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Part of our image. If we have to go into reverse, diffies because this is long-term p’mme with sound fwd. planning. [Rising cost is due to teachers’ salaries: hard to justify reducg. intake: we already are unable to accept for training girls with A level certs.] In 1st year 20% of expenditure to work done: 40% in 2nd: 3-% in 3rd: 10% in 4th. Para. 5. of Annex: justified items in break-down. i) must be top priority ii) pledged to complete in 5 yrs. & shall do so except in L’pl. iii) designed to give up to date labs. etc., to all secondary schools – essential to supply techn. colleges iv) has the same purpose. This leaves (v): we said in W. Paper we wd. tackle this. Cut of 1/3rd in July on minor works has made this posn worse. What remains under (v) is mainly for secondary schools.
To get down to £120.5 I shd. have to exclude much of this. I shd. have to control starting dates. Not prepd to do this when it doesn’t apply to other bldg. Bldg. in other public services is to rise by 15%: why shd. education be reduced to 10%. Wd. not square with policy of growth.
E.M. I have to control starting dates, for roads.
Ch.H There is also control in public housing. And I have also had to push our projects previously authorised to start.
K. Drew attention to para. 14 of C.210. This means tht. things excluded from 1962/3 cd. be included in 3 later years.
H.B. Yes: can be done if D.E. will introduce control of starts.
And I wd. not insist on £120.5 in each year, so long as 4 years were within that x4.

Ed. building has bn. v. large for some time.


J.M. Can we contemplate deliberate slowing-down of recruitment of teachers?

Further educn & techn. colleges? Shd we relax pressure for day-release?


If not, we must build to be ready.

I can phase back my replacement p’mme.


R.A.B. I wd. have thought that cd. be done in E. & W. also.
H.B. There is in 5(i) some element of old schools also.
Hail. If you delayed 6 schools how much wd. you save?
I.M. In 1951 we gave housing deliberate priority. We recently gave the same to education. On that basis 4.6% is not a large increase.

Shd we not look at public investment as a whole?


Ch.H. Support that. Housing has already bn. cut from 110.000 to 100.00 houses. This isn’t enough for ’63. Fear this may be pol. issue then.
If I am to have 120.000 in 1963 (slum clearance) I have to find means of cutting out other forms of bldg.
E.M. Support that, too. Can’t afford to accept any cuts in road p’mme.
R.A.B. x| 1. Cab. to look at public investment as a whole.

| 2. M’while D.E. shd. consider wtr. we cd. not p’pone some re-modelling projects.


D.E. Qua investment, I wd. go for (v) – wh. saves nothing on current expenditure.
H.B. D.E. is refusing to look at alternative p’mme.
He shd. take various levels between £120.5 & his bid, work out what wd. be involved, & show how each conflicts with pledges etc.
D.E. We can try deflationary policies designed to produce enough unemplt. to retrain wage demands. Or we can have a wages policy. But will you get enough support for second if you press first?

Agreed as at x/.

E.P.C. memo. on Inv. P’mme to be circulated to Cabinet.

2. Colleges of Advanced Technology.

D.E. Six negotns have reached point where we cd. transfer by ¼ .
No saving in public expre is involved, only transfer from l.a. to Exch.
Am I, for sake of this, to report my relations with most powerful l.a.’s.
H.B. We must redeem S.Ll.’s pledge of 21/2%. Transfer in Apl. will put at least £5m. on Exchequer. When shall we find that saving elsewhere?
This will be less painful than most.
Hail. Saving Exch. at expense of rates is not genuine saving.
H.B. We cd. have accepted this at original figures of £11/3m given by M/Ed.
Edn Policy Cttee approved it at that figure, with no date.

Now it emerges as £5m, and as we are pledged to the 21/2%, surely we shd. take this painless course. If we don’t, we shall find it v. much more difficult to find £5m. from somewhere else.


M. Cdn’t M/E. ask l.a.’s to agree to delay. If they won’t, we must stand behind him.
P.T. At the end of exercise we wdn’t scruple over a “fiddle” to round off the 21/2%.
Don’t give this away now.
D.E. Told Ty. in Oct. the cost and the date.
P’pone decision – until we see where we are on total savings.

C.C. 74(61). 14th December, 1961.
1. Parliament. [Enter M.R.
I.M. Business for next week.

Monday: Incomes. S.Ll. and Fin. Secy. or H.B. No need for

P.M. to reply.

Wed: F. Affairs – Berlin. L.P.S. and Godber – unless H.W.

needed to reply.

Thurs: Adjournment debate.

Comm. Immigrants Bill. Must now have guillotine – 3 more days

in Cttee and 2 for Rpt. & 3rd Rdg. Motion will be tabled before

we rise.

H/Lords Reform. Labour want powers as well as composn. Some

Tories want no enquiry. Compromise: enquiry into neither

powers nor composition but anomalies only. This has bn.

accepted by both sides, subject to Mr G. getting agreemt. of his

supporters. Omits remuneration.

Business for week after Recess.
2. Congo.
E.H. After consult. (incldg. F. Secy.) decided to ask formally in U.N. for

cease-fire.

Sec. Genl.’s lr. w’drawing request for bombs.

Sec. Genl. will discuss with his advisory cttee our request for

cease-fire.

U.S. repve: they want cease-fire if it can be combined with definite

guarantee of mtg. betwn. A. & T. If I can be persuaded (by

Bunche) to go to mtg. place (Katona) with A., Bunche will

accompany him as equal hostage. Conciliator, if needed as

alternative – Stevenson wd. be willing to act.


P.M. Anglo-U.S. rift is not as great as appears from Press.

Have spoken to Mr K. – he agreed U.N. military have bn. going

to far.

Situation in H/C. looks better.



Most awkward point for me: why did we change betwn. Thurs.

& Mon. Wd like to give full facts – incldg. my surprise tht. they

were unwilling to accept bombs on our conditions.
E.H. Attack will be v. our original decn of Thursday, not v. our change of

mind.
3. Goa.


E.H. G-B. saw Nehru y’day & lodged written repns. N. gave no assurance.

Said restraint had produced no result. U.S. Amb. has also heard

from M.J. Desai tht. if P. didn’t budge in 2 or 3 days India wd.

have to act.

P.M. message also sent to N.

At noon we shall let it be known we have made repns to India and P.

Suggestn (by P.) of observers – not to be selected by U.N. We shall

say we wd. support such a plan if acceptable to both sides.

Staging rights. J.A. worried about Azores. We have ascertained

it’s 2 aircraft = one with 130 soldiers at once: further flight in

2 wks. We said we cdn’t allow Gan Al Adun wd. need

Libyan permission, wh. is unlikely. Offered to consider other

routes if P. can suggest one.

We are thus keeping it open. Not clear, however, tht. they cd. fly

from Mauritius to Goa in one hop.
4. Commercial Policy: i) Polish Bacon.
F.E. 4.000 t. in all. Effect on exporters will be more serious than on

farmers.
C.S. I cd. conceal our draft on next year of 1200; but not 4.000.

This is only area in wh. we can control meat imports. If we

do this, we shall aggravate posn of S. Estimate, wh. is diff.

enough already.
H.B. Both instances fall w’in P.M.’s directive on exports (Sept.): we must

be ready to favour exports even at cost to domestic positions.


P.T. 0.2% of meat market: and it gives chance to sell Viscounts into

Poland with prospect of continuing trade. Vickers loss of £15 m.


P.M. But can we afford commitment on agric. subsidies.
F.E. Doesn’t follow tht. it will be net increase of bacon imports: Polish

competes with Danish, of which there may be less.


C.S. It will spoil any chance of getting vol. limitn of imports from our

traditional suppliers. How then can I hope to support meat

market.
H.B. Agree this is long-term aim. But I’m advised we now have no

chance of getting voluntary agreement.


M: J.H: D.E. We can’t allow our posn to be eroded on the meat market ques.
H.B. Ty. view is tht. b/advantage here is in favour of supporting exports

of aircraft.


J.H. If we get the exports, Poles will ask us to take more foodstuffs to

pay for them.


P.T. Not necessarily. If they have Viscounts pressure will be on them to

be able to get spares etc.

S.Ll. Believe 1.200 t. won’t be decisive on limiting meat imports – whereas

sale of Viscounts will firmly establish us in this market.


P.M. Make the concession to Poland on the basis of a carry-forward,

if possible.

Take extra 1.200 tons & consider best means of presentation.
ii) Romanian Meat.
C.S. We increased quota in last 2 yrs. & they have not met it – by 1 m. tons. We aren’t importg. any beef from them in fact. Doubt if they

will.


We cd. get all the odium for nothing.

Why not tell them to fill these first?


F.E. We knew they wdn’t fill these because our condns.

They now ask for 20.000 t. Unless we give 5.000 we shan’t get

renewal of agreement.
H.B. Favour doing this for prestige reasons – on faith tht. beef won’t come

in. We have a rising trade with them wh. wd. be imperilled if

we declined this.
I.M. Not surely in context of Suppl. on meat.
Agreed: no offer.
5. I.M. Fund. [Enter R.W., P.M.G.
S.Ll. 3½ billion dollars of Western money is being added. Our share wd.

be contingent if U.S. have to make large drawing.

Sick authy to accept this in principle.

It will need legn. But success in enlarging credit resources.

This is fruit of initiative we took last spring.

Approved.


6. Wages Policy.
P.M. No further use of “guiding light” in any official document.

Agreed.
S.Ll. Main issues i) how to deal with pay-pause.

ii) do I adopt alternative II – money vice percentage.

Ty. draft of statement circulated.

i) paras. 2 and 5 of draft statement.

T.U.’s are not expecting me to announce a date for its end. They

wd. be content with further indication tht. it is only a temporary

policy.
M. Enough to omit words “the pause continues”.

P.M. Speech shd. be v. simple. Start: earning too little & spending too

much. First need is to earn more. Stress that. Positive work of

N.E.D: that is what Cttee is for. Marginal effort by all wd. give

us the extra 3% or so which wd. make all the difference. The

other side is interim, what do we do about spending too much



before we have earned more. Pause inevitably rough & ready:

Can’t expect perfection in impoverished interim plan. Then go

on with long-term policy on incomes. Before we reach that,

there will have to be some relaxation from an absolute pause,

in words wh. prepare way for, e.g. some early increase in

rlwaymen’s wages.


Hail. Policy in draft is right: but presentn too rough.
J.H. S.Ll. shd. be ready to meet T.U.C. on Wed. next – p.m: announcg.

tht. he is going ahead with the office. Then another mtg. early

in Jan. Announce new form of pause before end/Jan. Otherwise

various T.U.’s will have got themselves into fixed posns. Favour

statement in Jan. forecastg. end of pause in present form at end

of fin. year.


P.M.G. Agree. Postmen & C.S. Unions likely to get into fixed posns in

January. They may press for negotns after S.Ll.’s 1st statement

on Monday. This will be awkward.

Para. 5. What are the post pause interim arrangements? We shall be

pressed to say.
P.M. Avoid “arrangements” – approach or policy.
Hail. Pause shd. fade out. “Phase” vice “end”.
S.Ll. Consultn on incomes wd. not be done, at outset, thro’ planning

N.E.D. Cttee.


P.T. Effect on rlway. claim? Tough (2½%) or easy (5%)?
I.M. Fundamental unease in Party is over wages policy.

On Mon. S.Ll. has to rise 2 horses: tough on thrift –

encouraging on growth. After speech, we shall be judged

by action: and rlway. settlement will be taken as test of our

intention. Needs to be tough.
P.M. Importance of date – and an arbitration decision.
P.T. If we end pause by 5-6% award to rlwaymen., wtr. by arbitn or not,

stiff re-actions from Party. This wd. be £26 m. – equivalent

to our cut in nutritional services. It wd. wreck any pause.
M. Read minutes of Wage Cttee mtg. of 11/12.
F.E. The £500 m. figure wd. lead to scramble for a share of it.

Better to put fwd. test: no increase wh. wd. increase

price/product.
Hail. Many claims fr. people who make no product.
D.E. Monday’s statement foreshadows attempt to relate incomes to

productivity, within a policy of growth, & to make that policy

work. Last para. of draft poses alternative.

Is it worth trying to get 2 sides of industry together – and put

everything into attempt to get understandg. of new policy.

This draft is v. discouraging. It must contain real incentive to

those who do increase national income. Dutch experience –

they have had to give more than national average to this sector.


F.E. But Dutch T.U.’s have accepted tht. they can’t expect wage increases

wh. involve price increases.


P.T. Danger of our sitn. Wage pause while we thght. out means of

handling this more sensibly. Then it ends with 6% for rlways.

Ty. will then be driven into deflationary measures – and what

happens about “growth”?

Real ques. for us is, not what S.Ll. says on Mon., but what we do

afterwards.


D.E. Continuance & increase of subsidy to rlways. at current level are

not consistent with cuts we have bn. considerg. e.g. in education.


I.M. Failure to stand firm on wage policy will bring us down politically.
Hail. But how can we run rlways. w’out a policy which will attract labour.
R.M. Agree with I.M. on rlways.

My main worry is wtr. N.E.D. can do much to promote growth.

Hail. Move from “wages pause” to “limitation of incomes”.
S.Ll. Country and Party are expecting us to say “no” to rlwaymen.
M. Rejection of engineers’ claim y’day is of great significance.
I.M. What about a general direction to all natd industries – so as to

x/ avoid “illegality” of special direction on particular wage claim.


Agreed: Ty. to consider x/.
S.Ll. We cd. presumably say tht. any wage increases wd. have to be

financed by increased charges or economies in operation:

cd. not be financed by Exchequer money.

Alternatives: %age or figures.

%age rejected because wd. be taken as minimum. Figure cd.

be translated to %age.


Agreed: in this speech, use neither.
Ch.H. Para. 6. on arbitn needs qualification, if we are going to make any

changes. Wiser to omit – for to-morrow.


K. Prefer to keep paras. 5-6: on basis arithmetical facts of prodn shd. be

put fwd. Use more precise words.


S.Ll. Not before consultns with T.U.’s.

C.C. 75(61). 19th December, 1961.
1. Goa. [Enter M.R.
H. Resoln in U.N. passed by 7:4. Those against included Ceylon,

Liberia, Russia & Egypt.


D.E. C’wealth Edn Confce in January. Must I go?
P.M. Yes. It is a C’wealth occasion.
H. This has set off Indonesia. Dang. sitn in New Guinea. Must discuss

with U.S. in B’muda. Wd like a note on oil tankers & other

B. interests.
Hail. Nehru’s action likely to touch off a series – and we are at risk in

various places e.g. Gib. or H. Kong.


I.M. Wd it not be wise to make Assembly discuss this – breach of the rule

of law.
R.M. What if majority supported Indian action? [Don’t let it drop, on a veto.


H. Implicns for U.N. might be serious. Do we want to break it up? Not a

matter for hasty decision. Wd prefer to discuss with U.S.

M’while will get views of our Delegn in N. Yk.
K. What is moral posn of C’wealth if we exclude S. Africa because

apartheid and then retain India despite naked aggression?


P.M. Better to take a U.N. stand over Indonesian aggression v. N. Guinea.

Avoids C’wealth issue.


H. Even so, not a v. clear issue.
2. Congo.
H. T. has left for Ndola with Br., Fr. & U.S. Consuls. Gullion mtg. him

There & expects to take him on to meet Adoula at Kitona. Before leavg. E’ville T. himself called for a cease-fire. (But U.N. troops stupidly attacked by air the H.Q. of Union Minière.)

U.S. are now alive to dangers - & pressing urgently for settlement.
3. Laos.
H. All 40 points of diffce with R. have bn. resolved save on (integratn of

P. Lao into natl forces) wh. can’t be settled until Prince’s are

agreed. U.S. are now putting heat on Phoumi to agree to

natl govt. If that comes off, there is an agreement – with

R. & Ch. Not bad.
P.M. Moral. For dealg. with R. must have repve who can spend months

on it continuously. Mtgs. of F. Ministers, too short – don’t work.


4. Berlin.
H. On ground reasonable quiet. U.S. have stopped sending civilians in

Offl. cars into E. Berlin. But moral of W. Berlin is declining –

& this is reason for G. to support negotns. In N.A. Council

14 favoured this & only 1 v. it. Endless argument with the

French over any use of “negotiation” or “….. cd.” in

communiqué. Much more strongly worded resoln wd. have

bn. passed if Fr. had not bn. represented. Obvious we shall

have gt. trouble with Fr. when we reach substance.

Rusk convinced tht. R. want to settle this with U.S. Thompson may

carry it far alone. Dangerous, unless G. kept fully in line. So

aim at 3 Powers contact in Moscow. France will stay on

side-lines.

Admit that, on R. public statements, there isn’t much hope of an

acceptable settlement.


P.M. If U.S. ready to take lead to U.S./R. settlement, may be better than

Anglo-U.S. settlement. Rusk might be willing to be a fall-guy.

Br. people aren’t ready for war over Berlin: they dislike G. almost

as much as R.


H. U.S. are more ready to fight for Berlin.
H.W. They feel their nuclear strength at moment is superior to R. & they

can therefore “lean on them for a bit”.


5. Meeting of N.A. Council. [Enter E.M.
H. Alliance under strain. Feel they aren’t sufftly consulted on matters of

concern to them – e.g. Berlin. Unco-opve attitude of Fr. Feeling

tht. U.K. haven’t done enough on build-up. Diffies on

Co-policy – e.g. Belgium & Portugal: agreed to consult more,

before ques. come up in U.N.

Stationing costs. Save Germans. Stikker helpful to us. No source of

help save G.

M.R.B.M.’s. U.S. ready to consider plan of control devised by

Europeans. U.S. rely on disagreemt. – to preserve key/cupboard.

But G. pressing for some control. Fr. m’while won’t commit

themselves because holding free to give to G.
H.W. Strength of B.A.O.R. No pressure on me. Stikker accepts our need

for financial help before doing more. U.S. prefer us to look

after M/E. & S.E.A. – bigger reserve in U.K. vice more in G.

But doubt if we’ll get much out of G. U.S. have done better

(arms deals) than we.

M.R.B.M.’s. We shan’t stall this much longer. Stikker wants solution.

Need agreed U.S./U.K. posn on this. N.A.T.O. nuclear force

dominated by G. wd. not be much good.


P.M. i) Who will buy them? U.S. interest in selling.

ii) Who will control them? Do Eur. fear most tht. U.S. will, or will

not, use them. What is real object of N.A.T.O. – to restrain U.S.

or to ensure action?


H.W. Can’t settle this w’out prior agreement on N.A.T.O. strategy –

e.g. nature & length of pause. N.A.T.O. won’t face fact tht.

Saceur’s interdiction plan involves total nuclear war.
E.H. Must seek solution in N.A.T.O. for w’out it Eur. will concentrate on

defence w’in Six. They are doubtful wtr. U.S. will defend them.

Cause of increasg. friction. Admit, however, tht. this control

Is veto: wdn’t give Eur. power to initiate w’out U.S. consent.


P.M. In these circs. it is mainly a political problem. With growing strength

they are resentful of inferiority to U.S.


H. Diffy is tht. you can’t satisfy that feeling w’out includg. G. – and that

will stimulate R. fears.


P.M. The only real solution is detents with R.
H. U.S. are beginning to feel this. [Exit M.R.
6. Kenya.
R.M. No fuss over removal of disqualificn on Kenyatta.

Tribal diffies are as deep as we feared. But hope for calm until the

conference in Feb.

Coastal strip. Don’t raise this until after conference.

Some chance of agreed solution in Feb. conference.
Hail. Any prospect tht. independent K. will be able to m’tain law & order?
R.M. K.A.R. bldg. up: unlikely to be dominated by any single tribe.

Settlers: Bill of Rights in constitn. If we can get that, most will be

satisfied.
H. We move so fast from self-govt. to independence. Can’t we prolong

first.
R.M. Not worth it if we can’t get p’ponemt. for about 5 yrs. – and no chance

of that. Local offls. satisfied no chance of delaying it beyond

spring of ’63.


Hail. Don’t believe you can get stable security force or adminn by early ’63.
H.W. O.K. if white officers cd. be retained.
R.M. Can’t work that out (or a base facility) save with a self-governing

Govt.


Base – not in present form: something, on coast, as C’wealth facility.
D.S. Don’t believe Africans wd. accept tht. such a base was to defend

their interests.
H. cf. Congo: can’t recover sitn if disorder once starts.
R.M. Business interests favour speed of settlement, to end uncertainty.

Farmers take other view.


H.W. I cdn’t afford to build a new base.
H. Nigerian resoln in U.N. – 10 years – because they fear it earlier esp. in

C. Africa.


R.M. Wd they back us in staying another 5 yrs. in Kenya?
P.M. We must evaluate risks of both courses. Risks also in delay.
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