cost of living going up, profits going up disproportionately, rents going up and the exploitation of the public going up—

Everything that the Tory Government touches does the same. Even our telegrams are going up.

No, I shall not give way.

While everything has gone up, the housewife's means of feeding her family have gone down. Today, in order to earn a living wage a man has to work overtime. The position is getting so bad that railwaymen, engineers and electricians have recently had no option whatever but to have recourse to the strike weapon. That is something new, an unfortunate trend in our industrial situation under the present Government. During the Labour Government there was not even a hint of it. Now the storms are gathering thick and fast. I noticed recently that one of the banks issued a diagram of wages and dividends, but diagrams are absolutely useless. What the men want is not diagrams but wages sufficient to support themselves and their family. Certainly business and investors should have a fair return, but to enrich them at the expense of workers and salary earners is asking for trouble—and getting it. What an exhibition of hyper-optimism we had from the Economic Secretary this afternoon—

I never came across a more successful case of peddling pseudo-prosperity than was contained in that speech.

It is time that the Government recognised that the workers are no longer willing to be economic ciphers or industrial pawns, and that they do not intend to beat the bush in order that other people can catch the birds. The sooner the Government realise that the better. There will be no peace in industry—and I am sure that the Minister recognises this— if a fair reward to the worker is withheld. And it has been withheld.

It has been withheld by one of our main industries.

What I say is not merely based on the complaints of a trade union or on political propaganda, but on the impartial finding of a tribunal presided over by a Lord Justice of Appeal. There is no doubt that our main industry has stubbornly and unjustly refused a wage claim when justice required that it should be allowed. I am referring to the engineers' case. Everything there was taken into consideration by the tribunal—costs, wages, overtime, the effect on the export trade —they were all considered, and in the face of them all it was held that the industry could afford the increase. [An HON. MEMBER: "An increase."] But the employers rejected the entire claim as outrageous. In those circumstances it is no wonder that we have resentment and unrest in industry.

The blunt truth ought to be stated, which is that certain employers have deliberately tried to evade their liability to pay their workers a just wage. It is notable that the claim was made over six months ago, although it has not at all been acceded to. In the meantime, the cost of living has been going up and up. In all the circumstances, the men have shown a most praiseworthy restraint.

It is no use the Government trying to burke this, because they cannot escape their responsibility. Their term of office has coincided with a serious increase in the prices of essential food. They have undermined the food subsidies and have removed or weakened controls and safeguards which would hold down the cost of living. The result has been this attack on the standard of wage and salary earners, those with fixed incomes and pensions, and on most other people's budgets.

If the Government want peace in industry there are one or two things that I would recommend.

On a point of order. Is it in accordance with the conventions of this House that an hon. Member should repeatedly misquote cost-of-living figures which have been accepted on both sides.

If the Government wants peace in industry they must do several things. They must get wage negotiations placed on a fairer basis of wage rates, and not have overtime included. There is not the slightest doubt —and it cannot be repeated too often— that at present a considerable body of men are unable to earn a living wage unless they work overtime. That means that they have to work a longer week for the same money that they should 'be getting for a shorter week.

Secondly, wages should not fall below the general wage levels of the country. There must be national equity in this matter. Instead of spending all this money on weapons of destruction the Government should save just a little to modernise machinery and methods in industry. There should also be more consultation with, and participation by, the workers. It should be made possible for men working in industry to take an intelligent interest in their work and— what is most important—to take part in management. I am rather surprised to see the Parliamentary Secretary to the Ministry of Works laughing at this. I should have thought that he would have viewed this matter with great seriousness, because it is part of the responsibility of his office. There are far too many backroom boys in industry. Far too much experimentation is going on, and all sorts of designs are being considered which never materialise. The men in the factories are waiting to see something produced, but it is not being produced, and instead of getting work they are getting sacked.

The Minister should ensure that there is continuity and security of work. So often a contract is given to a factory, and when that contract finishes the men are thrown out of work. That is a dreadful state of affairs and is one of the facets of the industrial situation which the Minister must keep in mind if he wants industrial peace. The Government must, also see that the workers and salary earners receive a fair share of the results of their work. We should not have a situation in which dividends are being increased and, at the same time, men are being sacked. That is absolutely unjustifiable.

The Minister should advise some of his colleagues—especially those on the back benches—and the Tory Press, to stop boasting about so much work being done when we are constantly getting at the same time the anti-climax of men being sacked. It is no use the Government thinking that they can hide or gloss the facts by its leaders, supporters and its Press peddling this pseudo-prosperity at a time when so many serious problems in industry are arising which are keeping prosperity back. We urgently need a change of industrial and economic policy, and, above all, a change of Government.

8.39 p.m.

I hope that the hon. and learned Member for Gloucester (Mr. Turner-Samuels) will forgive me if, at this stage in the debate, I do not follow the arguments which he raised on industrial arbitration. I want to refer back to the speech of the hon. Member for Midlothian and Peebles (Mr. Pryde), who dealt with specifically Scottish problems, and to put that in perspective as seen by hon. Members on this side of the Committee.

My hon. Friend the Economic Secretary said that the main subject before us was the economic framework from: which we approached the difficulties, ahead. Certain parts of that framework are peculiar to Scotland, and I ask for the forbearance of hon. Members from other areas if I refer specifically to those, portions. The only generalisation which I will make is one which is common ground to both sides of the Committee: that we are now facing the long-term realities of economic existence in the-post-war era. We had a period when. we were going along with American aid. We then had a postponement of the present trade competition by the inflationary effect of the Korean war. In the immediate future we shall face the real, unqualified long-term competitive circumstances.

In his speech, the hon. Member for Midlothian and Peebles gave the impression that Scotland was to enter that period virtually unprepared. That is not the case. I want to mention certain problems, and perhaps I may sub-divide them into two. I will speak, first, briefly of the Highlands and then of the mainly industrial belt.

In the Highlands, two sensational longterm developments have been announced in recent weeks. The first was the development work on the use of peat for industrial fuel which, if the prognostications are correct, may give the equivalent in resources of 500 million tons of coal and may mean the employment of 20,000 people for a period of perhaps up to 100 years. That can transform the industrial life of a great tract of territory.

Even more important, in my opinion, is the recent announcement of the establishment of an atomic development station in the extreme north. Scottish prosperity and Scottish economies of the post 1914–1918 period suffered from our dependence on the industries which we developed in the 19th century. That is well recognised. By and large, Scotland fell behind in the development of the industries of the first half of the 20th century. For example, for all our skill in the engineering industries, we never produced a satisfactory motor car. Nor did we get a fair proportion of the type of light industries which went to Slough, Birmingham and other areas. As a result, much of the attention of successive Governments was directed towards artificial measures, such as trading estates, to try to redress the balance in the interests of the northern half of these islands.

There is every reason to hope that the establishment of an atomic station at this early period in this new development will mean that in the years to come Scotland will have a real foundation in the industries of the future. We have all talked about the need for boffin-based industries, with their scientists and technicians, where men with the industrial skill of the old trades, and perhaps, in particular, the young men whose parents had those older skills, can, if they wish, make a rôle for Scotland and themselves in the newest industries with the greatest future. There are other questions of Highland development with which I will not detain the Committee at the moment—problems which are more special and more local. There are, for instance, the questions of small industries in the glens to maintain there the population needed for proper prosperity and agriculture, and to prevent the drift from those areas. Also, such questions as those which relate to Buckie, Peterhead and the north-east coast.

The hon. Member for Midlothian and Peebles, however, also referred to the transport problem, which is a wider problem. It has been much discussed in the House by Highland Members and I do not want to cover ground which has been covered before. Whether further special aid and preferential freight terms should be given for regional development and whether that should be through the Transport Commission or the National Exchequer is still a matter to be considered.

There is, however, a point on which emphasis should be placed both in this House and as widely and publicly as possible. It is that even while these broader matters are under discussion, there are possibilities for groups of producers to come forward, as groups, where they have an extensive range of products and volume of products to market, and to ask the Transport Commission for special terms and consideration. I hope that in the Highlands and other remote areas of Scotland everybody is thinking about this, and I hope we are not losing any opportunities of making piecemeal improvements on that basis to overcome, at least in part, this great transport problem which is so seriously prejudicing the development of the remoter areas.

To bring the transport problem closer to the industrial belt, I would remind the Committee that the hon. Member for Midlothian and Peebles also referred to the recent announcement about the Clyde Tunnel. Whatever differences of opinion there are on either side of the Committee about the proper organisation of the transport industry, I think there will at least be agreement that the most uneconomic way of using transport is to get it occupied and then keep it standing stationary. One can go down the quaysides of the Clyde and other sheds in that great industrial area, and see rows of lorries standing nose to tail with their exhausts blowing away thousands of pounds in waste hours of valuable time.

This is a physical handicap to our industrial development and export trade. We all hope that there will be no avoidable delay in administrative arrangements, either locally in the North or centrally in London or hold up in the necessary supplies to get this job on the Tunnel started as soon as possible. There is also the question of the Forth Bridge. That awaits the report of Sir Bruce White's Committee. It is unfortunate that the bridge, like Tutankhamen's Tomb, seems to have a damaging, though happily less lethal, effect on those who start to investigate it. They all fall ill. However, I believe that the eminent men concerned are recovering, and we hope before long to have a favourable result from their investigations.

Another aspect of industrial development and of transport has been the recent announcement, which will have an effect on Scotland's industrial future, of aid for the development of the Twin Pioneer aircraft, at Prestwick. I am in no way qualified to discuss the technical advantages or otherwise of these aircraft, but I am told they may be particularly suitable to play a part in solving the transport problems of our islands and remoter areas.

The right hon. Member for East Stirlingshire (Mr. Woodburn) mentioned, when the announcement was made, that it might indeed provide a basis for starting a real Scottish aircraft industry. It is satisfactory to learn that this work is going on in addition to the great headway being made by the Rolls Royce factories. I think, also, that hon. Members on both sides of the Committee will share the hope that there will be no diminution in the work of aircraft repair and maintenance at present being done in Renfrew. That also gives an opportunity for young engineers and young technicians from the old trades of the industrial belt to turn their hands to the newer trades, without going south to do it.

I will not take up the time of the Committee by referring to the old heavy industries and the Scottish position in steel, coal and ship building because there has been no great change.

There has been no great change in the situation since our last industrial debate on Scottish affairs, but I will deal with this briefly if the hon. Lady so wishes. The next big event, so far as Government action is concerned, which will affect our position in these industries will come with the announcement of our attitude and future policy towards the European Coal and Steel Pool. That is now under consideration. Both from the point of view of our industrial development, and also of general progress in Western Europe, I very much hope myself that close and effective association will be established between our industries and the Schuman Plan countries.

There is one final point concerning general industrial distribution which I should like to mention. In his opening remarks, the Economic Secretary referred lo the supply of capital for industry, and on 6th November the Chancellor of the Exchequer, in the debate on the Address, pointed out the very satisfactory progress which has been made since the last Budget in granting licences for new industrial building in the country as a whole.

The figures which he gave for the six months following the Budget, compared with the six months of the previous year, showed an increase from £58 million to £85 million, which amounts to an increase of 47 per cent. On 17th November I asked a Question to get the figures as they related to Scotland. In Scotland, the increase was only from £5,160,000 to £5,280,000, or an increase of about one per cent., compared with the 50 per cent, increase for the country as a whole. The figures in themselves are profoundly disturbing. There may be some special explanation, but I ask the Government to consider their implication and particularly to what extent, if any, the availability of finance may have some bearing on this disparity.

The right hon. Member for Leeds, South (Mr. Gaitskell), in his opening speech, quoted the "Manchester Guardian" as saying that finance was not a deterrent in present circumstances. The "Clydesdale Bank Review" for last year said this:
"The conclusion seems inescapable that more capital is needed for British industry as whole, and as a rider to that conclusion may be added the probability that the need is even more urgent in Scotland than in England.
If that is so, if that is the reason for the disparity between new industrial development in the South and current industrial development in the North, I very much hope that urgent consideration will be given to any action to make it good. I realise the difficulty of any overall directive, but could not something be done, for example, in the I.C.F.C., in granting more favourable terms of credit to those industries which, in the view of the Board of Trade and of the Government, should be encouraged to play their part in the development of the Scottish position.

On the general position taken by the hon. Member for Midlothian and Peebles, I think that if he or any other person in Scotland considers the position of the country as a whole, though there are many problems outstanding, and, indeed, there always will be, nevertheless, with the possibilities of improvement in transport, with the peat utilisation scheme, with the improvement in the aeronautics industry, and, in particular, with the new atomic station in Caithness, I think it is fair to claim that by the action undertaken under my right hon. Friend the Secretary of State a foundation has been laid for future Scottish development which may be not only of benefit to us in years to come, but of benefit to generations to come in the years ahead.

8.53 p.m.

In the short time at my disposal, I wish to follow the remarks of the hon. Member for Rutherglen (Mr. Brooman-White) about the heavy industries of Scotland. In this case, the Scottish position is an indication of the United Kingdom position, and I am not very surprised that the hon. Member shirked that aspect.

The position in Scotland reflects the position of our exports. Our export industries have gone down since 1950, and rose sharply in the second half of last year, chiefly in textiles; but we are dragging behind in engineering, heavy machinery and shipbuilding. The employment exchange in my constituency write to me:
"As you will observe the recession in iron and steel re-rolling continues and is mainly responsible for the heavy number registered as temporarily suspended.
A short-time working arrangement also affects…Stewart and Lloyds, Ltd., Sun Foundry….
This trend in Coatbridge is typical of the general trend, and hon. Members opposite have not a clue, let alone a cure for it.

It was very pleasant to observe the self-confidence of the Economic Secretary to the Treasury. Youth is always self-confident. I hope he will forgive me for something which he reminded me of, "I wish I was as cocksure of anything as you are of everything." I must draw to his notice that his cost-of-living index figures just do not square with the facts. It is said that we on this side of the Committee accept those figures. They are correct, and yet they can be hopeless when used to prove a point. Let me give an example. On page 64 of the Ministry of Labour Gazette of February the cost-of-living figures are shown as 100 on 15th January, 1952. There is an increase in bread, flour, biscuits and cakes to 118, and in meat, bacon, ham and fish to 110. Milk, cheese and eggs remain at 100—in other words they have been stabilised as from 1st January, 1952—but it is a group average.

If this group was considered as three items eggs would be below 100, and cheese and milk above it. Then there is a grouping of tea and sugar, which stands at 130. We do not dispute that, but it would be wrong to say that tea was 130 or sugar was 130. They are lumped together. I shall now deal with clothing. I want to get this point across, in the few moments that I have left. I recently asked the President of the Board of Trade if he was aware that men's suits, outer clothing, and sports jackets showed an increase in price averaging from 6 to 10 per cent. I had thrown at me that the cost-of-living figure for the whole range of the clothing group showed a fall.

If a man wears a suit that costs 18 guineas or upwards the cost of clothing is reduced. But if a man is one of the lower-paid groups and wears a six-guinea or an eight-guinea suit, the cost of living has not only increased but the Utility standards have gone. The sports jacket does not wear so well, neither do the trousers nor anything else. The same applies to all sorts of knitting wool and children's garments. They are lumped with higher-priced items in the same group.

We all know that fur coats, mink coats, otter fur coats and expensive jewellery are down in price owing to the reduction in Purchase Tax. But there is no doubt that since the sweeping away of the Utility standard of lower-priced garments which are bought by the lower wage groups there has not only been an increase in price but a reduction in the quality.

I am sorry, I cannot give way because I have only a minute left.

I want to say in that minute that it is no use appealing for wage restraint whilst the Government impose new burdens. The plea from the days of the late Sir Stafford Cripps right down to the present Chancellor has been that we must produce a bigger cake.

I am glad to have the approval of the hon. Member for Louth (Mr. Osborne). It would appear that last year we did produce a bigger cake, but that certain members of the community got a far bigger slice of it in the Budget, and are continuing to get far too big a slice of it, than others. All that the lower paid wage earners are asking is that their standards shall be maintained and not reduced. They are the men of Dunkirk, the men who showed the great spirit of Dunkirk.

I am talking of those whose living standards are being attacked. They also showed the spirit of Dunkirk. They are expected to be lions abroad and lambs at home when their living standards are attacked. But they are not going to stand by and see those standards lowered. I think it is good to have a bigger cake, but it is only right that it should be more equally divided.

9.1 p.m.

Every Government seem to have in their ranks one Minister who tends to be the chap who leans over backwards to avoid identification with any particular section, and, therefore, for the purposes of that Government, keeps himself as far out of politics as he possibly can. In this Government that Minister appears to be the Minister of Labour. In choosing this subject for de-bate we are not particularly seeking to disturb him in what, no doubt, he feels to be a somewhat comfortable position.

We neither want to bring into dispute in this House either the operations of the Ministry of Labour or its consultative machinery and mechanism for consulting industry, nor try to shift to the Floor of the House those ordinary industrial conciliatory processes that ought to go on outside. But no matter how non-political a Minister may seek to be or how properly he may seek to do his job, he is indeed a political Minister and a Member of a political Government. In fact, the present Minister of Labour will operate inside the pattern which the policies— particularly the economic policies—of his more politically alive colleagues will make for him.

The purpose of this debate has been to bring to the front the fact that this Government are pursuing a series of financial and economic policies which are making it extremely difficult for the Minister of Labour himself, for his Department and for both sides of industry to perform their conciliation job and to dp it reasonably well, and, as far as possible with satisfaction all round.

Anybody who heard the Economic Secretary to the Treasury this afternoon must have felt, as I did, that he had got the place mixed up. I have no doubt that, because the High Barnet Conservative women's meeting probably takes place on a Wednesday afternoon, the hon. Gentleman thought, as he was speaking at about the middle of the afternoon, that that was where he was. In point of fact, the speech that he made would no doubt have gone down extremely well there. They would have been as pleased with it there as the hon. Gentleman was here, and it would have been all to the good on a chilly afternoon in Barnet.

The hon. Gentleman's speech was extraordinarily optimistic. It conceded no possible query or problem in our economic position or prospect. It left me almost staggered. I do not think that any hon. Member opposite recognised the state of affairs that he was describing. If one dismisses from one's mind not only the situation that existed just after the (Korean fighting began and the world inflation at that time, but what has happened since to prices outside, and also the situation today, when the world inflation has passed and there is an altogether different trend in world prices, then, assuming that Britain has operated in a vacuum, one can convince oneself that there has been nothing but absolute improvement in our affairs and that the Government are entitled to take all the credit.

That is a really juvenile way of arguing. What happened in this country in 1951 and what has happened since must be seen against the world climate. The Economic Secretary failed to remember that when we were in office we were tempering to our people what was going on outside, and were on the whole managing to get a better record inside in terms of prices and other things than existed outside. What this Government have achieved is to have a slightly worse record inside the country than is the record outside.

Therefore, although there had to be an improvement in the situation of a country so vulnerable as ours in relation to what was happening outside, if that improvement is in inverse ratio to the improvement in the world situation then relatively we in this country are now doing worse than we were doing before. That was the net effect of what the Economic Secretary told us. Even in the picture which the hon. Gentleman presented to us there was a good deal of the background of the industrial scene which must be extremely worrying.

Last year we had a productive recovery. We reached a level a little above that of 1951 and achieved an improvement of about 2 per cent, over that year. But that achievement last year heightened and set put in clear type the downward drop which the Government allowed the country to take in 1952. At that time, we were first feeling the effects of the high Bank rate policy and the dash for economic freedom and the dismantling of the existing mechanism before the party opposite knew what to put in its place.

Now what has been done belatedly is to get back to or just above the 1951 level. It is no use the Economic Secretary or any other Minister saying very loudly that these are new record levels. We ought to be improving our position every year. Every year that we fail to improve on our production means that we not only fail to establish a new record but that we fail to go forward at all.

The Economic Secretary no doubt reads the "Daily Telegraph." This morning that newspaper reprinted the comment of the Economic Commission for Europe on the production results of last year. It is quite interesting. It said:
"Whilst the situation of Britain did little more than reach the level reached in 1951, Western Germany and the Netherlands greatly surpassed it.
It went on to deal in detail with Western Germany, and issued the warning that the probability was that the export demand in Sweden and the United Kingdom would not recover.

It was that situation that I should have expected the Economic Secretary to have noted, and it was the complete failure to comment on it that surprised me. It is the fact that this Government are getting into a state of mind in which they look at our affairs through rose-tinted spectacles. That fact is worrying many people outside. This is not divorced from the industrial situation. In terms of uncertainty, unrest, occasional strikes and so on, this is all part of it.

My hon. Friend the Member for Newton (Mr. Lee) said rightly that there are deep memories about what productivity, rationalism and all those words which go with the '30s meant to so many people. If it gets into their minds that the views of Ministers are so rosy-hued that they are not even aware of the difficulties which exist in the present situation, there will be a tendency for a lot of people with long memories to want to go carefully and try to protect themselves against the wind which they think is coming. From that point of view the speech could hardly have been worse.

Another point which I do not think the hon. Gentleman appreciated is that if in fact things are so good and there is not a single cloud in the sky, what moral does he think the workers of, for example, New Southgate, will draw from that? If things are so good does he think that they will draw the moral that they had better be careful and practice restraint, or that they will draw a different moral?

I did take care to stress the very great danger of German and other competition with our engineering goods. The right hon. Member should remember that.

I really should, because the hon. Gentleman made the speech and I happened to listen to it. I am well aware that a speech is easier to listen to when one is not also making it. When the hon. Gentleman reads HANSARD he will find that the reference to German competition was certainly thrown in, but towards the end of the speech, as the sort of thing one throws in, and not as a major or heavily-underlined part of his speech. I am certain that the whole tenor of his speech, if repeated outside, would have exactly the opposite effect on any worker. The worker would draw the moral that things are so good that he need not bother and that there ought to be a little of this good state of affairs for him.

There are other comments which one could make, and other matters of which one would expect the hon. Gentleman to take account. Some hon. Members said that all we have had in the last two years is the collecting of rewards of the change in the terms of trade. I was greatly amused when the Economic Secretary seemed to suggest to my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) that a favourable balance of trade is no longer to be desired in Britain because it brings too many other problems with it.

We have had an improvement in the changed terms of trade, but those terms are not going as well as they were. I do not want to enter the battle of statistical quotations, but I have extracted some statistics and find that, whereas in the terms of trade moved in our favour to about the extent of 10 per cent, and in 1953 by about the extent of 5 per cent., in fact in the last eight months of the move was only 2 per cent. Even that is beginning to change again in a way which ought to make us a little hesitant about being so sure that every thing is going ahead so well.

The rise in volume of 9 per cent, in imports in 1953 as against the rise in exports of only 3 per cent, reinforces the fact that the change which we have hitherto enjoyed in the terms of trade does not look permanent. In the light of what has been done under this change it would take a very small change indeed to make a great difference to our situation. Since all the food-producing countries in the world are already engaged in cutting down food acreages to avoid the risks of lower prices arising from the change in the terms of trade, we may find a change in the terms of trade the other way much more quickly than the hon. Gentleman seemed to thin.

If one looks at the production drive, if one goes behind the global increase of 5½ per cent, to see where it was achieved, it is difficult to persuade oneself that it is of lasting value and an improvement in the condition of our country. The people in industry ought to know this, and the Minister should be telling them instead of telling them all this rosy-hued stuff. We achieved a large rise in consumer goods, a rise in vehicles—largely passenger vehicles for the home market —and a rise in building. But factory and agricultural building has fallen to something like half, so that all the increase we achieved was not an economic improvement at all. That is what worries me.

Everyone can interpret figures for himself—that is clear from this debate—but so far as I can see, investment in plant and machinery appears to be down, or at any rate, there is no improvement. Although it is a shame to take the right hon. and learned Gentleman out of his bailiwick—but after all he has to answer for the Government—I would ask the Minister of Labour what was the position in 1953 so far as investment in the manufacturing industries was concerned? I do not want the global figure, but the investment in manufacturing industries. My impression is that it was down, but I should like to know if I am correct.

Although for a couple of years we have had a degree of luck—we have had a change in the terms of trade in our favour, as we were bound to—there has been no real effort by this Government to use that situation to create a better economic spring-board for this country. In fact, we may move out of that improved position long before the Government have got round to making any long-term and lasting use of it. That is the frightening aspect.

With the possibility of an American recession—or whatever is the modern word for that old-fashioned state of affairs—with the stiffening of competition from Germany and Japan, and presumably from the United States if anything happened there, the presentation of the correct picture becomes all the more important. The dismantling of controls in which the Government have been engaged—the alleged freeing of the economy—takes on a much more sinister look, and becomes a much more serious matter if groups of the population set out to take advantage of it.

As I said previously, unless the workers and the operatives in industry understand what is the position, and are clear about it; unless they understand what the Government propose to do about it, an element of fear will be introduced, and a piece of machinery which can only work well when that fear is absent will not function properly.

Stability in industrial relations; responsibility in the exercising of such powers which one may possess for the time being; restraint in the demands which are made; the raising of the level of productivity in order to carry all the other things we seek to achieve—all that must be based upon the feeling that the economic policy of the country is such as will make the best use of the situation. Unless there is that feeling, the fear, so graphically expressed by my hon. Friend the Member for Newton will defeat us all the time, because people will try to protect themselves.

My first conclusion, despite all that we have heard, is that the economic situation is nothing like so good as it has been painted; that we are far from making any real effort to use even the temporary advantage afforded to us, and that we are not presenting the facts to the workers as we should.

The second point is one which has occupied quite a lot of the debate. It is the question of what, inside that situation, the Government have been doing with what was available to distribute? This, too, has a considerable effect upon the way in which industrial relationships work. All my hon. Friends who have spoken in the debate have said that in fact the Government have been bringing about the redistribution of wealth in the opposite direction from that in which we were operating from 1945 to 1951. They have been redistributing back to those who were rather more well-to-do what we had been trying to swing across the other way in our policy of providing fair shares.

The taxation policy in successive Budgets has been designed to bring about a shift by way of tax reliefs to those rather better off—because the more better off the greater the tax relief—at the expense of subsidies being taken away from those who buy more of the necessary goods, and who, on the whole, tend to have smaller incomes.

At the same time there has been deliberate encouragement or acceptance of the policy of ending dividend restraint. There have been some remarkable speeches today about the payment of dividends. If hon. and right hon. Gentlemen opposite could prove their case that the paying of these extra dividends really matters so little, then once again they will have made it extremely difficult for any responsible trade union leader to convince his men that wage restraint matters. We have been told that 10s. or £1 is the sort of weekly rise that there has been in dividends this year. The sort of figure one gets seems to turn on which year one takes. If a non-worker is to have a rise of that sort as part of unearned income, what do the Government expect a worker to argue should be his share in the circumstances.

If the Government want to have restraint in our personal income demands, they must begin in the field of unearned income. The right hon. Member for Blackburn, West (Mr. Assheton), who is not here at the moment, explained to us that dividends are not a form of unearned income and that in fact they are a form of interest upon savings. If that was put to one of my friends outside, he would turn to me and say, "Who earns it, because the chap who draws it does not earn it; and who saved it in the first place, because very often the fellow who gets the dividend did not save it; it might have been saved by his grandfather or somebody else?" When unearned incomes are rising substantially, the other people are bound to take a dim view of that state of affairs.

I shall not quote all the figures again. The "Financial Times" published samples, not only toward the end of last year but in January this year, giving the figures of the companies reporting. I think that in January 122 companies reported higher profits and all reported very much higher dividends paid out. Even where the profits were not high dividends went up. They increased by 5 per cent, in the first quarter of 1953 and continued to increase until they reached 9 per cent, in the last quarter and 15 per cent, in the first month of this year.

There is apparently to be a free economy; that is, certainly free so far as the possessors of the title to unearned income is concerned. There has been an ending of restraint there, and the Government propose to do nothing about it. That is really the worrying thing; not that it has happened but that the Government propose to do nothing about it. It happened once under the Labour Government, too, but then my right hon. Friend stepped in and said that unless voluntary restraint and responsibility came back he would do something about it. We got that voluntary restraint back, but the present Government apparently propose to do nothing about it except to justify it. I must say that that seems to be a most unhelpful soil for the Minister of Labour to work in. It is most unhelpful soil for the negotiators on both sides of industry in the work that they are trying to do. When we remember that capital is being increased at the same time, with consequent additional paying out of dividends, the whole thing becomes worse than ever.

Let hon. Members look at the monthly rate of bonus issues. We are told that a bonus issue is merely a way of bringing the nominal capital into line with the capital actually employed, but it has rather more effect than that. I have looked at some of them, and I have a strong feeling that the companies which issue bonuses turn out to be the companies which go on to pay out increased dividends. If we examine what has been going on, we find that it has been a way of putting more money into the pockets of shareholders.

As my right hon. Friend pointed out, even on the argument that this is merely bringing the nominal capital into line with the real capital in the business, it means that the shareholders who went without—if that is the argument—in the period of restraint are now entitled to double their holding in the company and receive dividends on the doubled holding. But the workers who went without during the period of restraint cannot now collect the new wage increase and the one which they ought to have had in the past. They are unable to cash in on their restraint, and that is their sacrifice on behalf of the country.

We are bound to press the Government and the Minister to say something about this. If the Government are serious in their view about responsibility, restraint and industrial peace, they ought to say something on this subject tonight. I had proposed to quote Mr. Wincott, writing in the "Financial Times" about the "silent revolution" which was mentioned by my hon. Friend the Member for Newton. If articles like that are going round, it must be expected that some of our people will read them and draw their own conclusions from them.

I now turn to the question of the cost of living. It is nonsense, of course, to seek to prove too much from any figure. [Interruption.] If hon. Gentlemen opposite had been present earlier today, they would know more clearly what I am talking about. This afternoon we had the Economic Secretary dancing about with the index, saying gleefully to me, "Do you accept it or not?" wanting a straightforward "Yes" or "No" answer. One cannot answer in that way if one wants to discuss the matter. I beg the hon. Gentleman to treat the matter in a rather more grown-up way. It cannot be disposed of merely on one figure.

Let us be quite clear about the index. 1 regard the present cost-of-living index as a very much better shot at getting an adequate measure of weighting than anything we have previously had. There is no change of opinion about that. As a shot at getting a measuring stick, it is better than anything we have previously had, but it is no more than a shot; it is still no more than an average. It cannot be any more than an average. It cannot do other than hide the problems of many people who are affected by it.

For proof of that, we have only to look at the statement made by Mr. Campbell at the Railway Staff Tribunal. He took as an example the money of a platelayer, and indicated the amount that the man should be spending on food according to the weighting. The example applied to a family of three. One could see what could not be bought at all with that money within the weighting limits. It is clear that the index breaks down as an average when applied to such a case as that, and there must be many other examples.

That is what I meant the other day when I said, in a speech to which the hon. Gentleman referred, that it is outrageous nonsense to continue saying that, because the index does not move, or does not move enough, there are not many people who find the cost of living going up very heavily against them. I still say it is nonsense.

In point of fact, the cost of food has been rising steeply and continuously. One has only to read the reply given by the Parliamentary Secretary to the Ministry of Food in this House on 21st October, 1953, in which he instanced meat, milk, bacon, butter, cheese, margarine, lard, cooking fats, sugar and tea, and gave figures of substantial rises for the whole lot of them. Really, hon. Members cannot go on, in the face of that— [Interruption.] The point is that it is what people spend their money on which makes them feel the cost of living. If the money runs out, like that of the platelayer whom Mr. Campbell quoted, before reaching the end of the weighting, many of the other things are those we go without; but those are the necessities without which one should not go, and most people do not go without them.

The right hon. Gentleman has not mentioned the price of eggs, bacon and vegetables.

I mentioned bacon in my list. Eggs have certainly gone down, but I gave the last answer which I had. I am not cooking it up. [HON. MEMBERS: "Oh."] All right; if hon. Members like to think I am, well and good. Unless hon. Gentlemen opposite understand that there is something wrong about their reasoning they will not understand what is going on outside this House. It may be that I am wrong and that I am overstating the case, but the truth must lie somewhere between hon. Gentlemen who support the Government and me. Folk outside are feeling this, while hon. Gentlemen are resisting something about which they are not able to convince other people.

What has happened is that the economic situation is not being gripped; a section of the community has been allowed to get away with a rise in personal living standards while a large number of the workers have not had tax reliefs to offset the higher costs but have had to pay the higher costs. They are feeling the pinch of this, and all the answer they are getting is this playing around with the average index, which only serves to make them very much more angry.

We really must have an answer on some of these matters. The Minister of Labour owes it to the capacity in which he acts outside the House to give the answer. The trade unions have for the most part played a very responsible and statesmanlike part, both when we had the power and since, but in order to maintain the position of responsibility and of consideration for the national interest they have to feel that the Government have the same outlook. They will not be able easily to feel that unless we get some answer from the Minister. If we are to have Government supporters propagating the view that somehow or other the public good will emerge as a by-product of selfish personal well being and well doing, then they are on a very weak wicket indeed.

On the basis of what we have heard so far we believe that the Government are showing very little understanding of what is happening, and where they have grasped what is happening they are showing very little concern about it. We do not contend that the situation is worse than it is. We say that there are dangerous elements in the situation which are causing difficulties outside and that it is time we had a clear answer on this subject from the Minister of Labour, as the senior Minister here today.

9.34 p.m.

I am grateful for one thing that fell from the right hon. Gentleman the Member for Helper (Mr. G. Brown) who preceded me, and that is for his refraining from making any attack upon the Ministry in which I serve and upon the attempts that we are making within our sphere to bring peace into industry. He spoke of not wishing to disturb me in what I understood him to describe as my "comfortable position.

I have my eye on the right hon. Member for Blyth (Mr. Robens). I do not think we shall disagree that whatever may be said for and against a Minister of Labour it cannot be described as a comfortable position. I am happy to think that on a good many of the issues which have been debated here today I can rely upon what I understood the right hon. Gentleman to refer to as someone who is not so dead politically as I have become—my younger and more self-confident colleague, the Economic Secretary.

I am glad of that for this reason; that had it been possible I would gladly have been excused from speaking on this occasion—

Mine is for reticence.

There is, of course, a temptation on an occasion like this to take part, as one used to do in another sphere in controversy—political, economic or what have you. But I am at this moment personally engaged—as some hon. Members on both sides know—in a number of difficult and important negotiations, and I am very anxious, in addressing the Committee tonight, not to say anything which will diminish my chances of helping towards settlement in those cases.

I am sure that hon. Members will appreciate that it would be a little embarrassing if I were to say much on some of the controversial matters of economic policy—and I will at once tell the Committee why. I shall have occasion a little later to say something about the reports which have been received from the courts of inquiry which I set up in respect of the engineering and shipbuilding industries. Naturally, what those reports have given rise to is not over yet. In them are involved just the sort of issues—hon. Members who have read the reports will know this—which have been debated here tonight, about dividends, about earnings, about wages and about the wider economic problems to which the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell), my hon. Friend the Economic Secretary—and to some extent the right hon. Gentleman the Member for Belper —have devoted their speeches. I cannot easily speak, for instance, of the economic impact on industrial relations without trenching on a number of those issues, but I only want to say this. There is one which was referred to affecting the E.T.U. There is another affecting the engineering and shipbuilding unions, and then there is a matter to which one hon. Member drew attention where the Post Office workers had withdrawn a claim. I am sure that hon. Members will appreciate that that very matter is necessarily before me at the moment. I cannot say anything about it to the Committee except that I will do my best.

But there is one about which I want to say a word—and the hon. Member for Newcastle-upon-Tyne, West (Mr. Popplewell) referred to it in his speech. That is the railway dispute, which, happily, did not end in a strike. Those who look at all that happened there will, I think, bear me out most fully in saying that what we can hope for, as a result of the settlement, is just that sort of cooperation in getting that greater efficiency and productivity on the railways which we should be aiming at in all the discussions and negotiations which we have.

Much as I should like to excuse myself wholly from taking part in this debate I can hardly do so. I am not so elegant, I think, as to say that if we have a debate on industrial relations—although I think much more has been said about economic planning—if the Minister of Labour did not take part it would be like Hamlet without the Prince of Denmark—or so vain, I hope, as to say like Hamlet without Ophelia, but one cannot have Hamlet without at least the sententious Polonius.

Or the gravedigger. Why not—having regard to the "dead" politicians among whom I have been placed.

At least there are two words from Polonius which I hope hon. Members will think not inapposite to what I have to say tonight:
"Give every man thine ear, but few thy voice; Take each man's censure, but reserve thy judgment."
The right hon. Gentleman will agree that that is a very wise guide for a Minister of Labour to bear in mind even, on an occasion like this.

I hope that none of us will exaggerate the difficulties of the industrial position or of industrial relations. My honest belief is that there is no foundation for any impression of a catastrophic worsening in industrial relations.

One hon. Member drew attention to the figures of days lost through strikes during 1953, and criticised something which my hon. Friend the Economic Secretary said. We do not have to go back as far as 1937 to find a year when as many days were lost as in 1953; we shall find more in 1944, 1945 and 1947. But if we take what one hon. Member wanted to take —the last 20 years—we shall find that the average, taken over those 20 years is not so much less than the number of days lost in 1953.

Another hon. Member drew attention to the fact that of the 2,169,000 days lost in 1953; almost half were referable to what happened on 2nd December, when there was a one-day stoppage in the engineering and shipbuilding industries. Nobody in my place would minimise the importance of that stoppage, but it is fair to say—and I know that this fact is present in the minds of many trade union leaders, as well as in mine—that if it had not been for that one day we should have had a better result in 1953 than we have had for many years past. We should have to go back to 1941, or probably even 1934, to find comparable figures. I cannot leave out of account the one-day stoppage, but when we are judging the importance of difficulties in industrial relations it is fair to say that, apart from that one-day stoppage, which did not take us far above the ordinary figures, we should have been ever so much better off. I know that leaders of trade unions and employers would have been as glad as I if that could have been achieved.

My object in quoting those figures was to point out what was taking place in industry. There have been one-day stoppages through the ages —particularly in big industries like mine —and those figures have always been taken into account. The Minister must not minimise this one-day stoppage. I was trying to present the overall picture.

I was not seeking to challenge that. I was saying that if we look at the year as a whole we find that the situation was not so much worse than in other years, and that the fact that this year was worse was attributable to this one-day stoppage. I only want to avoid the difficulties being exaggerated.

If we look at the figures of men who were not at work because of stoppages— apart from the figure for this one-day stoppage, which was large, because this is a great industry—we find that only 240,000 workers were involved in stoppages, due to disputes, in 1953. Whatever we may say about that one-day stoppage, it is not a bad result. It is an insignificant proportion of the total number of persons employed. I am sure that it is everyone's desire not to exaggerate the difficulties of industrial relations; I know that every hon. Member is with me on that. But there is no room for complacency.

I want to say a few words which I hope will not be unconstructive. There is room, of course, for improvement in our industrial relations, but I do not think it will be done by a flash of brilliant illumination, or any further legislation. What we must set ourselves to do is the more mundane and humdrum job —which is the British way of doing it— of trying to build on the foundations which have been laid before by the leaders of trade unions and employers over the last 100 years.

It is right that the House and the public should take a very close and anxious interest in the course of industrial relations. It must now be clear to all of us that our competitive power in the markets of the world, and our survival as a nation, must largely depend upon the relationship between employers and trade unions over the whole field of British industry. It is the Government's duty to keep that consideration constantly before all parties in industry and before the public in general. But it is only fair that I should say, as hon. Members opposite have said today, that those who lead the employers' associations and those who lead the trade unions are fully conscious of their national responsibility in this respect.

I should like to pay my tribute, after some experience now, to the statesmanship with which, in the midst of difficult and, as some hon. Members said, tough negotiations, they have been willing to recognise the national need to continue good relations in industry and so lead to uninterrupted output and increased efficiency. This has led us to a solution of very many disputes and I believe that in it lies our hope for the future.

If, through improved relations, we can get output and efficiency increased, then all of us can rejoice, can we not, to see higher earnings. My only anxiety is this. I honestly want to be sure that higher earnings are matched by increased output and increased efficiency, because if they are not—and I am speaking here for many trade unionists as well as for myself—and if prices soar, then there is a real risk of heavy unemployment, and that is the last thing I want to see.

The right hon. Member for Leeds, South said he would like an assurance that full employment was the policy of the Government. I gladly give him it. I should hate to belong to a Government, in which I had responsibility for industrial relations, which had not that among the objects of its policy.

I want to say something about policy and about what I should like to see done. What I believe in is self-government in industry and voluntary negotiations. I have already paid two visits to the International Labour Organisation and I can assure the Committee that we have a leading position in that organisation. At the same time, many trade unionists and Ministers of Labour from other countries have paid visits to us here. Two things which they pick out, whether it is in Geneva or here, as important, characteristic and worth watching in our industrial system, are, first, the personal relations of our leaders in the industrial field and, secondly, our negotiating machinery.

That negotiating machinery has been built up over the past 100 years. Two things have developed side by side—the system of collective agreements on wages and conditions of employment and the establishment of joint machinery for dealing with disputes. What I want to see is the further improvement, solidly attained, of this collective bargaining system. The more questions that are settled by negotiation the better for all of us and when, after every effort has failed to bring about peace by negotiation, then the area of dispute may yet well be narrowed and that narrowed area can be submitted to voluntary arbitration and disposed of in that way. The more often that happens in such cases the better.

The aim, then, is plain enough. It is to develop collective bargaining so that as far as possible all wages and conditions are settled by voluntary negotiations and as far as possible all disputes are settled by voluntary constitutional machinery. The thing is, how to do it. The first thing I would suggest to the Committee and all those who are interested in this matter is that the basis of the collective bargaining system is organisation