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Commons Chamber
17 November 1965
Volume 720

House Of Commons

Wednesday, 17th November, 1965

The House met at half-past Two o'clock

Prayers

[ Mr. SPEAKER in the Chair]

Private Business

Covent Garden Market Money

Resolution reported,

That, for the purposes of any Act of the present Session to make provision for the transfer of Covent Garden Market to a site in the London boroughs of Lambeth and Wansdworth, it is expedient to authorise—
  • (a) the issue out of the Consolidated Fund of any sums required to enable the Treasury to fulfil guarantees given by them with respect to the redemption of, or the payment of interest on, Covent Garden Market Stock or Covent Garden Market debentures; and
  • (b)any increase attributable to provisions of the said Act of the present Session in the sums which under Section 40 of the Covent Garden Market Act 1961
  • (i) may be issued out of the Consolidated Fund to enable the Minister of Agriculture, Fisheries and Food to make advances to the Covent Garden Market Authority;
  • (ii) may be raised under the National Loans Act 1939;
  • (iii) are required to be paid into the Exchequer and subsequently issued out of the Consolidated Fund and applied in redeeming or paying off debt or meeting such part of the annual charges for the national debt as represents interest.
  • Resolution agreed to.

    Corporation Of The Trinity House Of Leith Order Confirmation Bill

    Read the Third time and passed.

    Clyde Navigation (Superannuation) Order Confirmation

    Bill to confirm a Provisional Order under the Private Legislation Procedure (Scotland) Act 1936, relating to Clyde Navigation (Superannuation), presented by Mr. Ross (under section 7 of the Act); and ordered to be considered upon Tuesday next, and to be printed. [Bill 17.]

    Glasgow Corporation (No 2) Order Confirmation

    Bill to confirm a Provisional Order under the Private Legislation Procedure (Scotland) Act, 1936, relating to Glasgow Corporation, presented by Mr. Ross (under Section 7 of the Act); and ordered to be considered upon Tuesday next, and to be printed. [Bill 18.]

    Oral Answers To Questions

    Scotland

    Rabbit Clearance

    1.

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    asked the Secretary of State for Scotland if he will seek to make membership of rabbit clearance societies compulsory in areas where such societies are functioning.

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    My right hon. Friend will consider this suggestion.

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    I thank the hon. Gentleman for that reply, but I draw his attention to the fact that the whole of Scotland is a rabbit clearance area under the Pests Act, 1956. Will he take steps to ensure that all Scotland is brought into this category for the purpose of rabbit clearance?

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    The responsibilities in this are fixed on the agricultural executive committees, and we have no reason to doubt that they are doing their job.

    North-East Scotland (Development Plan)

    2.

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    asked the Secretary of State for Scotland what plans he has for preventing depopulation of the north east of Scotland.

    22.

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    asked the Secretary of State for Scotland when he will announce his plan for the Borders.

    33 and 52.

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    asked the Secretary of State for Scotland (1) when he now expects to publish the north-east of Scotland Development Plan;

    (2) whether he will make a statement on his policy to reverse the trend of migration from the north-east of Scotland.

    41.

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    asked the Secretary of State for Scotland when he now expects to publish the Government's plan for the north-east of Scotland.

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    The Government's plans will be set out in a White Paper which my right hon. Friend hopes to publish at the turn of the year.

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    The National Plan foresees an average annual decrease of 20,000 in the working population of Scotland till 1971. Is not this an alarming tendency, and will it not bear most hardly on the periphery of the rapidly developing areas of central Scotland?

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    We are concerned about this bearing on the periphery, and part of the object of the plan is to do as much as possible to prevent that happening.

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    Is the hon. Gentleman satisfied that the plan for the Borders should be delayed until the plan for the north-east of Scotland is ready, as so much research has already taken place into the Borders problem?

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    All these plans have to be fitted into one plan, otherwise they are apt to be contradictory and to fit into no pattern at all. It is precisely because of this that we are publishing a National Plan. The National Plan will take account of the needs of the various areas and of the reports which have been produced for these areas.

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    Is the Minister aware that the North-East Development Plan has taken a very long time? Will he agree that plans are no substitute for action and that this problem of depopulation is serious and is still going on? Does he understand that there is urgent need to stem that tide and to start once again to revive employment in these distant areas such as the north-east of Scotland and other parts of Scotland in order to give our people a chance to work in the area where they were born?

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    I understand hon. Members' impatience. I only wish that they had shown the same impatience during the past 13 years.

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    Is the Minister aware that there has been almost intolerable procrastination by the Government in this matter? Is he aware that I was assured a year ago that this plan for the North-East would be published in the very near future? Can he guarantee that it will be published as soon as possible in the New Year? It has taken far too long already.

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    New Town (Irvine)

    3.

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    asked the Secretary of State for Scotland whether he will make a statement on the creation of a new town in the Irvine area.

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    Not yet.

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    Is the Minister aware of the great interest shown in this suggestion of a new town, particularly by the hon. Member for Central Ayreshire (Mr. Manuel), who I know is very interested in it? Does he realise that many planning decisions of all kinds are held up in the meantime? Can he give any indication at all of when we may have a decision on this important matter?

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    On the first part of the question, yes, Sir. On the second part of the question, the report was received on 31st May. Discussions have gone on with the local authorities concerned. My hon. Friend hopes to have a meeting on 3rd December, and after that we shall see what is what.

    Later

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    On a point of order. May I have your permission, Mr. Speaker, to ask a supplementary question on Question No. 3?

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    I understand the hon. Member's interest. I am sorry that I missed the hon. Member at the time. It is now too late.

    Ayr Bypass

    4.

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    asked the Secretary of State for Scotland when he expects work to start on the final stage of the Ayr bypass.

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    I regret that it has not been possible to find a place for this scheme in our trunk road programme up to 1970.

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    Does the right hon. Gentleman not recall his own promise a little more than a year ago that a Labour Government would complete this bypass? Does he not agree that there is great danger to people past whose houses traffic is now flowing? Will he please look again at the programme to see whether he can bring it forward?

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    I still hope that a Labour Government will complete this programme. I remind the hon. Member that he was so proud of the priority given to this project that he put it in his election address.

    Canadian Centenary Exhibition

    5.

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    asked the Secretary of State for Scotland what pro posals he has for visiting the Canadian Centenary Exhibition in Montreal in 1967 in order to encourage or assist Scottish producers and manufacturers to show their wares there.

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    None, Sir.

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    Does the right hon. Gentleman know of the success of the trade mission to Australia recently? Why will he not not make preparations so that we may have similar success in Canada? Is he aware that the United Kingdom site at Montreal is extremely good? Does he recognise the wealth of good will towards Scotland by Canadian people?

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    I welcome the spirit of the hon. Member's Question about the Canadian Centenary Exhibition, but he will appreciate that this is a cultural and prestige exhibition. It is not related to trade at all; in fact, commercial exhibitions there are forbidden. But he should not take it that we overlook the importance of this, or, indeed, that we are overlooking the question of having commercial participation by Scotland in trade fairs at that time.

    Artificial Limbs

    6.

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    asked the Secretary of State for Scotland what is the number of patients requiring artificial limbs; and what is the average waiting period before limbs are supplied.

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    At 31st October 176 patients had been measured for but had not received their first artificial limb, and 657 patients were awaiting a replacement limb. The waiting time varies, depending on clinical and other factors and any average period given would not be meaningful.

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    Is the Under-Secretary of State aware of the many complaints which many hon. Members have had about the waiting period for artificial limbs? Is she aware of the great concern and anxiety which this causes and the trouble which is caused both to employers and workmen because they cannot get back to employment as early as they ought? This is something which ought to be hurried on by her Department as much as possible.

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    I take the point made by my hon. Friend. I can assure him that I, too, am deeply concerned about the waiting period involved. We have made a number of efforts during the year, as a result of which there has been a considerable improvement in some directions, but I am by no means satisfied yet, and we are looking at the situation.

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    May I ask the hon. Lady whether all possible resources in Scotland are being fully utilised for this purpose? I have in mind the supply of artificial boots for artificial limbs, which are made by the Princess Marie Louise Hospital. Is the order book of that hospital completely full at the moment?

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    Most order books are full. We are looking very closely at the possibility of enlarging the field of production, and this is very relevant in speeding up the whole process.

    Slum Clearance

    7.

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    asked the Secretary of State for Scotland what plans he has formulated in the course of the past year for accelerating the pace of slum clearance.

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    In response to approaches my right hon. Friend has made to them, Scottish local authorities are proposing to accelerate the rate of slum clearance, so that some 45,000houses are closed or demolished during the three years 1965 to 1967. He intends to present very soon a White Paper about this and other aspects of the housing programme.

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    While thanking the Minister for that Answer, may I ask him whether he realises that this is another sad story of procrastination on the part of the Government and that a great many of us are profoundly dissatisfied that he has not shown a greater sense of urgency in pressing ahead with the solution of these tragic social problems resulting from the slums, particularly in view of the aggressive speeches made by his right hon. Friend when in Opposition?

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    I am sorry that the hon. Member misheard me. The figure which I stated was 45,000 houses proposed for demolition in three years. The past average has been 12,000 a year. The present figure of slum clearance under this Government is 7,870 in the first six months. I think that the hon. Member is wrong

    Justices Of The Peace

    8.

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    asked the Secretary of State for Scotland what steps he is taking to ensure that newly-appointed justices of the peace shall represent accurately a cross-section of the community from which they are appointed.

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    Advisory committees are asked, when they recommend persons for appointment as justices of the peace, to see that there are persons in the Commission representative of various sections of the community and I take into account the need to secure this when I am considering their recommendations.

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    Will my right hon. Friend give an assurance that he takes into account not only political affiliations and political colours in various areas, but the social and economic background of the individuals representing particular areas? Will he take into account the desirability, wherever possible, of appointing postmasters or sub-postmasters, because very often these are the people most in contact with the local community?

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    Yes. General guidance along the lines of the recommendation of the Royal Commission has been given to the committees in respect of this matter. I find that they do select carefully, but we must appreciate that the paramount consideration must be fitness to discharge their judicial functions. I can assure my hon. Friend that I will take into account the matters which he has raised.

    Procurators-Fiscal

    9.

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    asked the Secretary of State for Scotland if he will seek to improve the terms and conditions of service for procurators-fiscal to encourage recruitment to that service.

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    In August last increases of salary, effective from 1st January, 1964, were awarded to various grades of the Procurator-Fiscal service, including the recruitment grade.

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    Is the hon. Member aware that, with the development of legal aid in criminal cases, there is an ever-increasing demand on the Procurator-Fiscal service, and that unless recruitment to that service is speeded very serious danger arises that the administration of criminal jurisdiction in this country will be seriously prejudiced?

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    I am aware of certain difficulties in connection with this service, but there are shortages of legal civil servants in practically every sphere and I do not think they are any worse in this sphere than in any other.

    Erskine Bridge

    10.

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    asked the Secretary of State for Scotland if he will make a state ment on the progress of the Erskine Bridge project and the probable starting date.

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    Dunbarton and Renfrew County Councils have agreed with my right hon. Friend's proposal that the bridge should be built as a trunk road project; and our intention is that work should start in the financial year 1967-68. My Department is now taking over the preparatory work from the joint committee formed by the two councils.

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    Is the hon. Member aware of the importance of this project to the whole trunk road problem in Renfrewshire and that it is a matter in which the people of Renfrewshire have a very great interest?

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    My constituents are thoroughly overjoyed.

    Farm Improvement Scheme (Sludge Tanks)

    11.

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    asked the Secretary of State for Scotland if a grant is available under the farm improvement scheme for sludge tanks which are made of synthetic rubber.

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    My right hon. Friend has had no applications for grant on sludge tanks made wholly of synthetic rubber. Any application would have to be assessed in accordance with the conditions of the scheme, including the test of durability.

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    May I congratulate the hon. Member on the fact that his procrastination has not been carried into the field of sludge tanks? May I ask him whether he is, aware that applications have been made to his Department for grants for tanks which may not have been made wholly but which had been made at least partly of this material? Is it not the case that grants are available for these tanks under the farm improvement schemes in England and Wales? Is he satisfied with the co-ordination between his Department and the Ministry in seeing that there is uniformity in this matter?

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    There have been two applications and each of them was in connection with a tank in which the synthetic material was used as a lining. It was therefore not made wholly of synthetic rubber. There is nothing against the use of this material if it measures up to the requirements of the scheme.

    Shellfish (Rail Transport)

    12.

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    asked the Secretary of State for Scotland what representations he has received about the refusal of British Railways to carry small consign ments of shellfish; what reply he has given; and what is his estimate of the effect of this decision on the shellfish trade in the North of Scotland.

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    I have received such representations, but I understand that small consignments of shellfish are carried in guards vans of passenger trains, provided there is room, and I shall reply to that effect. I appreciate that some fishermen are anxious lest this should result in delay and losses, but I have no evidence that it has had any significant effect on the shellfish industry.

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    Is the acceptance of these small consignments in the guards vans of passenger trains a new offer of British Railways? Will these people be charged the penal rates by British Railways which are being charged for a full van consignments? Has there been any exploration of other methods of moving them if this proves unsatisfactory?

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    Some of the fishermen are arranging their own schemes for the consignment of shellfish, as with other fish. As far as we can see, this seems to be working quite well. British Railways gave a three-month halt in the arrangements coming into effect to enable it to be done. The prices to be charged are as set out by British Railways in their scheme. No change was made.

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    Is it a new offer?

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    This is an offer which was made originally.

    Sheep And Lambs (Prices)

    13.

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    asked the Secretary of State for Scotland what are the current average prices in Scotland for fat clean sheep and fat lambs this year compared with 1955.

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    For the last period for which this information is available, namely the four weeks ended 26th September, 1965, the average prices paid at Scottish auction markets for sheep certi-field for fatstock guarantee payments were for clean sheep 26·5d per lb. and for lambs 32·6d. per lb. The comparable figures for 1955 were 25·4d and 30·8d, respectively.

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    From those figures, it is clear that the prices have risen very little. While one welcomes anything which keeps down food prices, because—

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    Order. The right hon. Gentleman must ask a question.

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    Is the Minister aware that the costs which these sheep farmers have to meet have risen very much—for example, transport costs? This may have a serious effect on the sheep farmer in Scotland unless a bigger profit is available to meet the extra costs.

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    These factors are taken into account at the time of the annual review. In the last Review White Paper it was pointed out that this section of the industry continued to show a good figure of profitability, so it would not appear that heavy losses are being incurred. But all these factors are taken fully into consideration.

    Hospital Building Programme

    14.

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    asked the Secretary of State for Scotland why it has taken over twelve months to review the hospital building programme; and when he expects to publish the result.

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    There are many factors to consider in the review, and its later stages have to await Government decisions about priorities in expenditure. My right hon. Friend hopes to publish the results of the review by about the end of the year.

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    Does the hon. Lady agree that, whatever has motivated her right hon. Friend in this matter, it is not the dynamic feat of energy which we were promised by the Administration? Can she give a firm and unqualified undertaking that the review will not affect in any downward direction at all the quinquennial expenditure in the two periods to which the Government fell heir in the plan of the last Government?

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    I can reassure the hon. Gentleman that there will be no reduction in the total programme. We believe in a dynamic programme of social investment and, therefore, we must plan everything in integration.

    Capital Projects

    15

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    asked the Secretary of State for Scotland what is the number of capital projects in Scotland which are being slowed down in response to his circular letter to local authorities drawing attention to the Chancellor's state ment of 27th July; and what is the total value of these projects.

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    Local authorities are not required to report to my right hon. Friend all projects which they have decided to defer.

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    Is the hon. Gentleman aware of the very wide interest in these matters? Will he take some action to find out whether the Secretary of State's request for cuts is being observed by local authorities? Will he recognise that the Chancellor's statement in July and the Secretary of State's circular represented major changes in policy and that the House wishes to know what cuts are being made in Scotland?

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    The answer to the first part of that supplementary question is, yes, to the second part, yes, and to the third part, no. In exemplification I would point out that the total borrowing in the three months August, September and October, apart from houses and schools, of course, was £8·3 million compared with £12·9 million in April, May and June. Without a disproportionate amount of work it would be impossible to give a complete list, although I recognise the hon. Gentleman's interest in the matter.

    Teacher Training Colleges

    16.

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    asked the Secretary of State for Scotland what plans he has for providing extra teacher training colleges in Scotland.

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    A large programme is in hand for the expansion and modernisation of the facilities of the colleges of education, including a new college for 900 students due to open at Hamilton next October. My right hon. Friend has under review the possible need for an extension of the programme.

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    Can the hon. Lady say whether the programme has been cut back by the Secretary of State's request to local authorities to hold back expenditure for six months and to plan for reduced expenditure in the next financial year? What effect will these cuts have on the supply of teachers in Scotland during the next critical years?

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    There is only one area in which there is slight deferment, and this does not affect the number of places to be available next year. The unprecedented demand for places in the colleges requires us to look again at the programme for next year and the year following, and this is what we are doing.

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    How many prospective students were unable to gain places at the training colleges at the beginning of the year?

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    Because of the demand for places, it was necessary to limit acceptances to those who applied within the period and who were not late and to those of the correct minimum age. On that basis, we had to refuse 110 girls who applied for admission to the three-year diploma course and who were either under the minimum age of 17 or had not applied in time. That is all.

    Marriages (Young Persons)

    17.

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    asked the Secretary of State for Scotland how many marriages involving persons between the ages of 16 and 18 years occurred in each of the last 10 years; and if he will introduce legislation to raise the age limit.

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    The number of the marriages in which either one or both of the parties was 16 or 17 rose from 1,302 in 1954 to 2,938 in 1963. I shall, with permission, circulate figures for each year in the OFFICIAL REPORT. I am not aware of any general demand in Scotland for raising the lower age limit.

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    Is my hon. Friend using the argument that there is no demand for action as a reason for taking no action at all, because in that case the Judges Remuneration Act would never have gone through this House? Does not he think that the age of 16 is a very low age for this desperately lifelong commitment to be taken? Will not he reconsider the position? How long has this legislation been effective?

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    This was the common law of Scotland and was made statutory in 1929, so it has always been the law of Scotland. The question as to whether the age is too low is a matter of opinion. We have no evidence that there is any demand to change this law.

    Following are the figures:

    The number of marriages registered in Scotland
    (a)where one or other of the parties was aged 16 or over but under 18

    19541,302
    19551,640
    19561,815
    19571,940
    19581,960
    19592,028
    19602,316
    19612,588
    19622,683
    19632,938

    (b) where both the parties were age 16 or overbut under 18

    195469
    1955113
    1956135
    1957132
    1958104
    1959113
    1960164
    1961189
    1962235
    1963304

    Rivers And Lochs (Fishing Rights)

    18.

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    asked the Secretary of State for Scotland if he will seek to take all the rivers and lochs in Scotland into public ownership, abolish exclusive fishing rights and ensure that fishing for salmon and trout is equally open to all.

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    My right hon. Friend is considering the law relating to salmon and trout fisheries in Scotland in the light of the Report of the Hunter Committee and the comments he is receiving on it, but he is not yet in a position to make a further statement.

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    Is my hon. Friend aware that salmon fishing is now almost exclusively confined to the very wealthy and poachers and that the angling associations now believe that if the Hunter recommendations are implemented by the Government there will be the same position in relation to all fishing in Scotland?

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    The associations have been asked to submit their views on the Hunter Report to my right hon. Friend. They will, therefore, have the opportunity of putting their views at great length.

    Road Accidents (Warning Signs)

    19.

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    asked the Secretary of State for Scotland if he will circularize police forces in Scotland to ensure that all police and public service vehicles which are called to the scene of road accidents carry warning signs which can be put out to give advance warning of any obstruction caused by accidents.

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    It is already the general practice for police traffic patrol cars to carry warning signs. Emergency tenders of fire brigades also carry such signs.

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    Would the hon. Gentleman also ask that ambulances should do the same? They often have to stand at scenes of accidents and if they carried these warning signs it might help to prevent further crashes from taking place.

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    They do not carry them at present. Only those authorised by the chief constables to do so can erect these signs. However, the point is worthy of consideration.

    New Towns

    20.

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    asked the Secretary of State for Scotland whether he will make a statement on the future management of new towns in Scotland after they have obtained borough status.

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    Burgh status does not affect the functions of a development corporation which, as at East Kilbride, retains the duty of developing the new town to its planned size. It is important, however, that at all stages in the life of a new town the development corporation and all interested local authorities should work closely together.

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    Have the Government any plans for the eventual handing over of these: new towns so that they are removed from the development corporations?

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    It is too early to make a statement on this.

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    Will my hon. Friend give an assurance that the terms of the New Towns Act, 1946, will be fully implemented and that we shall get full democratic control of these new towns by elecied authorities at the appropriate time?

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    In principle that is the policy of the Government, but there is a transitional stage during which we shall have to sort out how that position is to be reached.

    Civil Defence

    21.

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    asked the Secretary of State for Scotland whether he will make a statement regarding the future of civil defence; and whether the number of recruits keeps pace with the number of resignations.

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    The review of home defence referred to in the Statement of Defence, 1965, is not yet complete, and I cannot anticipate the results. The active strength of the Civil Defence Corps in Scotland fell by 94 in the year ending 30th September, 1965, to a figure of 22,688.

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    Will the Minister of State bear in mind that the delay in publishing this review of civil defence is very discouraging to people who are giving voluntarily of their time to doing this work?

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    I fully appreciate that, but I think the right hon. Gentleman would agree that this important matter should be given proper consideration and that we should not try to be too hasty about it.

    Departmental Staff

    23.

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    asked the Secretary of State for Scotland what increase or decrease there was in the staff of the Department under his control in the period 16th October, 1964, to 15th October, 1965; and what increase or decrease he anticipates in the period up to 15th April, 1966.

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    There was an increase of 448 in the staff of the Departments under my control between October 1964 and October 1965, and a further increase of 278 is expected by April 1966.

    Fort William-Mallaig Road (Dual Carriageway)

    24.

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    asked the Secretary of State for Scotland when he will start work on the thirty miles of single carriageway still remaining between Fort William and Mallaig.

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    We intend to improve the worst sections as far as possible by using minor improvement funds, but I am afraid that comprehensive reconstruction cannot find a place in the road programme before 1970.

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    Is the hon. Gentleman aware that this is a narrow road which is causing very grave concern and great difficulty and is virtually endangering the whole future of Mallaig? There is also considerable doubt about the future of the railway. Can he assure us that he will bring pressure on the Minister of Transport to ensure that, if the railway goes, it will not go before the road is improved?

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    I can give the hon. Gentleman the assurance that he wants in the latter part of his supplementary Question, provided that he is willing to accept that, while traffic has increased on this road, it is much heavier on the single carriageway Invergary-Kyle road. This is a matter of priority, as he appreciates, and we naturally want to concentrate our efforts there.

    Hydro-Electric Development

    25.

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    asked the Secretary of State for Scotland when he will make a statement on the Government's policy concerning the future of hydro-electric development.

    30.

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    asked the Secretary of State for Scotland when he will make a statement concerning the future programme of hydro-electric projects in Scotland.

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    My right hon. Friend hopes to make a statement very shortly.

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    I welcome this announcement very much.

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    Is not this one other example of procrastination? We have waited a year for a reply and there is a hold-up of potential investment in the Highlands of £144- million as a result of the delay.

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    I understand why the hon. Gentleman blushes when he says that in view of the past record of his own Government, which to a large extent caused this delay. Fortunately, my right hon. Friend will be in a position very shortly to make a statement which I hope will find acceptance throughout the House.

    Edinburgh (Traffic Conditions)

    26.

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    asked the Secretary of State for Scotland what assistance or advice his Department is giving to Edinburgh Corporation on traffic problems.

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    My Department is represented at meetings of the working party which the corporation has set up to advise on the future traffic pattern in the city. The corporation also consults the Department about short-term traffic measures.

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    Is the hon. Gentleman aware that the traffic problems in Edinburgh are getting worse every day? What has happened to the ring road? Will he take up with the Minister of Transport the question of retaining the surburban railways, particularly in the light of experience in Canada and the United States, where they are being brought back? Will he see that we retain Caledonian Station, which is a valuable asset for railway purposes?

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    I appreciate the point, but the problem hinges on the submission of the quinquennial review by the corporation, which is at liberty to commission any transportation study it wishes, but at the moment my Department is concerned about the procedure under the review. When that review comes forward will be the time to make decisions in principle on a comprehensive assessment of the situation, including the position of suburban commuters and the railways.

    Rates

    27.

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    asked the Secretary of State for Scotland how many Scottish local authorities have now announced their rate poundages for the year 1965–66; and what percentage increase there will be in the total amount raised in rates by these authorities in the year 1965–66 compared with amounts raised in the year 1964–65.

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    All Scottish local authorities have now, by Statute, fixed their rate poundages for 1965–66. There is likely to be an increase of slightly over 9 per cent. in rate income, or 7 per cent. increase in average rate poundages.

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    Does the hon. Gentleman recall saying in Committee on 29th June that the probable increase in rates this year would be 4 per cent.? Why is it that, on housing and roads and other vital matters, he is proving to be such a bad prophet all the time?

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    This is the only assessment that has ever gone wrong. But I would point out that it compares not unfavourably with the 8·6 per cent. increase in 1963–64 and the 19 per cent. increase in 1961–62. He must await the Government's next steps in this matter, including, of course, the legislation which we have promised will be introduced this Session.

    Housing

    28.

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    asked the Secretary of State for Scotland how many houses were completed in Scotland in the 10 months ended Ocotber 1965; and how many it is estimated will be completed in the year 1965.

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    About 28,500 in the ten months and around 35,000 in the full year.

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    Does not the hon. Gentleman appreciate that this means a fall in the house-building programme this year of over 2,000? Does he also recall stating on the 1st June that it was wrong to say that house building this year would be less than last? Why has this further forecast of his gone wrong?

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    The hon. Gentleman is committing a grave error. He must read again what has been said. There are several factors, and we have always stated them in the House. The principal factor in the number of house completions this year—and he and his right hon. Friends cannot escape responsibility for that—was the dramatic fall in tender approvals during the period April-September, 1964. It is worthy of note that at the end of last September houses under construction in Scotland by all agencies totalled 50,554 —an all-time record.

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    Why, then, was the hon. Gentleman's estimate in the summer of a total of 37,000 so wrong, considering that it has been reduced to 35,000?

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    Because it has proved far too difficult to get over the initial errors for which the hon. Gentleman himself was primarily responsible, when he was in my position, by failing to see that the rate of tender approvals was at the level of the preceding first quarter as compared with the second and third quarters over which he presided in his final six months of office.

    34.

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    asked the Secretary of State for Scotland what is the number of houses being erected in Scotland by private enterprise at the latest convenient date; and what was the comparative number being erected on the corresponding date last year.

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    At 30th September, 8,100 houses were under construction for private owners, compared with 7,132 a year earlier.

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    I congratulate the hon. Gentleman on the success of his policy in encouraging private ownership. Is he aware that many hundreds of young couples who had set their hopes on being able to buy these houses now find themselves unable to do so because of the financial policies of his right hon. Friend the First Secretary? What does the hon. Gentleman intend to do about it?

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    I much appreciate the natural enthusiasm which the hon. Gentleman shows for the success with which the Government are reaching their housing targets. There is no short-fall of requests by young people for private builders' houses. The total of 6,051 houses already built in the first nine months of this year compares with the 5,559 built in the last year of the previous Administration.

    Salmon And Trout Fisheries (Report)

    29.

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    asked the Secretary of State for Scotland when he will bring forward proposals following the Hunter Committee Report on Scottish Salmon and Trout Fisheries.

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    My right hon. Friend is awaiting the observations of many of the organisations he invited to comment and he will be studying the Report further once these observations have been received.

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    Is the hon. Gentleman aware of the extreme concern about these proposals among all sections of the industry, and particularly among those employed in it? Would he, therefore, bear in mind that a decision about the proposals should not be delayed if uncertainty is to be avoided?

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    I am aware of the concern, but I am also aware of the importance of the decision, and I should have thought that the importance of the decision warranted the matter being given proper and not hurried consideration.

    A74 (Dual Carriageway)

    31.

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    asked the Secretary of State for Scotland what are now the estimated starting dates for the reconstruction to dual-carriageway standard of the Underwoodhouse to Hill Tollbar section and the Hill Tollbar to Mossband railway bridge section of the A.74.

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    Providing the necessary orders can be made in time, my right hon. Friend hopes that work will start on the Underwoodhouse-Hill Tollbar scheme in the spring of 1967 and on the Hill Tollbar-Mossband scheme a few months later.

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    Is the Under-Secretary aware that traffic conditions on this road are now intolerable? Why cannot he revert to the Conservative target of the summer of 1966?

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    Because the last Administration set targets but did very little work. The fact is that on the Underwoodhouse to Hill Tollbar scheme it has been necessary to vary the line to achieve better engineering standards. The reason with the second scheme is that we hope that the junction arrangements at Gretna will turn out to be better than our predecessors tried to arrange.

    Technical Colleges

    32.

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    asked the Secretary of State for Scotland to what extent the programmes in Scotland of building and extending technical colleges has been postponed or reduced by the Government' economic measures this year.

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    The following two new further education colleges have been deferred for six months and will now start next spring: Telford District College, Edinburgh; Esk Valley Technical College, Midlothian.

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    Is the hon. Lady aware that any postponement of technical education in Scotland could have a serious effect on industry in the years to come?

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    Yes, of course. But the point is that we think—in fact, we are quite certain—that the effect can be minimised, because the buildings can be partially occupied as they are completed. We are quite satisfied that there will be no serious repercussions from the delaying of these two projects.

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    Would the hon. Lady care to convey those comments to the Secretary of State for Economic Affairs who, in the debate on the National Plan, advised the House that Scotland was unaffected by the credit squeeze and cuts?

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    As the hon. Gentleman knows perfectly well, Scotland is relatively unaffected. Indeed, most of Scotland is protected under the present Government against the kind of thing that happened under the last Government because of our recognition of the needs of areas of unemployment.

    Local Authorities (House Purchase Schemes)

    35.

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    asked the Secretary of State for Scotland how many local authorities in Scotland operate mortgage schemes for private houses; and how many have ceased such schemes during the past 12 months.

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    Out of 108 local authorities which operate schemes of loans for house purchase, 96 have made loans during the past year. I have no knowledge of any decision to cease making loans.

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    Will the hon. Gentleman do everything he can to encourage local authorities to operate these schemes to help the hundreds of young couples in Scotland who find themselves not able to buy houses for themselves? Will he do everything he can to encourage his right hon. Friend the First Secretary to make mortgages available at rates which people can afford to pay?

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    I am sure that the hon. gentleman is not unaware of what the Prime Minister has said and of what both Housing Ministers have declared to be their policy. He will no doubt read that when the White Papers are published shortly. The 12 authorities in Scotland whom I have not included as making regular loans are mostly small burghs and lend only from time to time. However, we take the point. The hon. Gentleman is quite right, and it is the policy of the Government, and we shall pursue it much more energetically than our predecessors did.

    Forth Road Bridge

    36.

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    asked the Secretary of State for Scotland if he will now make a statement on the question of tolls on the Forth Road Bridge, following the experimental period of one year.

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    I have nothing to add to the reply I gave to the right hon. Member for Berwick and East Lothian (Sir W. Anstruther-Gray) on 2nd November.

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    Does the hon. Gentleman consider that the present rate of toll is likely to prove a handicap to plans for industrial expansion?

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    The present toll? No. There is no such evidence. As for future arrangements, I indicated in my reply that there would be discussions. The Joint Board met on 27th October and considered the inescapable financial effects of the first year. In the 12 months starting 1st October, 1964, 4·6 million vehicles crossed the bridge—excluding the initial surge of traffic in the earlier month. In the nine months to 28th May, 1965, tine Joint Board was due to make payments to the Secretary of State's Department of £569,059. The payment it was able to make amounted to £248,359. Therefore, £320,700 has to be carried forward and added to the capital debt of £14.5 million. With those facts in mind, it is difficult to go further than I went in answer to the right hon. Member for Berwick and East Lothian (Sir W. Anstruther-Gray).

    Oxgang Primary School, Kirkintilloch

    37.

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    asked the Secretary of State for Scotland how many new primary school places will be provided by the proposed Oxgang Primary School, Kirkintilloch.

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    The school will provide 680 places.

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    Is my hon. Friend aware that in the burgh of Kirkintilloch it is feared that we may be repeating the errors of the previous Administration over the last 14 years and providing school accommodation to meet current needs and forgetting to provide for the future? Can my hon. Friend give an assurance that she will not repeat the terrible blunders of the previous Administration but will see that school accommodation provides for future as well as present requirements?

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    My hon. Friend will know of the study which we have sponsored during the last year into methods of forecasting need for school places arising from population movement. This study is now going on. It is concentrated on the Scottish new towns and the Cumbernauld Development Corporation and the education authority concerned is giving a great deal of help. That will indicate the importance the Government attach to the issue which my hon. Friend has raised.

    Cumbernauld (Maternity Unit)

    38.

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    asked the Secretary of State for Scotland what plans he has for the provision of a maternity unit in the new town of Cumbernauld.

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    The Western Regional Hospital Board's long-term plans for Cumbernauld's hospital services include the provision of a materntiy unit with facilities for both specialists and general practitioners.

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    Can my hon. Friend give an assurance that the provision of the maternity unit will precede the building of the hospital, as, with a birth rate of 28 per 1,000, there is an immediate and urgent need for maternity facilities in the new town? Will she do all she can to urge forward the building of this maternity unit?

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    The exact starting date will, of course, be a matter for the regional hospital board's own assessment, but I understand that the general practitioners' maternity unit will be provided ahead of the consultant unit to which my hon. Friend refers. That should enable the immediate need to be met more quickly than would otherwise be possible.

    Higher School Bursaries

    39.

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    asked the Secretary of State for Scotland if he is aware of the large number of higher school bursaries which have been refused; and, to avoid any further hardship, if he will increase the ceiling value of these bursaries.

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    My right hon. Friend has no evidence that education authorities are refusing higher school bursaries to pupils entitled to receive them. The rates are kept under review and we will be glad to consider any evidence of hardship the hon. Member may have.

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    Is my hon. Friend aware that it is estimated that nearly half the applicants for higher school bursaries in Lanarkshire this year have been refused? Will she bear in mind that that is due not to parental incomes being too high—because these are the incomes of ordinary people—but because the ceiling for bursaries is too low? Will she and the Secretary of State look into the matter?

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    I am looking into it at the moment, as is my right hon. Friend. A number of factors are involved when secondary school children leave school earlier than they otherwise might. The economic factor is certainly very important.However, any particular evidence of hardship which my hon. Friend can supply will be very welcome in the study which we are making.

    Education (Gaelic Courses)

    40.

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    asked the Secretary of State for Scotland if, in view of the introduction of foreign languages into Scottish primary schools, he will approve the introduction of the Gaelic language with a view to preserving Scottish culture; and if he will make a statement.

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    It is open to any education authority to provide Gaelic courses in primary as in secondary schools. In Gaelic-speaking areas education authorities have a duty to ensure that adequate provision is made for the teaching of Gaelic language and literature and 4,125 primary pupils are studying it in these areas.

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    Can my hon. Friend see whether that information can be made known to all Scottish local education authorities? Is she aware that while French, for example, is being taught— and we welcome the introduction of the teaching of French in primary schools— in many primary schools in my district Gaelic is not taught as a subject of instruction? Therefore, in the interests of her Scottish culture, will my hon. Friend make sure that this information is available to the education authority concerned?

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    A number of pupils outside the area which normally speaks it are studying it. For example, at Glasgow, Edinburgh, Lanark and Renfrewshire just under 500 secondary pupils are taking it. Certainly the education authorities know their duties and power.

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    Is the hon. Lady aware that restricted experiments in Gaelic teaching in primary schools in the county of Inverness have been going on for some time? Would she take steps to make some money directly available and, if this is possible, to extend the area where this is being done? At present it is relatively restricted and the restriction is primarily financial.

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    This is a matter for the education authorities concerned. They have a duty in it. The allocations of money which they have are supposed to provide for this, but I would be very glad to look at the particular point if the hon. Member will write to me about it.

    Road Programme

    42.

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    asked the Secretary of State for Scotland to what extent the road programme in Scotland has been reduced or postponed, outside development districts, as a result of the economic measures announced on 27th July.

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    With minor exceptions, all road schemes outside development districts which were due to start in the six months from August, 1965 to January, 1966 are subject to deferment under the measures announced on 27th July. It is worthy of note that, of the whole Scottish road programme, 96·6 per cent. is unaffected.

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    With nine trunk road schemes postponed, in addition to these local authority schemes, is it not deplorable that there should be any interruption of the Scottish road programme, which is so important to the development of all parts of Scotland, not just development districts?

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    Obviously the hon. Gentleman has prepared his supplementary question before he heard my Answer. The fact is that 96·6 per cent. of the Scottish road programme is unaffected by these cuts. Scotland has been exempted to this degree because of the large incidence of development districts. We accept, as does the rest of the country, the sacrifices that must be made with regard to general policy to solve a situation which, after all, hon. Members opposite left to us.

    Taxicabs (Licences)

    43.

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    asked the Secretary of State for Scotland if he is aware of wide spread trafficking in taxi licences; and if he will seek power to take action to eliminate this practice.

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    The control of taxicabs in Scottish burghs is entirely a matter for the magistrates and I do not think that further legislation is necessary.

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    Is my hon. Friend aware that in the Glasgow region sums in excess of £1,000 are being paid, ostensibly for the purpose of buying a taxicab? In fact the major proportion of the sum is for the licence, because the vehicle in question has a market value somewhere in the region of £150 or £200. Does my hon. Friend conside: that this black market is a desirable state of affairs, or does he think that there should be action?

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    If such a black market exists, then, of course, it is not desirable. But I think that the point is whether or not magistrates consider their powers adequate to deal with this. This is the substance of the question, and the answer is that the Secretary of State has no knowledge that the present powers are inadequate.

    Unlicensed Clubs

    44.

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    asked the Secretary of State for Scotland if he will now introduce legislation in order that unlicensed clubs may be brought under proper police supervision.

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    It would be difficult to justify making all clubs subject to police supervision; but, as I explained on 14th April, the operation of the Betting, Gaming and Lotteries Act, 1963, in its application to gaming clubs is under review.

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    Is my hon. Friend aware that in Glasgow and other major cities of Scotland, in addition to gaming clubs, there are many clubs springing up, in attics and basements, which present a fire hazard to the general public? Is my hon. Friend further aware that the police and the fire service in Glasgow have expressed great concern about the upsurge of these clubs? Will he give the House an assurance that he will give further consideration to this matter?

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    I am aware of these facts and, as I pointed out on 14th April, we are preparing fire legislation which will be introduced whenever it is possible to do so. The wider issues such as the question of interfering with social clubs are very complex, but these are also under consideration.

    Scottish-English Schools (Joint Projects)

    45.

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    asked the Secretary of State for Scotland what discussions he has had with local education authorities on joint educational projects of a residential nature between Scottish and English schools.

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    None, Sir. It would be for the promoters in England of such a project to canvass support direct from Scottish education authorities.

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    Will my hon. Friend be prepared to receive a deputation of teachers—

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    From Woolwich.

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    From Woolwich—who are interested in the project in Argyllshire, which may well be of inestimable value to Scotland?

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    We are always delighted to help our friends over the Border, but on this occasion I would suggest that the best course for my hon. Friend to pursue would be to take it further with the education authorities in England and Scotland and then, if the point arises, I shall be only too glad to discuss it with him.

    River Don

    46.

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    asked the Secretary of State for Scotland what plans have been made to purify the estuary of the River Don at Aberdeen and to apply to it the new method of oxidation designed by the Shirley Institute, Didsbury, for cleaning up rivers which have been polluted by industrial waste from mills and factories.

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    These matters are the responsibility of the Dee and Don River Purification Board.

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    Surely the Minister has some power with regard to this river, which is not in my constituency alone; it borders another constituency. The new method of oxidation mentioned in my Question has been tried with great success elsewhere. To use it in the River Don would result in great benefit to trade, industry, commerce and to employment in Aberdeen city and county.

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    I quite accept what my hon. and learned Friend says in this regard. I would strongly suggest that if he contacts the Board itself he will obtain a thorough explanation of all its plans, both in this regard and in others. I have a lengthy submission here, but I do not wish to ascribe it to the OFFICIAL REPORT at this stage and weary the House with it.

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    Does the Under-Secretary of State not agree that this is a very complicated matter involving several local authorities, besides the river board, which I mentioned to him in detail at the beginning of last Session, in Committee? With a view to bringing an end to the procrastination between the Ministry and the local authorities, will he now—[HON. MEMBERS: "Speech."]— accept my invitation to visit the area for himself and see the extent of the nuisance—and smell the nuisance with his own nose?

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    Order. The hon. Gentleman's supplementary questions must be shorter.

    Large Estates (Sales)

    47.

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    asked the Secretary of State for Scotland if he will refer to the Highlands and Islands Development Board recent sales of large estates, such as the Ben Alder Estate of 22,300 acres in Inverness-shire, with a view to using their powers to have such estates taken over by the Board and developed in the interests of the people of the Highlands.

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    I think that the initiative in this matter can appropriately be left to the Board.

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    Will my hon. Friend bear in mind that many people in Scotland, particularly in the Highlands, are becoming outraged at this traffic in huge sections of our native land? Is it not time that this was brought to the attention of a public board in order to develop the full potential of this land, both in agriculture and forestry, in the interests of the people in this area where a real land hunger exists?

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    I have no reason to doubt that the Highlands and Islands Development Board will keep its eye upon these things and will, if it requires land in order to carry out its development plans, put forward proposals to acquire it.

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    Is the Minister aware of a quite outrageous case at this moment which runs entirely counter to the Government's declared policy in setting up the Highland Development Board? A large part of the Island of Coll is being acquired by a Dutchman for the purpose, declared publicly by himself, of starting it as a sporting estate. Does not this run quite counter to everything for which the Government stand? Will he take some action?

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    I am aware of this case. If the Board decides that something should be done in Coll, it has all the powers to do it, in spite of the Dutchman.

    Arbroath (A92 Inner Relief Road)

    48.

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    asked the Secretary of State for Scotland what request he has received from Arbroath Town Council to be allowed to proceed with the proposed new inner relief road on the A.92 forthwith; and what reply he has sent.

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    The council asked last month to be allowed to start work, at a cost of about £20,000, on the first phase of the proposed inner relief road. My right hon. Friend has told the council to go ahead if it is fully satisfied that the road must proceed now.

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    I thank the hon. Gentleman for that reply, but is he aware that the delays imposed by the Departments have already involved the local authority in considerably increased costs, because of the purchase of property for the building of this road, and will he see that there are no further delays?

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    As the hon. Gentleman knows, I have met the town council on this matter and we have given it the go-ahead on the first phase as early as possible. For the remaining phases, we will have to see how the provisional programme for 1967–69 goes.

    Local Government Reorganisation

    49.

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    asked the Secretary of State for Scotland, when the working party appointed to consider the reorganisation of local government will report; and if he will publish its findings.

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    The working party of officials has prepared a summary of its work since its first report was published, which is being circulated to the elected members of local authorities who form the steering committee. The summary is not in a form suitable for publication.

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    Perhaps the summary might be submitted to Members of this House who might wish to offer an opinion about it?

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    I accept that, but I am afraid that the report is inconclusive. It contains no formal recommendations as such. Once my right hon. Friend has consulted the local authorities, he wishes to proceed from that to see what should be done to take a wide consensus of opinion.

    Rating (Large Estates)

    50.

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    asked the Secretary of State for Scotland whether he will refer to the Scottish Valuation Advisory Council the matter of the discrepancy whereby large estates in the Highlands with lucrative fishing and sporting rights are ratedat low levels.

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    The valuation of fishing and sporting rights is a matter for the local assessors acting in accordance with valuation law. There is to be a general revaluation in 1966, and I hope my hon. Friend will agree that it would be better to await the results of that before pursuing the matter further.

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    Will my hon. Friend keep in mind that within land which is normally regarded as exempt because it is not productive there is very valuable and remunerative land which is used for shooting and deer stalking? For example, in Inverness-shire there is an estate of 22,000 acres on which only £330 is paid in rates despite large and lucrative fishing and deer rights?

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    Yes, Sir. It would, however, be better to await the up-to-date 1966 figures before making a fresh evaluation of the position.

    Question Time

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    On a point of order— [HON. MEMBERS: "Oh."]—which I submit, with the greatest respect, to you, Mr. Speaker. We lost three minutes at the beginning of this sitting of the House. Would it be possible now to have them back?

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    As a Sassenach, I was about to congratulate my Scottish colleagues on their co-operation at Question Time. I appreciate the parsimonious economy of time on the Question of the hon. Gentleman. I have no power whatever to add three minutes to Question Time.

    Gas And Electricity Supplies

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    (by Private Notice) asked the Minister of Power whether he is aware of the effects that the gas and electricity power cuts have now had on industrial firms and what action he is taking to remedy the situation.

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    A number of firms in the area of the West Midlands Gas Board were asked yesterday to stop taking gas as a necessary measure in the interests of public safety. The Board is restoring normal supplies today, and all industry in the West Midlands should have full supplies for the night shift. The electricity boards were obliged in the late afternoons on Monday and Tuesday to disconnect some consumers in certain areas for short periods. Both the electricity and gas industries are making every possible effort to bring in the additional capacity which is currently being installed or overhauled and will thus be better able to deal with a repetition of severe weather and high demand later in the winter.

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    While thanking the Minister for the hope that he holds out at the end of the present crisis, may I ask him whether he is aware that gas supplies were cut off from the great Midlands motor car manufacturers without any previous warning in the middle of yesterday, thereby causing many thousands of men to be put off? Will he tell the House what was the cause of this and what steps he is taking to ensure that this situation is not repeated?

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    The cause was a major breakdown at Coleshill gas works and the late commissioning of new plant at Tipton, which meant that the West Midlands Gas Board was unable to cope with an increased demand of 40 per cent. It is not the case that firms were not warned; they were warned. Only when there was no response to that warning was it necessary to cut certain supplies.

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    Could not the Electricity Generating Board import electrical current from Germany? The German factories close at four o'clock in the afternoon and, by their more efficient economy, there is surplus electrical power at four or five o'clock in the afternoon. Could not that be imported here?

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    No matter what expedients one resorted to now, one would still be faced with the fact that there was a shortage of investment a few years ago when the Conservative Party was in power which has never been made up. The position would be even better if hon. Members opposite would get their friends in private enterprise to honour the contracts and the dates of them.

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    Is the right hon. Gentleman aware that a gas shut-down of this kind is much more serious nowadays than, for example, in 1947, because there are now so many gas-automated furnaces used in the engineering industry of the Midlands, some of which take two or three days to warm up again after such a shut-down, and that thousands of pounds worth of components will have to be thrown away and written off? Can the right hon. Gentleman say whether the gas boards will pay proper compensation to the firms concerned?

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    I cannot comment on compensation. I can promise a better performance than was done in 1962–63.

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    Will the Minister give a general direction to responsible boards and authorities to discontinue spending millions of pounds on encouraging members of the public to use appliances which are then not capable of being used because of these power cuts?

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    While I doubt whether I have power to intervene too far in this, may I say that I have a lot of sympathy with what the hon. Gentleman says, and I will do what I can to be of assistance.

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    The Minister mentioned a major breakdown and lateness in commissioning. Could he tell the House exactly what these two items were?

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    I said that there was a major breakdown at Coleshill gasworks and the late commissioning of new plant at Tipton.

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    That is where— not why.

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    I must press the right hon. Gentleman on this. Does not he think that my hon. Friends and the rest of the House are entitled to a far more detailed statement of the causes of this very serious breakdown? He has made —I do not know with what backing— some aspersions about private enterprise concerns failing to keep to their contract dates. But do let us have full details about Tipton and about what happened at Coleshill. Does the right hon. Gentleman recall what his right hon. Friend the Minister of Transport asked my right hon. Friend the Member for Bridlington (Mr. Wood) in January, 1963, namely, whether he was telling the people that whenever we had a few days' cold weather in January we should immediately be short of gas? May I now ask the right hon. Gentleman: since there is a great deal more plant in operation. provision for which was made by the previous Administration, what on earth will happen in January under this Administration?

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    The hon. Gentleman has good reason to know of the shortcomings to which I have referred. If he wants a list of the failures of private enterprise to comply with delivery dates, if he will put down a Question I will try to provide him with a full answer.

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    Can my right hon. Friend say to what extent these cuts were due to failures of private enterprise to fulfil contracts? Were there default clauses in those contracts to provide for a situation such as this? If so, will my right hon. Friend ensure that they are fully implemented?

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    I could not give my hon. Friend details of a penalty clause. [HON. MEMBERS:"Why not?"] If hon. Members opposite are saying that the failures of private enterprise should be considered so endemic that we must have penalty clauses, I will accept that. But, as far as I know, there are no such clauses for this situation.

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    Well, there should be.

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    Is the Minister aware that this is yet another deterrent to export orders and that we have had hundreds of unofficial strikes as well as the trouble at the docks? Is he taking this matter to Cabinet level, because it is terribly important?

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    If the Tory Government's record in exports were half as good as ours, our balance of payments situation would not be as bad as it is.

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    rose

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    Order. I suspect that there is matter for debate here. May we move on to the next business?

    Phantom Aircraft (Spey Engines)

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    With permission, I would like to make a statement about the future of the Spey engine for the Phantom aircraft.

    The House will recall that the decision to adopt this aircraft for the Royal Navy was taken last year by the previous Administration following failure to achieve a version of the P. 1154 which would have been acceptable to both the Royal Navy and the Royal Air Force. At the time the engine had not been sufficiently defined for reliable estimates to be produced, and the cost assumptions which were then used have proved to be too low. When we took office, we became aware that the P. 1154 would not meet the R.A.F. time scale for a Hunter replacement, and in view also of the urgent need to contain the size of the Defence Budget, we decided to order the Spey engined Phantom for the R.A.F. as well.

    The costs of developing and producing the version of the Spey required for the Phantom have increased substantially above the 1964 assumptions, and we have therefore found it necessary to carry out a most intensive examination of comparative cost and performance between Phantom aircraft with the Spey and aircraft with the existing American engine.

    Although the aircraft with the American engine is adequate for Naval and R.A.F. requirements, the Spey offers a greatly enhanced performance and a greater potential for future improvement. In addition Rolls Royce have been prepared to negotiate guarantees on costs performance and time scale much firmer than have been achieved in the past. Against the greater cost of the Spey these considerations might not in themselves have justified its adoption. But we must also take into account the very great economic technological and industrial advantages of going ahead with the development and production of this very advanced engine, with its big export potential. In the Government's view these considerations are decisive.

    I am therefore glad to inform the House that we have decided to continue with existing plans for the installation of the Spey in the Phantom.

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    May I first ask the right hon. Gentleman whether he is aware that a copy of his statement reached the Opposition only at 3.26 and that this really does make it very difficult to express any considered view? This is by no means an isolated example and applies not only to the Minister of Aviation but to Ministers generally.

    Having said that, may I say to the right hon. Gentleman that we on this side warmly welcome this decision. We hope this is only one of many decisions which the industry and the nation are awaiting in this field, and that this is only the first of a number of decisions which will do something to restore confidence in the procurement policy of the Government in these fields.

    May I ask certain specific questions? First of all, can the right hon. Gentleman tell the House something about the total costs involved in the Phantom plus Spey engine such as now envisaged compared with the costs involved had the previous Government's plan been proceeded with? Can he tell us something about any escalation in the price of the Spey engine? He referred to this in his statement, but I was not quite clear about his meaning. Is it the case that Rolls Royce prices have now escalated compared with the estimates which they put in when they were asked to quote for this development? Will he tell us when production orders will be placed? Finally, will he tell us when he will be implementing the other half of the Prime Minister's promise in relation to British equipment in the Phantom aircraft, principally avionic equipment?

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    On the question of the time at which the hon. Gentleman was given the statement, we always, of course, endeavour to meet the convenience of the Front Bench opposite and the House. In this case, in view of some singularly misinformed rumours circulating in the Press this week, I thought it essential, outweighing even the advantages of giving a good deal of advance notice, to make this announcement to the House at the earliest possible opportunity. That precluded a large amount of notice being given.

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    Very poor.

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    Is the right hon. Gentleman really saying he would rather have had a little extra notice, even though holding up the industry for 24 hours or more?

    As for the other questions which the hon. Gentleman put to me, there is no reason at all to think that the saving over the programme which we inherited from the previous Government will still not be substantial. Nevertheless, the reasons for cancelling the P. 1154 were not primarily those of cost, though the cost was great, and it was right at the beginning of the programme, but primarily those of the time scale. There was no prospect of the aircraft being ready when the R.A.F. needed it. As for escalation of Roll Royce costs, they were then found to be very substantially above the estimates which we inherited from the previous Government. We had decided, in the interests of the industry and the firm, to go ahead with this proposal, and I am glad the right hon. Gentleman welcomes that, but he should not under-estimate the inheritance which his right hon. Friends left us in this respect.

    On the question of British equipment beyond the Spey in the Phantom, our policy remains as stated, and we are endeavouring, even at the cost of a premium, to keep as much British equipment as possible in, and I am hoping the results will be satisfactory.

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    Will the right hon. Gentleman answer somewhat further about when production orders will be placed and about the scale, because it is a fact that the aircraft industry has received virtually no production orders during the 12 months since the cuts were announced, and it is really a matter of great urgency that we move away from expressions of intent and get down to hard orders for purchasing, so that the industry can get down to cutting metal on a production scale.

    Will he please also give the House, if not today, a little more information about this escalation of costs? Is it really a fact that Rolls Royce estimates have escalated compared with the specification of which we are now talking, or is it the case that the costs have gone up because the specification has changed? I think that this really is a matter of great importance to clear up, and we ought to be quite clear whether any reflection does fall on the efficiency of this great company.

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    So far as production orders are concerned, we will go straight ahead now with the Spey Phantom programme of development and production orders, because it is a very tight programme and we want the aircraft to be in service by 1968. We have every reason to believe it can and will be in service by 1968.

    As to the question of responsibility, I of coarse wish to say nothing to damage the position of Rolls Royce. It is largely because we appreciate the great importance of the industrial value of this firm that we have taken this decision which we have announced at the present time, but there is no doubt at all that the position was that the previous Government took a decision on an engine required to perform a particular task and that the cost of this engine proved to be very much larger than was expected.

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    Is it realised that we welcome the concept of guarantees in relation to cost, performance and time scale, but, after all the Public Accounts Committee has said about cost estimates being loo low in the past, what is the Ministry doing to improve cost estimates in the future?

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    As I indicated in my Statement, we have in the case of the Spey programme now been able to secure guarantees about costs, about the time scale and about performance that are quite different from those which it has been possible to secure in the past.

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    While endorsing what the Minister said about the great advantage of going ahead with the Spey programme, may I ask him what he estimates will be the saving in our balance of payments in the period of this programme? Secondly, how many naval Phantoms is he ordering, bearing in mind the agreement with the French over variable geometry aircraft, which provides for a carrier-based version of it? Is he planning to replace all the Hunters with the Phantom or giving any consideration to a British specification of the COIN type such as they have in the United States?

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    A number of these matters are, of course, matters for the Secretary of State for Defence. So far as the Anglo-French variable geometry project is concerned, to which we attach the greatest importance, there is no reason to expect that the Phantom programme will in any way get in the way of this project. We shall pay the most careful attention to that aspect of the matter.

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    May I congratulate my right hon. Friend on his Statement and on his decision to make it today, and may I thank him for what he said about my constituents, the firm of Rolls Royce? It will be greatly appreciated in Derby.

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    While welcoming this statement, may I ask the right hon. Gentleman whether he can say when the sub-contract work on other frame parts, including the tail of the Phantom, will be placed, bearing in mind the responsibility placed on the Government, in their own firm of Short Bros., to fill the gap created by the cancellation of the H.S. 681 and to place some of the frame work with Short Bros.?

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    I will bear this in mind, and I am glad that Short Bros, have secured this sub-contract. There is no question of delay in the placing of this or other sub-contract orders.

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    rose

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    Order. I know we all like to debate Private Notice Questions, but there must be found other opportunities of doing so.

    Conference On Electoral Law

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    On 12th May my predecessor announced that, at the request of the Prime Minister, he had agreed to preside over the Conference on Electoral Law, and on 23rd June he informed the House of the names of the Members who had accepted his invitation to serve on the Conference. The Prime Minister has invited me to take over the Conference in order that this work may continue. I have readily agreed to do so.

    Bill Presented

    Post Office (Subway)

    Bill to authorise the Postmaster General to construct a subway in the City of Birmingham, presented by Mr. Benn; supported by Mr. Boyden and Mr. Joseph Slater; read the First time; to be read a Second time tomorrow and to be printed. [Bill 16.]

    Orders Of The Day

    Queen's Speech

    Debate On The Address

    [SIXTH DAY]

    Order read for resuming adjourned debate on Question [ 9th November]:

    That an humble Address be presented to Her Majesty, as follows:
    Most Gracious Sovereign,
    We, Your Majesty's most dutiful and loyal subjects, the Commons of the United Kingdom of Great Britain and Northern Ireland, in Parliament assembled, beg leave to offer our humble thanks to Your Majesty for the Gracious Speech which Your Majesty has addressed to both Houses of Parliament.

    Question again proposed

    Economic Affairs

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    I beg to move, at the end of the Question, to add:

    But humbly regret that the Gracious Speech contains no measures likely to redeem the failure of Your Majesty's Government's economic policy and, in particular, of the policy on Productivity, Prices and Incomes, which imperils the standard of living and savings of Your people.

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    On a point of order. May I confirm, Mr. Speaker, that the Amendment in my name on steel nationalisation has not been selected?

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    I can assure the hon. Member that his Amendment has not been selected.

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    By tradition, no Opposition has any more confidence in the Government than the Government have in the Opposition, and at the end of the debate on the Gracious Speech it is customary for an Amendment to be moved by Her Majesty's Opposition which expresses that particular point of view. I should make it clear at once that this is an Amendment moved by the official Opposition. The Liberal Party will no doubt explain, as usual, at the appropriate moment, why it is going to support the Government, and I congratulate the Prime Minister on the cheapest piece of political horse-trading in this century. Yet he has not even had to pay the price, as I understand it, of the electoral pottage which the Liberal Party hoped for.

    There are three Amendments referring to steel which are not being called but which are, of course, relevant to this debate. I was naturally delighted that steel had not been a feature in this Gracious Speech—

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    Oh, no.

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    Oh, yes, I am; and we know the reason which was given, the reason of priorities, which echoes the famous Socialist phrase which we all remember, and it is not surprising, perhaps, that the hon. Member for Ebbw Vale (Mr. Michael Foot) found that rather hard to take; but the point I want to put to the Prime Minister—I know he has to go in a few moments, and I am grateful to him for giving me notice of that—is a sentence he used when he spoke on 9th November, when he said:

    "Actions taken in good faith within the industry and in the normal course of business are unlikely to be challenged."—[OFFICIAL REPORT, 9th November, 1965; Vol. 720. c. 39.]
    I hope he will take the opportunity, or that one of his Ministers will, to delete that word "unlikely". The steel industry is in quite enough uncertainty at the present time. He has said, if I correctly understand the exchanges he has had with his own side of the House, that steel nationalisation remains part of the policy of the Socialist Party.—[HON. MEMBERS: "Hear, hear."] Let us wait and see. I think he would agree that it is desirable that all the actions that can be taken and are taken in good faith should not conceivably attract any penalty in any circumstances in future.

    The other point which my right hon. Friend the Leader of the Opposition mentioned, and which perhaps the Chancellor of the Exchequer might like to refer to when he winds up the debate, is in the paragraph in the Queen's Speech which says:
    "Steps will be taken to improve the arrangements for providing incentives for industrial investment…"
    I ask again the question which my right. hon. Friend asked. Are those words, "arrangements for providing" simply tautologous, in which case what will be improved—I hope they will be— are the incentives themselves, or is all that is planned some improvements in the arrangements? That is a small point which the Chancellor can make clear tonight, but I think it important.

    I turn to our Amendment. I shall not spend too much time tramping over the ground we have debated so often, and will debate again no doubt when the next General Election comes, of the exact responsibility and where it lies for 1964 and 1965. I think the House will agree that the start of this particular period of reflation which came to a halt in the first quartet of this year—I think I am right in saying that the production figures for September were released a few minutes ago and are down again. [HON. MEMBERS: "Oh."] I think that is correct. The figure, I am informed, is 131, dropping from the 134 of January. This particular period of reflation clearly started. I think we will all agree, mainly with the Budget of 1963. That Budget stimulated consumer demand by about 2 per cent. The public investment programme was increased in line with the proposals made by the N.E.D.C. for its 1961–66 targets and private investment was at the time encouraged. Looking back, with of course hindsight, the verdict of the O.E.C.D. on the two years is as follows:
    "In retrospect then, the expansionary policy measures taken at the beginning of the expansionary phase must clearly be judged to have been excessive. That they were so was not apparent to many observers at the time."
    Indeed, that is so, and it is also true, as the O.E.C.D. admits, that it itself was amongst those who did not judge them excessive at the time, as the Report for 1963, the annual survey, makes clear.

    At all stages, as the Prime Minister will know, he agreed with the analysis of my right hon. Friend the then Chancellor of the Exchequer when he said in April, 1963, that economic expansion would entail a temporary rise in imports. The Prime Minister then said:
    "I think it is perfectly reasonable and sensible to finance such a movement out of our reserves or out of our borrowing facilities in the I.M.F. and elsewhere."
    The Swansea speech endorsed that approach and when my right hon. Friend —turning now to the 1964 Budget— warned of the possibility of a deficit on the balance of payments and said:
    Provided that it is temporary this should give rise neither to alarm nor dismay. … it is a predictable accompaniment to a vigorous rate of growth which all of us are committed to seek."
    Over and over again the Prime Minister, in interviews, in speeches, in his speech, for example, to the T.U.C. on 7th September, endorsed that analysis. He said at the time:
    "this trade gap means a deficit on our current balance of payments of £500 million a year."
    In fact it turned out to be £412 million. The clear evidence of that is that the Prime Minister knew very well all the time what the figures were. He knew how the problem was being dealt with and he thought that the right methods were being selected to deal with the problem. He knew that there was no crisis and he said so, and called for no restrictive measures before the election. Nor did he scale down the Labour Parly's lavish preelection promises.

    There is one small point which should be made. On two occasions the Prime Minister and my right hon. Friend the Member for Barnet (Mr. Maudling) have clashed in this House on the question of the issue by Her Majesty's Treasury in the middle of the election last year of the United Kingdom balance of payments, the article which was published in "Economic Trends". When my right hon. Friend said that he had published this in the middle of the election, the Prime Minister replied:
    "Yes, and in the middle of the night."
    If that meant anything it was an accusation either against an unnamed civil servant in the Treasury or against my right hon. Friend the then Chancellor of the Exchequer. He was asked to withdraw it and he refused to do so. Now we have the comparable paper for 1965. I have it in front of me. It was issued by Her Majesty's Treasury and it says, in red type:
    "please note embargo. Not for publication broadcast or use on club tapes before 0030 hours.—
    in the middle of the night.

    We came to the General Election in 1964 without a crisis of confidence. As the Prime Minister knows very well, sterling held throughout the election and held throughout the immediate post-election period and on into November. Then the mistakes began. In our view, the first of those mistakes, although it did not affect confidence, was the formation of the Department of Economic Affairs.

    I personally had no objection; indeed I think it an excellent thing to refresh the still waters of Whitehall from time to time with some people coming in from outside. I did not object on those grounds at all. But the result of this was that the Chancellor of the Exchequer was, for a time at least, reduced to counting candle-ends. He was removed from his chairmanship of the N.E.D.C. and removed even from membership of the N.E.D.C. He was the first Chancellor—his Budget in April was proof of this—who had no true responsibility for the economy. The Chancellor would be less than human if he did not resent this, and he is a very human man. I am bound to say that he was saved. He was saved partly by the pressure of events and also saved by the skill of his Department, because the Treasury knights slew the foreign dragons by one of the prettiest pieces of knifemanship we have seen for many years. I think the Chancellor would be less than human if he did not chuckle a little about that.

    Secondly, there was the handling of the import surcharge. I understand that we are to have a day's debate on that in a few days' time and I need not develop my argument on that particular theme, but what the House as a whole must know beyond doubt is that, apart from the merits, the handling of it came as the gravest possible shock to confidence abroad.

    Finally in this particular phase, we had the autumn Budget. That autumn Budget, as many of my hon. and right hon. Friends have pointed out, was basically inflationary. It was an inflationary Budget imposed upon a potentially inflationary situation. It was not inflationary in the figures and it may not have been inflationary in intent, but it was inflationary in effect.

    The Chancellor, and indeed many hon. Members, will have read in the May issue of the National Economic Review an extremely interesting article which shows, I think with great clarity—the point was well made by my hon. Friend the Member for Scarborough and Whitby (Sir A. Spearman) in the first day's debate on the Address—that if in theory we balance consumption and taxation, they may be balanced for the first year, but immediately after that the inflationary effect becomes very marked.

    The last point I want to make about the errors of those early months was the double-talk that went on from every single Minister at all times. The classic example of this was the Chancellor himself saying that he hoped the 7 per cent. Bank Rate would not work through to the domestic economy. One might well ask what the object of it was. The observations that he made helped to weaken confidence abroad.

    So, viathe Budget of April, we came to the July measures. It has never been cleared up yet, although the Chancellor and I have had at least one exchange on this in the House of Commons, why these appeared in their particular guise and with this particular timing. The Chancellor will remember the famous sentence he used when he said that he was restraining himself from taking further measures. He in fact restrained himself for about a fortnight and then we had the measures which came at the end of July. It was put around at the time that he had added this sentence as it were to his brief, or impromptu notes, because he was tired.

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    The right hon. Member said that.

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    I took it from the Press. [HON. MEMBERS: "Oh."] I thought it was the kindest explanation there was; I cannot think of any other. If the Chancellor has any, by all means let us have it.

    What is quite clear is that that one unguarded sentence of his did the country a very great deal of damage indeed. There is no question that once more the tide of confidence turned in full measure against the £. It is my belief, and I have heard no refutation of this, that that stemmed exactly from that particular sentence in that particular speech.

    We have had a very expensive year's education as far as the Chancellor is concerned, because there can be no doubt that part of the load which this country has to bear comes from the folly of the words and part from the fragmentation of the action that in this year the Chancellor has had to take. Let us see what the position is at the moment. I hope that when he speaks the First Secretary of State and Secretary of State for Economic Affairs will be able to confirm or deny the information I was given about the production figures.

    The two main claims of the Government are that they have saved the£ and the balance of payments position has substantially improved. As far as the first is concerned, what they have been able to do is to obtain extended overdraft facilities. The Bank of England—and this is quite right—acting with the assistance of the American Treasury, persuaded the bankers of the world—I am delighted that they did—that devaluation was against international interests, and therefore these facilities were provided. The test comes now whether we can properly use that time so provided to strengthen our economy. When the Chancellor said that the battle for the £ was won but the battle of the economy still had to be won, I understood the distinction he was making, but I am sure he will agree that he cannot be confident about the first until the second objective is also secured.

    What, therefore, of the second claim, that the Government have substantially improved the balance of payments situation? Here we must look at the two aspects of the balance of payments; the capital account and the current account. What is happening on current account is that the penal taxation which the Government are proposing to apply to our overseas investments has forced the sale of some of those investments and the money has come back to London. This is of immediate short-term help, but, of course, in the long term it weakens the nation. And the improvement on capital account is largely due to the Government forcing investors to sell part of the £11,000 million of overseas investments of which the Prime Minister boasted in New York last March. I wish he had boasted of those assets a year ago.

    On current account, although month by month there is a considerable adverse balance of trade—our imports are far higher than our exports—the Government point to the improvement that has taken place. It is of the first importance that we should be clear just what the reasons are for that improvement. One of the main reasons is, of course, that the prices of our exports have gone up and the terms of trade have moved sharply in our favour. The price index of our imports in September was lower than in January, whereas the price index of our exports was nearly 2 per cent. higher—I calculate about £11 million for that month, on the sort of figures which we have seen in recent months—than in January. Even that— and that accounts for an enormous amount of the improvement—presents a precarious position because if the price index of exports continues to rise, the volume may some day start to fall.

    Besides the improvement in the terms of trade, there is another matter which we must take into account. That is the position in relation to stockbuilding. The National Plan states on page 69:
    "The current account deficit reflected a very rapid rise in domestic demand, which included … abnormally heavy stockbuilding."
    In a year in which the Government have had the benefit of the abnormally heavy stockpiling of the previous year and the benefit of a considerable improvement in the terms of trade, we must see the general improvement in our balance of payments in a realistic light. This worries the Chancellor and all hon. Members who are concerned with the future of the economy, wherever they may sit in the House.

    I therefore put this point to the Chancellor. One of the keys to this matter is, of course, the question of exports. At the meeting of the Institute of Directors the other day the Chancellor said that if people had ideas for improvement in this sphere they should put them forward. I appreciate that because, from my fairly short experience, I know that there is nothing more difficult than the task of finding ideas which one can use for export promotion.

    Sir Donald Stokes, who has a wonderful record in this sphere, paid high tribute to the Government's export: rebate. I am sure that many firms have found that very welcome indeed, but I question whether it has led to additional export orders. This, of course, should be the objective of any money spent. I wonder if it would not be right for us to turn from the impersonal to the personal in this matter and see if we cannot find a more direct incentive which will encourage the sale of our exports abroad.

    My hon. Friend the Member for Worcester (Mr. Peter Walker), in his speech at our Brighton conference, referred to this and it was also mentioned in a leading article in The Timestwo or three days ago. We have been studying whether it is possible for an Income Tax rebate to be given to export directors and salesmen for the period for which they are abroad. I am a great admirer of Harold Macmillan, but I do not think that the phrase "Exporting is fun "was the best of his slogans. Exporting is hard work and presents great inconvenience to many of the men, and their families, who are involved in these activities. If often means living out of a suitcase, going from 'plane to 'plane and hotel to hotel. An immense amount of personal inconvenience is attached to it.

    I say frankly to the Chancellor and the First Secretary of State that we are not yet satisfied—and we have been studying this matter carefully—that such a scheme could be made watertight. The opportunities for abuse are obvious; one might consider the possibility of someone obtaining a rebate when he had not genuinely been seeking exports. However, the scheme sounds an attractive idea, for it would involve the giving of a very personal tax incentive to the men who really are spearheading our export drive. I hope that the Chancellor will consider this matter and will, in due course, give us his views. All I ask is that he should not rule it out at this stage simply because of the possibilities of abuse—which are, as I say, obvious to all hon. Members who are interested in this subject.

    We refer particularly in the Amendment to the failure of the policy on productivity, prices and incomes. So far I have been dealing with the Chancellor of the Exchequer. I now turn to the First Secretary because while all this was going on—while this Socialist year was under way—there, down on the ranch, as they say, the First Secretary was hard at it putting forward his policy on productivity, prices and incomes.

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    Nobody has worked harder.

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    That is true. The right hon. Gentleman has been to meeting after meeting and has come away from nearly every one triumphant; in each case with a scrap of paper. [Interruption.] We have seen how effective this policy has been in fact.

    Let us start by looking at the figures. In the first quarter of 1965 the average percentage increase represented by wage settlements—and remember, this is since the Declaration of Intent—was 5·9. In the second quarter it was 6·2 per cent., and in the third quarter 6.7 per cent. I am sure that the Chancellor of the Exchequer must sometimes feel like saying, with Pyrrhus, "One more victory like this and we are undone."

    While the Chancellor has been working hard during this time, Little Boy Brown has been blowing his horn up and down the country. We have had this long series of agreements which has led, in the end, to an utterly disastrous situation. [Interruption.] It is nice to see the Minister of Technology coming into the Chamber. On 13th December last the First Secretary said:
    "We are on the brink of a break-through "
    Seven months later, on 12th July, he right hon. Gentleman said:
    "‖ I am convinced that we are on the verge of a major break-through …"
    Was that the same break-through or were there two different break-throughs? And when he said on 16th December, at the signing ceremony of the Declaration of Intent,
    "History is being made here today."
    —it certainly was.

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    It was indeed.

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    I agree with the hon. Gentleman. It was. We now have the biggest gap between productivity and earnings of any time in modern economic history. Certainly history was being made. The index figure of industrial production at 133 for January—revised on the latest figures to, I think, 134; and for December it is down to 131—is certainly history. I can find no period—and I have checked this all the way back, with the possible exception of 1952—when in 13 years there was a year when the gap was so wide between what we should be doing and we were in fact doing.

    We now have the worst of both worlds —not just inflation on the one side or stagnation on the other, but both of them together. We have a sort of "stagflation" situation and history in modern terms is indeed being made. There is another point behind the figures. As I say, production has fallen by 1 per cent. or ½per cent. while incomes have gone up, perhaps, by 8 per cent. This can result only in two things happening in the months ahead; either a considerable increase in our import bill to meet the increased consumer expenditure or a very real rise in our prices. But what the First Secretary is trying to do is to conceal the rises that are likely to take place.

    London bus and train fares were to rise, so the Government provided a £51½million subsidy, which runs out at the end of the year—but what then? Coal prices were to rise, so the Government gave a £15 million subsidy, which runs out in April—but what then? I ask, because all that is happening is that one is building a dam that is bound to burst in an economy where incomes are swiftly rising while production is completely stagnant.

    It was this that led to the Chancellor's famous speech in Scotland at the end of last month. Let me first read to the House what he said, and then what he meant to say. He said:
    "In spite of injunctions and signatures on the Declaration of Intent, earnings are still going up much faster than productivity. In the first eight months of this year they went up by 8 per cent. and this is bound, unless it is controlled, to result in increases in prices."
    Everyone had great difficulty in understanding this particular figure.

    I talked to my right hon. and hon. Friends, and we assumed the Chancellor must have some figures of his own and must have known what he was talking about. It turns out that he did not. The most charming account of how this was finally resolved is given in the Financial Timesof 5th November:
    "It was discreetly admitted in Whitehall last night that Mr. Callaghan's notes for his weekend speech had referred correctly to wage rates and not earnings, and to an annual rate of increase ' rather than an actual increase … Mr. Callaghan, it seems, is not challenging the Press reports of what he said, but it is stressed that he had intended to say something quite different."
    I will hand this cutting to the Chancellor in a minute—but I want it back. The right hon. Gentleman should look into this, because what, in fact, was "discreetly admitted in Whitehall last night" was that "we gave him the right figures —but, of course, the fellow cannot read ". If the Chancellor would now like the quotation, I hand it to him—on the strict understanding that I have it back.

    We are told that although there is some conflict between the two right hon. Gentlemen, there is no personal animus. I read this in five newspapers, so it must be right[Interruption.] Well, that is nice, is it not? I will go further and say that I have no personal animus against either right hon. Gentlemen, but what I want to know is which of them is steering this boat, and in which direction is it supposed to be going?

    The standard of living is mentioned specifically in our Amendment, and the record over the last 13 years is this. The standard of living—just one figure only—went up—we want to be precise —by 48·74 per cent. in the 13 years of Tory Government. That is defining the standard of living as the rise in personal incomes per head as reduced by the fall in the value of money. That rise is almost identical with the rise in the whole of the previous 50 years under many different Administrations and all three political parties.

    We say that this is being imperilled, and I want to start with one particular example. We all talked a great deal at the last election about the "brain drain" about the need of the younger executive, and I am quite certain that all three parties were sincere when we said that this was the sort of man to be encouraged. Let us see what has happened to this man's bills as a result of the year of Socialism we are considering. The figures are given in an excellent article in the Financial Times of 7th May, as the outgoings of a successful executive in his mid-thirties, with a salary of £3,500 a year, a wife and two children.

    The ordinary plain calculation alone is that his bills have gone up by £206 in the year. But, of course, that £206 is only part of the amount he has had to pay, because his tax bill has gone up by no less than £52 in the year, coming to a total of £258. Even if he had a rise of £258, he still would not be back where he was a year ago because of the tax element at 6s. 5d. in the £—that is, standard rate less earned-income relief. This one man, in order to cancel a year of Socialism, would need an increase of no less than £380. That shows what has happened to these people. It shows what has happened in absolute defiance of everything the Socialist Party said to these men at the time of the election.

    Let me turn from the particular example I have given, to the general example. What one has to say really needs no embellishment, because the cold list alone is indictment enough. In one year we have increased taxation by £623 million. We have moved into a period of what I call "stagflation". The cost of living has gone up by 5 points in 10 months. We have lost one-third more days in industrial disputes. We have cut the road programme and many other vital investment programmes in the social services. For most of that period, we have seen all forms of national savings doing less well than a year ago. The value of the £ in that period has dropped by a shilling. We have suffered an intense and prolonged credit squeeze. We have a formidable load of debt.

    It would be easy to extend the list, but each and every item on it is in direct contradiction to the promises of the Government as a whole, and to the pledges which the Socialist Members gave to their constituents. Such a record demands the censure of the House today and of the country at the General Election.

    4.29 p.m.

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    The kindest thing that one can say of the speech just made by the right hon. Member for Enfield, West (Mr. Iain Macleod) is that it was a bit better than last time. As far as I could discover, where it was not inaccurate it was exaggerated, and where it was neither it was just a tatty going over of the fill-ins we read every week in "Quoodle".

    I must say one word of appreciation and kind thanks to the right hon. Gentleman. It is becoming really helpful to us that we can always rely on Opposition spokesmen to bring up the question of the economic and financial inheritance that was ours, and digging out all the figures again. It saves us doing the work of making sure that that fact stays before the country. I am quite sure that his hon. Friends will agree that the more often they bring that up, the more firmly they plant it, and the less likely they are to explain it away.

    The right hon. Gentleman had a little fun about steel. I was not clear whether he was deploring the absence of it from the Queen's Speech, applauding the absence of it, or what the purpose of his comments was. As my right hon. Friend the Prime Minister told the Opposition the other day, if the right interpretation to put upon their solicitous care for steel nationalisation is that they think it wrong that we should not now be doing this, the usual channels can have their conversations about the facilities the Opposition would provide us with to get it through.

    I shall be saying a few words in the ordinary course of my speech on the question of investments and incentives. In the same way, I shall deal with the index of production as I come to it in my speech. The old fill-in about the relationships between the D.E.A. and the Treasury and the other economic production departments we have heard so often, but it gets no better and no nearer to the truth.

    On the question of the surcharge which the right hon. Gentleman mentioned, may I put this thought to him? If imports had continued to rise at the rate at which they were rising under our predecessors, the gap this year would not be £800 million. It would be £450 million more. Something had to be done about it, as the right hon. Member for Barnet (Mr. Maudling) said in his Budget speech in April of last year, but he then proceeded to waste the next six months doing absolutely nothing about it.

    I, like the right hon. Gentleman, will not go again over the whole of the field which we traversed only a fortnight ago. I will start by trying to restate the major objectives of the Government's economic policies. The first one is to get rid of the balance of payments deficit with which the Tories left us. The second one is to achieve a faster annual rate of increase in output as soon as we can, leading to a 25 per cent. increase by 1970 over 1964. The third is to encourage and to bring about a substantial improvement in industrial and commercial techniques and equipment. The fourth is, by an agreed policy for productivity, prices and incomes—agreed, that is, with industry and those who care about affairs, not agreed with the party opposite—to bring about an early and substantial improvement in Britain's competitive position. The fifth is to correct the gross imbalance which existed when we took over between the regions of the country, both in industrial terms and in social terms. The final one is to change the priorities governing our social expenditure so that the rewards from increased output and earnings are more justly and fairly distributed and used.

    Just as we saw in the debate on the National Plan two weeks ago, which hon. and right hon. Members opposite had condemned before they read it but thereafter had, rather humiliatingly, to acquiesce in a Motion welcoming what they condemned, so, it was clear from the right hon. Gentleman's speech today, will the position be on our economic policy in general. They have been too busy, too soon, shouting "Failure" even to note; what the objectives of that policy are. When they finally take them on board, they will be in the same position as they were with the Plan. They will then find that what they have been shouting so loudly is failing will, in fact, be succeeding, and they will again have to welcome what is happening.

    It was absolutely fascinating to watch hon. Members opposite today. The only time they cheered up was when they thought that the right hon. Gentleman was applauding some decline in the country's position. At every stage when he was talking about something which might go well they looked as miserable as sin.

    I will make a present of this point to the right hon. Gentleman for use, with suitable acknowledgements, in the Spectatorthis week. [HON. MEMBERS: "Oh late."] He can have it for next week. Of course it is not our claim that all our objectives have been successfully completed in the first year. For what it is worth, that point can be had. But they will not all be total failures at the end of 13 years. By its very nature, a programme of that size, apart from having to clear up so much mess at the beginning— (HON. MEMBERS:" Oh."] The right hon. Gentleman took 35 minutes explaining all this. I have made only one reference to it. Apart from that, such an exercise is a long-term and continuing one. Some of the objectives will be harder to achieve than others.

    I will come to the one which the right hon. Gentleman thinks is so difficult. He is quite right. It is difficult and is not made any easier by the challenges made by hon. Members opposite to managements and to workpeople not to cooperate. Some of the objectives will be harder to achieve than others. Action which is required to achieve some of them will have a deleterious effect on some of the others. It is true that having to take action on the balance of payments has a consequential effect on the objective of getting faster and larger growth.

    Quite apart from that and quite apart from the inherited difficulties, the need to lay the plans to achieve these objectives, to forge the new policies to carry them out, and to create the machinery to carry them out, all in this year was bound to make this a very difficult year indeed. It is always harder to reverse things and to get started in a new direction than it is to maintain momentum once started. Against that background, let us examine the objectives and see how much justification there is for the charge of failure. Let us see which ones we are progressing with more swiftly than the others. Let us see what substance there was in the general political speech made by the right hon. Gentleman. What justification was there for it?

    On the question of the balance of payments, we all know—even the right hon. Gentleman could not dispute it—the dramatic change which has been achieved in this year. I thought that one of the most fascinating operations I have ever listened to was when the right hon. Gentleman did not dispute that it had happened, but every reason why we had achieved a reduction in the balance of payments deficit was either a bad reason or one we could not help or one that did not count.

    The point is that, unlike the Tories, we have brought about a very substantial reduction in the balance of payments deficit. If hon. Members opposite are not pleased about it, the country outside is, and nobody more than the business community. It is not simply the reduction which we have achieved that is the outstanding thing. I believe that the outstanding thing is that 1965, in relation to the balance of payments, has been a year of steady progress towards getting out of the red, whereas 1964 was a year of rapid deterioration right the way through.

    As the right hon. Gentleman quite fairly said, we have had this considerable reduction and improvement, not only in global terms overall. The right hon. Gentleman was kind enough to say that we have had it both on capital and on current account. We are very grateful to the right hon. Gentleman for drawing attention to that. Again, I was not clear whether the right hon. Gentleman thought that it was a good thing or a bad thing that we have achieved a reduction on capital account. It is time that one Front Bench spokesman for the Opposition, at any rate, got it into the others' heads that there are times when the country can afford to do things in terms of overseas expenditure and investment. There are other times when other priorities force the Government to hold their hand on that for a bit. It is very much because the Tories would not face that last year that the position snowballed as much as it did.

    After what the right hon. Gentleman said, I am not clear whether they are glad that there has been a reduction or whether they claim that not enough has happened. I think that the right hon. Gentleman who will be winding up the debate tonight, and who was having a little trouble with his facial expressions during that part of his right hon. Friend's speech, might tell us whether he is glad and whether he thinks that we should have done more. If it is the latter, it is very odd when one considers the record of hon. Members opposite when they were in office and how they have criticised everything that we have achieved. They pretended that they could spend more and cut taxes, but references to extravagant pre-election promises came oddly indeed from the right hon. Member for Enfield, West. We did our best, but we never came within streets of them and when I saw the papers which they left behind and I found how they were kidding themselves I was surprised that they were as honest as they were.

    Just as in the field of Government expenditure they pretended that they could spend more and still cut taxes—and they go on with this piece of duplicity—so in the field of the balance of payments, to judge from what the right hon. Gentleman said, they consider that in their case they could have cut the deficit quicker while doing less about it. That was no more practical than the other proposals which they made.

    Within the various constrictions placed upon us by our international obligations —and when the right hon. Gentleman was telling us about the interesting exercise on which his hon. Friend the Member for Worcester (Mr- Peter Walker) and others are engaged I do not know whether he was keeping in mind what was practical and could be policed—we have adopted measures which have been designed to make the maximum impact on the balance of payments with the least threat of damage to the prospects of growth. In particular, we have taken a number of measures to deal directly with the balance of payments.

    First, there is the export rebate. It may be that the right hon. Gentleman was not sure what Donald Stokes said, but I think he will find that he is much more representative of those who have engaged in this business than the rather grudging remarks made by the right hon. Gentleman. The rebate has had a considerable impact both on our competitiveness and our ability to get on with the job, and it is showing a surprising degree of success in a short space of time.

    We also had the temporary surcharge on imports. As the right hon. Gentleman well knows, there were other possible ways. The Leader of the Opposition left quite a well-documented exercise behind him. Whichever course we took was going to be very hurtful to those whose imports we were going to keep out and, although if we had used some other method the importers would not have had the surcharge, they would not have thrown their hats in the air with joy if we had used a different and more autocratic form of machinery to achieve a different result.

    When the party opposite went out of office we had to do something in this field, and whatever we did was bound to be difficult to accept because it had to reduce imports. The party opposite shied off making a choice every time. We made the choice. It is open for hon. and right hon. Members opposite to say that if they had stayed in office they would have come out of their coma and they would have made a choice and it would have been different from ours. That is a legitimate point of view, but they should now tell us which choice they would have made and how they would have reduced the deficit since they could not have gone on in the way in which they had been going on in the last nine months of office.

    We also introduced tighter exchange control. The introduction of the Corporation Tax has had effects on private investment overseas. Restraints on Government expenditure overseas have been considerable. All these have been ways in which we have operated directly to get the maximum effect in the shortest time on the balance of payments situation while having the minimum impact on our need for growth here at home. We went further than hon. Members opposite were ever prepared to go to achieve this result, while they attack us both for taking these measures and for the impact of the measures on our home economy. It is no use right hon. Members opposite muttering about it. There were disagreeable consequences, but we had to take disagreeable measures in part to deal with a highly disagreeable situation which had been brought about by their unwillingness to take action.

    It is quite clear that if they had had to tackle this problem this year and had rejected all these measures and had relied on their traditional weapons, the amount of deflation and the consequent loss of output and high unemployment which would have followed would have been far more than anything that the country would have dreamed of during the year when we have been in office. These would have been very substantial, and when the muttering has to stop and more audible comments have to be made from the Front Bench opposite I hope that the right hon. Member for Barnet will give an estimate of what would have been the situation if they had tried to meet it with the old measures of deflation, mass unemployment and general shut-down.

    Considerable progress has been made in improving the balance of payments. The trade deficit in the first ten months of this year has averaged £25 million a month, compared with £46 million a month in the corresponding period of the right hon. Gentleman's last year in office. The right hon. Gentleman sought to explain that away. It was apparently all due to a sleight of hand about values. The answer is that it is not. Exports in this period were per cent. higher in value. The right hon. Gentleman mentioned this but, since it might have spoilt the gloom into which he was determined to sink, he did not say that they were about 4 per cent. higher in volume than they were in the same period of last year. If a right hon. Gentleman opposite thinks that that is good, as well he might, he might notice that both the outriders outflanking him shake their heads and say, "What a pity ".

    On the other hand, the value of imports has been less than 1 per cent. higher than for the same period last year, and the volume over 3 per cent. lower. I have already given the right hon. Gentleman my estimate of what that import bill would have been had we carried on with no weapons other than those which the party opposite were using last year. Therefore, with this reduction in imports and increase in exports we have avoided what otherwise would have been a vastly accelerating trend. Hon. Members opposite seek to explain away this increase in exports and decrease in imports, but they show that industry is making a very encouraging response to the various measures which we have taken to enable it to do so and that industry feels very differently about this compared with the attitude adopted by the party opposite.

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    In order that we may fully understand the position, will the right hon. Gentleman give us the figures, based on the latest Board of Trade publication, of net new export orders for the engineering industry, and tell us how these figures for the past five months compare with the corresponding five months of the preceding year?

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    That is the very same point that the right hon. Gentleman made. I did not interrupt him, and interruptions about it now only lengthen my speech. The figures will be readily available. I did not know that the hon. Gentleman would ask me for them or I should have brought them with me. If he will put down a Question, I will give him the answer.

    I turn now to output and the rate of growth at home. Clearly—I make a present of this point to the Opposition, for what it is worth; they can nag about it for as long as they like—the steps we have taken to deal with the balance of payments deficit have affected the rate of growth and have affected output here at home. The two Budgets and the July measures have had their part to play in this. Our justification is that we could not have done the one without incurring the risk, or, if one likes, the actuality, of the other. But let us not exaggerate the situation as the right hon. Gentleman did today.

    There are several indicators here. They are all in official publications and I shall not bore the House by going through them. Right hon. Gentlemen opposite can look them up for themselves. One indicator is the continuing level of fixed investment, and another is the clear way in which most of British industry is maintaining its investment programmes ahead. No one would do that if the economy and industry were in the state which the right hon. Gentleman tried to show in his speech.

    Second, there is the index of industrial production, to which the right hon. Gentleman referred. As far as he went, he was right: the figure for September, published today, is one point down. But the right hon. Gentleman knows that there always are fluctuations month by month. No one bases decisions or assessments on any particular month's figures. If the right hon. Gentleman had gone a little further in his researches, he would have seen what the comparison was with the period when he and his right hon. Friends left office. In the third quarter of last year, the last one for which they were responsible, the index of industrial production was 128. The graph in "Economic Trends", produced by their own statisticians when they were responsible, shows that not only was it at 128 in the third quarter of last year but it had been practically stagnant during all the nine months before that.

    What has been the situation since? In the fourth quarter, which, I suppose, we can nominally claim credit for though it must reflect a good deal that had gone before, production went from 128 to 130. It has gone up steadily this year, with the single exception of the second quarter when, obviously, some of the measures we took were having their effect. But, with the exception of the second quarter, the index has stood at 132. It was 132 in the first quarter and it was 132 again in the third. So that we are, in fact, per cent. up on the last quarter for which right hon. Gentlemen opposite were responsible, and all the so-called stagnation this year for which the Chancellor is supposed to be responsible has meant that we have had no reduction at all. True the expansion was checked in the second quarter, but it has been resumed in the third quarter. There has only been one quarter's check, not a nine months' check such as it had under the previous Government last year.

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    What was the figure for January and what was the figure for September?

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    The right hon. Gentleman said that we had published a corrected figure. I do not know about that. The figure I have for January is 133 and for September 131. In between, it has fluctuated from month to month, but it is the quarterly figures that are significant. The right hon. Member for Barnet can explain to his right hon. Friends how important it is in this connection to look at a period longer than one month by itself. For the first quarter of the year, the index of production was 132. It fell to 131 in the second quarter, but it is back to 132 now and, clearly, as the investment and other indicators show, the expansion has been resumed.

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    Purely to clarify this point, will the right hon. Gentleman agree that the figures for the first nine months last year started at 126 and climbed to 128, and they have this year dropped from 134 to 131? That is the comparison.

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    No. These constant interruptions only serve to lengthen the time which one must take. I did not interrupt the right hon. Gentleman on a single point although there was much in his speech that I should like to have clarified. However, I am glad he has clarified this. His figures are totally wrong. In the first quarter of 1964, when they were responsible, the figure was 126·7, for the second quarter it was 127·5, and for the third quarter it was 127·9. That is a rise of 1 per cent. in nine months. Now, after a year in which we are supposed to have done so much to damp down the economy, we are ½per cent. up on the position where they left it. I am very glad to have the point clarified in that way.

    There are other indicators. Despite some reports which we hear, the demand for labour in general remains high. The October count was 317,000 unemployed in Great Britain, or 1·4 per cent. of total employees. It is very hard to make that match the canvas which the right hon. Gentleman tried to paint today. It is the lowest figure for October in seven years, and I do not think that there will be a major change in the position during the current month of November. The level of unfilled vacancies was correspondingly higher than for many months past.

    It is absurd for right hon. Gentlemen to talk as though the Government's measures are having a catastrophic or even a seriously depressing effect on the economy. Whatever effect they have, they are not doing that. Moreover—this cannot be said too often—not only is the charge of failure unreal in national terms, as any of the indicators will show, but it is plainly unreal when one looks at the country through regional eyes. In order to avoid hurting investment projects or the development of regions with unemployed resources, the Government's measures this year have all been highly selective both in their impact on different parts of the country and as between projects of differing degrees of importance.

    The six months' moratorium—I want to make this clear again because the right hon. Gentleman once more got it wrong— on starting new projects in the public sector specifically excluded the programme for housing, for schools and for hospitals, and the need to obtain building licences for private projects costing more than £100,000 will not apply to housing or to industrial building. In addition, neither of these restraints will apply at all to projects in development districts and areas which have experienced high unemployment.

    By cutting out some of the less essential demands on the building industry, we are, far from depressing the economy, making it possible for more essential projects to be completed more quickly. The restraints on commercial projects in certain parts of the country, together with the controls on office building in London and Birmingham, will not hinder progress but will help to encourage commercial development of this kind in those areas which at the moment have no worthwhile commercial development at all.

    As a result of this policy, the less prosperous regions have not been affected as they used to be by the unselective measures which the Opposition always adopted to deal with a situation similar to the one we inherited. Seasonal movements apart, unemployment has not risen significantly in any of those places. As regards skilled labour, there are substantial shortages now in those regions where there used to be considerable over-supply and migration away by people of this very kind. Even in Scotland and other regions where relatively high unemployment has been the order of the day, the shortages of skilled labour are becoming a matter of very great concern.

    Business confidence in the less prosperous regions remains high. This does not fit the pattern which the right hon. Gentleman tried to show. It is reflected in a high level of new orders for industrial construction in those regions and also in the increased level of approvals for industrial development certificates in those regions. The latest figures for industrial development certificates approved show that Scotland, Wales, the North-Western and Northern Regions account for a substantially higher proportion of the total certificates approved than they did before. In the second and third quarters of this year these four regions accounted for 52 per cent. of the total projects approved.

    This means that we are beginning to overcome the regional imbalance. It means that even in a period of restriction, expansion can go ahead where the labour and materials are available without affecting those regions which are heavily overstrained. This is what right hon. Gentlemen opposite must try to get into their heads. People outside the House know what is happening. Hon. Members opposite may be able to kid people here but they cannot kid people outside the House who see the effects of this policy in new factories and in jobs. The main burden in postponement of starts resulting from the July measures relating to public expenditure has fallen outside the development districts, and this has no doubt contributed to the maintenance of demand and employment in those districts. Let us consider housing and, again, the same four regions. They have increased their share of starts to 33 per cent. compared with a figure of well under 30 per cent. for the same period in 1961.

    Many things remain to be done in industrial and regional development. The Liberal Party in its Amendment refers to the need for more incentives, and the right hon. Gentleman also referred to this need. I am talking about incentives for investment and not incentives for export. I want to repeat what I have said both about industrial investment incentives and about regional development incentives. The existing system of investment allowances was first introduced over 10 years ago by our predecessors; it was suspended for a time in 1956 and the rates of the allowances have been varied from time to time. There have been suggestions from various quarters that for one reason or another this system is not operating as effectively as it should in relation to the considerable sums of money which are involved.

    Last Session we carried through sweeping changes in the tax code, and, as the Chancellor explained in his Budget statement, we felt that it was time for a thoroughgoing review of the whole system of investment allowances. We are conducting that review now and are looking at the whole pattern of incentives, both national and regional, to see whether there is a better way of doing things. For obvious reasons I can go no further than that today and until the exercise has been completed and various other consultations and inquiries have taken place. But the exercise is being conducted, and I recognise its importance.

    What is clearly essential is to drive on, both with the work which the E.D.C.'s are doing on industrial efficiency and modernisation and with regional development policy so that the country as a whole is fully engaged and the overstrained areas are eased. Here we have—and we did not have them a year ago—the regional economic bodies, which are beginning to make an impact. No one should underrate the impact which they are having. I hope soon to announce the new East Anglian and South-East Councils. To the right hon. Gentleman this is failure or defeat. I repeat, that is not the view held by people outside the House, nor is it the view of The Timesas we saw from the second leader in The Timesyesterday which was headed," What Manchester thinks today …" They show how well this is working and how completely different it looks to informed and rational men outside the House from the way in which it looks to frightened and irrational men inside it.

    Let me turn to the other half of the official Opposition Amendment, about which the right hon. Gentleman smacked his lips with such relish today—the question of productivity, prices and incomes policy. First let me put the question, this time to the right hon. Member for Barnet, which I put to the right hon. Member for Enfield, West the other day. I have so far had no answer. Do they believe that we should have a prices and incomes policy and that it should be an agreed and effective policy? Do they believe that or do they not? Do they believe that we can have such a policy or do they not? The Government not only believe that we can have it but are working hard to get it. Indeed, the right hon. Gentleman's complaint was that we were working too hard, not that we were not trying to get it. Do they believe that we should? Do they think that the exercise is possible or do they not?

    We ought to know what is the view of the would-be alternative Government. Or do they believe, as frankly I think they do—and here the right hon. Member for Wolverhampton, South-West (Mr. Powell) has been much more open about their thinking than has the right hon. Member for Enfield, West—that this can be achieved only by the old, anarchic and I think cruel and unfair alternative of sporadic mass deflation and unemployment, reinforced every time that it does not work by even more unfair pay pauses operating on people in the public sector and on others who can least well defend themselves?

    It is anybody's guess, but I am pretty sure that the nation as a whole is anxious for our policy to succeed. But let us be clear and let the nation be clear: there is a long way to go yet before we have the degree of success which we need. That may make the right hon. Gentleman smile. But in my view it only reinforces the importance of getting on with the job. There are many people outside who want the policy to succeed but who have still to recognise—and I put it frankly to them —that they are themselves the people who are holding it back. There are too many who think that it is a matter for the other chap.

    But, having said that, let us get some things into perspective. Again there were exaggerations and inaccuracies written into the right hon. Gentleman's speech. It is less than a year since there was even the first glimmer of an intention, with which we so irritated the right hon. Gentleman by succeeding when all before us had failed. It is less than a year. We did not have an agreement on machinery with which to operate it, or criteria by which the machinery should operate, until April of this year. That is less than seven months back. We did not set up the Board until the very end of April. Clearly it could not start to work until well into May. What was happening before that could not possibly have been affected by what the policy was supposed to be doing. We have had the policy and the machinery to make it effective and the criteria on which to base it only since some period in May, and we are now only at the middle of November.

    Right hon. Gentlemen opposite also forget the number of claims which were already in the pipeline when we came into office. What happened in the first six months of this year was very largely the result of what had been happening in the six months before we came into power. That was inevitable. I have the figures. At the beginning of this year the Government knew of agreements for pay increases or hours reductions or both in the course of 1965 for nearly seven million manual workers, or 55 per cent. of the total of all manual workers in sectors employing 10,000 or more, and for well over 1 million non-manual workers. They were covered by agreements made in the Conservative Party's term of office and which came into operation in this year There was nothing that we could do about that.

    The alleged high rate of increase for a large part of this year—certainly the first six months—was due to operative dates for agreement on pay rates and on reduction of hours; although the operative dates were agreed in the time of the Conservative Party, the dates themselves were in 1965. If we add those 8 million people covered by agreements to the millions of others—I gave the figure to the House some time ago; I believe it was about 4 million or 5 million—whose claims were already in the pipeline before the policy ever got started, we shall see what an inaccurate and exaggerated picture the right hon. Gentleman is painting.

    Not surprisingly, if a movement of that order is already on, other workers feel that they have a right to an increase in any case, even though they support the policy for prices and incomes. They say, "There must be a catching up period, otherwise we shall be behind when the new policy starts." The motive for this was quite natural—it was catching up other people who had benefited under agreements which had already been made. This has had an effect on the periods between settlements and the size of the increase which those settlements reflected in hourly wages.

    The Government have made it clear to management and unions that this rate of increase in negotiated settlements is much too high. But it does not mean that the policy failed before it started. It means, now that the policy is going, that these rates of increase are rates which we cannot support under the new policy. It is to the credit of management and unions, both the F.B.I. and the T.U.C., that they are co-operating with us to bring this about.

    The right hon. Gentleman had a good deal to say about prices. The position on prices is better than at any time during the year for which we have been responsible and a good deal better than in the years before that. There has been hardly any increase at all in the average level of retail prices for some months. There is evidence that many firms are reluctant to risk the scrutiny of the N.B.P.I. which may follow if they put up their prices, and the early warning system, in which they are co-operating with us—even though the Conservative Party are not—will enhance this deterrent effect and will ensure that we have much more adequate information and can take action about price rises which are proposed.

    Despite all that the right hon. Gentleman said about the rise in wage rate settlements and the reductions in hours, I would emphasise that we have held the price level. The Conservative Party did not hold the price level even when the wage level was being held. We have held the price level despite all that they have said about increased earnings. Something must have been absorbed somewhere in higher productivity, reduced profit margins or reduced selling prices to bring that result about.

    I hope that right hon. Gentlemen opposite will get into their heads the major reason why they so signally failed in all their attempts—although from what the right hon. Gentleman said today we might imagine that there had been no attempts. The reason why the right hon. Gentleman did not have success with his attempt and why others before him did not succeed is that they kept on doing what he did today—talk about incomes but mean only wages and salaries. They did not accept that this incomes policy must apply to all incomes. This is what brought about their downfall, and it is one of the reasons why I hope to succeed.

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    Nonsense.

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    The right hon. Gentleman does not make it nonsense merely by saying so. We shall listen to the right hon. Gentleman with interest.

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    If the right hon. Gentleman will be kind enough to read what has been said by Mr. Harold Macmillan and successive Chancellors of the Exchequer he will discover that what he is saying is absolute nonsense.

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    I have a feeling that if I read anything by any Conservative leader I shall read some nonsense. Let the right hon. Gentleman ask the leaders of the two sides of industry why these policies broke down before. We know. Some of us were there. We are making some progress, even though we have a lot more to do. But we shall not get more done if we keep going round and telling people either that they should not do this, as the right hon. Member for Wolverhampton, South-West tells them, or that they cannot do it. This is why the Conservative Party should make up their minds and come into line with industry so that we may say that we shall try to make the policy succeed. They might try to help it to succeed.

    There are many different ways of comparing wages and salaries and of comparing earnings. This is one of the reasons why we have such a multiplicity of different figures which are exceedingly difficult to follow. From the point of view of the prices and incomes policy, it is the rate of increase in earnings per head which matters most.

    We have not a single or simple comprehensive up-to-date index of earnings per head. It was not part of the apparatus of information bequeathed to us. This and many other gaps in our apparatus of statistical information will have to be filled soon if we are to do the job properly. But taking all available statistics into account, it seems to us that the weekly earnings per head have been rising on average this year at an annual rate of 7 per cent. as against the rise in productivity.

    That is insupportable—there is no question of that. But from the start we all knew that 1965 would be a difficult year. There was already the heavy pressure which built up before we took office. The demand for labour was high and we preferred to keep it high. The movement towards a 40-hour week was well under way. All these factors were bound to make 1965 a difficult year.

    But clearly the prices and incomes policy is now having an impact. There is an increasing recognition of the importance of productivity in the whole operation. The word "break-through "does not seem to appeal to the Opposition, but we have nevertheless seen some break-throughs this year in the abandonment of traditional demarcation disputes in shipyards on the Clyde and the Tyne and in the electricity supply industry, the petroleum industry and a number of other industries where collective bargaining has brought agreement on greater flexibility of labour. We are trying to encourage and hasten the process by taking direct action ourselves—following up the Devlin Report, for instance, by the introduction of the liner trains and by our meetings with the car industry. Through the "little Neddies" we are trying to bring it about by gaining the co-operation and understanding of both sides of industry.

    I know that many of my hon. Friends are concerned about the question of dividends. In July, I said that the rate of increase of dividends in the first quarter of the year was excessive and that I was keeping a careful watch on the position. The increase in the quarter was 28 per cent. There were, however, some special factors and that is why I decided not to take further action then. In the second quarter there was a very considerable fall-back in the rate of dividends. They were increasing at the rate of only 3 per cent. compared with the situation of a year before.

    I put this out so that everyone on both sides of the House and on both sides of industry will recognise that this is not a matter of wages and salaries alone, much less of salaries for teachers and dockers and nurses. It is -a matter for all incomes. I repeat my pledge that we will take fiscal action if the dividend area proves to be unaffected by the general policy.

    The National Economic Development Council will be having its general review of trends and movements in prices and incomes soon and that will give us an opportunity in an independent atmosphere to appraise the situation. I think that there should be a smaller growth of income in the year ahead, because of the lower pressure of demand, because the pressure for the 40-hour week is coming to an end, because the "catching up" movement will be losing momentum and because the prices and incomes policy is having a greater impact. We are determined that it shall be applied much more vigorously and with greater urgency. Hence our proposal on 2nd September to put the Prices and Incomes Board on to a statutory basis with power to call witnesses to give evidence and to seek statutory powers to enable us, if we need to or wish to, to introduce—after coming back to this House, of course—a compulsory early warning system for pay and prices.

    Against that background we have agreed with both sides of industry on a voluntary early warning system which we are starting to operate. I want to emphasise, so that any fears on this score can be laid at rest—they are unjustified —that the statutory system would only be put into effect with the approval of the House and if the voluntary arrangements should prove ineffective. Even then, it would be done only after the fullest consultation with the T.U.C. and the C.B.I. We want to make it effective and I am convinced that they do. If we can do so there will be no need for statutory backing but there will have to be a very widespread will to make it successful in the time scale we want.

    Whatever the Opposition feel about it we, in co-operation with both sides of industry, will do our darnedest to make it work. We are further along the road than anyone with experience—and some of us have had a long experience in these matters and know a great deal about the snags and about the traditions we are disturbing and the delicate mechanisms that have been built up—could reasonably have expected a year ago.

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    The rate of dividend my right hon. Friend has in mind seems to work out at an average of about 16 per cent. This appears to be about twice any dividend that the United States gets for its overseas investors. Is it intended to hold the figure at that level in view of the 7 per cent. my right hon. Friend quoted for wages and salaries?

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    I am not sure that I recognise the figure of 16 per cent. as arising from what I have been saying. Perhaps my hon. Friend and I can discuss this later.

    It is our intention to make sure that this policy shall have an impact on dividends and every other form of personal income as well as wages and salaries. We believe that this must be pressed on because it is a critical key to the whole drive for productivity, for price competitiveness abroad, for curbing inflation at home, and for getting a real rise in our real standard of living.

    So long as the Opposition go round denigrating it, then so long must it be clear that they have not grasped the critical nature of this key to the very things that they say they would want to do. Any fool can show that this is a difficult operation. One does not need to be a Member of Parliament to be as foolish as that. Any idiot can just sit around and giggle at the struggle. But this is work for real people who are willing to have a go—and they are not lacking, despite the carping criticisms from the benches opposite.

    Who, a year ago, would have believed that today the T.U.C. would not only be scrutinising pay claims for which its individual units have some responsibility but would also be operating on them? No one a year ago would have believed that this would happen. Who, a year ago, would have thought that the C.B.I. —not even born then—would within a year be co-operating in an early warning system for prices of its thousands of members?

    I cannot pay too high a tribute to the vision of the leaders of both sides of industry, men of all political persuasions and none, for their participation in this great tripartite adventure. I can understand those who say that it cannot be done, or that we cannot do it in this way. But I have nothing but contempt for the idiots and gigglers and sneerers in a matter where real men are trying to achieve such an objective.

    We would never have been where we are now had industry—including supporters of the party opposite—been confined by the blinkers through which the Opposition squint at this policy. The Opposition's censure move last night was a flop. This one must be rated a fiasco.

    5.10 p.m.

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    If the Censure debate yesterday was a flop, the right hon. Gentleman's speech today makes it certain that he will not go down in history as "Capability Brown". It was a poor speech and the first part was much worse than the last.

    I know how very sincere and how determined he is in the views he holds and about the things he is trying to do. I admire him for it. But I wish he would get out of his mind the idea that any criticism is unjustified and unfair. I say this because these are the problems that, quite rightly, the nation should debate both inside and outside Parliament, but the right hon. Gentleman speaks with a "holier than thou" voice as though any word of criticism of anything he says must be wrong.

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    The hon. Gentleman knows that that is not so. In my closing words I said that I welcomed those who said that our prices and incomes policy could not be done or could not be done in the way we are trying to carry it out but that I have contempt for the idiots, gigglers and sneerers who do not even criticise and do nothing to help.

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    The right hon. Gentleman must put a brake on himself. He used to have a certain sense of humour. Now it has gone. This is not what the House likes. It does not like being lectured. Even in bitter debate we have some fun across the Floor of the House and I have seen Members of the Government laugh at something cynical said on this side. The right hon. Gentleman should not take it so much to heart.

    I want to deal first with the question of stable prices. I would like to know how the right hon. Gentleman reconciles the fact that the cost-of-living index shows a rise of 5 per cent. with his claim that we have stable prices. My right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) showed from the Financial Times the increased cost of living for a person with £3,500 a year. But do not let us forget that such a person is not the only one affected. It goes right down to every family. It has been estimated that it means something like £1 a week for every family of a couple with one child.

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    This is from the Tory Central Office.

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    No, it is not.

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    rose

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    No. I cannot give way now.

    I want now to deal with the so called crisis which is said to have bedevilled the Government's actions from the time they took office. It is rather like smashing the teapot and expecting the housewife to praise what one has done. The crisis that the right hon. Gentleman talked about was created by the Government. The more time passes and the more reports we get from O.E.C.D. and other organisations, the more it becomes clear that the policy pursued by my right hon. Friend the Member for Barnet (Mr. Maudling) was right. What did he say all through 1964? He made no bones about the fact that we were going to run into a balance of payments problem. My right hon. Friend said that we should be under severe pressure. He said that our reserves were sufficient to weather the storm and the right hon. Member for Huyton (Mr. Harold Wilson), who is now the Prime Minister, agreed with and supported him.

    As time has gone on, most of my right hon. Friend's forecasts have been borne out. Exports this year are up by 5½ per cent. In 1964, my right hon. Friend said that exports in 1965 would rise considerably. Right hon. Gentlemen opposite cannot take all the credit for this export rise because they know, as well as I do, that the great bulk of exports, because of the way industry and commerce work, were booked last year. The bulk of the orders now being exported were booked when the Conservatives were in power.

    The right hon. Gentleman was not prepared to give the figures to my hon. Friend the Member for Oswestry (Mr. Biffen). However, my hon. Friend has them and in the last five months engineering export orders have dropped by 7 per cent. compared with last year. The improvement in the figures this year is the result of Conservative policy last year and has nothing to do with what the Government are now doing. If the orders for engineering goods now being booked are down by 7 per cent., next year there will be a drop in engineering exports, unless the Government are very careful.

    Every hon. Member knows that in the cut and thrust of party strife, which is so much the democratic process, one gets blamed for what the other party has done and takes the credit for what the other party has done—because of the leads and lags. In the export total of £4,500 million, orders for ships and locomotives and aero engines and aeroplanes, probably worth about £1,000 million, will have been booked not last year or even the year before, but in 1961 and 1962. They take all that time to flow through the pipeline.

    When the Conservative Party was in power and various financial crises occurred from time to time, I was never certain when supporting the Government whether, because of the leads and lags, we should not have been reinflating when we were deflating and deflating when we were reinflating. We were often doing things at the wrong time because of the leads and lags, because we were only dealing with what had passed, not realising that the course of events had changed. The situation was sometimes made worse when the economy was squeezed when it should have been boosted.

    As a result of our experience, all of us from 1945—and let us include all parties in this—have learned a great deal about running the economy. Let us face the fact that for many years this country's economy will be on a knife edge. However successful we are, we shall never be able not to need to worry about what is going on overseas and what our export performance is. We shall always be balanced on a knife edge.

    What I blame the present Government for more than anything else is that deep down right hon. Gentlemen opposite even now have not learned the lesson that confidence is the most delicate flower ever to be grown in any industrial horticultural garden. Anybody who has been in business or commerce knows that a whisper can alter the atmosphere which sweeps across a country. If for some reason people suddenly say, "It is too good ", or a rumour spreads and people do not place orders, contraction sets in.

    The Government cannot get away from the fact, whether it was lack of experience—and I will give them credit for that, because right hon. Gentlemen opposite have been out of power for 13 years and there were very few of them left who had experience of administration—

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    indicated dissent.

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    The First Secretary and the Prime Minister had experience and the Chancellor of the Exchequer had a limited amount of experience, but the number of right hon. Gentlemen opposite with that experience could be counted on the fingers of one hand. With that and the crush of the General Election— for during a General Election we say bitter and unwise things about our opponents from time to time and the mood still existed when right hon. Gentlemen opposite formed a Government—two-thirds to three-quarters of the financial problems with which we were faced were created by the Government themselves. They would not have existed without Government action. My right hon. Friend the Member for Barnet forecast what would happen to the economy and in broad outline events have proved him right.

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    He did not check it, did he?

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    How could he check it? He had to wait for time to make it fact. However, in the following 12 months all the export performance and the reduction in the adverse trade balance which he forecast took place.

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    Is the hon. Gentleman saying that if his party had won the election, right hon. Gentlemen opposite would not have taken steps to correct the deficit in the balance of payments but would have allowed the situation to continue?

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    I am going a long way to saying it.

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    In that case, thank God they lost.

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    It is all right to talk about taking steps, but what steps did the right hon. Gentleman, take with the exception of the import charge which has had a very small effect on imports because of stockpiling and so on? What single action has he taken which has reduced the balance of payments? Will he tell me?

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    Certainly. There is the import charge, which is worth at least upwards of £200 million in the balance of payments. There is the capital account reduction, which is certainly worth upwards of £150 million in a full year. There is the export rebate, which has certainly helped exports. There are all the additional credits which have been put at the disposal of exports. If the hon. Gentleman is not careful, this will be not an interruption but a speech, because there is so much to tell him about what we have done.

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    I am grateful for that intervention. The Chancellor said that in his Budget he introduced capital control, which I welcome. Does he suggest that that will save £100 million this year? I doubt whether it will save £5 million. I will willingly give way to the right hon Gentleman again.

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    From what I gather, the House is not particularly keen on my prolonging the hon. Gentleman's speech.

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    I agree that the measures of our capital investment overseas will bite at some time and reduce our deficit, but is the right hon. Gentleman saying that they have done so now? Of course not. They have been in operation only for three months and these things do not work as quickly as all that. The balance of payments deficit was about to come down before any of these measures were taken. The Government themselves said that the balance of payments deficit would be halved in 1965 and it is working out that way.

    When he was Chancellor of the Exchequer and after the election, my right hon. Friend the Member for Barnet said that there was a problem. Of course I am not saying that we would not have taken any action. What I am saying is that the enormous measures which the Chancellor had to take were largely a result of the atmosphere which he and his right hon. Friends created in November and December, followed by hasty action and ill-thought-out measures which made the problem even worse. As a result of that, he has had to go on right through this year. I was delighted in July when he got further support from the banks and I hope and believe that as a result of that further support —and this is where I return to the issue of confidence—our reserves will be increased by between £400 million and £500 million by the end of February or March.

    When one gets a return of confidence, an assurance that in the near future there is going to be no devaluation, we will automatically, as the leads and the lags work out, get back nearly half of all that we have lost. I am delighted that this should happen, but I think that we should realise that it is jolly nearly automatic. When there is a fear of devaluation the leads and the lags work very much against the balance of payments, but as soon as the position is stabilised there is an automatic flow back into the country. When my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) was Chancellor of the Exchequer, he paid off all our borrowings in 12 months. Once confidence was re-established, the money flowed back again because it is needed in a great trading community such as ours is.

    I do not think that the National Plan ought to be called a plan at all. It is a forecast. I do not blame the First Secretary for producing only a forecast—it is a very difficult thing indeed to produce a plan intended to work for five years ahead. A great deal of the plan is based on entirely false premises. Many of the figures were produced by saying, "If we increase our productivity by 25 per cent. by 1970 what is the output in a certain industry expected to be? "That is a very different thing to saying "What is your forecast for the output of your industry "and finding out whether that forecast adds up to 25 per cent.

    Industry is trying to build into its forecast the proposition put to it by the Government as a result of the studies made by the Chancellor this year. Is this figure still the target for 1970, when we have this drop in production which means that we have to increase it to 26½ per cent.? Are we still going to increase by 25 per cent. by 1970? Is this a phased programme like the road programme? Is it going to be stretched, to take longer to achieve this figure, or are we still working on this target? It is an extraordinary plan. I thought that a plan was meant to produce a coherency—a matching of one's resources, manpower, wealth and technology, used to the maximum in order to produce the maximum wealth and benefit for the nation.

    After having been examined and worked on by a great number of people the plan emerges with 200,000 men short. I am tempted to say that I am very glad that the First Secretary is producing this plan, and not building the Forth Bridge, because it would look a pretty funny bridge if, at the end of the day he was 200 ft. short of the other side. Surely any plan should result in two and two equalling four. All that this plan works out is that our guesses have turned out wrongly, and that we have to find 200,000 men from somewhere else. The plan talks of the saving in manpower, but with all that saving, we still expect to be 200,000 men short. I hope, for the sake of the right hon. Gentleman and of the country, that we do not find that we are short. I hope that the growth of technology in five years will achieve the 25 per cent. increase without the additional manpower.

    There are one or two points I would like to make which I think may help. I would like the Chancellor to have another look at the whole system of P.A.Y.E. I am sure that he must realise that one of the greatest disincentives to increased effort is the amount of money taken out of a person's pay packet, or his monthly or quarterly cheque. If a chap thinks that he is earning £20 a week and he only gets £18, he stops thinking that he is earning £20 and thinks that he is only earning £18. One of the great disadvantages of P.A.Y.E. is that if a person works overtime he is then presumed to be earning what he has earned in overtime for 52 weeks of the year, and he pays a large amount of increased tax. Before the war we paid our tax one year in arrear. Could the Chancellor have a look at the possibility of our paying one year in arrears again and therefore paying exactly the same amount each week throughout the year? If we can get back to that system we would find that it was a greater incentive to increased effort than the present system.

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    rose

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    I will not give way at the moment.

    The reason that it would be so much of an incentive is that people do not work overtime 52 weeks of the year. The First Secretary has talked about the 40-hour week and we all know that although the official working week has gone down to 40 hours, people are still working to within 1 per cent., 47·6 hours a week, as they were doing 15 or 20 years ago. But they do not do seven hours overtime every week throughout the year. They work a lot of overtime for perhaps three or four months then go down to a standard wage for a while and then up again. The system I propose would be a far greater incentive to people to put in the extra effort for which we are asking.

    For many years our arguments have been on the question of increasing exports, to increase the standard of living of the British people. We already export 15½ per cent. of the gross national product. No other nation with the exception of West Germany exports a greater proportion of the gross national product. Japan, America and France are all less. It is going to be pretty hard to increase our exports every year, except as the growth of world trade increases, if we want anything like a slightly bigger slice than we now have, of 15½ per cent.

    This is where I part company with a great deal of what the Chancellor has done. I know that for temporary reasons he might have felt justified in hitting at overseas investments. But in the world as it is developing, I am sure that the long-term advantage to this country would be very much greater if we could build up our overseas investment from £11,000 million to £20,000 million. [Interruption.] Exactly, but the attitude which is creeping in with all the developing countries, namely, that they want the assembly factories there otherwise we cannot send the basic parts, will increase more keenly every year. Therefore, it is very important and almost essential, that increased investment flows overseas, otherwise these countries will not allow us to send our goods to their markets. We must encourage overseas investment.

    Secondly, if the export position is, inevitably, not to get any easier, would it not be money very well spent if we spent more on encouraging the tourist industry, which is one of the unrequited exports, which costs us very little in overseas currency, except for advertising, and which does not place an additional strain on the resources we have in this country? Perhaps the Chancellor of the Exchequer could get the Minister of Public Building and Works, who is responsible for ancient monuments, to go into this matter.

    I was horrified to find last year when I went to see Hadrian's Wall that it was almost impossible to look at it without going for a half-mile tramp. There were about three car parks over the whole length of the wall, and there was nowhere to get a cup of tea. This is one of the biggest draws for Americans. The biggest attraction after the Great Wall of China is Hadrian's Wall. Many Americans would visit it if it were made easier to do so. The tourist industry, which does not involve the transit of goods over frontiers, is one of the things which we have to consider more seriously if we are to achieve the increased standard of living that we want.

    We are living in an ever-increasingly competitive world in which more and more nations are industrialising and therefore are demanding that their products should be bought in their country rather than in ours. This means that overseas investment must have priority. Indirect exports are just as valuable, if not more valuable, than sending goods across frontiers. I hope that the Chancellor of the Exchequer will consider these matters because I am sure that they are part of the problem which we in this country have to solve.

    5.53 p.m.

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    I have been in the House long enough to know that the hon. Member for Ormskirk (Sir D. Glover) likes nothing better than a bout of in-fighting in the Chamber. But he has a very generous side to his nature. Therefore, I thought that his description of the speech of my right hon. Friend the First Secretary of State as a poor one was entirely out of character.

    I enjoyed listening to the speech of the right hon. Member for Enfield, West (Mr. Iain Macleod). It was a good speech, and certainly a distinct improvement on the speech which he made a fortnight ago in the debate on the National Plan. The right hon. Gentleman was perfectly right to dwell on what I regard as the weaker, more disturbing aspects of the present behaviour of our economy, the changing character of our terms of trade and the widening gap between earnings and productivity. Although he may not have satisfied the hon. Member for Ormskirk, my right hon. Friend the First Secretary of State replied at length. His was altogether a much more substantial speech, and I am taking nothing away from the speech of the right hon. Member for Enfield, West. My right hon. Friend made a very well-structured speech and I am sorry that the hon. Gentleman, although he did not pay tribute to it— we can hardly expect that from him—did not at least do a little more justice to it. I thought that the hon. Gentleman, like the right hon. Member for Enfield, West, was concerned, perhaps more than anything else, to acquit his party of responsibility for the crisis of confidence a year ago.

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    Then the hon. Gentleman does admit that it was a crisis of confidence?

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    Yes, indeed. One can hardly say otherwise in view of the great efforts which my right hon. Friend the Chancellor of the Exchequer has had to make this year to try to overcome that crisis of confidence.

    It is important that we should briefly review some of the key economic indicators not touched on in the debate so that we can assess the Opposition's performance during the last, say, 10 years. I want primarily to contrast the position of a year ago, on the eve of the election, with the present position so as to bring out the corrective actions demanded by that crisis—a balance of payments crisis as well as a confidence crisis—which the Government inherited or which was certainly in existence, whether or not it was coincidental with our coming to power. I want to consider how far they have been, first, implemented by the Government, and, secondly, related to the Government's long-term objectives.

    I want to do that against the background of a remarkable speech by my right hon. Friend the Prime Minister in New York on 14th April to which many Americans referred while I was touring the United States only recently for seven weeks, when I had the fortune and pleasure to meet many American businessmen, economists and journalists. They were almost at one in their admiration of what they had seen of the Prime Minister, not only on 14th May, but subsequently. They have since by Telstar seen him meet the Press. His speech in Wall Street in April stuck in their minds, and I want to refer to it later because it will help me in dealing with the Liberal Party's Amendment to the Gracious Speech and to make some sort of appraisal of the Government's programme, its objectives and its chances of success.

    The right hon. Member for Enfield, West was right to emphasise the way in which, while his party was in office, the living standards of the people increased. He said that they had gone up by 49 per cent. over the last 13 years. Even if he had not mentioned that figure, I was ready to say that the gross domestic product per head of population has increased over the last 10 years by about 25 per cent., which was sufficient to double the G.D.P. over a comparatively short period of 30 years, which is a good performance by any standard. Of course, no one can deny that because it is so obviously reflected in the average consumption level in this country.

    But what the right hon. Member for Enfield, West did not say in order to give a balanced picture was that the retail price level in the same period went up 36 per cent.

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    My right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) also gave the adjusted figure after taking into account the rise which had taken place in the retail price index. The 49 per cent. figure is a real figure.

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    Yes, that is so. I was going on to make that point. Nevertheless, the significance of this continued rise in the price level over the period for other reasons, which I need not go into because of what my right hon. Friend is trying to do through the National Board for Prices and Incomes, cannot be overlooked. These increased resources were used by the Opposition when they were in government to raise the rate of fixed capital formation in the economy. The cumulative effect of 10 years of investment is a rise in capital stock by about one-third. Despite this, home costs per unit of output have risen by 37 per cent., which shows that we have not been getting the full benefit of this investment and the right level of productivity during those years which the Opposition properly remind us now we are not achieving.

    The volume of exports of goods and services increased faster than the G.D.P. for which the Oppposition can take credit —37 per cent. as against 33 per cent. on the other hand, Britain's share of world's exports of manufactures over this period fell from 20 to 13·7 per cent. The amount of imports which these exports would buy rose by 48 per cent. with the aid of improved terms of trade. It might also have been said, by way of balancing the picture, that the volume of imports has grown faster than the purchasing power of exports—56 per cent. as against 48 per cent. and much faster than the G.D.P., namely, 33 per cent.

    I think it is not surprising, in view of this, that the balance of payments on current account at the end of this period, though favourable for most years, gave us only an aggregate of £389 million by way of surplus, and this, as we know, was achieved only at the cost of exchange control, at the cost of "stop" policies, at the cost of a certain amount of growth. Moreover, the reserves of gold and convertible currencies were consistently lower in relation to our short-term liabilities and we had at the end of the period a net deficiency of nearly £600 million.

    I am not saying that at the end of this period, about which the right hon. Gentleman was talking with such pride an hour ago, there were not achievements, substantial achievements, to the credit of his party, but the fact that a man has added to his net assets during a period does not mean he had not some difficulty in living within his income during that period, and that pretty well sums up, I think, the record of the Opposition over the last decade.

    If we now come to the position at the eve of the election we find that the cumulative current account was just in balance, but it was making no contribution—and this is something of which the hon. Member for Ormskirk needs to be reminded— to the financing of long-term capital exports which were averaging then about £175 million a year, and, indeed, had done for some years. The reason why this current account was only just in balance was that our export performance was not satisfactory. It was not satisfactory when we recall the comparative cost position of this country at the time, and when we recall the difficulties of other countries in Western Europe on account of the scarcity of labour. It was not satisfactory, either, when we remember that the exports of manufactured goods, which make up the bulk of United Kingdom exports, were rising less than those of other industrial countries taken as a whole. It was not satisfactory, also, of course, when we remember that our gold and foreign currency reserves were under £1,000 million for the previous seven years. It certainly was not satisfactory when we also recall that the United Kingdom, the United States apart, was the only industrial country not to increase its reserves during that period.

    I wonder, therefore, how the right hon. Member for Enfield, West could possibly have said during his speech And so we came to the election of 1964 without any crisis of confidence." Of course, there was a latent crisis of confidence. We felt it all that year. We all knew that corrective measures were not being taken sooner. No one was in any doubt at all that there was a need for corrective measures and that the delay in taking them, as we all know, was due to the need for careful election timing.

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    rose

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    I ought not to give way because I want to sit down within 20 minutes if I can.

    My right hon. Friend the Secretary of State for Economic Affairs described 1964 as a year of rapid deterioration throughout, and I do not see how we can possibly get away from that in view of what I have just said. I have been at pains to come up with an objective picture. I have not been selective in my indicators. These are key ones. No doubt following speakers —and as far as I can judge there are Members who are very well qualified to do so—can come up with more significant indicators—if there are any—if they catch the eye of the Chair. But in view of all this, I think my right hon. Friend was perfectly entitled to ask that during the speech of the right hon. Member for Barnet (Mr. Maudling), who will wind up the debate for the Opposition, he will say what he and what his party would have done had they won the election.

    Now, to come up to date and compare the position I have just described a year ago with the position today, and we look at the reserves, balance of payments, exports, investment, savings. I shall not go over the ground already covered, but it is important to stress a marked improvement in the reserves this year.

    When we look at the balance of payments we note a marked improvement in the second quarter. We have these figures, and I shall not delay the House or take up time by detailing them. As to exports, I am not giving figures which the hon. Member for Ormskirk has rightly given, but I will give figures which have not been given. During the period August to October this year exports were nearly 10 per cent. higher than a year ago, while imports were precisely the same. I am not going to say that we shall keep that up. I hope we shall. Happily, the trend is significantly upwards. But it is nevertheless a most striking improvement.

    When we look at investment, and particularly at what the Prime Minister said in his speech on the National Plan a fortnight ago, we see fixed investment by manufacturing industry in the first six months; of this year compared with the second half of 1964 is 7 per cent. up, and he gave us the optimistic picture for 1965 as well as 1966 so far as one can determine the intentions of manufacturers according to Board of Trade returns.

    That again is most heartening, and yet the Opposition Amendment, as my right hon. Friend reminded us, refers to the failure of the Government's economic policies. I do not see how Members opposite can possibly sustain that indictment during the rest of this debate.

    I was worried, I must confess, in recent weeks, about local savings, not merely for the short-term position but also the long-term position. I was worried about the implications of the National Plan for savings and investments and how it would be possible to get the requisite levels of both to give us our targets by 1970. However, I was considerably heartened at the weekend by a reply to a Written Question to my right hon. Friend the Chancellor of the Exchequer, on the basis of the seasonally adjusted figures, that personal savings are estimated in the second quarter of this year to have been 9 per cent. of personal disposable income, which compares with 7–6 per cent. in the first quarter of 1965, and the level so far in the first half of this year is clearly above that for 1964 and certainly 1963.

    This is most heartening. I do not want to be unfair to some Members opposite. I know they are interested in this, and there is certainly one of them wanting to catch your eye, Mr. Speaker, and I know he has been even more pessimistic over this than I have been in recent months. I hope that he and some of his hon. Friends will share the joy which we feel about this striking improvement, because we know that without this we cannot possibly sustain not merely the Plan but the present position.

    Yet the right hon. Gentleman the Member for Enfield, West in a sense was right. He is usually right most of the time because he is so careful in what he says, but it very often means that he has not given the whole picture. For example, he said that we had seen last year national savings doing less well than a year ago. That was only part of the picture, and I suspect he knew it.

    Now what of the future? I think the Secretary of State for Economic Affairs was quite right to dwell upon the need for balance of payments equilibrium and the defence of sterling, because without either we cannot possibly hope to achieve all the wide programme of social reform which makes up the Queen's Speech. I want to touch briefly upon the balance of payments in order to show, as I have said I would like to, what steps I think will be needed and relate them to the Government's economic objectives.

    I do not think there is any doubt whatsoever when we look back on the experience of the past that the balance of payments has always tended to be a major constraint on economic growth. On the other hand, many of the difficulties of the past can be attributed to failures of demand management policy. For example, in 1963 the expansion, like the previous upswing in 1959–60, led to crisis. This was undoubtedly due to excessive expansionary measures. I recall that during the Budget of 1963 Members of this House warned the then Chancellor of this.

    I think that this is even more significant when I recall that the recent expansion was shorter than the previous upswing. Demand management is clearly of vital importance. But what is crucial is that the persistence of an unsatisfactory underlying balance of payments position, on an average of fair years and bad, points to more deep-seated factors. There is a need, therefore, for planning, for more skilful management of demand within the economy, and for a tougher competitive climate to help maintain an upward trend of exports.

    As for planning, we are going to get this now, as we know from the evidence of recent weeks and which my right hon. Friend repeated only an hour or so ago. It is absolutely imperative to encourage steadier as well as faster growth as part of our long-term strategy.

    I think, however, that more skilful demand management is needed to help us pay more attention to the main secondary effects of reflationary policies. If the competitive position of the United Kingdom is to be improved, then a prices and incomes policy is clearly called for. Such a policy is being developed by this Government, though no one can possibly mistake the difficulties in the path of such a policy, especially in a free society.

    Productivity is also of importance because, as I have said, and as I think is clear, we have not yet felt the benefits of all the investment already made. Other longer-term reforms of a structural character are highly desirable therefore, and the Government have already some of these in hand. For example, there is a number of measures to improve the quality and flexibility of labour supply, and the little "Neddies" are studying ways of improving the efficiency of firms, and regional development schemes are being brought forward for major areas of the country. In turn, they should facilitate the adoption of a more differentiated approach to the problems of each region than has been the case in the past. In certain basic sectors, particularly rail transport and the docks, the Government have announced rationalisation and modernisation schemes. Legislation on monopolistic and restrictive trading practices is being extended and reinforced.

    That does not mean that the Government's goal of reaching a balance of payments equilibrium by the end of 1966 is going to be an easy one. The margin for manoeuvre is limited, and large external obligations have been contracted. Servicing of the debt to the I.M.F. calls for an annual surplus of some £200 million in the years 1967–70. It was really about those external obliga- tions and our ability to meet these new debts that the Prime Minister spoke in New York on 14th April and American businessmen were heartened by what he said. He described simply how this could be done by a tougher competitive climate. In a most impressive speech he brought together the Government's objectives for a new Britain and a comprehensive picture of a dynamic economy in which good incomes could be fairly earned by hard, intelligent work, or constructive enterprise in a tough, competitive environment, and in which the Government will assist in the process of modernisation, largely by securing a cooperative approach based on planning by consent, but by a readiness to penalise or prevent anti-social practices, and also by a readiness to look after the weaker members of society. In this way he believed—I found American businessmen a good deal more convinced than formerly—that the national output would rise much more rapidly, and that its allocation between people and uses could and would follow a more acceptable set of social priorities.

    I wonder, in view of this and in view of the Prime Minister's assurances as well as the content of the Gracious Speech, how the Liberals can possibly have put down their Amendment. I do not doubt that the hon. Member for Caithness and Sutherland (Mr. George Y. Mackie) will try to catch your eye, Mr. Deputy Speaker, but I should like to remind him that I probably represent more Liberals than he does. I know what some of them are thinking about the Queen's Speech. I know from my experience that a surprisingly large number over the past ten days have been heartened by our announced policies. They welcome and accept the contents of the Queen's Speech; like the Liberal candidate for Harrogate who, according to today's Yorkshire Post, has resigned from the Liberal Party and taken steps to join the Labour Party. That was for the reasons I have just given, because he accepts the Queen's Speech.

    The fruits of this new Government's conduct of our economy are already evident in the balance of payments position and in the recovered strength of sterling. It is also to the credit of this Government that they have been able to keep the boom going for so long without having recourse to large-scale unemployment. I do not know that we have managed the trick this time, I do not know that we have established the right Keynesian balance—only time will tell— but I do know that in his management of the economy the Chancellor of the Exchequer has been more successful so far than any of his predecessors. The proof of this can be seen in the prolongation of the present boom.

    My right hon. Friend the First Secretary of State and Secretary of State for Economic Affairs was perfectly right to claim credit in his remarks for the way in which his selective policies, notably in the regions, have also helped to keep the boom going. I want to be fair about this. On the evidence and the face of things there is a much more skilful conduct of the economy by the Chancellor and by the First Secretary. I do not see, therefore, how the House can possibly accept these two Amendments.

    6.16 p.m.

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    Although the debate has ranged over pretty well the full spectrum of economic policy, I wish to try to confine my remarks mainly to one aspect, the incomes policy, not least because it is specifically mentioned in the Amendment moved by my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod).

    I invite the House to recall with me 11th February when the First Secretary of State and Secretary of State for Economic Affairs told us that he now had machinery established on which the prices and incomes policy could work. This, in a sense, was an historic occasion. The right hon. Gentleman on that occasion was feeling in a fairly fraternal mood, I think, because I was rash enough to comment that very many people would regard the quest for an incomes policy as illusory and, indeed, undesirable. I also asked about statistical machinery, and I shall come back to that later. On that occasion, we did not have comments about idiots, gigglers or sneerers, but the right hon. Gentleman in a great state of fraternal feeling accused me of courage. Whether it was the courage of the Minister of Technology's convictions, I do not know. I did not claim that at all. Perhaps I was entitled to say that I was sceptical, and I hope to show that my scepticism has been more than justified.

    I ask the House to consider three points which now seem worth considering on the development of the incomes policy. I put them under the headings of confusion, danger, and yet again a concern with the statistical machinery which must touch upon the very practicability of such a policy. I hope to return to the point I made in questions on 11th February, a point which has been made subsequently by a number of my hon. Friends, about the statistical machinery by which we are asked to evaluate whether or not the policy is succeeding and also to determine whether or not the First Secretary and the Chancellor himself can determine whether such a policy is succeeding.

    I comment first on the confusion. I think we are seeing a considerable amount of confusion about the incomes policy. As evidence for that, I consider the statement which was issued by the First Secretary's Department on 3rd September. There was then the comment put out by the Department of Economic Affairs that—
    "There is a general understanding of the need of the situation but it is not being reflected in a satisfactory movement of productivity, prices and incomes. Prices are still rising and pay claims are being settled well above the norm."
    Clearly this is a statement which is incontrovertible, but what I find confusing and, I suspect, a great many others find confusing, is that just short of a fortnight later the Department of Economic Affairs with a great flourish produced the National Plan which says, on page 67, on the incomes policy:
    "An encouraging start has been made." I find it somewhat difficult to reconcile those two statements.
    I shall now consider the question of the danger which I believe to be inherent in this policy. I think the danger is that the Government have "gone nap "on an incomes policy. Their whole economic programme to some extent rests on the success of an incomes policy. This is no exaggeration on my part. I think one could find ample quotations to show that the arch stone, as it were, of their economic policy is the success of this venture.

    It seems that as the difficulties and, as I believe, the inherent contradictions of such a policy become apparent there will be a growing disposition to cast around to blame others. At the moment the blame to some extent is focused pretty sharply—as it was by the Secretary of State this afternoon—on my hon. and right hon. Friends who are taking a somewhat sceptical attitude towards it, but I think that as time goes by others may find that they are accused of not co-operating in this great venture. I have always distrusted the idea of consensus in politics and consensus in Government. This may be a highly unfashionable thing to say, but I believe that one of the results of this will be increasing concern on the part of the Government that they have been let down by those whom they invited to be their agents, the Confederation of British Industries or the vetting sub-committee of the Trades Union Congress.

    If I understood the Secretary of State correctly, he said that these bodies must make the policy effective, when he was referring to the early warning system. That was a clear indication that if they did not make it effective statutory power would be taken. I do not think that an unfair condensation of the remarks he made. I believe there is an inherent slide towards increasing control of prices and incomes. I believe this is a return to the philosophy of the 1945 Labour Government which set great store by these kind of controls. This is no exaggeration; it is there in the Statist article published some months ago when the President of the Board of Trade talked about the Tories dismantling the fine planning machinery left behind by the outgoing Labour Government in 1951. Therefore I do not regard it in any sense as scare politics to talk about the slide towards statutory controls implicit in this incomes policy.

    I wish to conform with my intention to be brief, and I will now talk about what seems to be the confidence trick nature of this exercise. I hope that it is understood that I do not use this term in any pejorative sense. There is a degree of nonsense in all our politics. We must acknowledge this to ourselves. There is a degree to which we hope we can sell things to the people without them necessarily understanding the full implications or extent. I do not want to prate on this particular line. [Laughter.]An hon. Member laughs as if this were something like pas devant les enfants. We may adopt these postures, it seems, but not on the Floor of the House. What I am saying this afternoon is not particularly agreeable. It is perhaps a distinctive view, but I am saying it on the Floor of the House because I believe that it is here that it should be said.

    Where the nonsense calls for more than the permissible degree of credibility is in the attempt of the Government to establish that an incomes policy can succeed. As I understand—and I shall be happy to be corrected by the Chancellor on this point—the development of an incomes policy is seen as trying to determine the general level of activity by identifying and then selecting individual components and subsequently controlling them rather than relying on what he would call the old crude overall tools for the management of the economy.

    As the Chancellor does not intervene to correct me, I think I may take it that he assumes that to be a fair interpretation of the philosophy behind the policy. The Chancellor has not interrupted me and I move on comforted. Therefore, when I question the statistics of an incomes policy, this is not a sort of esoteric touch or a clever dick kind of intervention. It must touch on the whole feasibility of an incomes policy, because if we are unable to identify as the prerequisite of our measure of selectivity the whole exercise to my mind is severely questioned, to put it no higher. This was the point which prompted me to ask my questions of the First Secretary of State. I am sorry that I am gunning for him when he is not present to take account of this, but the Chancellor will be answering the debate and I hope that he will assure me on these points.

    When I asked the First Secretary about the machinery which would be employed for measuring the success of the incomes policy, that was a question which he declined to answer. I make no complaint about that, but I hoped that as time went on we would see developed an answer to the question. The answer has come, not from the First Secretary of State but from the Ministry of Labour in its publication, the September issue of Statistics of Incomes, Prices, Employment and Production That says:
    "Information is not generally available about the rates of wages actually paid by employers, commonly called ' market rates', nor of the extent to which these may be different from negotiated or statutory rates." If that is conceded by the Ministry of Labour, it throws very considerable doubt on the whole credibility of this exercise.
    I go a stage further. We are all too prone to talk about wages as though wages were the overwhelming component of the wages and salaries section of the gross national product, but that is not so. Wages admittedly account for 60 per cent., but salaries account for 40 per cent. A number of my hon. Friends, the hon. Member for Woking (Mr. Onslow), the hon. Member for Worthing (Mr. Higgins), the hon. Member for Portsmouth, Langstone (Mr. Ian Lloyd) and myself, asked some questions relating to salaries because we felt that salaries must be vital to the credibility of the whole exercise. The Secretary of State on that day was feeling rather less fraternal. It was called a venomous intervention. What did we have against salary earners? This was touchiness against any kind of examination of his policy which augurs ill for those who are the voluntary participants in this exercise. If it goes ill they may get the same rough handling as was meted out to me on one or two occasions, but maybe they are better able to look after themselves.

    No Government Department has been able to offer very much in the way of a trend in salaries, and there is no such thing as drift in salaries as in wages. We have only to look at the heavyweight weekend Press to realise that there is a fantastic movement around of young salary workers throughout industry. Therefore, the measure of the drift in salaries is really what is paid to refill a job which has become vacant because someone has moved on to better himself elsewhere.

    Though entirely reliant on outside sources for information, it is worth quoting from the Hay-M.S.L. report which appears in the November edition of The Director. From the sampling carried out, of salaries in the range £1,250-£2,000 a year, it was found that the increase had amounted to between 8 per cent. and 9 per cent. over this time last year. This may be so, and I think that it probably is. But, as far as I can judge from speaking with people in industry, this may not be the whole picture. Are the Government able to confirm this rate of increase? Can they deny it, or is their answer simply, "We do not know "? If it is the latter, then, to put it mildly, this casts considerable doubt on the credibility of this kind of exercise.

    In the attitude which I have struck, particularly about the statistics of an incomes policy, it must be made clear that what I have said is not pedantry at all. Indeed, it runs to the very heart of the problem, for a great deal of nonsense is talked these days about this subject—not least by the New Statesman, in which John Morgan wrote on 5th November:
    "… at the Economic Ministry … the understanding of the movement of wages and prices reaches unparalleled heights of sophistication."
    What sophistication? I wrote to the New Statesman, but my letter was not published, and I have heard not a word from Mr. Morgan. Perhaps the Chancellor will tonight tell us whether he agrees that unparalleled heights of sophistication have been reached. If they have, perhaps he will let us know what they are.

    Let us return to the significant day in February when the First Secretary made his statement. I admit at once that there has been a lot of history reviewing, which, I have tried not to do. There may be another occasion when I can go into that in greater detail. Suppose that at that stage, in February, we had known that during the following few months retail prices would be rising at an annual rate of 5 per cent. I take that figure from the Government's own statistics. Suppose, too, that we had known that the rate of productivity—such as it may be calculated from the index in the Economist— was rising at a mere 1½ per cent. annual rate, and that the index of industrial production would be lower than it was in February. I suspect that we would all have felt that the incomes policy was not living up to the fairly rich reputation which was being accorded to it.

    It is no good the First Secretary saying, "It did not start until May ", because I believe that the whole idea was that the climate should be set for it to come into being. Certainly that applied to the Budget in April. I recall that a great deal of argument centred around the fact that that Budget was designed to create such a social climate. If we had known or could have been told that in the months to follow—and such figures were available from the Board of Trade—that the volume of net new engineering orders would fall by as much as 7 per cent. over the corresponding period of 1964, we would indeed have been shaken.

    When I raise these questions, it is no good the First Secretary trying to fob me off as if I were impertinent to be asking them. It is a reflection on his ineptitude that he did not talk about our balance of payments position and our prospects for next year in terms of the current balance without these figures, particularly since they are available in the Board of Trade Journal.

    I do not want to be accused of knocking Britain because I am drawing attention to this volume of figures. Indeed, the value of orders may come out somewhat better. None the less, I imagine that the engineering sphere accounts for about 25 per cent. of our total exports. I do not imagine that this sort of thing is susceptible to a precise definition, although the Chancellor may wish to correct me. Nevertheless, this must have implications on our current trade balance for next year.

    What I now have to say may be considered controversial, although I make no apology for saying it. When one looks at the economic indicators it must be through a glass darkly—and I speak as an economist. There is far too great a disposition these days to give to economic forecasters or preachers a kind of astrological importance. Let us, therefore, be modest in our forecasting.

    On the existing evidence, I think the economy is still over-heated. I say this in view of the continuing shortage of skilled labour and evidence that the wage drift is continuing. I believe, therefore, that we are confronted with the quite serious possibility of renewed balance of payments difficulties next year on the current trade balance. We must, at the same time, remember that it is on the current trade balance that most overseas attention will be focused. Having said that, I again reiterate that I hope I will not be accused of knocking Britain in making these comments. The First Secretary appears to be in a fairly robust mood today, so I must make my position clear.

    I make these remarks on this occasion in view of four items which appear in the Gracious Speech; legislation on Exchequer subsidies for local authority housing, legislation to lessen injustices in the rating system, measures to provide supplementary National Insurance benefits relating to earnings, and measures concerning the pensions of retired members of the public services. We know that in the latter case there will be a cost of about £25 million a year. I do not wish to argue the merits of these items. There will be other occasions to do that.

    Suffice to say at this stage that in every case there will be an addition to consumption, because I think I am correct ing saying that the whole purpose of those four items will be conceived in terms of social legislation to aid those who are more likely to spend the money they get than to put it in the bank. That being so, we are moving to a situation which must result in increased consumption, the full measure of which I do not know, although I would be grateful if the Chancellor would tell me.

    I suspect that we need deflationary policies in addition to those announced by the Government. This may sound like harsh reality, but it must be said in a debate of this sort and in the kind of speech I am making. The cost of these pieces of legislation must, I suggest, be matched by increased taxation designed to fall on consumption; and it could well be that additional measures should be under consideration. These things must be said, and it is no good saying them in the smoking room. Perhaps the Chancellor may even get some vicarious benefit from my saying them. I would rather these points were made here than elsewhere. Government measures must measure up to the reality of the situation, and while, as I say, it may sound like harsh reality, I prefer it to the fiction of an incomes policy and the fiction of a National Plan.

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    Would the hon. Gentleman conclude what I think is a realistic and logical analysis of the situation by telling us whether he thinks we should pursue the incomes policy? If so, how does he consider that we should strengthen it? If he thinks that we should abandon it because it will not work, what does he suggest we put in its place?