Commons Sitting of 12 April 1967

Preamble
The House met at Ten o'clock
PRAYERS
[Mr. SPEAKER in the Chair]

EROSION PREVENTION
10.5 a.m.
Mr. Anthony Kershaw: I beg to move,
That leave be given to bring in a Bill to enable river boards to build erosion prevention works on river banks.
Erosion occurs in my area along the River Severn, and affects a number of my hon. Friends—
Sir Gerald Nabarro: Hear, hear.
Mr. Kershaw: —including my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) whom I am glad to see in his place.
The River Severn has a very strong stream and, particularly in the lower reaches, a formidable tide, culminating at its highest periods, in the well-known phenomenon of the Severn bore, a wall of water six or seven feet high moving at great speed up the river. It is a very impressive sight, and it can occasionally be dangerous.
That action of the waters and the stream of the river tends to erode rather more than usual the banks of the river which are, at any rate in my area, mostly made of soft earth and are not rocky. They are, therefore, particularly susceptible to erosion. In the past that erosion was countered by various works, and when labour was cheap the great landlords who owned a lot of territory there built groynes out into the river to prevent the action of the water on the banks. A good deal of land was won back from the river estuary in that way and added to the agricultural land available. Today the great landlords have mostly gone. Labour and materials are not cheap, and it is beyond the purse of the riparian private owners to repair those groynes under modern conditions and prices. As a result, there has been a
1114
sharply increasing loss of valuable agricultural land. One small landowner in my constituency has lost 20 acres to the river in the past few years.
There are river authorities and other bodies up and down the river which have certain powers, but I understand that the Severn river authority does not consider that its responsibility extends to carrying out works solely for the purpose of adding to, or preventing the loss of, agricultural land, although it is certain that it would carry out those works if the consequence of not doing so was to cause flooding, or in some way interfere with its purposes as a water undertaking.
Local authorities have no powers in this regard, unless they happen to be riparian owners, which I do not believe to be the case, at any rate to any important degree. I therefore suggest that the Ministry of Agriculture, Fisheries and Food is concerned in the matter because of the loss of agricultural land.
There is a second consequence of the erosion, arising more in the estuary than in the upper reaches. The groynes which were built out into the Severn provided mooring places for fishing boats, on one side of them or the other according to the state of the tide. The Severn is a most important fishing river. The salmon, the elvers—the baby eels which come at this time of the year—and other fish are a very important source of revenue to fishermen. Fishing on the lower reaches of the Severn is very largely a commercial undertaking, not a sporting one. I therefore suggest that the Minister of Agriculture, Fisheries and Food is again involved because of the difficulties imposed upon fishermen through their not having the possibility of mooring their boats conveniently or anywhere near their fishing grounds.
This is a permissive Bill. It is designed only to make it possible for the Ministry of Agriculture, Fisheries and Food to intervene where it thinks it is necessary and where it thinks that the expenditure is justified to prevent the loss of good agricultural land.
At present there is no public authority with any specific powers. The vast majority of the owners have no capability, financial or otherwise, of carrying

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out the necessary works. These works are now, after many years, all falling into disuse more or less at the same time and the problem will be increased sharply in the next few years. I suggest that the Bill could fill a minor but valuable purpose and that it would be in the public interest that the Minister of Agriculture, Fisheries and Food should have these powers.
Question put and agreed to.
Bill ordered to be brought in by Mr. Anthony Kershaw, Mr. David Webster, Mr. Corfield, and Sir Gerald Nabarro.

EROSION PREVENTION
Bill to enable river boards to build erosion prevention works on river banks, presented accordingly and read the First time; to be read a Second time upon Friday 21st April and to be printed. [Bill 230.]

RATING AND VALUATION (WATER UNDERTAKINGS)
10.12 a.m.
The Minister of State, Scottish Office (Dr. J. Dickson Mabon): I beg to move,
That the Valuation (Water Undertakings) (Scotland) (No. 1) Order 1967, dated 13th March 1967, a copy of which was laid before this House on 16th March, be approved.
Section 16 and Schedule 2 of the Local Government (Scotland) Act, 1966, provide for the introduction in 1967–68 of a new system of valuing water undertakings by reference to a "norm" or national average rateable value per unit of water to replace the present system which produces unduly high rateable values for undertakings with heavy capital expenditure.
The principle of the new system, which was fully debated during the passage of the Bill, is that the rateable value of an undertaking will in future be obtained by multiplying the norm by the average daily output of water. This will have the effect of equating the rateable value of all undertakings directly with output.
The Order establishes how the norm is to be calculated; and it is the key to the operation of the new system. The Order is required by 15th April to fit in with the statutory timetable of the
1116
Assessor of Public Undertakings who, under the Act, now has the responsibility of calculating all water valuations.
The norm is to be the aggregate rateable values of all water undertakings in 1964–65 divided by the aggregate potential output of water for that year, the resulting factor being increased by 31.6 per cent. to take account of the general increase in rateable values in Scotland as a result of the 1966 revaluation.
The explanation for using 1964–65 data is that this is the latest information available to the Working Party and to the Government.
As far as the effect of revaluation is concerned, it is a reasonable proposition that the norm should reflect this, otherwise the new system would achieve too substantial a reduction in values, which is not its main purpose, and this would be unfair to other ratepayers. On the basis of the method described, the norm is £5.568 per thousand gallons of water per day—that is, the figure derived from 1964–65 valuations and output, plus an increase of 31.6 per cent.
The local authority associations were fully consulted about the "norm" method of valuation as the best alternative to the present system. Indeed this method, as I mentioned in Committee and at other stages of the Bill, is very much the brain-child of a sub-committee of the Local Government Finance (Scotland) Working Party, which included representatives of the local authority associations, the British Waterworks Association and officers of my Department.
It was only after the fullest examination of a number of alternative systems that the norm method was selected as being the fairest. The local authority associations are also fully in agreement that the means of arriving at the norm should include a factor for revaluation.
The British Waterworks Association was the only dissentient to the principles of the norm. It felt that the reduction in values which the norm system would be likely to achieve were not radical enough. That was not, however, felt by the Government to be a fair point of view, bearing in mind the interests of other ratepayers who would have to make good the deficiencies in rates no longer being paid by water undertakings.

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The use of the norm will not give rise to any dramatic reduction in the over-all rateable value of water undertakings; indeed the levelling-off process involved will mean that some undertakings will have higher values than before. But it is estimated that the total rateable value of all water undertakings will, as a result, be reduced by about 20 per cent.
The real value of the Order lies in the fact that in future all water undertakings will be protected from the swingeing increases in rateable value arising solely on account of increased loan debt. This overcomes one unsatisfactory feature of the present system which we are replacing in the next financial year.
I commend the Order to the House.
10.16 a.m.
Mr. Gordon Campbell: The Minister of State has described how the Order arises from the Act. As he said, the Order determines a method whereby a norm is established. He indicated that the British Waterworks Association did not agree to the idea of a factor. It seems that this has been a Government decision. It would seem also, from what the hon. Gentleman said, that it is the result of a recommendation by a working party.
The hon. Gentleman said that the water authorities were agreeable to the inclusion of a factor, but have they been consulted about the method prescribed in the Order? If so, did they agree with the figure and with the method? There is one further point. This seems to be a very good argument for having a decimal currency as soon as possible, because we are dealing with 5·568 of a £.
Mr. James Davidson: I welcome the Order. Would the Minister of State confirm that seasonal variations in the actual volume of water coming from these undertakings are taken into account in determining the norm?
10.18 a.m.
Mr. Richard Buchanan: The cost per thousand gallons of water in England is estimated to be between 2s. 3d. and 2s. 6d. In Scotland the cost per thousand gallons is 1s. 3d. According to the British Waterworks Association under the Order the rateable content will be double that in
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England. The rate content in England and Wales will be 2d. per thousand gallons. In Scotland it will be 4d. Although water undertakings may be protected from the swingeing increase and although there will be normalcy in their rateable value, nevertheless 31·6 per cent. is being added to take account of the general increase in the rateable values of shops, offices and industrial premises. I believe that this should be put on the same basis as the nationalised industries and that there should be a pool. If the Minister can explain why it is different in Scotland I shall be grateful.
Dr.Mabon: I am very sorry that, because we are obliged to have the Order by 15th April, we have not had time to discuss further with the British Waterworks Association the matters referred to by my hon. Friend. There was a meeting with my noble Friend the Under-Secretary of State for Scotland, and I am glad to say that my noble Friend has written to the British Waterworks Association taking up various points made, some of which have been touched upon this morning by my hon. Friend.
I hope that the Association, when it reads the letter, particularly the final paragraph, will see that there is room to look at the impact of this on individual authorities. If my hon. Friend reads Schedule 2, paragraph 24, of the Act he will see that the transitional powers are such that the Secretary of State can look into all or some of the undertakings, as he prefers. The reason for this flexibility is so that the system shall get off to a good start.
The local authority associations are in agreement with the Government on this. They do not take the same view as the British Waterworks Association about the degree to which we should reduce these rateable values. I respect the arguments of the Association which are perfectly sound from its point of view. The Government have to take into account that this is a new system. We are advancing not only into a new system of local government finance, but into a new system of water reorganisation in Scotland. In addition, we have a revaluation year to take account of.
This is an awful lot to swallow at one go, and that is why I think it wise that we should take the base line as 1964–65

1119
which is the only year for which we have up-to-date and accurate figures. We should then proceed from that taking in the revaluation figure, and then the formula as devised by the working party.
The hon. Member for Moray and Nairn (Mr. G. Campbell) asked me how this was arrived at. I have the report of the sub-committee to the working party, which is not available publicly, and this shows that it was agreed as an essential point of switching over from the unsatisfactory position of raising rateable value on loan debt in respect of waterworks to output. The British Waterworks Association accepts that that is a fundamentally sound way of doing things, even though it may disagree with the degree to which we are doing it in this Order.
There will be every opportunity of looking at this, if anyone is dissatisfied, either generally or from an individual point of view. The Assessor will shortly be sending out to each undertaking the figures which he has been collecting and which he will be applying in respect of this formula, if the Order is agreed. I am certain that out of that will come comments which are bound to attract the attention of the Secretary of State. He may not want to do anything generally, or very few things individually. This remains to be seen. We have to start somewhere, and it is with the Order. We have left this very small margin of only a few days because we wanted the best possible advice from all bodies.
I am only sorry that the British Waterworks Association was not able to impress its arguments on us a little earlier, although I do not blame it for that because we have been working very hard on the subject of water in this Parliament, and the Waterworks Association has done very well on a number of matters.
In answer to the hon. Member for Aberdeenshire, West (Mr. James Davidson), the average output per day is averaged over the year, so that seasonal variations are taken into account. Nothing need worry him about the peculiarities of the Aberdeenshire area, which I hope will be overcome quite soon.
Water in Scotland is much cheaper than in England. For anyone thinking
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of coming to Scotland for the purpose of industrial expansion it must be an encouragement to know that the cost of water to industry is, roughly speaking, half the price of that in England. This is one more attraction. Not only have we cheap water but we have plenty of fine water. We hope that this Order will help us on our way to achieving industrial expansion in Scotland.
Question put and agreed to.
Resolved,
That the Valuation (Water Undertakings) (Scotland) (No. 1) Order, 1967, dated 13th March 1967, a copy of which was laid before this House on 16th March, be approved.

INDUSTRIAL DEVELOPMENT (INVESTMENT GRANTS)
10.25 a.m.
The Minister of State to the Board of Trade (Mr. George Darling): I beg to move,
That the Industrial Development (Eligible Assets) Order 1967 (S.I., 1967, No. 339), dated 7th March 1967, a copy of which was laid before this House on 14th March, be approved.
This rather technical Order will not detain the House long. It really applies to Northern Ireland, but I do not see any Northern Ireland Members present. Its purpose is to give the Board of Trade authority to pay investment grants on assets that are leased in Northern Ireland. As the House is aware, the Industrial Development Act, 1966, as a general rule provides for investment grants to be made only for assets to be used in business in Great Britain.
Northern Ireland has long had its own system of investment incentives, and the Parliament at Stormont passed last December the Industrial Investment (General Assistance) Act (Northern Ireland), 1966, whose provisions are very similar to those in our Act. They enable the Ministry of Commerce to make grants to persons carrying on business in Northern Ireland, if the machinery or plant or computers are provided for use in Northern Ireland.
Under our Industrial Development Act, the Board of Trade may make grants to persons carrying on business in Great Britain for machinery or plant for use in Great Britain, carrying on a qualifying industrial process, and for computers for

1121
use in Great Britain and for hovercraft. Where the user purchases any of these assets, there is no problem about making a grant towards his capital expenditure. But there is also a growing practice of leasing in British industry, which was provided for under Section 4 of the Act. Under this Section, the Board of Trade may make a grant to the lessor of an asset if it is leased to a person who would have qualified for a grant if he had bought it. Where the lessee would have qualified for a higher rate of grant because he uses the asset in a development area, then that higher rate is paid to the lessor.
If this Order was not made, any assets leased to Northern Ireland would fall between the two systems. The Board of Trade could not pay the lessor, because the lessee is outside Great Britain; and the Ministry of Commerce in Belfast could not pay either, because the lessor is outside Northern Ireland; and grants towards capital expenditure cannot be paid under either Act to lessees, since they are renting their equipment.
To avoid this anomaly my right hon. Friend, the President of the Board of Trade moved an Amendment to the Industrial Development Bill, which is now Section 7(2) of the Act. This gives the Board of Trade power to make this Order, when we are satisfied that reciprocal action has been taken in Northern Ireland. At that time the Northern Ireland legislation had not yet been passed. Now that it has been passed, and the Northern Ireland Government have made an Order under which the Ministry of Commerce can make grants to lessors in Northern Ireland who hire out assets to Great Britain, we can fulfil our part of the bargain, and make this Order.
I should perhaps explain that there is a special provision in Section 4 of our Act for construction plant hire, because this plant is normally hired out for short periods. As the result of the Order, a construction plant hire firm will be able to hire out machinery or plant on which it is getting grant anywhere in the United Kingdom.
Article 1 of the Order enables the Board of Trade to make grants under Section 4, even though the asset is to be used in a business in Northern Ireland and not in Great Britain. Article 2 provides that the rate of grant should
1122
be what it would be if Northern Ireland were a development area in Great Britain; for example, if the expenditure were incurred this year or next year, the rate would be 45 per cent. for machinery or plant, and for computers which are integrated with machinery or for scientific research. On other computers, on hovercraft and construction plant on short-term hire, the rate would be 25 per cent.
Section 7 of the Industrial Development Act empowers the Board of Trade to make Orders to vary the rate of grant or to make grants for additional assets not hitherto eligible, subject to this affirmative Resolution procedure. Since assets leased to Northern Ireland were not previously eligible for grant, technically the Order provides for the addition of eligible assets, but the number of applications which will benefit from it is likely to be rather small. The Order will apply to expenditure already incurred from the beginning of the investment grant scheme in both countries, because no grants will have been paid before the Order comes into operation.
I hope that that explanation is clear, and I ask the House to approve the Order.
10.32 a.m.
Mr. F. V. Corfield: Mr. Speaker, I must apologise to you and to the right hon. Gentleman for not being here when he rose to speak. I confess, however, that I have not felt the need for people to find me useful things to do in the morning.
I appreciate fully that the principle of the Order is in line with the principle of the parent Act, and the parent Act in relation to Northern Ireland would be something of a nonsense without it. At the same time, I would ask the right hon. Gentleman if he can tell us a little more about the way in which he sees the leasing powers working out. He will remember that, before the passing of the Act, we were concerned about how we were to administer a system by which grants were given to the lessee without necessarily knowing the length of the period during which he would be handling the equipment. That clearly makes a great deal of difference to eligibility for grant, particularly where we are concerned with development areas, of which Northern Ireland is obviously one. The

1123
equipment may be moved across the boundary of the development area, and that introduces the difficulty that different grants are payable.
We welcome the extension to Northern Ireland which, in effect, makes this United Kingdom legislation instead of Great Britain legislation, and no one on either side of the House would think it right if Northern Ireland were put under disadvantage owing to constitutional differences between the two parts of the Kingdom.
I should be grateful if the right hon. Gentleman could tell us how the leasing is working. I know that is a more general question, but some further information would be of great value.
10.34 a.m.
Mr. Darling: As the hon. Gentleman will remember, we had discussions about this point during the passage of the Bill through the House. We think that the arrangements which were then discussed and laid down will work out satisfactorily. I am assured that, in dealing with the applications which have come forward, in effect we are asking for undertakings that, where the equipment is to be used in a development area, it will be in the development area for some time. The experience with applications so far received is that the leasing provisions are working satisfactorily, and we do not anticipate any great trouble here. Normally, the lease must be for a period of at least three years as laid down in the Act. If it is terminated earlier, it must be reported to the Board of Trade, when appropriate action will be taken to adjust the grant. In the case of construction plant hire, there is provision for short-term leasing, as I said.
I do not know whether there will be any teething troubles here. I am assured that the provisions laid down in the Act are working satisfactorily. For all practical purposes, Northern Ireland will be treated as a development area, and moving over the boundary there will be slightly more difficult than in Great Britain.
Question put and agreed to.
Resolved,
That the Industrial Development (Eligible Assets) Order 1967 (S.I., 1967, No. 339), dated 7th March, 1967, a copy of which was laid before this House on 14th March, be approved.

ORDERS OF THE DAY

  UNIFORM LAWS ON INTERNATIONAL SALES BILL
  Not amended (in the Standing Committee), considered.
  10.36 a.m.
  The Minister of State, Board of Trade (Mr. George Darling): I beg to move, That the Bill be now read the Third time.
  This is a short, technical but, nevertheless, potentially important Bill, which has been introduced to enable the United Kingdom to ratify two international Conventions relating to uniform laws on and the formation of contracts for the international sale of goods. These Conventions aim at creating uniformity in the law covering contracts for international trade, and it is hoped thereby that the legislation will remove one cause of possible misunderstanding or bad feeling between traders resulting from the differences in the legal systems of different countries.
  The United Kingdom has taken a leading rôle in the drawing up of these uniform laws, and the introduction of this legislation will be a further indication of the importance which we in this country attach to international co-operation in such matters to facilitate the expansion of world trade.
  As I made clear during the earlier stages of the Bill, the uniform laws will, under the Bill, apply only to contracts by United Kingdom traders who have adopted them expressly as the law of their contract. However, we hope that an increasing number of businessmen will adopt the laws by way of experiment so that experience can be gained of their practical operation. If they prove to be satisfactory, it is hoped that in due course they will become the laws which are generally used for the purposes of contracts in international trade.
  Since the Bill was introduced and discussed in the House and in Committee, we have had quite a lot of correspondence about it and about the uniform laws. In particular, we have been asked what publicity we shall give to the United Kingdom's ratification and to ratification by other countries. This is quite important to traders over here. In particular, we have been asked what publicity we can give to any reservations

  1125
  which other countries may have. At this stage I can merely assure the House that we shall be keeping the legal and business communities in touch with developments here and in other countries. We shall be having discussions with the appropriate associations on how best we can publicise the matter so that all traders who might be involved in the application of the uniform laws will know precisely what is going on.
  I am grateful for the interest that was shown by hon. Members who took part in the earlier discussions on the Measure, for the welcome that has been given to the Bill and for the way in which it has been so considerately and speedily brought to this stage.
  10.41 a.m.
  Mr. A. H. Macdonald: Because of the procedures of this House, I have been waiting for a considerable time to speak on this Measure. The Second Reading took place in a Second Reading Committee and I did not have the privilege of being appointed to that Committee. I was, therefore, not able to speak on the Bill on that occasion. The Measure then went into Committee in the normal way—but, again, I was unfortunately not appointed to that Committee and was not able to speak on the Bill then.
  It is not until now that I have an opportunity to say something about the Measure, yet the procedures of the House mean that, at this stage, I can comment only on what is in the Bill and cannot complain about what has been left out of it. This is a pity because up to now I have been an enthusiastic supporter of reforming Parliamentary procedures. As I find myself hampered by this reform, I am not quite so enthusiastic a supporter of reform as I was before this Bill began its process through Parliament.
  A constituent of mine takes a particular interest in the Bill and has been in touch with me about it. He has naturally been expecting me to speak on his behalf in Parliament, particularly since I regard the points which he has made to me as valid ones. Up to now, I have merely been able to correspond on the subject with my right hon. Friend the Minister of State, who has been extremely helpful—but that is not the same as my being able to stand up in Parliament and oblige
  1126
  my right hon. Friend to answer my comment publicly.
  However, within the restrictions imposed on me by the procedures governing Third Reading debates, I believe that I am able to refer to certain aspects of the matter, including a remark made in Committee—the real Committee and not the Second Reading Committee—by my hon. and learned Friend the Member for Crewe (Mr. Scholefield Allen), who said:
  "For 40 years, efforts have been going on to make private international law uniform, and this is the one of the best examples of that work."—[OFFICIAL REPORT, Standing Committee D, 8th March, 1967; c. 5.]
  With respect to my hon. and learned Friend, I would hate to see one of the worst examples.
  As its name suggests, the Bill purports to make uniform international law, yet the whole concept of the Measure seems to be that the thing is optional and to that extent it does not create a very great degree of uniformity. As returned from its Committee stage, the Bill states in Clause 1(1):
  "In this Act 'the Uniform Law on Sales' means the Uniform Law on the International Sale of Goods forming the Annex to the first Convention and set out, with the modification provided for by Article III of that Convention, in Schedule 1 to this Act. …"
  Article III of the Convention states:
  "By way of derogation from Article 1 of the Uniform Law, any State may, at the time of the deposit of its instrument of ratification of or accession to the present Convention declare … that it will apply the Uniform Law only if each of the parties to the contract of sale has his place of business or, if he has no place of business, has habitual residence in the territory of a different Contracting State, and in consequence may insert the word 'Contracting' before the word 'States' where the latter word first occurs in paragraph 1 of Article 1 of the Uniform Law".
  We have done exactly that because Schedule 1 states:
  "The present law shall apply to contracts of sale of goods entered into by parties whose places of business are in the territories of different Contracting States.…"
  Thus, at the very outset of the Bill we have restricted its operation by inserting the word "contracting"—which certainly we are entitled to do under the terms of the Convention—although this is not necessarily what other states which have ratified or will be ratifying the Convention will do. We are therefore restricting the operation of these so-called uniform laws.

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  We have imposed a second measure of restriction on the extent of these laws, because the Bill states in Clause 1(3):
  "While an Order of Her Majesty in Council is in force declaring that a declaration by the United Kingdom under Article V of the First Convention (application only by choice of parties) has been made and not withdrawn the Uniform Law on Sales shall apply to a contract of sale only if it has been chosen by the parties to the contract as the law of the contract".
  That refers to Article V of the Convention, which states:
  "Any state may, at the time of the deposit of its instrument of ratification, … declare … that it will apply the Uniform Law only to contracts in which the parties thereto have … chosen the Law as the law of the contract".
  Once again we have indeed done what is lawful and permissible to us under the terms of the Convention, but by so doing we have restricted the operation of these laws.
  A third restriction appears in the Bill in Clause 1(5), which states:
  "If Her Majesty by Order in Council declares what States and Contracting States or what Declarations under Article II of the First Convention are for the time being in force, the Order shall, while in force, be conclusive for the purposes of paragraph 1 or, as the case may be, paragraph 5 of Article 1 … but any Order in Council under this subsection may be varied or revoked by a subsequent Order in Council".
  Once again this is a restriction because Article II of the Convention states:
  "Any contracting state may declare that it does not consider one or more non-contracting states as different States from itself for the purpose of the requirements of the Uniform Law which are referred to in paragraph 1 of this Article, because such States apply to sales which in the absence of such a declaration would be governed by the Uniform Law legal rules which are the same as or closely related to its own".
  Indeed, we are going to impose this further restriction because Clause 1(5) refers to this possibility in that it refers to a declaration made under Article II of the Convention, which I have quoted.
  In these three ways these uniform laws—which I first took to be and read as being extensive uniform laws which would apply universally and which would be really uniform—have, by our voluntary action, been restricted and the extent of these uniform laws now appears very small indeed, which is a pity. I should have thought that if these were good laws
  1128
  —and my right hon. Friend has indicated that delegates from this country took a leading part in drawing them up—they should apply universally.
  The concept that the laws should be optional is peculiar. I have never heard of an optional law, although I have a dim memory from my historical reading that in the time of Charles II there was a Measure called the Occasional Conformity Act. I do not know whether that was an optional law, but, if not, this is the first law known to me which is optional in its extent. Because it is optional, I criticise it on the ground that it makes things harder, not easier, for exporters.
  I understand that at present businessmen contemplating entering into a contract with a national of a foreign country have two laws to take into account—the law of this country, and the law of the other country concerned—and that it will be for the two parties to determine which of the two shall apply according to the provisions of the two laws. Now they may or may not have to take into account the possibility of a third law applying. This increases confusion instead of bringing about uniformity.
  The combination of contracting in or contracting out as permitted under the Convention and the possibility that traders may choose whether the law shall apply creates great uncertainty, because, as we have decided to operate these uniform laws on a contracting-in basis, a trader in this country might reasonably assume that a contract entered into which does not expressly say that these laws shall apply will be a contract to which these laws shall not apply because we have not contracted in. But it may well be that the foreign national with whom he is entering into a contract is a national of a country which has adopted these laws on a contracting-out basis—that is, in that country these laws shall apply unless the contract expressly says that they shall not. Therefore, that foreign national will assume, if the contract is silent, that the law does apply. There is the possibility of uncertainty and confusion arising, and I am not clear how the trader is supposed to know.
  I wrote to the Board of Trade on this subject, and I am very grateful to my right hon. Friend for his reply. He has taken pains over this matter. But I am

  1129
  bound to say that I am not entirely happy with his reply. I asked how traders were supposed to know whether foreign States had adopted the law and, if they had, whether it was on a contracting-in or contracting-out basis. My right hon. Friend's reply reads:
  "You asked what steps we will take to publicise the list of States adhering to the Convention. Orders in Council will list the contracting States and show what declarations have been made. The Orders in Council will not, however, show which States have adopted the uniform law on a contracting in basis and which have adopted it on a contracting out basis. Clearly some publicity will have to be given to this and we are considering how it might best be done."
  That is just great. But had not the Government better get a ripple on—because we have now reached the Third Reading of the Bill and presumably, therefore, it will not be long before it becomes an Act and has the force of law. Yet the Government are still merely considering what kind of publicity they will give to ensure that traders and businessmen know the exact effect of the operation of this law.
  The constituent whom I mentioned earlier has been in correspondence with the Board of Trade asking for what he called a "plain man's guide" to this subject. In my opinion, it is a very reasonable request, and I should like to endorse it and to press as strongly as I can the desirability, indeed the necessity, of making absolutely plain to traders and businessmen in this country the basis on which other countries have adopted this law, because without such information the list which the Board of Trade has undertaken to publish will be of no value.
  My right hon. Friend, in moving the Third Reading, referred to the need to do this sort of thing but, if I may respectfully say so, in rather mild and mousy terms, when he said that the business community would be kept in touch with developments. The phrase "kept in touch" suggests a degree of publicity rather more modest than I should have liked to see.
  If these laws are desirable and important, I should have thought that it was advisable that they should apply universally. I took up this point in earlier correspondence with the Board of Trade and received a rather curious reply. It was said that a lot of people might not know about these laws and, therefore, it might be rather hard that they should be
  1130
  affected by them. I can understand that argument. But I have always been under the impression that it was a principle of this country that ignorance of the law is no excuse. If that be the principle, I am not clear as to why it should not apply in this case.
  However, if it be the Government's decision that these uniform laws shall be permissive and not mandatory—I would regret that decision, but I assume that it is their decision—may I underline as strongly as I can the necessity of making absolutely clear to the business community the exact terms and conditions on which other States have adopted the Convention. I realise that a contract may be entered into in all good faith which will have different meanings and effects according to the terms on which the other States have adopted the Convention.
  It would be a great pity if what purports to be a Measure bringing uniformity into international law should create disunity and chaos. I see the real possibility of this happening unless adequate publicity is given to the point which I have mentioned.
  10.58 a.m.
  Mr. Ray Mawby: I apologise for not being here earlier, but I was consulting the Bill and the point which was raised on Second Reading and to which the hon. Member for Chislehurst (Mr. Macdonald) has referred. This is the only point which worries me. Everyone in the House will applaud this move forward to a more uniform law on international sales. But there is the problem which I have in mind which could lead to all sorts of difficulties and to the main parts of the Bill creating more confusion.
  On Second Reading, the reservations of British businessmen when the Convention was originally discussed were raised. The right hon. Gentleman the Minister of State referred to the fact that there was an addition to the Convention which provided:
  "Any State may apply the uniform law only to contracts in which the parties thereto have chosen that law as the law of the contract."
  Apparently that gave a certain amount of satisfaction to businessmen in this country.
  The difficulty which I see is that which exercises the mind of the hon. Member

  1131
  for Chislehurst, namely, that misunderstandings could arise when various countries took a different view. We in this country would obviously take the view that unless it was expressly put into the contract our present laws relating to contracts for the sale of goods would apply, but a contracting party from another country, because of the way in which that country had brought in the Convention, might assume that unless it was expressly provided against the uniform law on international sales would apply.
  It is important that as much publicity as possible is given, first, to the convenience which everyone will enjoy by accepting the conditions of the Bill, and, secondly, to making it quite clear that every contracting party ought not to assume anything and indeed ought to accept the express conditions of the contract into which they enter. It is only in this way that we shall get the benefits which can accrue from a uniform law such as this. I hope, therefore, that the right hon. Gentleman will do everything he can to make it as clear as possible to everyone concerned that we would like to see all our people following the terms of this Bill to make certain that there is not this misunderstanding which could arise between contracting parties in different countries even though they are all signatories to the Convention.
  11.2 a.m.
  Mr. F. V. Corfield: We all welcome the basic principle of incorporating into our domestic law internationally agreed provisions for the interpretation and enforcement of international contracts in relation to the sale of goods. I would have thought that this probably had more advantage to a country such as our own, depending as it does so much on international trade, than to some other countries.
  I am delighted that the hon. Member for Chislehurst (Mr. Macdonald) is growing wiser with regard to Parliamentary reform. I accept some of his reservations, though I think that some of them have been a little over-stated. It seems to me that at this stage it is almost inevitable that the use of these provisions will be optional. I do not know, and perhaps the right hon. Gentleman will be able to tell us, what proportion of the States which took part in
  1132
  this Convention have ratified it and incorporated its provisions into their domestic law. This clearly is a factor which very much affects the degree to which the provisions can be of universal application.
  I disagree with the hon. Gentleman in his criticism of the provision by which these provisions will not apply where there is a declaration that the law of two countries is so close that they can be considered for this purpose as virtually governed by the same rules of law. In our own case, for example, the law on the sale of goods is derived from the Sale of Goods Act which has always been held up to students of the law as almost a model piece of drafting. Perhaps some of us would do well, and some of the Parliamentary draftsmen would do well, to study it in greater detail when drafting some of our modern legislation. No doubt it needs a certain amount of bringing up to date, and I understand that the Law Commission is considering this, but it is not one of our less successful pieces of legislation, and an enormous amount of trade is carried on on the basis of its terms.
  I think I am right in saying that almost all our recently independent former Colonies have laws based on the Sale of Goods Act and that this is also true of the older Dominions with whom we do a great deal of trade. I would have thought that it was being somewhat dogmatic to introduce different rules for trade between countries of that sort, when on both sides they were accustomed to applying existing provisions.
  Nor am I entirely convinced of the fears of the hon. Gentleman, or of my hon. Friend the Member for Totnes (Mr. Mawby), that by introducing a third set of provisions, in other words, the domestic laws of the two countries of the trading partners, plus this new Convention, we will necessarily make things harder rather than easier, or introduce confusion, because it seems to me that this is in a sense part of the Convention rather than part of the Bill.
  Article 3 of the Annex to the Convention says:
  "The parties to a contract of sale shall be free to exclude the application thereto of the present Law either entirely or partially. Such exclusion may be expressed or implied."

  1133
  It seems to me that with that provision in the law the first thing the contracting parties must do is to advert to the provisions of the Articles before deciding to what extent their contract is to be governed by them. Whether or not the country is a contracting in country, or a contracting out one, this is the first thing that will have to be done. I do not profess to know enough about it to say whether this is a disadvantage in the provisions of the Convention, but I do not see what Her Majesty's Government can do about it, because they must be concerned with relating domestic law to the international Convention, and not to something which we think would be a better international Convention. I think it unlikely that anybody will adopt these provisions as the basis of any contract without both sides being clear what provisions are being adopted and what are not.
  I think that the hon. Gentleman is on sounder ground in wishing that the Convention had included some arrangement by which all countries would either be contracting-in or contracting-out. But there again, without having read the evidence, I cannot, even in my most extreme party mood, blame the Government for that. I think that, as in every other form of international Convention, this is a matter of give and take. We must accept what has been agreed, and I have no doubt that as progress is made in seeing how these provisions work the various parties to the Convention will have ideas by which it can be improved, and if the difficulties which arise are common difficulties and cut right across international frontiers, no doubt there will not be a great deal of difficulty in reaching agreement on the points which have given rise to those difficulties.
  I think that the hon. Gentleman has a strong point in saying that business people will want to be kept up to date on what countries have incorporated these provisions into their domestic law with or without variations. But, subject to that, I hope that this will be a useful addition to the basis of international contracts for the sale of goods which, as I said, seems to be of great importance to this country. No doubt as time goes on the right hon. Gentleman will be able to come back and tell us whether his hon. Friend's fears are justified or not.
  11.9 a.m.
  Mr. Darling: I do not know whether I have to seek permission to answer the points which have been raised. I am rather stale on Third Reading procedure, but I know that the hon. Member for Gloucestershire, South (Mr. Corfield) will shortly help us to have a Third Reading debate on another important Bill.
  I do not know whether it is in order to do so, but I would like to put on record that I disagree profoundly with the views expressed by my hon. Friend the Member for Chislehurst (Mr. Macdonald) about the Second Reading procedure. I think that it is an excellent idea, and I am only sorry that other activities prevented my hon. Friend from taking part in the debates from which he appears to have been excluded.
  The main issue which my hon. Friend and the hon. Member for Totnes (Mr. Mawby) have raised is, I should imagine, a problem which arises in all international discussions. To what extent we can get agreement is a matter of give and take, and in the case of contracting-in or contracting-out it would have been better if the Conventions had come down in favour of one or the other. I would have thought that contracting-out would have been the better arrangement, but the discussions which led up to the Conventions and then to the Bill have been going on for about 40 years, during which time opinions have changed about the need for international laws and contracts, and even for international co-operation.
  The British business community a short time ago reached a point at which it was in favour of doing something, although it still has some general reservations. It was largely on our business community's initiative that the contracting-in arrangement was put forward—or, at least, strongly supported. We shall have to see how this arrangement works out. These are called uniform laws. The word "law" in this context seems to have a rather less severe meaning than is generally attached to it in this country. Law or not, the whole operation is optional.
  This is the only way we can proceed towards uniformity in international law. It is a developing process. My hon. Friend said that he hoped that the uniform laws would be universal. We have

  1135
  no authority to lay down laws for other countries. We can only proceed on a measure of agreement, and I hope that in the not too distant future uniform laws will become generally accepted.
  I have said that we cannot impose the law on our business community, let alone the business communities of other countries. We must therefore retain the optional character of these laws. But in developing towards international agreement on contracts nobody can be absolutely certain that these Conventions and the rules that arise from them will prove to be entirely satisfactory. Much experience will be needed before we can be sure that the rules are satisfactory.
  My hon. Friend has overlooked one important point. The Conventions, and therefore the rules, may prove to be unsatisfactory in certain respects; we do not know. Provision has therefore been made in the Conventions themselves to allow for changes, and these changes can be made only at further international conferences. Unless we ratify the Conventions we can take no further part in the proceedings. If, therefore, we really want international agreement in contractual law it is essential for us to ratify the Conventions and put the laws into operation in this country in the optional way that we are doing, thereby being able to play our part in moulding future contractual arrangements and law.
  I have answered the point about contracting-in and contracting-out—briefly, I agree. We must make it clear to our traders that on occasions when they make arrangements for their contracts to be governed by the uniform laws that arise out of the Bill they must make certain that the country of the party with whom they are dealing has similar arrangements—in other words, contracting-in arrangements. If it does not, this fact must be made clear in the contract drawn up between the two parties. The fact that one party is in a contracting-in country and the other in a contracting-out country must be made clear to both parties.
  My hon. Friend the Member for Chislehurst referred to what he called a further weakness, in that the law will not apply between States having similar legal systems to ours. This situation arises because, generally speaking, our trading arrangements have been governed by the
  1136
  Sale of Goods Act, which is now 80 years old. It is a very good piece of legislation, drawn up not by Parliament but by a county court judge to codify the law. So good has it been as a codification of common law that it has been taken as the basis of contractual law in, I believe, all the countries that we used to call Dominions and which are now members of the Commonwealth, and also in the United States of America.
  There is no point in having a different system of international contractual law where Great Britain is trading with countries who have the same system of law as we have. This reservation is made so that if the contracting parties agree they will not need to adopt the uniform laws laid down in the Conventions. In practice it is very unlikely, at any rate for the time being, that they will adopt the uniform laws system, because, in effect, they already have uniform law as a result of basing their contractual arrangements on our Sale of Goods Act.
  The hon. Member for Gloucestershire, South asked how many countries had ratified the Conventions. When this Measure gets on to the Statute Book we shall be the first country to ratify the Conventions and make them part of our law. There are good reasons why we should proceed quickly. First, it gives us an opportunity to influence further developments of international law in this respect.
  Secondly, whether or not we enter the Common Market our traders will have closer contacts with European countries. We hope that there will be much more trade between the United Kingdom and European countries—and the European countries that we have in mind on occasions like this are mainly countries in the Common Market which base their trading arrangements on an entirely different system of law. It is therefore desirable to come to some kind of agreement quickly.
  We are taking the lead in this matter, and this gives us a little time carefully to work out the kind of publicity that must be given to the new arrangements, so that our traders are in no doubt about where they stand under the law of contract. We can proceed to work out with the business community and the lawyers the best way to give

  1137
  publicity to this matter. I agree about the absolute need for good and careful publicity, and we shall keep this matter under active consideration. We will be in contact with the business communities concerned, and I do not think that we shall fail on that score.
  Question put and agreed to.
  Bill accordingly read the Third time and passed.

  ST. TERESA'S MATERNITY HOSPITAL, WIMBLEDON
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Gourlay.]
  11.20 a.m.
  Sir Cyril Black: I am glad to have the opportunity of raising today the question of the future of St. Teresa's Maternity Hospital, which is situated in my constituency of Wimbledon. I am fortunate that the matter has come up at this stage today, because we have a little more time than is normally available for such an Adjournment debate which will enable more to be said than would ordinarily be possible in a debate of this kind.
  For 20 years past the South-West Metropolitan Regional Hospital Board has had a contract with St. Teresa's Maternity Hospital whereby the Board pays for 40 beds which are thereby made available for National Health Service patients. Recently the Board has given notice to bring that contractual arrangement to an end at the end of the present calendar year. This has caused the greatest possible concern and indignation in the area which is served by this greatly esteemed and much loved hospital.
  The proposal for the termination of this contract arises from the fact that there is to be a new maternity wing at Queen Mary's Hospital, Roehampton, which is a branch of Westminster Hospital, and in that new wing at Roehampton Hospital, which I understand is to open in January next, there will be 50 maternity beds. It is claimed by the Board and by the Minister that those 50 beds, which is a net addition of only 10 beds in the area, will make it possible for all mothers who can reasonably expect to have their babies in hospital in the area to be accommodated in the
  1138
  maternity beds that will then be available.
  In 25 years of public life in my constituency, I cannot recall any matter that has arisen which has produced the same intensity of feeling and widespread indignation as has been aroused by this proposal for the withdrawal of National Health support from St. Teresa's Hospital. On a recent Sunday afternoon, a meeting was arranged in the Wimbledon Theatre at which this matter was discussed. Most hon. Members are familiar with the difficulties today of attracting large public audiences at any time in any circumstances. Most hon. Members with any experience of organising meetings will know that a Sunday afternoon is generally the least propitious time for such an exercise. On this occasion, about 2,000 people were present at the meeting in the Wimbledon Theatre. They unanimously expressed their indignation and concern at this proposal of the Hospital Board.
  A committee which has been organised to undertake the protection of the interests of this hospital has organised a petition for which signatures have been gathered in the area. I am told that up to the present 45,000 signatures have been attracted in what is, after all, a comparatively limited area.
  My colleagues in adjoining constituencies whose constituents are also affected by this decision have, along with me, received scores, and in some cases hundreds, of letters from indignant constituents. Lobbying of Members of the House, of the Hospital Board, and of the Ministry, has been undertaken on a scale that must be almost unprecedented. Such has been the interest in what ordinarily might be regarded as only a local matter that not only the local Press but the national Press and T.V. have devoted a very large amount of time to reporting on this particular matter. Virtually without exception the action of the Regional Hospital Board and the Minister has come under severe condemnation.
  If they are fortunate enough to catch your eye, Mr. Deputy Speaker, there are several of my colleagues from adjoining constituencies who want to say something about this matter on behalf of their constituents. I think that the hon. Member for Putney (Mr. Hugh Jenkins), whose Division is also much concerned, has

  1139
  expressed at any rate a degree of sympathy with what we are seeking to do. I am only sorry that he is not able apparently to be with us this morning to add his plea to those which my fellow Members and I wish to address to the Parliamentary Secretary.
  I want to say a few words about some of the sources from which protests have come. The Wandsworth Borough Council, through its Health Committee—I probably do not need to remind hon. Members that this is a Socialist-controlled local authority—has passed a resolution condemning the action of the Board and the support given to that action by the Minister.
  The Merton Borough Council, at its Health Committee, recently passed the following resolution:
  "That the Minister of Health be informed that the Council considers that there is already a local shortage of beds for maternity cases in the Borough.
  That it is understood that this view is fully shared by the Local Medical Committee.
  That the withdrawal of National Health Service support from St. Teresa's Hospital can only further aggravate the local shortage of maternity beds.
  And that accordingly the Minister be asked to reconsider his support of the decision of the Regional Hospital Board to terminate on 1st January, 1968, the Board's present contractual arrangements with St. Teresa's for the provision of National Health Service maternity beds, and to arrange for the maternity service presently provided at the Hospital to be continued at least until the end of 1969."
  I would like to pray in aid a useful statement on this matter from a source which will, I am sure, not be called into question by any hon. Member opposite. It is a resolution passed by the Merton and District Trades Council which says:
  "In spite of the intention to build a 50-bed maternity unit at Roehampton, we strongly urge the Minister of Health to reconsider his decision to discontinue sending National Health patients to St. Teresa's Maternity Hospital, Wimbledon.
  We feel that, in view of the fine record of service this Hospital has rendered over the past 25 years, also the fact that the new unit at Roehampton will not satisfy the demand on the maternity service, the Minister of Health should continue supporting St. Teresa's and inform the management promptly."
  The Regional Hospital Board and the Minister have found no support in the
  1140
  area affected by the decision which has been taken. I am certain that I am not over-stating the case when I say that if a referendum could be taken locally on the continuation of National Health support for this hospital it would be carried in favour of continued support by at least 10 to 1.
  There are three questions to which we must seek the answer in reaching the right conclusion on the facts of this case. I shall mention them and discuss them in turn. The first is: Is St. Teresa's efficient and satisfactory as a maternity hospital? The answer is, "Yes", and there is no doubt about it.
  In a Press statement which was issued by the Regional Board it was stated:
  "Over the years, St. Teresa's has provided a very satisfactory maternity service for those patients admitted there."
  In this House, and in letters, the Minister has expressed his agreement with that view. One of the great things to be claimed in favour of the hospital is that it has virtually never been short of nursing staff, which is a great advantage and a very exceptional state of affairs is an age when there is such a chronic shortage of nursing staff in many hospitals throughout the country.
  Most of the nursing is undertaken by the nuns who run the hospital, and no one can speak too highly of the devoted service of these dedicated women. It is interesting to note that over a period of about 20 years there have been 19,000 confinements in the hospital, and not one single mother has been lost. I am advised that there is only one other hospital in the country with a comparable record, and, perhaps fittingly, it is the Churchill Hospital at Oxford. At the beginning of the period with which I am dealing, 20 years ago, I am advised that about one mother was lost per 1,000 confinements.
  There has been a tremendous and welcome improvement in the figures over 20 years, and the national average is now about one mother lost per 3,500 confinements. At a rough estimate, if the average figure for the loss of mothers per 1,000 confinements for the country as a whole had applied in the case of St. Teresa's over the past 20 years, there would have been about 10 mothers lost on the 19,000 confinements. It is a remarkable fact that not one mother has been

  1141
  lost during the period. I do not know if the Parliamentary Secretary can give us the statistics at Westminster Hospital, which will be in charge of Queen Mary's Hospital, Roehampton, but my understanding, and I will be glad to be corrected, is that at Westminster Hospital, over five years, there have been 2,500 confinements and three mothers have been lost.
  There could be no question that St. Teresa's is eminently efficient and satisfactory. The second question is: is there any saving of public money effected by giving up National Health Service beds at St. Teresa's? If it could be argued that there was a substantial gain in public expenditure by the new arrangements, that would be an argument to be weighed against the arguments in favour of continuing the present arrangements. The answer to the question must be that there is no public saving, quite the reverse.
  In reply to recent Questions put to him by my right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) and myself, the Minister admitted—we had some difficulty in extracting the information from him—that the cost per bed per day at St. Teresa's to the Regional Hospital Board was £4 12s. 11d. He said that the cost per bed per day at Roehampton was £6. One has experience of estimates with regard to future expenditure, and they have usually proved to be on the low side. If we accept the figure of £6 per bed, there must be some very good reason, of which I am unaware, for giving up a satisfactory service costing the Exchequer £4 12s. 11d. and substituting for it a service which at present is of unproved merit, and which is estimated to cost £6 per bed per day.
  Mr. Anthony Royle: Ideological reasons.
  Sir C. Black: The Minister was not very fair or forthcoming in dealing with this matter in the short exchange that some of us had with him on 13th March. He tried to use a financial computation with which most people are entirely unfamiliar when applied to the Hospital Service. He tried to build up a case for saying that the cost of maternity beds ought to be based on the cost per case and not the cost per day or per week. All the statistical information that I have
  1142
  been able to find with reference to the costing of hospital service is always calculated on the cost per bed per day or week. It is difficult to see any other method of presenting reliable or relevant statistics.
  The Minister said on 13th March that the cost per case at St. Teresa's was £57 4s. 8d. compared with £49 8s. 10d. in the case of the South-West Metropolitan hospitals providing full medical and surgical services. In reply to my right hon. Friend the Member for Kingston-upon-Thames, who asked if the figures were based upon a stay of equal duration, the Minister replied:
  "No, Sir. The average length of stay at St. Teresa's is 12 days, compared with nine days in the other hospitals."—[OFFICIAL REPORT, 13th March, 1967; Vol. 743, c. 26.]
  I do not claim to be a statistician, but I would have thought that it was a fundamental statistical rule that where one makes comparisons one compares like with like. If one does not do so the comparison has no use or relevance. All that the Minister is saying in his effort to show that there is no additional public cost involved in his proposals is that he will make up what he will lose by the extra charge per bed per day at Roehampton by hustling out the patients more quickly following the confinement than has been the case at St. Teresa's.
  As that fact becomes to be understood by prospective mothers it will arouse an increasing dislike for the Minister's decision and repugnance for the manner in which he proposes to save money at the cost of the interest and the well-being of those who go into hospital. No case can be made, on any proper examination of the figures, to lead one other than to the conclusion that a more economical method of providing maternity beds is being given up and that a more expensive method is being substituted for it.
  My third question is this. If 40 National Health Service beds at St. Teresa's are replaced by 50 beds at Roehampton, will there be a sufficiency of maternity beds in the area? The Minister's answer is "Yes", but the answer of everybody connected with the hospital and medical service in the area is an emphatic "No", as I shall show. At St. Teresa's and other maternity hospitals in the area patients are, in normal cases,

  1143
  being sent home after six or seven days, which, in the view of most authorities, is too short an average period after a confinement. Such is the pressure on beds that some mothers are being hustled out of maternity beds 48 hours following confinement.
  As recently as June of last year the St. Helier Hospital Group sent a circular to doctors practising in the area informing them that certain categories of cases would no longer necessarily get beds in the area. One such category specifically mentioned is that of a first confinement when the mother is between 18 and 25 years of age. Speaking as a layman, that would seem to be the kind of case that should have a very high priority for a maternity bed. This is certainly the view of competent medical men with whom I have discussed the matter.
  In support of the proposition that the substitution of 50 beds at Roehampton for 40 at St. Teresa's will still leave a considerable shortage of beds in the area, I cite a letter from the Maternity Liaison Committee of the St. Helier Hospital Group, which stated that even when a new unit was opened in January at Queen Mary's Hospital, Roehampton, the Group would still be under considerable pressure for beds. Dr. Doody, Medical Officer of Health for the London Borough of Merton, who is a member of the Maternity Liaison Committee, has said that he is concerned about any maternity unit in his area being closed to National Health patients. The question of the Roehampton Unit did not matter, Dr. Doody has pointed out, because
  "Some hospitals in the area have to send patients home after 48 hours. This will still be so when the new unit is opened. This is permitted, indeed encouraged, by the Ministry of Health, but I believe the practice is bad. Maternity patients should be kept in at least eight days and, ideally, ten."
  I have said enough to make it clear that all informed local opinion—and these people have, after all, long experience of working in the maternity service in the area—is persuaded that even with the addition of 50 new beds at Roehampton, there is still a need for the 40 beds at St. Teresa's if the reasonable requirements of mothers in the district are to be adequately served.
  I must comment on the Minister's alternative proposal for the use of these
  1144
  beds at St. Teresa's if he ceases to pay for them under contract for maternity cases. The right hon. Gentleman has made a proposal to the St. Teresa's Management Committee that the Regional Board would be willing to negotiate a contract for these beds for geriatric cases, something that seems to me and others with whom I have discussed the matter as an entirely unacceptable proposal and one which I do not believe the Management Committee would contemplate in any circumstances.
  There are two main objections to this course. The first is that St. Teresa's is equipped, with an experienced staff, for maternity work. For more than 20 years they have built up an unparalleled reputation in this sphere. To have, say, the ground floor of a comparatively small hospital occupied by geriatric cases—for which the building was not constructed, is not equipped and does not possess the right facilities—and to have the upper floors occupied by maternity cases is something that one cannot contemplate. After all, there would be the inevitable noise that must come from crying babies. Even the advances of medical science have not found a satisfactory method of preventing babies crying on certain occasions. It seems to the doctors and hospital experts with whom I have discussed this matter that this is an entirely unthinkable and inappropriate alternative for the 40 beds at St. Teresa's.
  I do not want to spend time discussing what I would call the ideological view underlying the action of the Board and the Minister. It is only too obvious. What the Minister is doing in this case seems to be based on entirely contrary reasoning to the reasoning applied to fee paying schools. In that case the Government say that it is unfair that these should be reserved wholly for fee paying parents and that, therefore, local authorities should take a number of places, at public expense, to be occupied by the children of parents in general.
  In this case, however, instead of the most admirable and sensible arrangement whereby half the beds in St. Teresa's are paid for by the patients who use them and the other half paid for by the Board and the Minister, the right hon. Gentleman is saying, "I am now going to take away from people who cannot themselves pay hospital fees any

  1145
  right to benefit from the services of this admittedly superlatively efficient hospital and leave all the beds in future for the privileged minority of people who can afford to pay for them. This is an inversion of the philosophy that is generally applied, and it is utterly inconsistent with what is sought to be done in respect of schools and other social services.
  I beg the Minister to regard this as a human problem in which the health and happiness of thousands of mothers are involved in the years ahead. This is not a statistical exercise. If hon. Members would read the pathetic letters I have received from mothers who have been patients in this hospital, begging me to persuade the Minister to change his mind, they could not fail to be moved by their earnestness and sincerity.
  St. Teresa's is an efficient, economical and necessary hospital, and the ending of the grant has no local support. The Regional Hospital Board, aided and abetted by the Minister, is engaged in nothing more nor less than the murder of a hospital. I beg the Minister to think again on this matter because if he proceeds with this project he will not be forgiven.
  11.50 a.m.
  Mr. John Boyd-Carpenter: There has been some informal indication in the last few days that further consideration has been given to this matter. I very much hope that that is so; and that the Parliamentary Secretary will have good news to give us this morning. For that reason, and in that hope, I shall speak with more restraint than my feelings impel me to do in view of a decision which, if allowed to stand, seems to me to be the worst decision that has been made since the inception of the National Health Service.
  I do not want to impale either the Parliamentary Secretary or the Minister of Health any further on the hook: I am only anxious to help them both off it. I very much hope that the hon. Gentleman who has shown in many respects great good sense in many matters of this kind, will himself be able to secure reconsideration of a matter which has, as my hon. Friend the Member for Wimbledon (Sir C. Black) has so well said, aroused local opinion in the areas which he and I and many of my hon. Friends
  1146
  represent more sharply than has any issue for many years past.
  I beg the Parliamentary Secretary to understand the feeling that has been aroused. I have personally had more letters on this subject than on any I recall in 20 years membership of the House. I have had an immense mail—detailed, precise, bearing none of those indications of organisation which hon. Members have experienced and which they very easily detect. They have all been quite obviously spontaneous, and more than one have been from women who have written to say that they believe that the attention they got from the hospital saved the life of the child if not of the mother herself.
  It is an issue of no party political significance, but one on which people of all political views in the area are unanimous in simply asking the Parliamentary Secretary, his right hon. Friend the Minister and the Regional Board, by whatever expedient they like, to get themselves off the hook and continue arrangements under which the National Health Service supports this hospital as a maternity hospital by paying a certain amount in respect of beds.
  I should like to follow up one or two of the points made by my hon. Friend in what I thought was an immensely cogent speech. First of all, there is the cost factor. I put a supplementary question to the Minister of Health on 20th March last. I asked him:
  "As his own Answer to me … indicated that his alternative method of providing these beds was some 30 per cent. more expensive to the taxpayer, will he not reconsider the matter?"
  The right hon. Gentleman replied:
  "No, Sir; I do not accept that the alternative provision will be 30 per cent. more expensive to the taxpayer …"—[OFFICIAL REPORT, 20th March, 1967; Vol. 743, c. 1030.]
  The figures on which I based my supplementary question are the right hon. Gentleman's own: £4 12s. 11d.—there is a rather curious precision about that figure—paid to St. Teresa's under the present arrangement, and about £6 at Roehampton; in both cases per bed per day.
  Without relying on the point my hon. Friend very wisely made that it is one's general experience, as perhaps the Parliamentary Secretary will know, that particularly with new hospitals costs are

  1147
  higher rather than lower than expected, accepting the Minister's figures, it may be that my mathematics on my legs erred marginally, but I still make the difference between £4 12s. 11d. and £6 to be nearly 30 per cent.—perhaps 28½ per cent. At all events, it is a very substantial difference, and I would be obliged if the Parliamentary Secretary would explain why his right hon. Friend contradicted me when I made that assertion. The figures are there. It is purely a matter of fairly simple calculation. If I am wrong, will the hon. Gentleman tell me his right hon. Friend's view of the difference in cost?
  I do not rely by any manner of means solely on these financial figures. This is such a good hospital that even if the financial arguments were the other way it would still be reasonable to retain it; but it certainly makes a more powerful case against change. If public opinion is to be affronted, if the public who actually are being served are to get what they think will be a less good service and, as an outcome of it all, the taxpayer is to pay more, it really seems to be the reductio ad absurdum of administration.
  I come to the reasons which the Regional Board itself has given for this proposition. The right hon. Gentleman the Minister was courteous enough, when I corresponded with him, to send me a copy of the Press statement which the Board put out. Following immediately on the passage that my hon. Friend read out:
  "Over the years St. Teresa's has provided a very satisfactory maternity service for those patients admitted there"
  the statement goes on:
  "It is however the duty of the Board to provide its own maternity service, where possible in district general hospitals or Teaching Hospitals providing a district function. This policy was set out in the Minister's Building Plan and there will be a progressive reduction of contractual arrangements as the programme unfolds."
  Whether this is right, whether this centralisation of hospital facilities in those hospitals that are the Board's own is right or wrong, could be argued at length. I know that there are many of us who feel that basically it is the wrong approach; and that if a voluntary hospital is satisfactory there is something to be said for variety, for alternatives,
  1148
  for choice for National Health Service patients.
  With respect, however, this point does not arise at this stage. No one knows better than does the Parliamentary Secretary how inadequate are the hospital facilities generally in this area. I think that he has visited Kingston Hospital. If he has, he knows the kind of urgent work in many directions in respect of many services that is simply awaiting financial approval from his right hon. Friend. It is really the biggest nonsense in the world, if a maternity service is properly provided already in a voluntary hospital, to set up the Board's hospital as an alternative, even if it were as good, when there are large numbers of other directions in which services are inadequate and to which I would suggest priority should be given in the allocation of resources. If a voluntary hospital already adequately serves an area, why replace it with the Board's hospital when the Board itself knows as well as anyone in how many other directions modernisation and extension work is required on its existing hospitals? I particularly stress that a very short time ago I saw the work required on Kingston Hospital.
  There are really two points on which it seems that the Board's argument falls down. First, there is the curious proposition that everything should be bureaucratised into the Board's hospitals, and that there should be taken away from what are admittedly efficient hospitals the National Health Service support and patients. On this general issue I should like to argue at some length on an appropriate occasion. The second point is this. Even if the Board and the right hon. Gentleman are right about this proposition, it is not sense at this moment to go out of the way to replace satisfactory externally operated services by the Board's services before the Board has applied the resources which the right hon. Gentleman gives it to provision of what is so much lacking and where rebuilding and modernisation are already so much needed. These should have prior claims because the citizen is not getting the service either from the Board or from outside.
  This would be an argument, if the Board and the Minister are in a conciliatory mood, for a change of view. It

  1149
  would be perfectly reasonable for the Board to say that it would prefer to apply its resources in other directions, and for the time being there would be St. Teresa's in operation doing the job which it has been doing so well for a number of years. I hope that the hon. Gentleman will grasp the opportunity which the situation offers him. I beg him to understand the violence of public reaction to this proposal.
  Many of us thought from the beginning—some of us were here to say it at the time—that it was a pity to set up the hospital regional board system divorced from local authorities and divorced from local opinion. Surely the fact that a regional board is dependent solely on the Minister and has no constitutional dependence on other local organisations or local people demands that it should be the more cautious in not affronting public opinion. This is what in this case the Regional Board has done by this decision.
  My hon. Friend did not exaggerate—if anything, I think he under-stated—the reaction in the whole area which this hospital serves. It cannot make sense for a regional board, because it is not responsible to local opinion or organisations but has to live and work with them, to affront local opinion in this way and go flat in the face of local opinion. There is so much that local voluntary organisations and locally-elected authorities can do to help a hospital board if there is co-operation with organisations such as "Friends of the Hospitals". Surely a regional hospital board, anxious to do a good job, would go a long way and would lean over backwards to carry public opinion with it.
  This issue is the crunch in the relationship between the South-West Metropolitan Hospital Board and opinion in a large part of the area which it is supposed to serve. I do not want to rake over old sores, but the Parliamentary Secretary knows as well as I do that this Hospital Board has not had a happy history. The appointment of its present chairman was very much criticised as a political appointment. I had hoped that this was wearing down and that the Board and local opinion were beginning to live with each other. If the Board could show generosity—I do not ask that it should admit that it is wrong but that its action is premature—it could go along with
  1150
  local opinion which would help it in the job it has to do and would help the Minister.
  We are in a democracy, and public bodies, whether directly dependent on public election or not, are right to pay attention to public opinion. They are doing their job foolishly if unnecessarily they defy public opinion. The Parliamentary Secretary has had some experience, not unsuccessful experience, of constituency work and dealing with public opinion. I ask him, if it be necessary, to use his own influence to persuade the Board, whatever its view of the precise merits of this particular proposal and whether or not they are contrary to what seems to himself to be right, that it should recognise that it will do the hospital service in this area much harm if it persists in a step which the overwhelming majority of opinion in the area regards as wantonly wrong.
  12.5 p.m.
  Mr. Hugh Jenkins: I express regret that I was not here at the beginning of this debate to hear the whole of the speech of the hon. Member for Wimbledon (Sir C. Black). I had assumed that he would be rising about midday and I arranged my morning accordingly and had hastily to readjust it. I am sorry for that.
  I did not agree altogether with what I heard of the speech of the hon. Member. Neither do I go the whole of the way with the right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter). I do, however, think that there ought to be found room for a compromise here. I think it possible that such a solution might be found. Indeed, and here again I agree with the right hon. Member for Kingston-upon-Thames, this whole situation would probably not have occurred if the regional hospital board were itself responsible to an electorate. I think that this can be adduced as an argument for something which many of us on both sides of the House feel it is time we moved in the direction of, the establishment of responsible regional government—
  Mr. James Dempsey: Elected.
  Mr. Jenkins: Elected.

  1151
  Appointed boards are no substitute for government responsible to an electorate. Regional hospital boards are not the only appointed boards which as soon as possible should be made responsible to election. I shall not press this point further, because if I did so I should be out of order, but we badly need the establishment of an effective form of regional government between national and local government, and this is an example.
  We are in a position in which the board has firmly established its view and my right hon. Friend the Minister has firmly established his view. It is unreasonable to suppose that the Government will move back on their policy decision in the matter because the Government's view is a general one, and it would be unfruitful to ask the Government to change their mind on their whole attitude. Obviously, it would be quite impracticable to pursue that line.
  What, however, I think, would be a practicable line to follow would be to ask the chairman of the regional hospital board, not to look at the principle of the matter again, but to look at its practical application in this case.
  I am glad to say that Lord Addison has agreed to receive a deputation which I shall be taking to him consisting entirely of members of the women's section of the Putney Labour Party. That cannot be accused of having a political bias, against Government policy in this respect.
  Mr. Boyd-Carpenter: Why not? It does not necessarily follow.
  Mr. Jenkins: The right hon. Member says that it does not necessarily follow, but he will have noticed that I used the words, "in this respect".
  In this respect at any rate, whatever may be the case in other respects, this group will be found when the discussion takes place not to be wishing in any way to say that the Government's broad and general policy is wrong. That is not the line which it will take. What it will say is that whoever is right and whoever is wrong in this matter depends to some degree on a series of estimates, a series of estimates on the need in the area, whether the facilities at Roehampton will
  1152
  be ready when the time comes, and upon a number of other factors which are largely imponderable.
  One cannot say what the exact compromise may be, but I think it likely, because the group have already ascertained opinion, that it will press on the chairman the view that there ought to be some deferment here and that the Ministry should continue to utilise the facilities of St. Teresa's for a sufficient time, concurrently with the new facilities, until it is discovered whether the forecasts are correct and whether the facilities offered at the new hospital, excellent as I am sure they will be, will succeed in filling the need now filled by St. Teresa's.
  I hope that my hon. Friend the Parliamentary Secretary will agree that this is a way in which a solution to this impasse might be found. Such an answer would give us time to discover who is right and who is wrong in this case. I hope that not only will the chairman and the Board see eye to eye with us on this, but that perhaps the Parliamentary Secretary will say that he would not frown upon such a compromise outcome.
  12.10 p.m.
  Mr. Humphrey Atkins: My hon. Friend the Member for Wimbledon (Sir C. Black) said that this was in no way a party matter and the speech of the hon. Member for Putney (Mr. Hugh Jenkins) demonstrated that there is no difference between the two sides of the House on this very important issue. I was glad to hear his suggestion to the Minister and to have his support in what we seek to do, which is to cause the whole matter to be reconsidered. My hon. Friend the Member for Wimbledon covered the ground so well that I do not propose to detain the House for more than a few moments.
  My constituency neighbours that of my hon. Friend, and many of my constituents have been patients in St. Teresa's Hospital. I wholly confirm what my hon. Friend said about the amount of local feeling aroused by the Regional Hospital Board's decision. I too have received many letters and have been approached by many people who know the hospital and are dismayed by the Board's decision to withdraw its contractual arrangements with it.

  1153
  My first point concerns shortage of beds. I do not know whether the Parliamentary Secretary will try to prove to us that the replacement of 40 National Health Service beds in St. Teresa's by 50 in Queen Mary's at Roehampton will solve the maternity bed shortage in our district. I have grave doubts about that, because the average length of stay in the National Health Service hospitals in our area for mothers who go in for confinements is well below that recommended by the Minister. Even if the Parliamentary Secretary thinks that he can show that the replacement of 40 beds at St. Teresa's by 50 at Roehampton will solve the problem, will he consider that by the Board's action, whatever else happens, it is deliberately depriving the National Health Service of 40 hospital beds?
  I do not believe that the Parliamentary Secretary could claim that the National Health Service as a whole has enough beds. I think that it was said on behalf of the Government in another place only about six weeks ago that there is a queue of about 529,000 people waiting for hospital beds. I admit that they are not maternity beds, but it is clear that this is not the moment to give up any hospital beds. Nevertheless, that is what the Board's proposal appears to do. I ask the Parliamentary Secretary to take that into account when deciding what should be done in the matter.
  My other point relates to the question of cost. As both my hon. Friend the Member for Wimbledon and my right hon. Friend the Member for Kingston-upon-Thames (Mr Boyd-Carpenter) said, the replacement beds will be more expensive. Some of us view with a certain amount of suspicion the estimate of the cost of the beds at Roehampton, because it was also said in another place during a debate on these matters that the cost of a bed in a teaching hospital is £103 a week in London and £76 a week in the country.
  The estimate the Parliamentary Secretary has produced for the cost of a bed in the hospital at Roehampton, which will be a teaching hospital, is £42 a week—much lower than the cost of beds anywhere else. I am not challenging flue figure, for he may be absolutely right, and I hope that he is, but he will understand if we view it with some suspicion. It is only an estimate, and the cost of
  1154
  £4 12s. 11d. per day for St. Teresa's is not an estimate but the actual cost.
  Those two points should be taken into account by the Minister, and I hope that in view of all that has been said today, and the interest which this matter has aroused in my constituency and the neighbouring constituencies, he will undertake this morning that the matter will be reconsidered.
  12.15 p.m.
  Mr. Anthony Royle: I am also glad to have the opportunity to speak and follow my right hon. and hon. Friends and the hon. Member for Putney (Mr. Hugh Jenkins) on this important issue, which affects so many of our constituents. The strange decision which affects so many of our constituents, taken by the Regional Hospital Board, supported by both the Minister and the Parliamentary Secretary, has puzzled many local people, not only in the constituency of my hon. Friend the Member for Wimbledon (Sir C. Black), but in others divisions. That has been made clear this morning.
  The details of the case against the withdrawal of the maternity beds from St. Teresa's have been skillfully put by my hon. Friend the Member for Wimbledon, who has been ably backed up by my right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter), my hon. Friend the Member for Merton and Morden (Mr. Atkins) and the hon. Member for Putney, all of whom, like me, have seen an outburst of indignation in our constituencies over the past few weeks.
  While the hospital of St. Teresa's is not in my constituency, large numbers of patients are drawn from my area, and I have had some of the largest number of letters I have ever received during the seven years I have been privileged to represent Richmond at Westminster. The extent of local indignation is underlined by the fact that in most of the lobbies that are built up on any public issue the letters sent to Members are quite often stereotyped; we know that an organisation behind the lobby is operating, though perhaps not skilfully enough, to convince Members of Parliament.
  But I confirm that in this case the type of letter received is that from constituents who are obviously, judging from the letters' tone and the way they are written,

  1155
  very concerned and emotionally involved, perhaps because of past experiences of the hospital, where members of their family have been well looked after. They feel so strongly that they have decided to write.
  That was confirmed by the incredible demonstration, including dozens of small children, which livened up the Central Lobby here recently, when people came to lobby their Members. The reaction of the national Press, which has also been mentioned, has underlined the extent of the very real local indignation.
  I do not wish to speak at great length, as my hon. Friend the Member for Wimbledon has already very ably covered the case, and every point that should be made has been made. But I wish to back him up on one or two points that he has put forward. We have heard that a St. Teresa's Maternity Hospital Action Committee delegation went to see the Hospital Board recently to suggest an alternative. The Board's behaviour was rather strange. I have received a letter from the leader of the Committee, who wrote:
  "At this meeting it was suggested by our delegation that the special committee at present reviewing the maternity services of S.W. London could consider the possibility of retaining the services of St. Teresa's, and converting maternity beds in some other general hospital in the area to some other purpose for which there was a shortage, …"
  The point was made by my hon. Friend the Member for Wimbledon that St. Teresa's was a purpose built maternity hospital. To switch the ground floor to geriatric cases, mixing both geriatric and maternity cases in the same building could be very damaging. There is no need for me to detail that.
  The Action Committee went on to say this:
  "It was felt that this would be cheaper than converting a purpose built maternity hospital, and would be a temporary solution and a compromise which would meet the Board's point that they can only allocate a certain proportion of their funds to maternity beds. At the same time it would allow the Board to provide a better maternity service than they will do by using beds in some very dilapidated and dirty old hospitals.
  The Board officials said that they would look into this suggestion and refer it to the special committee. The meeting then came to an end.
  1156
  The Board have since stated that such a reference can have no effect on their decision to terminate the St. Teresa's contract. This amounts to a unilateral withdrawal of a promise made and received in good faith."
  The Action Committee is very upset by the Board's attitude. I should be grateful if the Parliamentary Secretary would comment on this.
  All the points made by right hon. and hon. Members on both sides this morning boil down to three main issues. Why has this action been taken? Has it been taken for financial reasons? Has it been taken because St. Teresa's provides a very bad service? Has it been taken because there is a much better alternative elsewhere or a cheaper alternative elsewhere?
  If the answers to all these questions could be, "Yes", it might be possible to make out some sort of case for taking the decision which the Board has taken. However, right hon. and hon. Members on both sides have made a strong case for showing that none of these points is true, that there are no good financial reasons for taking this action, that St. Teresa's provides an extraordinary good service, that there is no better alternative elsewhere, and that there is no cheaper alternative elsewhere. All the answers to these questions are in the negative. Surely these reasons alone are sufficient to justify the Minister's suggesting to the Board that it should reconsider its decision.
  I support the comment made by my right hon. and hon. Friends regarding the bureaucratic reasons for this decision. In reply to a supplementary question asked by me, the Minister said this on 13th March:
  "If the hon. Gentleman has cost in mind, then nothing would be more extravagant or in my view, unreasonable than for the National Health Service to spend something like £70,000 a year subsidising maternity beds in a private hospital for which there is no longer a National Health Service need."
  In reply to the hon. Member for Putney, the Minister said this:
  "I know that this hospital has provided good service to the regional board, but the fact is that there will no longer be any need for the contractual use of these beds after the end of this year. It has been the policy of successive Ministers—and it is my policy—that maternity units should, wherever possible, form an integral part of a district general hospital. This is in the interests of the safety of mothers and babies."—[OFFICIAL REPORT, 13th March, 1967; Vol. 742, c. 27.]

  1157
  I find this an incredible reply. The Minister's answers make it plain that the only reason for doing this is that he considers that all beds should, if possible, be within the National Health Service ambit and that, even if a hospital which is outside it is providing a better service or a service as good as that provided by the National Health Service, still these beds must be closed and moved into a National Health Service hospital, for what are apparently purely bureaucratic reasons. Both sides of the House this morning have expressed their discontent and concern about this attitude.
  At that time I maintained, and I still maintain, that this attitude was inhumane. I said that—and I continued to say it—because so far there has been no sign that the Government are prepared to reconsider their attitude. The letter which I have read shows that the Board is not prepared to reconsider its decision or take into account the local protests which are being made.
  The Minister has refused to receive a deputation or listen to the case it wishes to make. In view of the widespread concern and real worry caused by the decision, the least the Minister should do is to agree to receive the deputation and undertake that, if the deputation can make a good case for his reconsidering the matter, as this is a democratic country he will review the facts again and reconsider his attitude.
  I am sorry to have to use strong language. All I can say about the Minister's attitude is that his arrogance in refusing to listen to the views of a deputation, or even to receive it, supports the contention that the decision has been taken for bureaucratic reasons and that the Minister intends to back the local Board. On no occasion has he given any indication that he intends to reconsider his attitude.
  I beg the Parliamentary Secretary to ask his right hon. Friend to think again. The hon. Gentleman is personally a humane and generous man. He has listened to the detailed and cast-iron case made by hon. Members on both sides. He has heard about the high degree of local feeling and indignation which exists throughout this part of London. I beg the Minister to reconsider the matter carefully and talk to the Board. As St. Teresa's is a modern,
  1158
  efficient and highly regarded hospital, which draws support from, and which has carried out a task second to none in this area of London, we all ask the Board, and urge the Government to press the Board, to seek a better solution than that which has caused distress to so many of my constituents.
  12.28 p.m.
  The Parliamentary Secretary to the Ministry of Health (Mr. Julian Snow): I, for one, could not possibly complain about the moderation with which, with only two exceptions, the case has been put on behalf of St. Teresa's. The two exceptions to which I take objection were embodied in the speech of the hon. Member for Wimbledon (Sir C. Black), to which I shall refer later.
  However that may be, I am grateful to the hon. Member for Wimbledon for raising this matter, because it gives me an opportunity to deal, I hope fully, with the various points which have been raised, not only this morning, but outside the House as well.
  The question we are concerned with is a very sensitive one. It is natural for people to form an attachment to their local hospital, whether it is a National Health Service hospital or a private one. One is piling Pelion on Ossa when the hospital concerned is one which deals with maternity cases. Strong emotions become involved. The fact remains that the hospital authorities, under the Minister, have the duty to provide the best possible service for patients in their area.
  That is what they are genuinely striving to do here and I hope that we shall not allow the matter to become too clouded with emotion. In the House, a speech which is entirely free from emotion tends to be a dull one. Therefore, I certainly do not complain about such emotion as has been displayed this morning.
  To some extent the case of the Regional Hospital Board, and consequently the attitude of my right hon. Friend, has gone by the board. I do not underestimate the organising genius behind the perfectly legitimate agitation over this decision. There has been very good organisation and I do not think that the other side of the coin has been examined. It is important that I should

  1159
  draw attention to one of the main principles governing the development of the hospital service. This is that the hospital service should be based on a network of district general hospitals. This concept was first expounded in the Hospital Plan which was presented to Parliament by my right hon. Friend's predecessor, the right hon. Member for Wolverhampton, South-West (Mr. Powell), in January, 1962.
  The Plan went on to state, in referring to maternity beds:
  "A maternity unit will be a normal part of the district general hospital where full and continuous consultant cover will be at hand for all beds …".
  The concept was, and still is, that the full supporting services which are found in a district general hospital should be available to all maternity patients. It is in the implementation of this policy, that in the area of South-West London with which we are today concerned, Queen Mary's Hospital, Roehampton, is being developed as a district general hospital for the surrounding community.
  In order that this hospital, which is part of the Westminster Teaching Hospital Group, should be able to undertake a responsibility for maternity services, my right hon. Friend's predecessor, the right hon. Member for Wolverhampton, South-West, five years ago, asked the Board of Governors of Westminster Hospital to plan a maternity unit at Roehampton.
  Here, I will come to two points made by the hon. Gentleman the Member for Wimbledon. On reflection, he may consider that talk about hustling patients out of hospitals, and coming dangerously near to suggesting that the mortality rate for the Westminster, which is a very famous hospital indeed, was not as good as St. Teresa's, was mistaken.
  Sir C. Black: On the second point, I have asked for information. Perhaps the hon. Gentleman would tell me what the facts are.
  Mr. Snow: The hon. Gentleman did not put it quite like that. He drew attention to a disparity of statistics, as known to him. The point that I am making is that St. Teresa's, in its own way an excellent hospital, cannot be compared with the responsibilities and duties of a great teaching hospital such as
  1160
  Westminster. The analogy was unfortunate.
  This maternity unit is now under construction, and is expected to open for admissions from January next year. The new unit will embody many improvements which are the result of research and experience. It will contain 50 beds, consisting of 35 beds in single rooms or rooms with four beds, and a further ward similarly divided for 15 ante-natal patients. The full resources of Queen Mary's Hospital, Roehampton, will be available to mothers and to their babies whatever the complications in any case.
  These will include full operating and X-ray facilities, and pathological services, a small isolation unit and a special care baby unit. In addition, paediatric cover will be available. The unit will also provide training for medical students, and student nurses for Westminster Hospital will receive their midwifery training there.
  The new building, which will surround a courtyard garden will provide a fully modem service up to the high standards of a teaching hospital.
  I mention the point about the courtyard garden, because as hon. Members will be aware, some of our older hospitals have these gardens. I am thinking of Queen Charlotte Hospital, with which I have some connection. This is not just an amenity, but in many cases, something providing an essential part of recuperative treatment. I am sure that Members will agree that the new hospital will represent a most valuable addition to services in the area.
  Perhaps it would be appropriate for me to refer to the hospital services which are now available and which will be available for maternity services when the new unit is opened next year. My right hon. Friend's policy on hospital confinements is based on the Report of the Maternity Services Committee, which was under the chairmanship of the Earl of Cranbrook, published in 1959.
  It is important, because we have been discussing certain financial statistics today and, as the hon. Member for Wimbledon has mentioned, one of the basic necessities in preparing statistics is that there should be a certain common factor. In this case, it is difficult to provide such a factor.

  1161
  The objective recommended in that Report was that a national average of 70 per cent. of all confinements should take place in hospital on the basis of a normal stay of 10 days. That figure of 70 per cent. was to include women in the following classes:

  (i) those with abnormalities or anticipated abnormalities (including mothers with four or more children and those over 35);

  (ii) those requiring admission on social grounds;

  (iii) all primigravidae;

  (iv) all emergency admissions for medical reasons.

  There is, however, no objection in suitable cases to arrangements being made for early discharge, before the period of 10 days has elapsed. In that part of London with which we are mainly concerned, that is, the London Boroughs of Wandsworth and Merton, 85.4 per cent. and 85.9 per cent. of mothers were delivered in hospital last year—well above the percentage recommended in the Cranbrook Report. In providing this service, the South-West Metropolitan Regional Hospital Board has made use, on an average of about 40 beds at St. Teresa's Hospital, Wimbledon, a private hospital which caters also for private patients and with which it contracted to pay for maternity admissions.
  I have already explained that 50 additional National Health Service beds will he provided in the new maternity unit at Roehampton next year. In addition to these beds, 10 additional beds for mothers from the Richmond area will be provided by Queen Charlotte's Hospital, and 12 more beds are to be provided at Kingston Hospital later this year.
  I have seen a letter written by an obstetrician who has played no small part in this matter, in which he says that he has been advised that these beds are not to be provided. I can assure the House that this is not the case, and that the beds will be made available. A total of 72 beds will be added in place of the average of 40 beds contracted for at St. Teresa's.
  Mr. A. Royle: Who will cover the ante-natal care for these new beds?
  Mr. Snow: I will refer to this later.
  1162
  These figures of bed provision demonstrate conclusively that the National Health Service facilities which will exist next year will be fully adequate to meet the need for hospital confinements in this area. The Board has many other priority calls on its budget, and could not be expected to devote further finance to a maternity service which is already well up to the nationally accepted standard for confinements in hospital.
  Given the policy which I have stated for the provision of maternity services, and given the practical implementation of this policy which I have described, hon. Members will surely see that the Regional Hospital Board had no option but to give notice to St. Teresa's Hospital that it would no longer need to maintain its contractual arrangement for maternity beds after the end of the current year. My right hon. Friend has supported the Board in the conclusions which it reached and in the action which it has taken.
  I should perhaps explain that all contractual arrangements for hospital services are, by their nature, temporary and I understand that the temporary nature of the contract in question was specifically referred to during discussions which took place between the Board and St. Teresa's on at least two occasions before the formal notice was given in November, 1966. The earlier of the two alerts was given about the middle of 1964.
  I should say, in parenthesis, that it is perhaps a little unfortunate that some of the financial anxieties as opposed to the other considerations with which the administration of St. Teresa's is confronted arise from the fact that it contracted to have built an extension costing, I am informed, about £60,000. I understand that it is nearing completion. The Regional Hospital Board has informed me that it was not told of this intention, nor was it consulted as to the future need for additional accommodation.
  I take the point that St. Teresa's caters for private patients as well as for National Health Service patients. Therefore, what I have said is no criticism of the decision to build additional accommodation, but, in the light of what has been said since, the fact that St. Teresa's had this intention should perhaps have been a matter for consideration by and consultation with the Board.

  1163
  Hon. Members have made many references to the comparative costs which have been the subject of exchanges in the House at Question Time on one or two occasions. The true comparison, in our judgment, can only be the respective costs per case, and these were, in 1965–66, £49 18s. 10d. in regional board hospitals and £57 4s. 8d. in St. Teresa's Hospital. These are the actual costs to the National Health Service.
  Mr. Boyd-Carpenter Mr. Boyd-Carpenter rose—
  Mr. Snow: Perhaps I can anticipate what the right hon. Gentleman wishes to say.
  It is estimated that the cost per case at Queen Mary's Hospital, Roehampton, will be about £55. I accept the historical fact that estimates tend to go awry. But we are dealing with a new hospital which will incorporate tremendously expensive equipment, and its use and amortisation, and so forth, is an imponderable factor which will arise in any event.
  The length of stay in regional board hospitals was on average 9·04 days in 1965 and in St. Teresa's Hospital 12·2 days. But even in the case of the latter hospital the length of stay was reduced in 1966 to 11·15 days. I mention this point because I referred earlier to the difficulty of finding a common denominator in assessing costs.
  Mr. A. Royle: Does the figure for National Health Service beds include such facilities as ambulances and the wider paraphernalia of the Health Service?
  Mr. Snow: I should like to consider that question. I think that it does not.
  So far as we can, we are comparing like with like, but what slightly upsets comparisons is the difference in the length of stay. I do not wish to imply any criticism whatsoever of the decisions taken at St. Teresa's to have a slightly longer stay than the national average or the average of that in National Health Service hospitals. That is a matter for medical assessment. Therefore, I deprecated—I do not wish to make a meal of this—the remark about hustling patients out of Health Service hospitals.
  I do not quote these figures to make the point that St. Teresa's Hospital is
  1164
  more expensive, but to refute the argument that the Regional Board, in developing its own hospital services, will be failing to make use of a cheaper alternative which is available at St. Teresa's.
  Mr. Boyd-Carpenter: Since the hon. Gentleman has said that we should compare like with like, would he not agree that his right hon. Friend was less than frank with the House when he said that the right comparison was cost per bed and did not disclose, until it was pressed from him, that we were dealing with about a 30 per cent. difference in the length of stay?
  Mr. Snow: I think that my right hon. Friend was perfectly fair. These figures about the length of stay were known to the people who have been raising this matter outside the House and my right hon. Friend had every right to assume that hon. Members, who have been well briefed, would know about these comparative figures. I think that the right hon. Gentleman knows my right hon. Friend better than that. He would not intentionally mislead the House.
  Mr. Bernard Braine: I have not intervened because, clearly, this is not a party matter. It is a matter which reflects a great deal of local anxiety. But, so that we can judge the matter fairly, may we be told, for the purposes of comparison, exactly the cost per patient per day?
  Mr. Snow: I will certainly provide the hon. Gentleman with that information. I do not have the figures at my disposal now, because I was not basing my case on that computation.
  Mr. Boyd-Carpenter: The figures are on record as given by the Minister—£4 12s. 11d. per day at St. Teresa's and approximately £6 per day at Queen Mary's. Those are the Minister's figures.
  Mr. Snow: I assumed that the hon. Member for Essex, South-East (Mr. Braine) knew those figures. I am giving what I believe to be the correct comparison in assessing the economic argument about this case. I do not wish to base my argument purely on economic considerations. There were other considerations.

  1165
  A further argument is that, as there is a general shortage of midwifery staff, it is wrong that use should not continue to be made of the trained staff at St. Teresa's. I understand that a substantial proportion of the nursing staff at St. Teresa's are lay nurses, and mainly nurses obtained on a fee basis from agencies. It is a free world. If the hospital authorities want to run the hospital in that way—it may be the only way in which they can run it—it is up to them. But it would be a pity if my right hon. Friend were jockeyed into the position of denigrating the great value of what is a minority of sisters of a distinguished order in this hospital.
  I am glad to say that in the year to September, 1966, there was a national increase of 2·3 per cent. in midwifery staff in the National Health Service and 4·1 per cent. in nursing and midwifery staff taken together. This improvement is, of course, most welcome. Incidentally, no maternity beds in this area are closed because of staff shortage.
  I should answer the question of the hon. Member for Richmond, Surrey (Mr. A. Royle) about ante-natal provision. The distribution of ante-natal facilities under the proposed plan is that Queen Mary's will cater for patients from Putney; St. Helier and Nelson will cater for patients from Wimbledon; Kingston Hospital will be self-sufficient; and Queen Charlotte's will cater for patients of this character from Richmond.
  I am well aware of the esteem in which St. Teresa's Hospital is held by the local population. This private hospital has indeed rendered good service to the National Health Service since 1948 and I appreciate St. Teresa's proud claim never to have lost a mother and to have a record for stillbirths and peri-natal mortality of infants which is well below the national average. This is a fine record, but we must bear in mind that the hospital does not provide a comprehensive service to the local community.
  The writer of the letter addressed to the hon. Member for Wimbledon—and I assure the House that I have seen the letter—an obstetrician who has been very much concerned with these activities, makes some play with the fact that only a minimal number of cases are not sent to St. Teresa's because of their complexity. The same comment could be
  1166
  made about cases which could not be catered for by a district general hospital.
  It is true to say that certain cases would inevitably have to be referred to specialist hospitals, but I hope that the hon. Member for Wimbledon is not arguing that a modernly equipped and designed hospital will not have technical advantages over a hospital which—contrary to a comment made by the hon. Member for Richmond, Surrey—was not custom-built for maternity use. It is a very old hospital brought up-to-date, and perhaps the hon. Member for Richmond, Surrey, will reconsider his remarks in the light of what I have said.
  Before 1948 the hospital acted as an annexe of the Royal Cancer Hospital, now the Royal Marsden, and cared for chronic sick patients. When the Regional Hospital Board notified St. Teresa's last year—I am referring to the formal notification as opposed to the verbal alert which was given during the administration of the right hon. Member for Wolverhampton, South-West—that it would no longer require the hospital's beds for maternity services, it offered to discuss with the hospital the possible use of beds for other purposes. I know that the Board had in mind the use of beds for geriatric cases. I very much hope that the hospital will consider very seriously whether it could not undertake this much needed service, and extend the reputation which it has already built up among the local residents.
  I hope that I carry the House with me in saying that the developing problems confronting any Administration in the care of old people and of what are called the young chronic sick is getting so serious that we just cannot write this problem off on the grounds that maternity services are needed as well. Any Administration must try to take a balanced view of all this. That is why I say that the use, either for geriatric cases or for the young chronic sick are getting so a suggestion which I hope St. Teresa's will consider most seriously. If St. Teresa's accepted such a responsibility it would, to some extent, be reverting to the use which was being made of the hospital prior to 1948.
  Hon. Members will appreciate that, as the hospital building programme gains momentum, there is bound to be a reduction in the contractual arrangements of

  1167
  the type which have existed at St. Teresa's. I assure the House that this is not a question of doctrinal bias, or ideology, but that it is in the nature of the responsibility which Parliament has given to the Government to provide a general hospital service. If ideological or doctrinal attitudes are to be alleged, I must point out—this is the only party point I will make today—that the decision in principle was taken when the right hon. Member for Wolverhampton, South-West (Mr. Powell) was Minister of Health.
  During the last three years the number of contractual beds has declined by nearly 1,000 to 4,960. Under the National Health Service Act, 1946, it is my right hon. Friend's statutory duty to provide hospital and specialist services and he is continuing the policy of his predecessors that the services should, as far as possible, be provided in hospitals within the National Health Service. I am sure that hon. Members will agree that this is the right and, indeed, in the long-term, the only policy.
  Reference has been made to the fact that my right hon. Friend refused to meet the Action Committee. The contract was, after all, entered into between the Regional Hospital Board and the hospital. The Action Committee has, as some hon. Members have pointed out, been seen by the chairman of the Regional Hospital Board. In addition, officers of the Board interviewed representatives of the Committee at the Board's offices last week.
  Mr. A. Royle: If, however, the meetings with the Regional Hospital Board were thoroughly unsatisfactory, as they were, should not the Minister now be more generous and agree to meet the Action Committee?
  Mr. Snow: A lot has been said about democracy. My hon. Friend the Member for Putney (Mr. Hugh Jenkins) mentioned that regional hospital boards were not democratic. One could criticise that comment. After all, what is the ultimate right members of the public have? It is to make representations through their M.P.s, and this has been done effectively today. I do not believe that there can be any complaint on that score.
  1168
  Reference was made by the hon. Member for Wimbledon to a circular which, he said, had been sent out by the St. Helier Hospital Group, saying that certain cases could not be taken care of. I am informed that that circular was sent out not by that Group, but by consultants of the Group, a distinction, and that that was done without prior consultation with the Board.
  Mr. Humphrey Atkins: The hon. Gentleman says that the circular was sent out by the consultants and not by the Group. Is not the effect the same?
  Mr. Snow: As a matter of fact, the provisions of the circular have not been implemented. I understand that the document may be withdrawn for the reason that the provision of hospital accommodation has been forthcoming. Thus, it was a non-starter to begin with.
  It has also been stated that there is a shortage of maternity beds in the Kingston area. The position in the area covered by the Kingston Group Hospital Management Committee is that, in addition to the beds available in the Kingston Group, 30 to 40 beds in London teaching hospitals are occupied by women living in the Kingston area. This is possible because of reduced pressure on London teaching hospitals. In addition, 12 more beds are being provided this year at Kingston hospital, as I have already mentioned. The relevant figure is that, in 1965, 75 per cent.—5 per cent. above the Cranbrook recommendation—of the confinements of women from the Kingston area were in hospital.
  I draw the attention of the House to this changing pattern in the use of teaching hospital accommodation in the central teaching areas of London. There is considerable indication that available maternity beds at teaching hospitals are under much less pressure than they used to be. There are various reasons for this, including the decentralisation of population, and the gradual building up of the suburbs. Any Administration must see that the beds that are available, where local demand falls off, become available to people living on the periphery of London. I hope that nothing will be said to deprecate the efficiency and inspiration which is the proud history of our teaching hospitals. I emphasise this in view of certain remarks that have been made.

  1169
  The right hon. Member for Kingston-upon-Thames referred to the loss of a good service. This is not a good factor in the argument because the facilities of this hospital can be used, and well used, for other requirements in the National Health Service. I hope that the House will accept that we would welcome co-operative attitudes on the part of St. Teresa's to the suggestion that has been made.
  I have tried—although I fear that I have not answered all the questions that have been asked—to describe the back-
  1170
  ground to this hospital. I assure the House that we are not being dogmatic. We feel that, within our responsibilities, there is a case for this step. As to a proposal that Lord Addison may have had second thoughts, I cannot, naturally, anticipate what he might think, although, of course, the Department is always willing to listen to what he has to say.
  The debate having been concluded, Mr. DEPUTY SPEAKER suspended the sitting till half-past Two o'clock, pursuant to Order.
  Sitting resumed at 2.30 p.m.

ORAL ANSWERS TO QUESTIONS
  MINISTRY OF DEFENCE

    Arms Sales
    Mr. Martenasked the Secretary of State for Defence if he will make a statement on the progress to date of the work of the arms salesman, Mr. Raymond Brown.
    The Minister of Defence for Equipment (Mr. Roy Mason): I would refer the hon. Gentleman to Chapter VII of the Statement on the Defence Estimates, 1967 (Cmnd. 3203).
    Mr. Marten: I am grateful for that reference, which I had seen. Could the Minister not in future give a more exact figure than the rather overall general figure given in the Defence Review and undertake to give it year by year so that we can make a comparison of the success of our arms sales effort?
    Mr. Mason: Yes. In view of the approach by the hon. Gentleman, certainly I am prepared to consider how better we can give more detailed information in the Defence Estimates on sales. As he appreciates, on this occasion it was the first, but there were three pages of information in it.

    Overseas Servicemen (United Kingdom Accommodation)
    Mr. Martenasked the Secretary of State for Defence what assistance he is proposing to give to local authorities to offset the extra cost involved to them in receiving in their areas the Servicemen and families being brought home from overseas.
    The Under-Secretary of State for Defence for the Army (Mr. James Boyden): I would refer the hon. Member to the Answer that I gave on 10th April to the hon. Lady the Member for Peters-field (Miss Quennell).—[Vol. 744, c. 136].
    Mr. Marten: I saw that Answer, too. Nevertheless, is the Minister aware that a lot of preparatory work of a capital
    1172
    nature has to go in and be done by local authorities before the forces arrive? It is the loans which they have to raise to do this and the charges on them which will be a burden on the ratepayer. Ought not the Government to contribute to those loan charges?
    Mr. Boyden: The local commanders are in close touch with the local authorities, and the military authorities make a big contribution to the rates, anyhow. The spending power which results from families being in an area is good for a local authority. However, if the hon Gentleman has any specific difficulty about which he knows, I will be glad to look at it.
    Mr. Atkinsasked the Secretary of State for Defence what progress he has made in the acquisition of the 4,000 extra married quarters he needs to house the families of troops which may be brought home from Germany.
    Mr. Boyden: All necessary preparations are being made for purchase of houses to meet this need should it arise.
    Mr. Atkins: On what number of Service men being withdrawn from Germany did the hon. Gentleman base this figure of 4,000 married quarters?
    Mr. Boyden: A suitable number.
    Mr. Kershaw: Will the Minister give as assurance that the troops will not he brought back until the accommodation is ready for them?
    Mr. Boyden: Yes.
    Mr. Powell: Will the Under Secretary recognise the unwisdom of insulting the House with the kind of reply which he has just given to my hon. Friend the Member for Merton and Morden (Mr. Atkins)? When the Government state that they have ascertained the requirement for married quarters and announce that requirement, they must rationally have some basis in the number of troops for that figure, and it is legitimate to ask for it and legitimate to be told.
    Mr. Boyden: The present programme of purchasing married quarters in the open market is going very well, and we have every reason to suspect that when decisions are taken about the return from Germany, we shall be able to continue in

    1173
    the same way. I must say that co-operation with private builders in this respect is very good indeed.
    Mr. Atkinsasked the Secretary of State for Defence which barracks he is now preparing for the use of any troops brought home from Germany; by what dates each will be ready; and how many troops each will accommodate.
    Mr. Boyden: I would refer the hon. Member to the Answer that my right hon. Friend gave to the right hon. Member for Wolverhampton, South-West (Mr. Powell) on 16th March.—[Vol. 743, c. 149.]
    Mr. Atkins: Does the hon. Gentleman not recognise the difficulty with which we on this side of the House are faced because of so many conflicting statements from the benches opposite? Can he now assure us that the information given in the Answer to which he has referred is the fixed and final information?
    Mr. Boyden: Of course, the information is not fixed and final. The situation is changing from time to time, and the arrangements being made for both barracks and married quarters take that into account. They are proceeding very well.
    Mr. Kershaw: Is the hon. Gentleman not aware that that is a most unsatisfactory reply? We have already had two lists which have been altered from time to time. The first obviously was thought up on the spur of the moment. For him to say now that the position is still not firm must leave a great many doubts in the minds of Servicemen and the public.
    Mr. Boyden: Nothing of the sort. Negotiations with our allies are continuing and, until they are settled, the facts will not be absolutely definite. The contingency planning is going well and we take great trouble with that.
    Mr. Atkins: Owing to the unsatisfactory nature of that reply, I beg to give notice that I shall seek to raise the matter on the Adjournment at the earliest possible moment.
    Mr. Chichester-Clarkasked the Secretary of State for Defence where he now proposes to house the 25,000 men due to come home this year.
    Mr. Boyden: Camps have been, or are being, re-activated in the following areas:
    1174
    Barton Stacey, Winchester, Maresfield, Lingfield, Tonfanau, Taunton. Inverness, Weeton, Longmoor, Worcester and Plymouth.
    Mr. Chichester-Clark: All other things being equal, would not the hon. Gentleman give rather more consideration to housing some of these troops in barracks in some of the economically weaker areas of the country where they would give welcome civilian employment and more spending power?
    Mr. Boyden: If the hon. Gentleman is referring to Northern Ireland, we have considered the situation there. Unfortunately, in view of the rôles of the units which are likely to be withdrawn, there is no adequate accommodation there.
    Mr. Kershaw: Do not the hon. Gentleman's replies to this and to the Question by my hon. and gallant Friend the Member for Winchester (Rear-Admiral Morgan Giles) indicate that it is the Government's policy—in line with their military planning—to cut the troops according to the barracks available?
    Mr. Boyden: No, Sir.

    F111 Aircraft (Offset Agreement)
    Mr. Woodnuttasked the Secretary of State for Defence what is the total value of orders received to date from the United States of America by British manufacturers to offset the cost of the F111; and what efforts he has made to include machine tools in the list of approved equipment.
    Mr. Mason: 130·87 million dollars. Milling machines are included in the U.S. Air Force's Shopping List, and several British firms have shown interest in tendering. We are pressing the U.S. Navy to include machine tools in their list. The U.S. Army does not buy significant quantities of machine tools.
    Mr. Woodnutt: I congratulate the Minister on the progress which he has made. Could he not try to have the whole range of British machine tools included? There are many machines which we make for ordnance factories in Australia and Canada and which are not included in this list.
    Mr. Mason: I will certainly look into that.
    Sir C. Osborne: Is the Minister still satisfied that the F111 is a good buy for this country?
    Mr. Mason: If the hon. Gentleman peruses the initial Question, he will see that it is in relation to the offset and not particularly to the aircraft itself.
    Mr. Goodhew: On the subject of offset sales, how can we hope for early decisions on subjects like machine tools when only on 6th April we were told in another place by the Minister without Portfolio that matters like the automatic testing equipment which belong to the aircraft itself are still under consideration?
    Mr. Mason: That is a different question from obtaining orders under the offset agreement.
    Mr. Woodnuttasked the Secretary of State for Defence whether the agreement to offset the cost of the F111 exempts British quotations from the provisions of the Buy American Act.
    Mr. Mason: Provided that the item concerned has been identified by the two Governments, and the British bid is in all respects competitive, the U.S. Defense Secretary will normally waive the provisions of the Buy American Act.
    Mr. Woodnutt: Is the Minister aware that the provisions are only waived for machine tools for contracts in excess of 100,000 dollars at any one time, building up to 500,000 dollars in a year? This is a very large figure for small items like machine tools, and it should be lowered. Can he give an assurance that he will try to do something?
    Mr. Mason: The hon. Gentleman is quite correct. I hope that there will be a review in the near future.

    Thailand (British Army Detachment)
    Mr. Russell Kerrasked the Secretary of State for Defence what plans he has for the further employment in Thailand of the British Army detachment which recently completed the construction of a military aerodrome there; and how long approximately it will be before the detachment involved is repatriated to this country.
    Mr. Dickensasked the Secretary of State for Defence if he will state his proposals for the future employment in
    1176
    Thailand of the British Army detachment, which has recently completed the construction of an aerodrome there.
    The Secretary of State for Defence (Mr. Denis Healey): The Royal Engineers, who recently completed the airfield at Loeng Nok Tha, will be helping the Thai authorities throughout 1967 with a programme of road building.
    Mr. Kerr: Can the Minister give us an assurance that there will be no repetition of this clandestine support of the American war of aggression in Vietnam by any of Her Majesty's forces in the future?
    Mr. Healey: There is no connection between the work which we are carrying out to help the Thai Government to open up its country to Government services to enable local people to export their produce, and the events in Vietnam.
    Mr. Dickens: On the subject of assistance for the American war effort in Vietnam, can the Minister tell the House for what purpose the aerodrome at Loeung Nok Tha is being used? Is it, for instance, being used by American B.52 bombers to bomb North Vietnam?
    Mr. Healey: As I made clear in answer to Questions last time, it is not being used by American B.52 bombers and has no facilities appropriate for that purpose.

    Middle East (Defence Commitments)
    Mr. Juddasked the Secretary of State for Defence what research he has now initiated into the possibility and methods of transferring existing overseas defence commitments in the Middle East and east of Suez to international security systems under the auspices of the United Nations.
    Mr. Healey: It is an established aim of British policy to strengthen the United Nations as the main instrument for keeping peace in the world and to give it effective means of doing so, but there is as yet no concerted will amongst nations to this end. Meanwhile within the practical limitations, Her Majesty's Government are constantly seeking ways and means of improving United Nations influence both generally and in particular situations.
    Mr. Judd: While welcoming the reassurance of that Answer, does my right

    1177
    hon. Friend not consider that the recent events in Aden have reminded us that, if we are to make real use of the United Nations, we must bring it in at the earliest possible stage?
    Mr. Healey: There is something in what my hon. Friend says, but we cannot bring in the United Nations at any stage. The United Nations must decide to come in, and this has been one of the sources of problems in recent weeks.

    Rhodesia (Public Order)
    Mr. Juddasked the Secretary of State for Defence whether he has prepared contingency plans for the restoration of public order in Rhodesia following any breakdown of law and order there as the result of mandatory sanctions.
    Mr. Healey: As I informed the hon. Member on 30th November, 1966, it is not the practice to reveal information about military contingency planning.—[Vol. 737, c. 111–2.]
    Mr. Judd: Surely my right hon. Friend will agree that if we are serious in our policy of economic sanctions, one of the instances which we must have foreseen is the breakdown of law and order, and we must, therefore, be planning for action if that should occur.
    Mr. Healey: I am not in a position to prevent my hon. Friend from speculating, but I stick to what I said in answer to the Question.

    South Arabia (British Forces)
    Mr. Powellasked the Secretary of State for Defence what interval of time he now expects to elapse between the commencement of the independence of the Federation of South Arabia and the completion of the withdrawal of British forces.
    Rear-Admiral Morgan Gilesasked the Secretary of State for Defence whether he will delay the withdrawal of British troops from Aden until Egyptian troops withdraw from the Yemen.
    Mr. Wallasked the Secretary of State for Defence if he will now announce the programme for the withdrawal of British troops from Aden.
    Mr. Healey: I have nothing to add to the statements made by my right hon.
    1178
    Friend the Foreign Secretary on 20th March in the debate on the Consolidated Fund Bill, and on 10th April.—[Vol. 743, cc. 1091–4; Vol. 744, cc. 743–6.]
    Mr. Powell: Does the right hon. Gentleman recall his indication in a reply to me on 1st March, that after independence for Southern Arabia there would be an interval before the final withdrawal of British troops? In view of the important contribution which such an interval could make to a peaceful solution in Southern Arabia, will the right hon. Gentleman reaffirm that important indication?
    Mr. Healey: I do not want to encourage the right hon. Gentleman to draw conclusions which are not justified by what I said or what I now say. It will not be possible to withdraw the last British troops from the soil of South Arabia on the very day that South Arabia obtains independence, but I will bear in mind the considerations which the right hon. Gentleman has mentioned.
    Rear-Admiral Morgan Giles: As the right hon. Gentleman said a few moments ago that there was no concerted will among the United Nations, would he agree that it would facilitate peaceful negotiations in Aden if the Government would at least declare one thing, namely, that they will definitely not abdicate to anarchy, and will stay there for as long as is necessary?
    Mr. Healey: With respect, my right hon. Friend has discussed this on many occasions in the House, and so have I. I do not think that broad statements of a rhetorical character such as the hon. and gallant Gentleman has suggested are likely to help at all in the matter.
    Mr. Stratton Mills: Having just returned from the Middle East, may I ask the right hon. Gentleman whether he is aware that I am advised that 45,000 Egyptian troops in the Yemen are now deployed in such a way along the Yemen border facing towards the Federation, and will he bear this in mind in settling his policy for the future defence of the Arabian Federation?
    Mr. Healey: I will certainly bear in mind all the facts which are brought to my notice by sources at my disposal. I think that it might be helpful if the hon. Gentleman gave the figure of 45,000 to

    1179
    his right hon. Friend who spoke in the debate on Monday and said that it was 60,000.
    Mr. Dickens: Is my right hon. Friend aware that while we on this side of the House appreciate that there need be no precise time between the departure of the last British soldiers from Aden and the date of independence, we are very much against any continuing defence commitment there involving further military expenditure?
    Mr. Healey: I certainly will bear that in mind.

    F111 Aircraft
    Mr. Powellasked the Secretary of State for Defence if he will state the terms on which he has taken up the option to order 40 further F111K aircraft.
    Mr. Goodhewasked the Secretary of State for Defence what supplemental ceiling price he has negotiated for the 50 F111K aircraft; and what he now expects to be the total cost of these aircraft including spares.
    Mr. Russell Kerrasked the Secretary of State for Defence what representations he has made this year to the United States Secretary of Defence concerning modifications to the F111 aircraft being insisted upon by Service authorities in the United States of America to meet their specifications; what answers he has received; what is the estimated overall cost of the modifications not required by Her Majesty's Government but required by the United States authorities before their approval of the aircraft as operationally viable is granted; and if he will make a statement.
    Mr. Edelmanasked the Secretary of State for Defence (1) whether, before taking up the option to buy a further 40 F111 aircraft, he will satisfy himself that the disabilities of the aircraft in relation to its original specification have been overcome;
    (2) whether, before confirming his decision to take up the option to buy a further 40 F111 aircraft, he will await the findings of the McClellan investigating committee, which is investigating the cost and capability of this aircraft.
    Mr. Healey: Before ordering the balance of 40 F111K's on 31st March,
    1180
    I received assurances from the United States Government that the aircraft would meet our performance requirements. I also received up to date cost information from the United States Government which gave a satisfactory assurance that, excluding United States money inflation, the total unit cost of this aircraft, including the special British features, would be about £2½ million as we had assumed. Discussions on the final figure for the supplemental ceiling for the special British features are, however, still in progress with a view to fixing it at the lowest possible level. I will give the House the figure when it is agreed.
    As regards spares, I would refer to the answer given to the hon. Member for St. Albans (Mr. Goodhew) by my hon. Friend the Under-Secretary of State for Defence for the Royal Air Force on 23rd March.—[Vol. 743, c. 330–1.]
    Mr. Powell: May I ask the right hon. Gentleman two questions: first, why, despite an undertaking given on 1st March that he would not close with this option until there was a firm agreement on the supplemental ceiling, he has nevertheless done so? Secondly, why has he until the present moment concealed from the House and from the country the fact that the fixed price for the basic aircraft was subject to an escalation clause for American money inflation?
    Mr. Healey: On the second question, I have yet to identify a single defence contract made by the present or previous Governments which does not accept that price increases due to the inflation of the cost of labour and materials must be involved. This applies to the Polaris submarine agreement, and also to the Royal Naval Phantom agreement, both made by the party opposite. No reference was made to the House about this at the time by the previous Administration because this was always understood to be the case.
    On the first question about the supplemental ceiling, as I said, I have accepted satisfactory assurances that the supplemental ceiling will not bring the cost of the aircraft above the figure which we originally assumed.
    Mr. Goodhew: Why has the right hon. Gentleman made these categorical statements to the House insisting that a fixed price agreement had been reached, and, furthermore, that he would not place an

    1181
    order before he knew what the price would be?
    Mr. Healey: Because both the statements which I made were literally correct.
    Mr. Russell Kerr: Is my right hon. Friend aware that according to the defence correspondent of The Times the F111 programme will total £280 million over a 10-year period, including spares, and that this works out at £5·6 million per aircraft? Does not my right hon. Friend find some difficulty in reconciling this both with his own foreign policy commitment and also with our commitment as a party to the people of Britain?
    Mr. Healey: No, Sir, and I think that my hon. Friend would be wise to recognise that when we are talking about costs over a period of years, we are talking about total programme costs which include the cost of the aircrew who man the aircraft, the people who service it, all spares, and all facilities remotely connected with the aircraft, and that the cost of the F111K programme over 10 years is only 50 per cent. of the cost of a comparable TSR2 programme.
    Mr. Edelman: In view of the serious doubt expressed by the McClellan Investigating Committee about this aircraft, would not it have been more prudent of my right hon. Friend to have delayed making further purchases until the Committee had reported? Furthermore, is it not the case that the new Pratt and Whitney engines introduced last January as replacements for the previous unsatisfactory engines are themselves considered in the United States to be not fully adequate?
    Mr. Healey: No, Sir. On the first question, as I understand it the main subject of criticism of the McClellan inquiry is the suitability of the F111B, which we are not buying, for the U.S. Navy. On the question of the engines, as I said, I have received satisfactory assurances from the United States Administration that the aircraft which we are buying will in all respects surpass the operational requirements which we have set for it.
    Mr. Lubbock: Further to the question asked by the hon. Member for Feltham (Mr. Russell Kerr), does the right hon. Gentleman recall that not only was an
    1182
    overall figure of £280 million over 10 years given by the defence correspondent of The Times, but he also said that out of this £260 million would be in dollars? Will the right hon. Gentleman confirm that that figure is in accordance with the estimates made by his Department?
    Mr. Healey: No, Sir. I cannot confirm any statements made by the defence correspondent of The Times who, with respect, is not a member of Her Majesty's Government.
    Mr. R. Carr: Will the right hon. Gentleman recall the importance which we on this side of the House have always attached to the cost of spares in relation to the total cost of this programme, and will he confirm or deny that the cost of a new replacement engine will be at least 35 per cent. higher than, and perhaps even double the cost of, the original engine?
    Mr. Healey: I cannot confirm that without notice. What I can tell the House is that we shall be buying spares for this aircraft at the same price as the United States Air Force is paying, and no agreement on an aircraft bought from abroad of such a favourable nature has ever been made by any previous Government in Britain.
    Sir A. V. Harvey: How does the right hon. Gentleman reconcile what he has said about prices if he has read last week's edition of Flight, which is based on American information that the costs of the F111K are now the same as those of the TSR2?
    Mr. Healey: With respect, I have not read that article, nor am I expected to comment on such statements, but I can tell the House that the cost of the F111 programme over 10 years will be about half the cost of a comparable TSR2 programme. I can also point out to the hon. and gallant Gentleman that we have a firm ceiling for the cost of the basic aircraft, and now an agreed ceiling for the supplemental features of the British F111K, which at 1965 prices cannot be exceeded.
    Mr. Lubbock: In view of the unsatisfactory nature of those replies, I beg to give notice that I shall seek to raise the matter on the Adjournment at the earliest possible moment.

    Training Areas
    Mr. Kershawasked the Secretary of State for Defence how many training areas there are in the United Kingdom where an armoured brigade group may train as a whole; where they are; and what plans he has for acquiring more such areas.
    Mr. Boyden: A limited brigade group exercise can be carried out on the Salisbury Plain training area. Until a decision has been taken on withdrawals of troops from Germany the need for additional land for tracked vehicle training does not arise.
    Mr. Kershaw: Does the hon. Gentleman agree that this raises another serious question? What kind of an Army does he want? Does he not realise that unless we have adequate training areas we shall not be able to have a modern Army in future?
    Mr. Boyden: We have a good Army. We shall keep it, and go on improving it.
    Mrs. Gwyneth Dunwoody: Is my hon. Friend aware that many people who live in areas where the Army has taken over large parts of national parks are concerned that it should not have more land, and that in fact we would like it to give up some of the land which it possesses?
    Mr. Boyden: The Army and Army Ministers are conscious of this clash of interest.
    Mr. Powell: Will it not be necessary to send back to Germany for training any armoured or other formations withdrawn to this country?
    Mr. Boyden: That is a possibility.

    North Atlantic Treaty Organisation (Force Levels)
    Mr. Kershawasked the Secretary of State for Defence when he expects a conclusion to the consideration within the North Atlantic Treaty Organisation of force levels.
    Mr. Healey: Alliance force planning is a continuing process but I assume that the hon. Member has in mind its current consideration within N.A.T.O. My expectation is that, by the middle of this year, broad agreement will have been
    1184
    reached on N.A.T.O.'s strategy and force posture. Detailed force plans derived therefrom will be presented for endorsement at the December Ministerial meeting.
    Mr. Kershaw: Can the Secretary of State say what progress he is making to convince his N.A.T.O. colleagues of the validity of the trip-wire strategy in which, so far as I know, he is the sole remaining believer?
    Mr. Healey: I do not know what the hon. Member means by a trip-wire strategy, but I am pleased to be able to tell the House that I am making very good progress. Some hon. and right hon. Gentlemen opposite may be rather chagrined to find later in the year that their extraordinary views about the need for N.A.T.O. being prepared to fight a long conventional war are not shared by any of our allies.
    Mr. Powell: Can the Minister tell the House whether the estimate of £82 million for the cost of British forces in Germany given by the Chancellor in his Budget speech yesterday is based upon present force levels or some other force levels and, if so, which?
    Mr. Healey: The cost of £82 million, announced by the Chancellor yesterday, allows for present levels of combat forces, but also allows for savings that we are making in administrative, support and consumer spending of the forces, which I have already announced to the House.
    Mr. Hugh Jenkins: Does my right hon. Friend agree that, whatever need there was for N.A.T.O., it expired some years ago?
    Mr. Healey: Certainly not.

    Military Expenditure (Asia)
    Mr. William Hamiltonasked the Secretary of State for Defence if he will make a statement on the results of his consultations with Australia and New Zealand concerning proposed reductions in the United Kingdom's military expenditure in that part of the world.
    Mr. Dickensasked the Secretary of State for Defence what consultations he has had with the Government of Australia and New Zealand about the

    1185
    forthcoming reductions in the United Kingdom military expenditure in Asia.
    Mr. Healey: I have had no further consultations on the level of our forces in the Far East since the 1966 Defence Review was published.
    Mr. Hamilton: Can my right hon. Friend say why he is not continuing discussions with Australia and New Zealand, in view of the declared intention of the Government to reduce these commitments as soon as they can? Is it not the case—it was certainly understood by hon. Members on this side of the House—that these talks were continuing on that specific basis?
    Mr. Healey: My discussions with the Australian Government in January last year covered all the contingencies to which my hon. Friend has referred.
    Mr. Dickens: Is my right hon. Friend aware that since January of last year certain things have happened, most notably that the official policy of the Labour Party in this country has changed in favour of decisive cuts east of Suez? Will not my right hon. Friend open consultations now with the Governments of Singapore, Australia and New Zealand with a view to implementing that change of policy by 1970?
    Mr. Healey: I must explain to my hon. Friend that Her Majesty's Government's policy is determined by decisions taken in the Cabinet and not by decisions taken elsewhere, although we take all relevant factors into account. I can assure my hon. Friend that if there were any question of a change in the basis on which we consulted Australia and other allied Governments last year we should certainly wish to consult them about it.
    Mr. Costain: Does the right hon. Gentleman realise that Australia takes cognisance of statements made at Labour Party conferences, and will he make it clear to the Australian Government that Her Majesty's Government rule this country?
    Mr. Healey: The Australian Government are in no doubt that the policy of Her Majesty's Government is decided by Her Majesty's Government and not by other bodies, including Her Majesty's Opposition.

    Aldabra
    Mr. Ridleyasked the Secretary of State for Defence when he intends to visit the island of Aldabra.
    Mr. Healey: I have no plans for doing so.
    Mr. Ridley: Is the Secretary of State aware that the island of Aldabra is the main haunt of the giant turtle? Is he further aware that it is practically impossible ever to land there because of the weather? Will he say what on earth he intends to do there, and why he wishes to pour so much of the taxpayer's money into this barren coral reef?
    Mr. Healey: As I understand it, the island of Aldabra is inhabited—like Her Majesty's Opposition Front Bench—by giant turtles, frigate birds and boobies. Nevertheless, it may well provide useful facilities for aircraft. What the hon. Member said about the suitability of Aldabra in this respect is totally wrong.
    Mr. Goodhew: Will the Minister tell the House whether it is intended to be a staging post for transport aircraft or a base for the F111K, which we now know is not to be used in Europe?
    Mr. Healey: Without accepting the extraordinary assertion made by the hon. Gentleman at the end of his supplementary question, I can say that so far no decision has been taken by Her Majesty's Government to develop facilities on this island. This island has not been bought. It did not require to be bought. It did not belong to anybody else except Her Majesty's Government, as the hon. Member would know if he took the trouble to do his homework. But if we decide in the end to develop the facilities on this island we shall use them to the extent required both in respect of air transport and any other aircraft.
    Mr. Onslow: May I ask the right hon. Gentleman—
    Mr. Speaker: Order. Mr. Onslow; Question No. 18.

    Military Firearms (Consignment)
    Mr. Onslowasked the Secretary of State for Defence what revised instructions he has issued concerning the

    1187
    consignment of military firearms by passenger train.
    Mr. Boyden: I have now issued instructions that when small consignments of military firearms are sent by passenger train use must be made of the Recorded Parcels Transit Scheme operated by British Railways. This will enable the appropriate authorities to keep the closest control of arms consignments.
    Mr. Onslow: Will that prevent their being stolen?
    Mr. Boyden: I cannot give the hon. Member an assurance, but it is more likely to do so.

    R.A.F. Ground Attack Squadrons (Far East)
    Mr. Onslowasked the Secretary of State for Defence how many Royal Air Force ground attack squadrons are deployed in Far East command.
    The Under-Secretary of State for Defence for the Royal Air Force (Mr. Merlyn Rees): One, Sir.
    Mr. Onslow: Can the Minister explain why Chapter 2, paragraph 15 of the Defence Review suggests that there was more than one?
    Mr. Rees: Since that time there has been a withdrawal because of the end of confrontation.
    Mr. Goodhew: Can the Minister tell us now whether he will leave one squadron of ground attack Hunters in Aden?
    Mr. Rees: We shall have all that is required to carry out what is required in Aden.

    Barracks and Married Quarters
    Rear-Admiral Morgan Gilesasked the Secretary of State for Defence by what date, according to his present plans, the shortage of barracks and married quarters in the United Kingdom will have been eliminated.
    Mr. Boyden: Our aim is to provide Service men with well-designed modern accommodation, either in the form of barracks or permanent houses for all families entitled to them. Under present plans, our building programme for this will be completed about 1973–74 for
    1188
    married quarters and four or five years later for barracks.
    Rear-Admiral Morgan Giles: Does that mean that the implication that caravans and mobile homes are not likely to be needed after Christmas is no longer valid?
    Mr. Boyden: No, Sir, but caravans and mobile homes will be used to the very minimum.
    Mr. Powell: Does the hon. Member's estimate take into account the withdrawals from Germany?
    Mr. Boyden: The permanent programme to which I was referring was devised, and is carrying on, largely without that in mind, but there is some slack in the system to take this up. Withdrawals from Germany, should they occur, will largely be accommodated in temporary barracks which are available now.

    Anglo-French Variable Geometry Aircraft
    Mr. Goodhewasked the Secretary of State for Defence whether he has now agreed a specification for the Anglo-French variable geometry aircraft; and how many of these he expects to order for the Royal Air Force.
    Mr. Healey: My hon. Friend the Minister of State for Technology and I are meeting the French Minister for the Armed Forces next Monday, 17th April, to consider the results of the work done by our officials on the specification of the aircraft. It is too early to take decisions yet on the number of aircraft.
    Mr. Goodhew: The right hon. Gentleman has been talking about making decisions about the specification of this aircraft for some time. In view of the uncertainty that exists in the Royal Air Force about even the number of Phantoms which will be at its service, should not the right hon. Gentleman rapidly agree on some figure in respect of the Anglo-French variable geometry aircraft?
    Mr. Healey: Certainly not without knowing the cost and other details about the programme. But I have always made it clear to the House that we planned to take decisions on specification in April. That is what we plan to do. The hon. Member ought to remember that.
    Mr. Hooley: Can my right hon. Friend give any estimate of the approximate difference in cost between designing this aircraft purely for an interceptor rôle and for a strike and interceptor rôle?
    Mr. Healey: A great deal depends on the precise operation characteristics of the interceptor or strike aircraft. I can say that if this aircraft were designed purely for an interceptor rôle, as now seen, we could accommodate the characteristics required of it as a strike aircraft within that ceiling.
    Mr. Hastings: Can the Minister tell the House anything about the talks held recently with General Steinhoff, Chief of the German Air Staff, about this aircraft, which were surely relevant to this issue?
    Mr. Healey: I think that there is a Question already on the Order Paper about that point.

    Surface-to-Surface missile
    Mr. Wallasked the Secretary of State for Defence when the first British surface-to-surface missile for use at sea will be operational.
    Mr. Mason: I have nothing to add at present to the statements which my hon. Friend the Under-Secretary of State for Defence for the Royal Navy and I made in the recent Defence debates.—[Vol. 742, c. 553; Vol. 743, c. 614–5.]
    Mr. Wall: Can the hon. Gentleman undertake that these missiles will be operational before aircraft carriers are phased out?
    Mr. Mason: I could not give such an assurance, but I think that the position will become clearer after we have examined the report of the Future Fleet Working Party.
    Mr. Goodhew: This is altogether unsatisfactory. The Government have decided to abandon the aircraft carriers and surely it is essential that they should know whether they will have the surface-to-surface missiles to replace them, because without such missiles the Navy will be useless.
    Mr. Mason: We have in mind providing a light tactical strike capabality from either ships or helicopters, and the various alternatives are still under consideration.

    Servicemen (Overseas Service)
    Mr. Gwynfor Evansasked the Secretary of State for Defence what is the minimum age below which no lad entering the services may be drafted overseas.
    Mr. Rees: 17½ in the Army and Royal Air Force, except that soldiers may be posted to B.A.O.R., which is a home station for the Army, from 17¼. The Royal Navy does not lay down a minimum age for overseas service but in practice it is about 16½.
    Mr. Evans: I thank the hon. Gentleman for that reply. Is he aware that no fewer than 12,000 children between the ages of 15 and 17½ were recruited into the British Forces last year, making more than one-quarter of the total? Is he aware that this is causing great concern? What does he propose to do to ensure that only people of a more mature age shall be allowed to make this decision?
    Mr. Rees: The hon. Gentleman is confusing apprentices and people of that kind who receive apprenticeship technical training at Halton and other places. It would be extremely unusual if they came into the category mentioned in the hon. Gentleman's Question about those drafted overseas.

    Aden (Ground Defence Equipment)
    Mr. Dodds-Parkerasked the Secretary of State for Defence what is the value of airport radar and ground defence equipment being left to defend Aden when South Arabia attains independence.
    Mr. Healey: It is not the intention to leave behind any airport radars or associated ground defence equipment when South Arabia attains independence.
    Mr. Dodds-Parker: Will the right hon. Gentleman then give an assurance that what is being left behind in the way of aircraft will enable the South Arabian Government to defend itself against external aggression? Will he give the same assurance about naval forces, about which he has sidestepped a Question from me?
    Mr. Healey: What I can say is that the South Arabian Government are being given very substantial financial and other

    1191
    help by Her Majesty's Government within the limits of their own capabilities to operate the equipment which they would wish to use.
    Mr. Goodhew: Surely—[HON. MEMBERS: "Not again"]—Hon. Members opposite are very sensitive about this. Surely the right hon. Gentleman can recognise that it would be much more sensible, if we are to preserve stability in the area and if he feels that the South Arabians are unable to operate appropriate equipment, to see that we supply it until such time as they are.
    Mr. Healey: This subject has often been discussed in the House and I know that there are differences of view between the two sides. I do not believe that an independent South Arabia would have a chance of acceptance in the Arab world as an independent State if it were known to be totally dependent for its defence on the presence of British forces.

    Military Equipment Orders (South Africa)
    Mr. Wingfield Digbyasked the Secretary of State for Defence what inquiries for orders for warships and military aircraft from South Africa have been received during the last year; and whether any such orders have been encouraged.
    Mr. Healey: Detailed information about arms inquiries or sales to any country is confidential but, as the House knows, in the case of South Africa these would be dealt with in the light of our arms embargo policy which was explained to the House by my right hon. Friend the Prime Minister on 17th and 25th November, 1964.—[Vol. 702, c. 199–208; Vol. 702, c. 1281–7.]
    Mr. Digby: Is it then the policy of the Government to discourage such inquiries and to encourage the South African Government to get its supplies elsewhere?
    Mr. Healey: The hon. Gentleman will know that in our opinion there are many good political reasons for this. We decided to limit the chances of British arms exporters so far as South Africa was concerned. We still believe that those considerations are correct.
    Dame Irene Ward: As we are very short of naval orders on nearly all our great rivers, if the right hon. Gentleman is to pursue this policy towards South Africa, will the Government kindly place some orders to make sure that men have employment in naval shipbuilding?
    Mr. Healey: I am glad to have the assurance that the hon. Lady will support the Government's policy towards the purchase of the F111K which has brought such large numbers of orders to naval shipbuilding areas in various parts of the country.
    Mr. Rose: Will my right hon. Friend assure the House that he will not yield to this financial expediency as against political principle? Will he also bear in mind that countries like South Africa are conniving at the breach of the sanctions against Rhodesia?
    Mr. Healey: I can certainly give the assurance that in this matter we do not intend to allow what might be regarded as expediency to overrule principle.

    British Nuclear Weapons
    Mr. George Jegerasked the Secretary of State for Defence what steps have been taken to implement the policy of internationalising the British nuclear weapons; and whether he will make a statement.
    Mr. Healey: Our policy remains to internationalise our nuclear forces. Discussion of the N.A.T.O. nuclear sharing problem is now concentrated on improving consultation and planning, and the United Kingdom is participating actively in the machinery which has been set up in N.A.T.O. for this purpose.
    Mr. Jeger: Is my right hon. Friend aware that this has been the subject of a number of firm pledges over the last few years and that very little action appears to have been taken? Will he issue a statement to say exactly what action is being taken and who, apart from ourselves, is really interested?
    Mr. Healey: This matter was very fully covered not only in the defence debate, but in the Defence White Paper. The existing strategic nuclear forces of the United Kingdom and the planned nuclear forces of Polaris will be assigned

    1193
    to N.A.T.O. and targeted by the appropriate and suitable N.A.T.O. authorities.
    Mr. Emrys Hughes: Will my right hon. Friend explain whether he is proposing to internationalise the Polaris submarines and, if so, what other nations have offered to pay any of their cost?
    Mr. Healey: I have just answered that question.

    Medical Officers (Pay)
    Mr. John Hallasked the Secretary of State for Defence (1) when he proposes to bring the increase in pay to medical officers in the Armed Forces into line with the increases given to medical general practitioners in the National Health Service;
    (2) what representations have been made to him by the British Medical Association that a new structure of pay and conditions should be negotiated for medical officers in the Armed Forces; and if he will make a statement.
    Mr. Healey: Service medical officers will receive a pay increase of 10 per cent. on 1st July which will be backdated to 1st October, 1966. The British Medical Association proposed in discussions last month that a further increase of 8 per cent. should be awarded and that any new pay structure should be excepted from the terms of the White Paper on Prices and Incomes (Cmnd. 3235). These proposals could not be accepted by Her Majesty's Government.
    Mr. Hall: Would not the right hon. Gentleman agree that there is a great deal of indignation among Service medical officers at what they regard as very shabby treatment by the Government? Does he not also agree that this decision will not only have an adverse effect on recruitment but will also encourage medical officers to leave the Services as soon as they can leave without incurring financial liability?
    Mr. Healey: Of course, I know that the application of the prices and incomes policy is resented and regretted by many sections of the community, but I do not believe that there is any chance of that policy succeeding unless it is universally applied. For that reason, although there may be unfortunate effects from the
    1194
    application of the policy, it is right to apply it uniformly all round.
    Mr. Peter Mills: Will the right hon. Gentleman bear in mind that some of us who have just returned from visiting troops in Germany have been appalled and shocked by the lack of doctors in certain units? Is he aware that the doctors there are grossly overworked? Is not this a situation which will never be altered unless the pay structure is altered, and altered quickly?
    Mr. Healey: In July all the doctors are to get a 10 per cent. increase backdated to October,1966. That is a very substantial contribution towards the end which the hon. Gentleman has in mind.
    Mr. Longden: Is the right hon. Gentleman aware that there is even more discontent among Service legal officers? Why are not these concessions being granted also to them?
    Mr. Speaker: That has nothing to do with the Question.

    Malagasy Republic (Defence)
    Mr. Wingfield Digbyasked the Secretary of State for Defence what defence agreement exists with the Malagasy Republic; when it was published; and what has been the total cost to Defence Votes of operating from Majunga and other places in Malagasy during the last year.
    Mr. Healey: We have no defence agreement with the Malagasy Republic. By arrangement with the Malagasy Government Royal Air Force Shackletons are undertaking patrols from Majunga in pursuance of the Security Council resolution of 9th April, 1966. The additional cost to Defence Votes of operating from Majunga during the 12-month period which has so far elapsed is about £175,000.
    Mr. Digby: Would it not have been more tactful to approach the French Government in the first place, in view of its defence agreement with this Republic, rather than annoy it at a critical time in our relations with France?
    Mr. Healey: The hon. Gentleman must recognise that the Malagasy Republic is an independent State.

    Burtonwood
    Mr. Frank Allaunasked the Secretary of State for Defence if, when Burton-wood comes into use again as a United States Air Force Base, United States bombing aircraft using it will carry hydrogen bombs on board at any time.
    Mr. Healey: Burtonwood is not coming into use again as a United States Air Force base. It is a storage depôt for the United States Army.
    Mr. Allaun: Is my right hon. Friend aware that that reply will receive a warm welcome in Lancashire, which is a highly populated area and wants nothing to do with H-bombs anywhere near it?
    Mr. Healey: If my hon. Friend keeps more closely in touch with me, I may be able to tell him a great deal more to our mutual advantage.

    Servicemen and Families (B.A.O.R. and Far East)
    Mr. Frank Allaunasked the Secretary of State for Defence if he will state the number of single men in the British

    Single

    Married Unaccompanied

    Married Accompanied

    BAOR

    …

    …

    Officers

    …

    …

    …

    952

    117

    2,503

    Soldiers

    …

    …

    …

    26,085

    1,660

    17,669

    FARELF

    …

    …

    Officers

    …

    …

    …

    534

    114

    1,329

    Soldiers

    …

    …

    …

    7,039

    806

    5,939

    Under-Age Recruits (Discharge)
    Mr. Fisherasked the Secretary of State for Defence (1) whether, in future, he will allow under-age recruits to the Services to opt for a discharge a year after enlistment instead of only three months after enlistment as at present;
    (2) whether he will allow under-age recruits to the Services to opt for a discharge when they reach the age of 21 years.
    Mr. Merlyn Rees: As the hon. Member knows, my right hon. Friend is at present looking into these and related matters. I cannot anticipate the result of his investigations.
    Mr. Fisher: There are two separate Questions, of course. On the first, would the hon. Gentleman agree that three months is rather a short period—in the Navy boys would not even have been to sea—in which to expect a young boy to
    1196
    Army of the Rhine, the number of married men and the number of married men whose families live with them; and if he will state the equivalent numbers in the Far East.
    Mr. Boyden: As the Answer consists of a table of figures I will, with permission, circulate it in the OFFICIAL REPORT.
    Mr. Allaun: Is it not a fact that, if there were a big rundown through demobilisation or curtailing recruitment, most of the single men would return to their family homes and there would be relatively little need for new housing in Britain?
    Mr. Boyden: I do not accept that.
    Mr. Onslow: Has the hon. Gentleman any proposals to reduce the time before families can join married soldiers in Germany, which we found a cause for great concern over there?
    Mr. Boyden: The percentage is not very high but we are naturally anxious to cut down the time whenever we can.
    Following is the information:
    make a long-term decision covering the next 10 or 12 years of his life? On the second Question, surely, especially if a boy has not received any special training, he should be allowed the option of discharge at the age of 21, when he has gone into the Service without really knowing what was involved in the first place.
    Mr. Rees: I assure the hon. Gentleman that all these points are receiving urgent investigation.
    Mr. J. T. Price: Is my hon. Friend aware that there is a good deal of public disquiet about this matter of juniors who enlist in the Armed Forces not being allowed to opt out? How do the Government continue to justify the discrimination in this matter, when under the ordinary civil law of this country, no minor under 21 can make a contract which is not for his own personal benefit?
    Mr. Rees: I fully accept that there is great concern. This is not a new matter.

    1197
    It has gone on for a long time, but we are looking at it with urgency.
    Mr. Bishop: Has my hon. Friend seen the publicity given to the case of Airman David Arnold, who was sentenced to 56 days detention following disobedience of orders while seeking his release from the R.A.F.?
    Mr. Rees: This illustrates the difficulty of the matter. I am sorry that this happened to this young man, who fits into the category about which the country is concerned, but if he had applied for his discharge at one point, he would have had it. He applied only when he was down for an overseas posting, and this immediately altered the case. If he had applied at the earlier point, it would have been possible for him to be discharged, because it is not the case in every instance that a young man has to serve out his time.
    Mr. Kenneth Lewis: Would not the hon. Gentleman at least agree that, when a boy has gone into the Service at 15 and has done a long term of service, he should come out within a year or 18 months of his normal discharge if he so requests?
    Mr. Rees: I can only promise that this and all allied subjects, in the light of changes in apprenticeships and so on in recent years, are being investigated closely by my right hon. Friend.
    Mr. Speaker: Mr. Kenneth Lewis, Question No. 46.
    Mr. Gilbert Longden: On a point of order. May I have the opportunity to ask Question No. 45?
    Mr. Speaker: I am sorry, I thought that that Question was answered with No. 28—
    Mr. Longden: My hon. Friend was not here, Mr. Speaker.
    Mr. Speaker: My apologies. The hon. Gentleman was not called. Mr. Longden, Question No. 45.

    Legal Officers (Pay)
    Mr. Longdenasked the Secretary of State for Defence what is the present position regarding the pay of the Army Legal Services; whether Command
    1198
    Paper No. 2903 of February, 1966, applies; and if he will make a statement.
    Mr. Healey: Discussions on the new pay scales for Service legal officers were overtaken by the Prices and Incomes Standstill. Increases in pay for these officers are still under consideration and I hope to be able to announce the amounts and the timing before 1st July, 1967, which is the earliest possible date of implementation under Cmnd. 3150.
    Mr. Longden: I thank the right hon. Gentleman for that reply. From what date will the increases run? Is he aware that these services are greatly undermanned, that one of the greatest needs of justice is that it should he speedy and that these officers are being treated totally differently from their equivalents in other branches?
    Mr. Healey: Yes, Sir, I am aware of all these points, and they will, of course, be taken into account in the negotiations.
    Mr. Allason: As the other officers received a 12½ per cent. increase, could not the Army legal services receive that increase as a temporary measure while waiting for the further increase, which will, no doubt, come on 1st July?
    Mr. Healey: The hon. Member will know that, under Government policy, it is not possible to give people increases now as a temporary measure. All these matters are under consideration, but I hope to be able to announce a decision on this in time for the payment to be made on the first possible date under the law.
    Mr. Powell: Why has it not been possible to make an earlier announcement regarding the Government's intentions as to these forgotten men of the last Grigg Award?
    Mr. Healey: I can assure the right hon. Gentleman that these men are not forgotten. We have been negotiating on their case for some time. This is why we are not able now to take decisions.
    Sir Ian Orr-Ewing: On a point of order. Have we not missed Question No. 28? Was it not to be taken with No. 45—
    Mr. Speaker: Order. I am afraid that the hon. Gentleman is just unlucky. Mr. Kenneth Lewis, No. 46.

    Forces, Aden (Casualties)
    Kenneth Lewisasked the Secretary of State for Defence whether he will take steps to see that information either by print or photograph of members of Her Majesty's Forces in Aden being injured in combat is not released before the next of kin is informed.
    Mr. Boyden: We release the names of serious casualties only after the next of kin have been informed. Where the Press have free access to incidents, they cannot be prevented from publishing photographs and information about them.
    Mr. Lewis: Cannot the hon. Gentleman make some arrangement to try to persuade the Press not to print photographs or to show them on television or to give names, as happened in the case of a consituent of mine, because next of kin suffer great anxiety when this happens?
    Mr. Boyden: I appreciate the hon. Gentleman's position, but normally the Press is very responsible and frequently inquires of the Army first before publishing, names. Fortunately, in two reports in the Press recently, the incident was of a relatively trivial nature.

    Chemical and Biological Warfare Laboratories (Inspection)
    Mr. Hugh Jenkinsasked the Secretary of State for Defence what is the Government's policy towards the international inspection of chemical and biological warfare laboratories, in the light of the Report of the 13th Pugwash Conference, a copy of which has been sent to him.
    Mr. Healey: Her Majesty's Government would like to see progress made towards international agreement on measures to deal with chemical and biological weapons. The Western Plan for General and Complete Disarmament makes proposals to this end. We hope that it will, in due course, be possible for the Eighteen-Nation Disarmament Committee at Geneva to examine the problems involved and we naturally welcome contributions such as those by the Pugwash Conference on Science and World Affairs to their solution.
    Mr. Jenkins: Does my right hon. Friend agree that chemical and biological
    1200
    warfare must be mainly directed at the civilian population and that, for this reason, it is a particularly dangerous development, and that the United States Government appear to be trying it out in Vietnam? Will he, therefore, regard this matter with rather greater urgency than has perhaps been done hitherto?
    Mr. Healey: I cannot accept my hon. Friend's implied criticism of the urgency with which we regard this matter, but I agree that it would be desirable in all our interests if we could reach an agreement to ensure that these weapons were neither produced nor used.

    Aden (Service Accommodation)
    Mr. Boyd-Carpenterasked the Secretary of State for Defence for how many Service personnel his Department has accommodation in Aden; and for how many Service families; and how much has been spent in the last five years on the provision of such accommodation.
    Mr. Boyden: There is accommodation for 8,467 single personnel and for 3,051 Service families; about £4 million and £7 million respectively.
    Mr. Boyd-Carpenter: As one of the arguments adduced in favour of the withdrawal of troops from Aden is the saving to public funds, has the hon. Gentleman taken into account the cost of providing similar accommodation to this in the United Kingdom for troops when they are withdrawn?
    Mr. Boyden: This has been done.

    Malta (Service Accommodation)
    Mr. Boyd-Carpenterasked the Secretary of State for Defence for how many Service personnel and for how many members of their families he has accommodation in Malta; and what is the average cost per man per day involved in maintaining a private soldier in Malta, Germany, and the United Kingdom, respectively.
    Mr. Boyden: There is accommodation for 4,015 single personnel and for 2,250 Service families. The average costs are £3 4s., £3 10s., and £3 12s., respectively.
    Mr. Boyd-Carpenter: In view in particular of the cost figures which the hon.

    1201
    Gentleman has quoted, may I ask whether he is considering the sending to Malta of some of the troops who are withdrawn from other stations, using the accommodation there at apparently less cost to public funds than maintaining them in the United Kingdom?
    Mr. Boyden: No, Sir.
    Rear-Admiral Morgan Giles: How long would it be before the alleged extra cost of keeping troops in Malta was amortised and reached a greater figure than the capital sum which would be involved in rebuilding the barracks in Britain?
    Mr. Boyden: The hon. and gallant Member should give me notice of that question.
    Mr. Frank Allaun: As I said a few minutes ago without getting a reply, if these men were brought home and demobilised, since they are either single men or mostly married men with wives living in this country, no or very little additional housing would be required to accommodate them.
    Mr. Boyden: I cannot accept that.

    Aden (Evacuation of Women and Children)
    Mr. Leadbitterasked the Secretary of State for Defence what plans he has for the early evacuation of British women and children from Aden; what steps have been taken to provide their fullest protection; and if he will make a statement.
    Mr. Healey: On the first part of the Question, I have nothing to add to my reply to the hon. Member for Surbiton (Mr. Fisher) on 15th March; on the second, the comprehensive range of measures taken to protect families includes patrols, guards, flood-lighting, escorts and the use of secure areas. It would not be in the interests of the safety of families in Aden for me to reveal details of these protective measures.—[Vol. 743, c. 111–2.]
    Mr. Leadbitter: That is all very well, but will my right hon. Friend bear in mind that since that statement of his the Chairman of the United Nations Mission, Perez-Guerrero, has made some very disgraceful, irresponsible, and calculated
    1202
    comments which have added to the danger of these families and I am of the opinion that, unless immediate steps are taken to bring these families back much earlier, there will be a graver risk than need be taken?
    Mr. Healey: I understand my hon. Friend's concern, but I must ask him to recognise that the withdrawal of families in an orderly way with their children will start in just over a fortnight's time. It would not be in the interests of the families, and certainly not of the morale of the troops serving in Aden, to take panic measures which do not have a real justification.
    Mr. Stratton Mills: Does the Secretary of State accept that it is virtually impossible to protect families living in the Ma'alla district of Aden, and will he consider evacuating those homes first?
    Mr. Healey: I will certainly take into account the point made by the hon. Member.

    "Torrey Canyon"
    Mr. Liptonasked the Secretary of State for Defence how many high-explosive bombs were used in operations against the "Torrey Canyon"; how many hit the ship or fell into the sea; and how many failed to explode either on the ship or in the sea.
    Mr. Mason: 171 high-explosive bombs and rockets were used against the "Torrey Canyon". The conditions prevailing made it impossible to count with any degree of certainty the number of misses and the number of bombs which did not explode.
    Mr. Lipton: If that is the best information that we can get with hand-picked crews on an undefended target in reasonably good conditions, does it not look as if we are getting very poor value for our vast defence expenditure? Will my hon. Friend accept the proposition that it is time that somebody got a bowler hat for the lamentable Answer which he has just given?
    Mr. Mason: That is a disgraceful reflection upon the efficiency of Her Majesty's forces. I should, in fairness, point out that two-thirds of the vessel was submerged and was seen only at low tide and, secondly, that after the initial

    1203
    strikes, it was covered with a thick pall of smoke and, consequently, it could not be seen whether there were direct hits or explosions.
    Sir Knox Cunningham: Can the Minister give the cost of all the bombs which were dropped during the "Torrey Canyon" operation?
    Mr. Mason: £200,000.

    Recruits (Security Inquiries)
    Mr. James Davidsonasked the Secretary of State for Defence if applicants for entry to the Armed Forces who are likely to come into contact with classified material during their Service careers are subject to security inquiries to establish their reliability, whether or not they are of British parentage.
    Mr. Merlyn Rees: The rules for access to classified material in the Armed Forces apply irrespective of parentage. Consequently, any security inquiries required by these rules are made whether or not the individual is of British parentage.
    Mr. Davidson: In that case, does the Minister agree that the country of origin of parents of an applicant is irrelevant?
    Mr. Rees: The hon. Member's next Question is more concerned with that matter. Once a person is in the Armed Forces, however, irrespective of parentage, if he has access to classified material the rules of access apply irrespective of who the parents might be.

    Recruits (Nationality Rules)
    Mr. James Davidsonasked the Secretary of State for Defence why the parents of British applicants for entry to the Armed Forces, apart from other rank entrants to the Army, are required to be British subjects or citizens of the Irish Republic by birth.
    Mr. Merlyn Rees: The hon. Member's Question refers to the nationality rules which apply for the Armed Services. There is a special consideration relating to the employment of persons of alien origin in case they may be liable to pressure. This implies no reflection on the character of those concerned.
    Mr. Davidson: I understood that those regulations applied to the parentage of the
    1204
    applicant. Will the Minister confirm that any British citizen is entitled to the same rights and privileges in applying for entry to the Services regardless of the origin of his parents?
    Mr. Rees: Everybody who comes to join the Armed Services has made available to him the nationality rules. Large numbers of questions on this matter come to my right hon. Friend, because many people whose parents have fought for this country in different circumstances are affected. The point at issue is that if at some future date pressure could be brought to bear on them because of relations living in some part of the world, we consider it fair from the earliest possible time not to allow them to come into the Services, otherwise they would not be able to have a full and proper career. My right hon. Friend has the right of waiver in this respect, but only in the most special circumstances.

    Armed Forces (Police Service)
    Mr. Emrys Hughesasked the Secretary of State for Defence if he will take steps to give facilities to members of the Services who wish to leave the Armed Forces for service in the police force to do so.
    Mr. Merlyn Rees: No, Sir. I could not justify extending the existing arrangements for discharge by purchase. However I was glad to learn that my right hon. Friend the Home Secretary has recently made a regulation which will allow ex-Servicemen to join the police up to the age of 40.
    Mr. Hughes: While congratulating the Minister on that reply, may I ask whether he is aware that there is still a deplorable shortage of police and prison officers? Does he not think that this could be made up by men who are prepared to volunteer, especially in view of the rise in pay, from places in Germany, where some of them are doing damn all?
    Mr. Rees: My hon. Friend should bear in mind that any changes that take place, whether from Germany or elsewhere, are not within the category of the release of a citizen army after 1945. The changes that take place must take into account not only the needs of the police but the needs of the individuals concerned. We

    1205
    have done the best we can in this matter, and personnel on short service can go into the police at an early age.
    Sir A. V. Harvey: Will the Minister repudiate the statement by the hon. Member for South Ayrshire (Mr. Emrys Hughes) about the Armed Forces in Germany?
    Mr. Rees: I entirely repudiate it. I was once a school teacher, however, and subsequently became a Member of Parliament. A lot of people think that school teachers and Members of Parliament do nothing. I get it both ways. I took it as a joke rather than anything else.

    Polaris Submarine Programme (Cost)
    Mr. Emrys Hughesasked the Secretary of State for Defence what is now his estimate of the likely total cost of the Polaris submarine programme and its support costs compared with the cost that was stated when the project was first announced in Parliament.
    Mr. Mason: £370 million and £350 million, respectively.
    Mr. Hughes: Is my hon. Friend aware that his estimate is for four Polaris submarines and that the estimate given by the Conservative Government was £400 million? Can he say which was too high and which was too low?
    Mr. Mason: My hon. Friend will have noticed that there is an increase of £20 million, but now included is the cost of the Royal Naval Polaris School, the new floating dock, the modular repair facility and some spares.

    Westerly Winds
    Mr. Gresham Cookeasked the Secretary of State for Defence to what reasons is ascribed the recent eight-week period of westerly winds over this country, one of the longest periods in recorded meteorological history.
    Mr. Merlyn Rees: In the British Isles, westerly winds are more common than other winds and the recent long spell of westerlies, which lasted with some breaks for 45 days, is not without precedent. The reasons for the persistence of particular types of weather over many weeks
    1206
    are not understood at the present time, but the Meteorological Office is engaged on research on the problem because of its importance to long-range forecasting.
    Mr. Gresham Cooke: If the Government cannot give me an answer to this very simple question of why we had 45 days of westerly winds—which might help them over the "Torrey Canyon"—can the hon. Gentleman say whether the world weather watch and the putting up of satellites to examine the clouds will give us the answers to these problems and lead eventually to control of the weather?
    Mr. Rees: We ourselves have a research team at work in this matter—but it is no good beating about the bush. The amount that anybody knows about this subject is very small. The hon. Member is falling into the same mistake as his right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) on Monday evening in pretending that a Government can control the weather.
    Mr. Ellis: Does not my hon. Friend agree that in a recent debate the fact that the wind was not westerly was given by the Opposition spokesman as the reason why the Government were saved over the "Torrey Canyon" incident? Does not this demonstrate that neither in the political nor in the meteorological field do the Opposition know which way the wind is blowing?
    Mr. Rees: The right hon. Member who spoke for the Opposition got his winds going the wrong way.
    Sir R. Cary: Can the Under-Secretary of State for Defence do something about today's weather? It is a wretched day.
    Mr. Rees: I suggest that the hon. Gentleman brings that matter up at a meeting of the 1922 Committee.
    Mr. Hector Hughes: As these persistent westerly winds have driven a lot of oil from the "Torrey Canyon" up into Britain's traditional shoals, what steps are the Government taking to protect Britain's fisheries from poison?
    Mr. Rees: I can assure my hon. and learned Friend that I will defend to the death the chance of any oil getting to Aberdeen.

QUESTIONS TO MINISTERS
Mr. Hastings: On a point of Order, Mr. Speaker. Some little time ago, by means of a supplementary question, I asked the Secretary of State for Defence whether he would say something about the visit of General Steinhoff, the German Chief of Air Staff, with regard to the variable geometry aircraft. I understood the right hon. Gentleman to say that there was another Question on this subject. Since, wherever it may be, the Question has not been reached, is it possible for the Secretary of State to say something about the matter now?
Mr. Speaker: I have had no such request from the Minister. It is not a matter for me.
From meteorology to finance—the Clerk will now proceed to read the Orders of the Day.
Sir Harmar Nicholls: On a point of order, Mr. Speaker. As we seemed to have an indication from the Minister that he was prepared to give an answer, might we have the answer from him?
Mr. Healey: On that point of order. Mr. Speaker. This Question had a written Answer two days ago.
Mr. Speaker: I think that finishes that.

ORDERS OF THE DAY

  WAYS AND MEANS
  Considered in Committee [Progress 11th April].
  [Sir ERIC FLETCHER in the Chair]

  WAYS AND MEANS

    AMENDMENT OF THE LAW
    Question again proposed,
    That it is expedient to amend the law with respect to the National Debt and the public review and to make further provision in connection with finance, so, however, that this Resolution shall not extend to making—

    (1) amendments of the enactments relating to purchase tax so as to give relief from tax, other than amendments making the same provision for chargeable goods of whatever description, or for all goods to which any of the several rates of tax at present applies;

    (2) amendments of the enactments relating to selective employment tax so as to give relief from tax—

    (a) by way of exemption fro m, or a reduction in the rate of, tax except in respect of all persons of the same descriptions relevant for determining the rate of the employer's flat-rate contribution with which the tax is combined, whether that contribution is under the National Insurance Acts or under the corresponding enactments in Northern Ireland; or

    (b) by way of providing for payments to employers of an amount equal to the whole or a specified part of the tax paid if the proposed provision—

    (i) is in respect of employers in part only of Great Britain, unless it is in respect of all employers not already entitled to such payments in a part of Great Britain which is included in the areas specified as development areas under section 15(2) of the Industrial Development Act 1966; or

    (ii) extends to employers in Northern Ireland; or

    (iii) is in respect of all persons in any particular description of employment in all parts of Great Britain, and relief in respect of the whole of the tax paid could be given in respect of that description of employment by an order under section 9(1)(a) of the Selective Employment Payments Act 1966 adding that description of employment to the employments to which section 1 or 2 of that Act applies; or

    (c) by adding or removing any employer to or from the employers to whom section 3 of that Act applies; or

    (d) by amending the provisions of Schedule 1 or Schedule 2 to that Act;

    (3) Amendment of the Land Commission Act 1967.

  BUDGET RESOLUTIONS AND ECONOMIC SITUATION
  3.33 p.m.
  Mr. Iain Macleod: The Committee listens with respect, and quite rightly, to the Chancellor of the Exchequer, but the right hon. Gentleman probably regrets that the ritual of Budget day yesterday meant that he had to take one and a half hours on a speech that he could well have delivered to the Committee in about 15 minutes. It would, perhaps, have been neither better nor worse for that. I would, on the whole, wholly welcome it if Budget day itself became less important in our affairs. I remember very well "Nye" Bevan saying long ago that our Budget day was a remembrance of a time when we were a purely pastoral society, so it is, perhaps, a mistake that we give such ritualistic importance to one particular day when the management of the economy is something that obviously concerns the Government—and, therefore, their critics—for every month in the year.
  It is inevitable, therefore, that this Budget debate will turn into something of an economic debate on some of the premises offered yesterday by the Chancellor of the Exchequer, and it may well be that the attendance in the next four days will reflect that. I shall do nothing in particular to raise the temperature of the debate—at least, I do not think so—
  Mr. Hector Hughes Mr. Hector Hughes (Aberdeen, North) rose—
  Mr. Macleod: Not at the moment. A little later, perhaps.
  I mention this at the beginning, because yesterday, at the very opening of his speech, the Chancellor of the Exchequer suggested that Members should go away and not come back till 5 o'clock. We did not realise that he was serious.
  Any Budget, even one without major proposals, has to be set in the context of the previous debates, and I propose to refer, and that briefly, to only one, the debate in which we had the pre-election preview from the Chancellor of the Exchequer on 1st March, 1966, in which he summed up his considered Budget judgment by saying:
  "The best guidance that I can give the House, therefore, at this stage is that I do not
  1210
  foresee the need for severe increases in taxation."—[OFFICIAL REPORT, 1st March, 1966; Vol. 725, c. 1116.]
  As we know, after the election that phrase turned out to be £385 million in the first year, and a vast amount more in the subsequent measures of 20th July. That statement by the right hon. Gentleman was either wholly dishonest or wholly misinformed and, quite clearly, it was the second.
  But the keynote of that particular debate was summed up in a flashing phrase from the Chief Secretary, in his peroration, when he said:
  "We have taken the stop out of the stop-go."—[OFFICIAL REPORT, 1st March, 1966; Vol. 725, c. 1231.]
  We should not be too critical of the right hon. Gentleman the Chief Secretary. He realised that the Government had taken one of the components out of the stop-go, and there was an even chance that he had picked the right one.
  The Chancellor of the Exchequer will remember that last year his Budget judgment was not really in dispute. What was in dispute, from the very beginning, was the timing, particularly in view of the fact that the S.E.T. and, indeed, the minor factors in the Budget, did not begin to operate until the autumn. I am certain that the scar of that misjudgment last year still remains and that it has affected the right hon. Gentleman's judgment this year.
  Before turning to that, however, which is my main theme, I would pick up one or two smaller matters to which the Chancellor of the Exchequer may lend a sympathetic ear. There is the question of secrecy of economic decisions and the aura of mystery that surrounds our financial affairs. I do not accept the view that sterling and the true state of the reserves are something that we should not mention. I have refrained from raising these matters at all out of deference to that view—which is one that I think the right hon. Gentleman shares—but I am happy to raise it today, a day when sterling, as I am delighted to see, touched parity.
  The position with regard to reserves is that we have got into a habit—it was always there, but it has got worse in recent years—of announcing the figure of, say, £30 million, and then allowing people to guess, with the help of nods here and winks there, what the true figure,

  1211
  it may be up to £250 million, is said to be. During an exchange that the Chancellor of the Exchequer had with some of us on this side, one of my hon. Friends said that the monthly figures were inaccurate and misleading. I said that in my view they were accurate and misleading in that they show accurately the state of the cash transfer in the month, but made no mention, of course, of borrowing.
  It is clear that if a man's personal account is, say, £100 in credit at the end of one month and £100 in credit at the end of the next month, we cannot judge whether that man is doing well until we know whether he has borrowed or has repaid borrowing in that month. I would ask the right hon. Gentleman, particularly now that sterling is strong—I understand his difficulties before—whether honesty may not well be the best policy here, because the trouble with guesses is that they invariably tend to be alarmist.
  I feel that information in this field should be given by the Government rather than that it should drift out from other sources. For example, the Financial Times said on 9th March:
  "The Bank of England has this month completed repayments of all the special credits obtained in the U.S. at the time of Britain's last sterling crisis in the summer of 1966."
  It goes on to discuss this turn-round and says that the report was prepared by Mr. Charles A. Coombs. That is fine, but I prefer to be told these matters by the Chancellor of the Exchequer than to read about them from Mr. Coombs. I am sure that the Chancellor shares that view.
  The second matter is to consider whether the Government feel that they can share all basic economic thinking with Parliament and the country. When the Conservative Finance Committee tried, a short time ago, to mount an exercise designed to find the basis on which really informed discussion of economic judgment alone could be based, the attitude of Treasury Ministers was deliberately obscurantist.
  The approach of the Green Paper is a welcome one. I think that a Tory Government once produced a draft Bill for people affected by it to examine and consider. But it is even more important that we should not be asked to accept
  1212
  matters of gravest import without proper proof.
  For example, easily the most important section in the Chancellor's Budget statement yesterday was the one in which he said:
  "In the Government's view the growth is likely to be about 3 per cent. per annum."—[OFFICIAL REPORT, 11th April, 1967; Vol. 744, c. 983.]
  On what basis is this view formed? Was it like the figures in the National Plan—just something which was plucked out of air? That statement is also a requiem for the National Plan itself.
  The figures in the National Plan are buried by what the Chancellor said yesterday and we, too, can bury with it a famous exchange, which has been referred to more than once in this House, which took place on the day before the election last year. It was an exchange between the Prime Minister and my right hon. Friend the Leader of the Opposition. The Leader of the Opposition asked.
  "How does Mr. Wilson propose to pay for his programme, which is based on a growth rate of 4 per cent., now that it is absolutely apparent that this growth rate is not going to be achieved?"
  The answer was:
  "It is only apparent to Mr. Heath; it is not apparent to us. We shall pay for it out of provision in the National Plan involving a growth rate of 4 per cent."
  It is now at least apparent to the Chancellor of the Exchequer, and, I take it, therefore to the Government as a whole.
  The other matter I wish to refer to is the question of voluntary limitation of overseas investment which is to be continued at least for one year. I am sure that the Chancellor knows that this is voluntary only in the sense that once upon a time a church parade was voluntary in the Army. It has been very well observed that the two strongest instruments of control in the City of London are the Governor's eyebrows. I am sure that he knows very well that a great deal of this is more than voluntary in its operation.
  The Reddaway Report may at first sight confirm some of the Chancellor's analysis and shows that short-term restrictions may be reasonable in a balance of payments crisis, but this problem should be seen in the wider picture of international capital flows to which long-term

  1213
  capital from the United Kingdom makes such an important contribution. It follows that it should be tackled in the context of the world liquidity problem.
  I give a brief illustration from Australia, where I was recently. The figures of the relative decline of our trade with Australia are startling indeed. Ten years ago our share of her imports was 43·5 per cent. On the latest figures, it is 23 per cent. and it has fallen behind that of the United States of America. Our share of her exports 10 years ago was 32·9 per cent. It has fallen to 15 per cent. on the latest figures I have, which is behind both Japan and the United States. The growth potential of Australia is enormous. If we do not invest there some other countries will do so.
  I shall read part of a note sent to me by Mr. Alan Green, who was a Treasury Minister in the last Conservative Administration. He writes:
  "The restrictions on U.S. capital movements are regarded as temporary. The U.K. restrictions are regarded as permanent. The villain of the piece here is the way in which U.K. Corporation Tax has been set up. Australia sees this as a discouragement to U.K. investors."
  I am sure that is true and it reflects a Little England policy which could be particularly formidable, especially at a time, with the growth of Concord travel, in particular, when we shall come nearer, in real terms as it were, to Australia and not further away. I should, therefore, like the Chancellor to reflect on this and, when he winds up the debate, as I understand he will on Monday night, say whether he can go a little further and make clear that this further restriction is to be for one year only.
  I return to the main stream of my argument. I coined a phrase in an article in the Financial Times a week or so ago about "doing a July". By that I meant the Chancellor of the Exchequer, against a great deal of advice from this side of the Committee, was, until the last moment, too optimistic about the pressures upon the economy and that after his Budget he had to have further deflationary measures in July, 1965. In July, 1966, for the reasons I have given, because of the timing of S.E.T., exactly the same thing happened. The Chancellor believed that he could ride on the reserves all that time and this particular judgment proved to be wrong.
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  Now the right hon. Gentleman is determined, in spite of much good news which has come recently—and I welcome it—not to be caught in the short term. I think that the danger which has scared the Chancellor into immobility and reading too much into these portents is a real one, but I cannot believe that inaction is the right reaction in these circumstances.
  I take three points and I shall concentrate in a moment on unemployment. First, there is the question of prices. The claim is often made that the July measures steadied prices. In fact, that is wholly untrue. We have the figures. The latest prices figure is for February. If we take the figures from July to February inclusive, in no less than seven of the last 10 years the figures were better and in only three were they worse. This is a seasonably favourable period. Therefore, no credit whatever can be taken by the Government for any steadying influence on prices over this period.
  Secondly, the February trade figures were very warmly greeted. I found them less encouraging the more deeply I looked into them because I came to the conclusion that the propensity to import was still disturbingly high, particularly when we have a low level of activity as at the moment. It follows that imports may well be sucked in, as often before, when reflation begins.
  I was disappointed that the Chancellor yesterday made no reference to this particular problem. He might be leaving it to one of his colleagues. I have always thought, without the benefit of seeing the inside Treasury papers, that something in the nature of a prior deposit scheme has a good deal to recommend it.
  Thirdly, and most important, I believe that unemployment is a great deal more serious than it looks. I say that, first, because the mildness of the winter cloaks the real unemployment situation and, second, because the underlying trend is still averse. I am not an alarmist in these matters. When my right hon. Friend the Member for Flint, West (Mr. Birch) and I, in different speeches, analysed this in an economic debate before Christmas we both came to the conclusion that no enormous increase in unemployment, being cheerfully predicted then, would come about.

  1215
  But the Committee should study the actual position, because it is far from reassuring. My right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) introduced his measures in July, 1961, when the total level of unemployment was 259,000. The Government's measures last year were introduced when the level was 264,000, for practical purposes an identical starting point. In March, 1962, the figure had risen to 442,000, but in March, 1967, it had risen to 569,000, or 127,000 more than at the comparable period even with a mild winter. I think that we sometimes forget what an enormous effect the weather can have in short winter months. Although there may be a useful debating point in this, I do not believe that we should take it too much into account.
  In the particular cycle of my right hon. and learned Friend's to which I am referring the increase in unemployment went on from December to January, by no fewer than 250,000, and after the February peak it dropped by April by no fewer than 274,000. Clearly, these peak figures are quite unreal and one must discount them in considering both cycles.
  But what matters, and what seems to indicate that the situation is worse now, is that the average estimate—we have had many estimates—of the end figure for 1967 is given as about 650,000. The Committee should remember that in December, 1962, the actual figure was 556,000, getting on for 100,000 or so less than the figure that we may well see towards the end of this year.
  So I must put a point to the Chancellor. If he thinks that unemployment may go more or less according to what I have indicated—he certainly seemed to accept that point of view yesterday—clearly, the situation at all points is worse than in 1962–63, and if there is a severe winter in 1967–68 the figure—it would, of course, be temporary—could easily outstrip that for 1963.
  Nor can I see the slightest real evidence that the development areas have been faring, or will fare, better this time. There was a time, with the distorted effect right at the beginning of the Midland car dismissals which swelled the temporarily stopped, when it was possible to argue that this was so, and, I think, the President of the Board of Trade did so. But
  1216
  these figures have disappeared from the temporarily stopped, and we all know very well that the development areas tend to take the full force of deflation many months after areas which are more sensitive to attacks on consumer goods. In short—and, I believe, with good reason—I am less able than the Chancellor to take a cheerful or even passive view of the economy.
  I was alarmed to read that the Foreign Secretary was making a bullish economic speech last weekend. He has been doing this on and off, turning corners, going round the bend, ever since October, 1964. The besetting sin of this Government, at least until July, 1966 was infirmity of purpose, which led them always to doing too little and doing it too late. However, I should like to compliment the Chancellor of the Exchequer—it will do him no good on his own side of the Council, but most of my political compliments fall into this category—on his steadfastness since last July. I have twice in debate since July urged him not to reflate. But now I believe that very moderate reflation is the right action to take.
  The Chancellor's anxiety is that he may move too soon. No Chancellor ever reflates too soon. Some of them reflate too late, some of them reflate by too little and some of them reflate by too much, but no Chancellor ever reflates too soon. The drag anchors of the Treasury see to that, as they are seeing to it now. The difficulty, to continue in his nautical turn of phrase, is that he has no sea room, no room for manoeuvre at all. Taxation has on many aspects, particularly direct taxation, reached a point where the law of diminishing returns is beginning to operate.
  I am sure that the Chancellor is conscious of the difficulty about the level of public expenditure and the problem that will create in 1968–69 and later years. He said yesterday that he is having a new exercise to bring it under control. We have heard this often enough, from both sides of the Committee when they were at the Government Dispatch Box. I should like the Chief Secretary—he is the most appropriate Minister to deal with it—to expand a little on this when he speaks, and, in particular, to reconcile the known facts about the 8½ per cent. increase in public expenditure with the

  1217
  new target, if we can call it that, of 3 per cent. growth. I should like to know whether the increase will be geared to the new growth target, and if so, what year by year increase the Chief Secretary sees as tolerable, and where the slowdown will come.
  I do not believe that this is the true problem for 1967, although I believe that it may well be the true problem for 1968 and later years. The true problem now is how to provide incentives and to deal with the most pressing of our social needs. Of course, we welcome—the Chancellor knows this; small though they are, I would not wish to pass them without acknowledgment—the proposals which affect the single women with dependants, the widows and others who have responsibilities for children, and the proposals affecting authors and house buyers and the change in S.E.T. for part-timers, against which on no fewer than three occasions the Chief Secretary and Financial Secretary fought us tenaciously a year ago when similar proposals were pressed on them from all three parties in the House.
  But the Chancellor has not tried to deal with—indeed, he has turned his face away, anyway for the moment—what everyone on both sides of the Committee would, I think, accept as the No. 1 problem in the social field, and that is the problem of poverty in the family, particularly when there are a large number of children in the family. I realise that the Government, in their prices and incomes policy, gave a sort of passing nod to the problems of the lower-paid worker, but one cannot solve the problems of the lower-paid worker in the context of the wage structure of the country, because a national wage agreement, or even a local wage agreement, does not take into account the very differing needs of Tom, Dick and Harry and all the rest of us who go to make up the population. If we are to solve this problem, it will never be through a prices and incomes policy, nor will it be through a wage structure. It must be through proposals in the social security field.
  Nor would I think it right—I say this in passing—to solve this problem by taking away the tax allowances for children from those to whom they are paid. I hope that we have heard the last of that proposal. It is entirely wrong to
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  make one particular group pay for the subsidies to another. In any case, this would be the worst of all groups—the brain drain group—to be attacked.
  I believe that we can only fairly find money for such needs in such a year by reducing Government expenditure. I do not mean, in this year anyway, by cuts in the public sector claims for goods and services, because if we did that we should merely increase in 1967 the recessionary pressures that are just around the corner. I mean, in part at least, by the changes in transfer payments which we on the side of the Committee have constantly put forward. I have always believed that the Beveridge Report, admirable in its day but founded with the experience of, and on the assumption of, heavy unemployment, is quite unsuited to our needs in a much more prosperous society a generation later.
  As I put the problem as I see it in a recent speech, "If you help everybody, you help nobody". You cannot help need unless you can identify it. I therefore believe that true compassion in this difficult sphere involves choice. That is the way towards choice in welfare in which we should move, and it happens also to be a way in which the Chancellor, to a small extent this year and a much greater extent in future years, could find the room he needs to manoeuvre.
  As for incentives and the over-riding need to reduce personal direct taxation, it is a sufficient comment that the very word "incentive" did not, I think, appear once in a 90-minute speech yesterday. Of course, the Chancellor should have moved in both those spheres, but he could not because he refused to face the necessity for a reduction in Government expenditure, and so he did nothing.
  As, I think, the First Secretary is to follow me, I wish now to comment briefly on the Government's prices and incomes policy and its Green Paper. We have always held that the creation of the D.E.A. was a mistake. We believe that we have suffered much from there being two hands on the economic wheel, with the inevitable result that the Treasury has won and has turned itself into a sort of sponsoring Department for unemployment. I hope that the First Secretary will soon be ready—perhaps today—to announce the Government's plans for legislation. It is our view that he should

  1219
  not compound folly by continuing a statutory incomes policy, and I think that that is the view of the great majority of the Committee.
  On 25th October last year I said that although Part IV of the Prices and Incomes Act would lapse in August we feared that
  "… some equally unattractive bastard child may take its place."—[OFFICIAL REPORT, 25th October, 1966; Vol. 734, c. 874.]
  That is not a very elegant phrase, but what we have read about a strengthened Part II makes us fear that the Government intend to breach not just the spirit, but perhaps also the letter, of the promise that compulsory penal statutory powers would lapse. Perhaps the First Secretary will tell us today.
  The other point concerns the Green Paper. I do not wish to put forward final considered views from Her Majesty's Opposition, because to do that would be to opt out of the debate, but merely to make some preliminary observations. First, I am wholly in sympathy with the desire to diminish the differences in prosperity between different parts of the country. Everything I say must be taken as subject to that. But the Government should realise that the S.E.T. had a pronounced, built-in, anti-regional bias—that is only one of its many failings. That is why the West Midlands gained from it and Scotland, the South-West and other areas lost. In the Highlands, for example, the service industries are vastly more important than the manufacturing industries.
  We have always been against paying premiums to manufacturing industry, just as we were against the original and, to our mind, wholly artificial—in a modern community anyway—distinction between manufacturing and the service industries. It is not a question whether industry in development areas would like £100 million subsidy on their wage bill. The First Secretary would not need a Gallup poll to get the answer to that. The true question is, "If £100 million can be found, is that the right way of using it?" Should it be used, for example, in the general reduction of tax levels, or, if it is thought right to point it exclusively to the development areas—and I have some sympathy with that view, would it not be far better to do so by repaying
  1220
  all payroll tax, which did not discriminate against the service industries? Or would it be better, as a third possibility, to develop the infrastructure of those areas, the roads, the ports and other services?
  The Chancellor was right yesterday when he said that confidence is the real key to investment in this country. It is not so much a question whether there is this or that scheme, whether there are grants or allowances. Businessmen are not very interested in a promise that they will get £95 back if they will make £100 loss. What they care about is confidence, and I do not believe that that is built in those areas by a proposal proclaimed to be temporary by its very nature.
  I also fear that, at least in some cases, we shall bolster the inefficient firm, and I cannot believe that it is in the long-term interest of those areas that we should do so. Therefore, although my initial reaction is that the proposal is probably misconceived, as was its parent, the Selective Employment Tax, we do not intend to make final pronouncements until we have studied what the First Secretary says today, and in any debate that may follow.
  There are four more days of this Budget debate. It will be possible to get through them only by ignoring the Budget itself. I assure the Chancellor that he will have no difficulty this year in arranging a voluntary timetable for the Finance Bill, although it is only fair to give him notice that as Her Majesty's Government have no particular proposals to put forward we shall wish to concentrate for most of the time on the proposals of Her Majesty's Opposition.
  Mr. J. J. Mendelson: I was disappointed, when the right hon. Gentleman criticised the high level of public expenditure, that he did not take this first opportunity to state what sort of cuts and changes he wishes to urge upon the Government. He is rather under an obligation to do that.
  Mr. Macleod: I spelt them out in almost incredible detail in the Financial Times a week ago, a copy of which I shall send to the hon. Gentleman.
  Mr. Mendelson: That is not the same as dealing with it now.
  Mr. Macleod: I shall not go over it all again. I found that the proposals I

  1221
  put forward were almost identical with those of the Economist, and that alarmed me considerably.
  However empty the Budget may have been, it is not without significance. I agree with the editorial comment in this morning's business news section of The Times, under the heading, "The Conversion of Callaghan". The editorial says:
  "In essence he comprehensively repudiated the basic tenets of the economic faith on which the 1964 and, to a lesser extent, the 1966 elections were fought and won."
  That is true, and that editorial is perhaps of more interest to the other side of the Committee.
  What most concerns us is the total lack of imagination shown yesterday by the Chancellor of the Exchequer. My right hon. Friend the Leader of the Opposition rightly described the Budget as a Budget of lost opportunities, and so it was. The Chancellor did nothing, because he could not think of anything to do. I think that that is sufficient comment on the Budget that never was.
  4.10 p.m.
  The First Secretary of State and Secretary of State for Economic Affairs (Mr. Michael Stewart): I begin what I have to say on the point that was defined by my right hon. Friend the Chancellor of the Exchequer when he said yesterday:
  "… the message is clear. Britain need not stagnate at home in order to pay her way abroad. … Our purpose is to achieve over the years a faster rate of growth of our productive capacity and a fuller use of our manpower both nation-wide as well as in the development areas."—[OFFICIAL REPORT, 11th April, 1967; Vol. 744, c. 984.]
  In his brief comments on the Budget yesterday, the right hon. Gentleman the Leader of the Opposition complained that we had not been told how this is to be done. This is the question that it falls to me to answer, because we must all realise—it was clear from the speech to which we have just listened that the right hon. Member for Enfield, West (Mr. Iain Macleod) realised it—that the results that we want in the field of growth will not be attained by fiscal means at all, that we are having increasingly to realise, first, that the Budget itself plays a smaller part in the whole range of fiscal measures than it used to, because we have devised means of taking fiscal measures at other times of the year or in other ways; and,
  1222
  secondly, that fiscal measures are a lesser proportion of our whole armoury of instruments for dealing with the economic situation.
  In answering the Leader of the Opposition's question, "How is this to be done?", the things I shall want particularly to be commenting on will be the extent to which it can be done, by sheer increase of industrial efficiency on the part of both management and employees; by better use of such skilled labour as we have; by increasing the amount of skilled labour; by regional policy; by the linkup of taxation, prices and incomes policy and incentives; and by the process of economic planning. Those are the matters to which I shall now invite the Committee's attention.
  Perhaps before embarking on that I should make a comment or two on what the right hon. Member for Enfield, West has just said. He said that my right hon. Friend the Chancellor of the Exchequer had put forward so few proposals that the Committee must discuss the proposals of Her Majesty's Opposition. They were limited in number in his own speech. We then learned that we are apparently to regard an article in the Financial Times as having been, as it were, read into the record for the purposes of the debate in this Committee.
  I read that article. I noticed, first, some gaps in it. Where was the provision made in public expenditure to finance a number of extremely expensive aircraft programmes against the cancellation of which the Opposition have protested? Where was the provision to provide for an army on the Continent of Europe as large as that of any other Power, which the party opposite, through its defence spokesman, advocates? These were serious gaps. Perhaps the right hon. Gentleman was not aware of what his colleagues have done and proposed in these fields. It certainly left no trace on his article.
  The article is also subject to the difficulty that the right hon. Gentleman had supposed that by doing what he labelled "consolidating the regulator" he had equipped himself with £150 million extra revenue, whereas, in fact, he had merely left it as it was; so that his Budget, which he intended to be reflationary to the extent of £50 million, would have been reflationary to the tune of £200 million.

  1223
  I do not think that the Committee will be very well advised to pursue the proposals of Her Majesty's Opposition, if these are they.
  The rest of the article—there was a hint of it at the end of the right hon. Gentleman's speech—in the talk about incentives, selective payments, and so on, was a plea for a shift of the burden of taxation by and large in a manner which would hit poorer people and advantage those who were better off. This may be the avowed policy of the hon. Members opposite, but, if so, there are two requirements. The first is that they state it without any dodging or qualifications. The second—perhaps they had better to do this before stating it too precisely—is that they weigh up what the effect of this policy might be when we are having to look at incomes and incomes policy in the way we have to at present.
  When the party opposite has finished messing round with the social services and putting everybody who is not so poor that he is actually on National Assistance or so rich that he is really well off, in a worse position, do hon. Members opposite suppose that men will not pay any attention to that fact when they are arguing about what wage they ought to be paid and what wage they need to bring their families up on? This is one of the nostrums of the party opposite, put out without thought and without consideration of the kind of society in which we are living today.
  I want to turn from these proposals, if I may so call them, to the things with which my Department is specially concerned, the items of policy that are designed to promote growth. We know what the underlying position is, that frequently in the past, ever since the end of the last war at least we have found that attempts to get sustained growth have been checked by balance of payments difficulties. We have asked ourselves time and time again: how can this chain be broken?
  To some extent this restraint can be removed if we are all of us careful about prices and about every form of income. The restraint can to some extent be removed if we devote our efforts towards greater efficiency, particularly in industries which contribute to exports or
  1224
  which result in the saving of imports. Above all, we can break this balance of payments restraint on growth if we can increase the figure to which my right hon. Friend referred and which was really the basic figure in productivity.
  If we allow balance of payments considerations to restrict growth, we shall be faced, as my right hon. Friend warned us, with a continuation of unemployment at a level we should not be prepared to tolerate. If we merely attempt to increase the actual amount of growth, without bothering about the underlying productivity, that can be done for a time. The balance of payments consideration can be neglected for a time It cannot be so neglected for long, and that turns us up in violent difficulty.
  Our real task—this is something to which economic argument must repeatedly return—is an actual increase in productivity, or, to put it in its simplest terms, to ensure that a week's or an hour's effort goes further in the satisfaction of human wants than it did before if this is to be done, it must be looked at at several different levels—at the level of the individual firm, the particular industry, the industrial world as a whole, and in the field of Government action.
  I want to begin by referring to the pursuit of efficiency in the individual firm, because that in the last resort is where it really occurs. All the other things—action by the Government, advice given in an industry as a whole, or the general climate of business and industrial opinion—are important only in so far as they affect the individual behaviour of management and employees in the firm in question.
  For this reason, I want to begin deliberately by mentioning what I think can be called the success story of a particular firm. It is the Kershaw Division of the Rank Organisation, at Leeds, a firm making optical instruments, three-fifths of its production being for export. By taking advice and acting on it, and by applying quality and reliability methods, it has in a comparatively short period been able to reduce its prices by one-seventh and expects to make a further reduction of about 25 per cent. during the next six months. I mention that one example—it is one of many that I could put before the Committee.
  Mr. John Biffen: I am sure that the Committee is interested in the case quoted by the right hon. Gentleman. Could he tell us, as a result of the application of these new techniques, what kind of return on capital this company is now earning, so that we may judge what the Government mean by a fair return?
  Mr. Stewart: I cannot give that figure offhand, but I do not think that the hon. Member has taken the point. This firm has managed to produce the same amount of worth at a lesser cost. Consequently, it can reduce prices', and, since it is an export firm, reducing prices means that its products will be able to compete with Japanese and American products in a way that would not have been possible before. This means an advantage not only to the firm and its employees, but, by the beneficial effect on the balance of payments, it is contributing to building that foundation on which the whole increase of productivity proceeds. This is one of a great many examples that I could put before the Committee.
  The important thing is to notice that, first of all, this increase in productivity ha: not been gained by toil and drudgery, but by skill and forethought, and by receptivity to new ideas. It is sometimes believed, when people hear exhortations to be more productive, that they are being told that they are lazy and are not sweating enough. That is not the point at all. These results are achieved not by drudgery, but by skill and forethought. Our motto for the future ought to be "less drudgery and more work".
  Sir Cyril Osborne: If the Minister has a secret by which we can improve our efficiency I am sure that many businessmen would like to hear from him. In this special case, did it involve a great outlay in new machinery and, if so, how much did it cost?
  Mr. Stewart: No, it did not involve a great outlay on machinery. It was obtained very largely by the pursuit of what are called quality and reliability methods, which, as the hon. Member knows, would not involve a great outlay on machinery. I am glad to see that there is so much enthusiasm for information of this kind, because much more of it can be obtained in my Department's magazine Upswing, about the publication of which some hon. Members opposite
  1226
  were, a little while ago, bitterly objecting.
  There is a great deal of evidence of this kind throughout the country and sometimes I think that if some of the money that has been applied to finding ways of not paying one's taxes had been directed to this kind of activity we should be better off. In case it may be thought that I am attacking one section of the community unduly, I will add this. We know quite well that there are groups of workpeople who engage in practices such as seeing that a man goes on being paid even when he has nothing whatever to do, and seeing that there are seven men doing work that five could do perfectly well. If all the ingenuity which went into that had been used in the manner which I have outlined, we all, including the practitioners of this kind of thing, would be better off. If we want less drudgery and more work, we also want more wit and less craftiness.
  These are examples at the level of the individual firm, but the significant thing is that these successes are often achieved by the willingness of one firm to learn from another, and by the spread of knowledge and discovery throughout an industry. This is the purpose of the bodies known as the "Little Neddies". At the National Productivity Conference, last autumn, there were frequent references to the need for inter-firm comparisons. I am glad to find that the "Little Neddy" on the chemical industry is now pursuing this very rigorously, both nationally and with American comparisons. In the "Little Neddies" for the chemical and the chemical engineering industry, there is a careful study of relations between the manufacture of a product and its user. This will make it possible for us to assess more accurately the demand the need for plant in the chemical, petroleum and gas industry.
  The "Little Neddies" have been important in bringing to the attention of Government changes in legislation desired by industry. We are for instance, in process of preparing alterations in the Restrictive Practices Act, which will at the same time crack down more vigorously on certain kinds of restrictive practice which ought to be prevented, and also remove from industry a fear of being caught in the working of the Act, which has sometimes prevented entirely

  1227
  legitimate and helpful developments in industry taking place.
  We are also arranging for industry to have better information, for example, about what kinds of machinery are imported so that we can apply ourselves more effectively to the task of making at home things which ought to be made here instead of importing them. Similarly, the proposal which was welcomed from the other side for the treatment of part-time workers under S.E.T. was also urged upon us by more than one of the "little Neddies."
  What we have done in the creation of the "Little Neddies" is not only to get an instrument through which improvements in production can spread throughout an industry, but we have also helped to create an understanding by industry of the fact that the Government are willing to listen to, and to act upon its recommendations.
  Sir Douglas Glover: If the right hon. Gentleman's party feels that way, why did it vote against out Amendments last year?
  Mr. Stewart: That point has been met and it is hardly worth wasting time on it.
  This contact between Government and industry has been apparent also in the Industrial Reorganisation Corporation. It has engaged on a list of about a dozen projects. The Committee will understand that, in view of the nature of its work, I cannot give details, except to say that it is making very good progress in the telecommunications industry, and is receiving all support from the firms concerned. I am sure that hon. Members opposite would be glad to know that, despite the fact that if they had had their way, the Corporation would not be in existence at all. Perhaps the hon. Gentleman at some subsequent time would explain why his party took that obscurantist attitude to I.R.C.
  I have spoken of the individual firm and particular industries, but there is also the climate of industry as a whole. Here the most important single factor at the moment is the level of private investment. When the right hon. Gentleman complained that there was nothing in the Budget to stimulate investment, he
  1228
  has surely not forgotten the increase in the rates of investment grants, and the arrangements, more recently announced for the speedier payments of the grants.
  This is the point that I was making at the beginning of my speech, that we do not nowadays expect to see all the measures necessarily taken in one annual block at Budget time, and at no other time. It is doubtful if that leads to good management of the economy. The fact that we made that increase in investment grants and made certain other changes indicates very clearly our attitude. The way in which we have behaved shows very clearly that the Government watch the situation and are aware of the need not to be inflexible and to apply at the appropriate moment such corrective measures as the situation may need.
  Sir Gerald Nabarro: The right hon. Gentleman talked earlier about a tolerable level of unemployment. As we have had from the Chancellor a forethought as to the level of exports, the level of production and the level of every other essential figure, may we have the right hon. Gentleman's estimate of the tolerable level of unemployment during 1967 and 1968?
  Mr. Stewart: I think that this must depend on how successful we are in the regional programmes. A figure which sounds tolerable as an average over the whole nation can be intolerable if the gap between certain regions and the nation as a whole is too wide. If it is evenly spread, we can tolerate a figure—
  Sir G. Nabarro: Answer the question.
  Mr. Stewart: I have answered it. I do not think that I can go further.
  Mr. Eric S. Heffer Mr. Eric S. Heffer (Liverpool, Walton) rose—
  Sir G. Nabarro Sir G. Nabarro rose—
  Mr. Stewart: I will not give way again.
  On the encouragement of investment, we should notice the figure of increased grant and the speedier payment and the recent increase in liquidity. But, as I have said, we have made it clear by the action taken so far that the Government is watching this situation and would be ready to take whatever steps were appropriate in dealing with the problem.

  1229
  But we cannot expect investment to arise simply from grants or action by the Government. As the right hon. Gentleman said, this is a matter of confidence, and on that there are a few things which I want to say. First, it will be clear—and no critic of the Budget disputes it—that the Budget and the measures which preceded it mark a success in defence of the £ sterling and the balance of payments. We have not now that anxiety overhanging us so as to be an obstruction to growth in the future. Secondly, industry should notice the increasing possibilities of markets overseas—the actual existence of E.F.T.A. with the industrial free Trade Area completed in it, and the possibilities of the approach to Europe.
  I know from reading an article in the Journal of the Confederation of British Industry that there are still certain anxieties voiced by them. First, they say that if the Government want the kind of confidence that leads to investment they must have a proper regard to profits. I would first reiterate what my right hon. Friend said yesterday about profits and about the unwisdom of attempting to kill the goose or to pluck it too harshly.
  Sir G. Nabarro: Hear, hear.
  Mr. Stewart: When I referred to the goose I was not referring to the hon. Member.
  But when we deal with prices and incomes policy we have to accept the position that what we do over prices and incomes policy affects wages, salary, prices, profits and dividends. We must start with the assumption that all forms of contributing to production—work, professional skill, enterprise, management and thrift—have a claim for proper consideration. The result is that an incomes policy cannot be administered on the basis of favouring one section of these to the exclusion of others. If there is any doubt about that in the mind of the C.B.I. I hope that they will take it as quite clear that the Government understand that the rewarding of enterprise and management is as important as the rewarding of any other form of human effort.
  I understand from that article, too, that another of the Confederation's anxieties is the fear that Government activity may
  1230
  be widened to the disadvantage of the private sector. My right hon. Friend pointed out yesterday that by common consent the Government have had to act in certain fields—aircraft, shipping and computers—which are new for Government action. It is long ago since J. M. Keynes wrote that in every decade or so the line between those things which Government can properly do and those which they had better leave to others needs to be redrawn. This is something which the Government have always understood, and comprehension of it is now increasingly apparent on the benches opposite. But I should like to make it clear that where the Government propose any new field of Government activity, this will be done plainly in consultation with industry in advance and not by any kind of back door. If industry have any further anxieties about this, I shall be happy to have further consultations with them.
  I think that we all accept that we live in a mixed economy, that the dividing line cannot be the same at all times, and that, as I once heard the right hon. Member for Leeds, North-East (Sir K. Joseph) say, the important point in a mixed economy is that both the public and the private parts should be run with zest.
  Mr. Michael Alison Mr. Michael Alison (Barkston Ash) rose—
  Mr. Stewart: I do not want to take too long, for many hon. Members wish to take part in the debate.
  I have spoken of efforts to increase growth at the level of the individual firm, of an industry and of the industrial climate as a whole. I want now to turn to certain fields where, in particular, Government action is required.
  This is particularly true with regard to the increase in what I suppose is one of the most valuable forms of investment—the number of really skilled men and women there are in industry and commerce, because, particularly for a nation with our industry and needs, we are still surprisingly short of what we need in this respect.
  For example, in some regions, in the skilled occupations the vacancies are twice as great as the number of unemployed people. By the end of this year

  1231
  we shall have 15,000 people in Government training centres. That is a decided advance on what was put in the check list of the National Plan when it was originally published. It represents a very rapid advance—about five times the rate of the previous Conservative Government.
  But this training is not all done in Government training centres. Much more important quantitatively is what is done in industry. It was for this reason that the Government made the advance of £2 million to the Industrial Training Boards for the training of men to a semiskilled level. The Boards also have their levies from its own very considerable resources.
  On looking into the question I found that we have to make further study of exactly where our needs lie. A short time ago my right hon. Friend the Minister of Labour and I got on to this and we are now identifying, and aiming to be able to quantify, the numbers of people at different ranges of skill that we are likely to need in years to come. This is a point to which neither the Government nor industry have given sufficient attention in the past. It is an attempt to make a forward budgeting of manpower and to see the numbers of skilled men which would be required. We are getting on to that.
  But when one speaks of retraining one must remember that this has a human problem side to it. If we want the economy to expand and grow at all, it is inescapable that during their working lives men and women should accept the idea of giving up one job and learning a new skill and occupation.
  However, one cannot expect people to do this unless one makes proper provision for them when they are not in employment. That is one of the purposes of the Redundancy Payments Act. One cannot get the necessary degree of mobility of labour unless one increases the amount of housing—of accomodation to let, which means housing provided by public authorities; and makes it easier—and my right hon. Friend the Chancellor has taken a step in this direction—for people who wish to buy houses to do so. It is, then, by a combination of effort in industry and action by the Government that we shall progressively
  1232
  be able to overcome the shortage of skilled labour which has been one of the shackles holding us back from growth.
  Sir Harmar Nicholls: Am I to take it, since I gather that the right hon. Gentleman is coming to the end of his speech, that we will not be hearing from him how he arrives at a productivity growth figure of 3 per cent.? How does that fit in with an 8½ per cent. increase in public expenditure, mentioned by the Chancellor yesterday? The right hon. Gentleman is the second Treasury Minister to speak. Are we not to get an explanation of how these figures are arrived at and reconciled?
  Mr. Stewart: The hon. Gentleman will have noted what was said by my right hon. Friend and what I have said. I hope that he will wait to hear what I have yet to say.
  To recapitulate, this would appear to be a figure that we could achieve without making a special extra effort, the need for which I am urging on the Committee. [HON. MEMBERS: "Answer."] During these months, as I have explained, with N.E.D.C., I shall be examining the whole basis on which growth can be obtained. We will probably find, for the future of the National Plan, that we should set out alternative rates of growth; one which we should, in any case, achieve, and a higher one which could be achieved by extra effort. I have explained this to the House before, and the process of consultation through which we should get to that result.
  I turn to the question of regional policy. When people speak of regional policy they have generally thought of the social case for this. They have contrasted conurbations like London and Birmingham, such magnets for jobs which looked as if they would never solve their housing and traffic problems, with parts of the country that are gradually becoming derelict as the population, particularly the younger and more vigorous, move away. That would, in itself, be a good enough case for having a regional policy.
  We should notice, however, that there is also an economic case that is an instrument for growth. It is that it is possible, if we can spread economic activity a bit more evenly over the country, to have extra growth in the sense that more people will be in work—will be producing wealth

  1233
  —without our producing the overheating of the economy that would result if one tried to do, at one and the same time in London and Birmingham, what it may be desirable to do in Scotland, Wales, or the North-East. It is for these reasons that the Government have pursued a whole range of measures to get a more even spread of economic activity.
  One hundred advance factories are included in the programmes already announced. The building and occupation of a number of them is already complete and we have exercised the industrial development certificate policy in a way that has been to the increasing advantage of the more difficult regions. We have pursued, particularly in regard to any organisation which is under the control or influence of the Government, a policy of dispersal away from crowded centres to where the work that it can provide is more needed. We have made arrangements for the preferential treatment of local authorities in the development areas. It is noticeable that during the months of increasing unemployment the rate of increase in these areas has been only two-thirds of the national average and, therefore, substantially less than that in the more fortunate areas like the South-East.
  However, the question—a fair one—asked by the right hon. Member for Enfield, West was whether the impact of recession will become apparent rather later in these regions. That is true of some, but not necessarily of all regions. It depends very much on the industrial structure of the different regions. It has generally been true that Scotland has felt the impact later, but it is not true of all regions.
  If this is a continuing problem, then the measures I have described are also continuing measures, the impact of which will become increasingly felt. From the time one starts a programme of advance factories to the time when the first one is in use is so much, but after one has reached that point the rate at which more and more come into use proceeds more rapidly.
  It is with this very point in mind that we have put before the Committee the proposal about the regional employment premium. I listened to what the right
  1234
  hon. Member for Enfield, West said on this subject, but I do not think that anybody will expect me to give, at this stage, the Government's view on this proposal. Clearly, it is the function of the Government, at this stage, to listen to the reactions, in the light of which they must make their decision. We have deliberately put this forward—as hon. Members who have read the Green Paper will note—as a proposal for discussion, and I look forward during these debates to hearing hon. Members' opinions on the proposal, some critical perhaps—but I am not sure that the right hon. Member for Enfield, West will find all that number on his own benches to agree with the rather critical attitude which he took to the proposal as a whole.
  Mr. Stanley R. McMaster: Is not the right hon. Gentleman aware that for the past eight years I have been putting forward the argument about increasing productivity? Does the present position mean that the Government are giving up all idea of mobility of labour and are replacing it with a development policy for the regions?
  Mr. Stewart: No, and a short while ago I was speaking about mobility of labour and some of the problems involved, such as housing and training. I note what the hon. Gentleman says and I appreciate that he has often put this argument forward. He must be glad that, perhaps for the first time, he is hearing it echoed back to him from the Government Front Bench.
  I suggest that firms, industry as a whole, the commercial world and the Government have before them a programme of useful and important things that can be done to promote growth. This question will then be asked: will people really have the incentive to do it? If a firm or industry learns that there are measures it could take to increase productivity, will it feel that it is worthwhile? If a group of employees learns that if they accepted certain new practices good results would follow, will they feel that it is worth while?
  It is on this point that the prices and incomes policy is relevant. There are several aspects of the prices and incomes policy and several arguments why it is necessary to have such a policy. I will

  1235
  mention, first, on this occasion, the connection between this policy and incentive. It was noticeable that even during the period of standstill a productivity agreement was reached among shipbuilders on the Clyde and was carried through, to their advantage and to that of the nation. Since then we have had the Report of the National Board for Prices and Incomes on the nature of productivity agreements, with a means by which a genuine and useful productivity agreement may be distinguished from a sham.
  We have also had increasingly the recognition that the concept of productivity goes wider than manufacturing industry. My right hon. Friend the Minister of Housing and Local Government and I recently opened a conference called by the Greater London Council on the question of how productivity can be applied to the work of local authorities.
  One useful outcome of a prices and incomes policy can be an increasing study of how individual effort can be related to individual award and how the readiness by a group of workpeople to adopt policies which lead to an increase in growth can be made of direct benefit to that group as well as to the nation as a whole.
  Another aspect of a prices and incomes policy is that it helps safeguard the balance of payments and makes growth possible. Another aspect is that, though it cannot do everything, it can do something to help the position of the lowest-paid workers. The Government's recent acceptance of the Board's recommendation about manual workers in local government is an indication of the influence which a prices and incomes policy can have in that direction.
  When we speak of productivity it must not be forgotten that, if a prices and incomes policy is to be generally acceptable, it must make provision for those whose work is not susceptible to precise productivity measurement. That is why it is my earnest hope that, when we move on in the development of our prices and incomes policy, we shall be able, as we were not able for the coming period, to state a positive norm. What is required of a prices and incomes policy is a certain amount of economic growth which will enable everyone to have some rise in his or her standard of life, and then there
  1236
  will be additions to that for certain groups who may prove their case on genuine criteria, of which a special contribution to increased productivity is one.
  If the nation fails to get a successful prices and incomes policy, we shall not only again endanger the balance of payments but set back the good progress now being made towards getting everyone to see that increased productivity is in their interest, that the national interest is not some vague abstraction, but that it is their interest as well as other people's I look forward to the time when we can say that we have a successful prices and incomes policy worked by wholly voluntary means. As the Committee knows, we have to consider by what rates or stages we proceed from the present admittedly harsh statutory powers to a fully voluntary policy, and that is something on which I shall be making a statement to the House before long.
  For the purposes of this debate, what cannot be disputed is the vital necessity of making the prices and incomes policy a success. Whenever it is claimed by any group of people, be they management or employees, that they can work it successfully on a purely voluntary basis, they take on themselves a considerable responsibility. If it does not work voluntarily, it can throw away everything which has been gained by the sacrifices which we have made since last July, it can upset all our prospects of growth, it can threaten the employment position, and the results of these evils would by no means necessarily fall on those whose irresponsiblity was the cause of them. Those are matters which we have to weigh up when we talk of a prices and incomes policy.
  Perhaps I might refer again to the right hon. Gentleman's article in the Financial Times. One of his proposals was to save several million pounds by abolishing the Land Commission. The party opposite did enough injury to the country by letting the land racket loose when they repealed the 1947 Act. Right hon. and hon. Gentlemen opposite all know that, and the right hon. Member for Leeds, North-East (Sir K. Joseph) actually got as far as saying, in their last years of office, that they ought to do something about it. I can well remember the angry growls which arose on the benches round him when he said it.

  1237
  Are they really proposing at the present time, when we are obliged to say that everyone must look very narrowly at whether his claim to increased income is justified, that we should do something which will enable people to get large chunks of money for doing nothing? If there is one essential in a prices and incomes policy, it is that it should be accompanied by saying that people shall not get gains for doing nothing. It is very hard to tell a man who is working that he ought not to have more when he asks for it if he can see people getting advantages for doing nothing. That is something which the party opposite has not considered.
  Anyone who has to administer a prices and incomes policy is bound to be represented as a person who always has to say, "No". I think that it was Goethe who called Mephistopheles "the spirit that never denies". But that necessity is there at the moment. It is not an invention of mine, of the D.E.A., nor of the Government. It is the child of fact and necessity. The more ready that we are to say "No" when it is necessary, the speedier will come the time when we are able to say "Yes" and when we are able to see our prices and incomes policy as an instrument for the proper sharing out of the growth which is within our hands.
  I have tried to set out the steps which need to be taken and which can be taken if we apply ourselves to them and if we keep a sense of proportion about the rewards which can be earned by them. However, keeping a sense of proportion involves the concept of economic planning, and I was describing just now in response to an intervention how we propose to deal with the reconstruction of the National Plan.
  Of the need for planning, among informed people there is no doubt at all. There is no doubt about its necessity to enable the Government to see how their part of the economy fits into the whole, its necessity to enable industries to see both their opportunities and their tasks, and its necessity to be able to set out to all a credible and genuine incentive.
  When, during the course of this year, we are able to complete the process of setting out the National Plan, we shall be able to say to the nation as a whole that here is a possible course which, if
  1238
  we make the necessary effort, can give us the increase of wealth, and, by a proper prices and incomes policy, we can see that that wealth is reasonably shared. But if everyone is to say that he will not play his part until someone else does it first, or unless he can snatch an unfair share for himself, we shall not make progress. I believe that, by a combination and knitting together in the National Plan of the measures which I have been outlining, it is well within the capacity of the country to make not merely the growth which my right hon. Friend the Chancellor described first, but the greater rate of growth which he foreshadowed.
  In my speech, I have been obliged to deal almost entirely with material matters, incentives and personal rewards. There is more to it than that. When we speak of growth, we are speaking not only of the hope of each man and family to raise their individual standard of life. We are speaking of the aspirations of all to provide the country with social services of which it can be proud and of the desire of us all to see the country able to play its proper part in the world, both in helping to keep the peace and in giving its proper share of aid to the less fortunate sections of mankind. That is what material growth means.
  It is not a concept to be despised, and when we speak about incentives it would be unrealistic to suppose that people act without any regard for personal gain. It would also be a misreading of human nature to believe that people act from that motive only, or that that motive only can bring out their greatest efforts. It is true, I think, that the greatest moments in the history of nations have occurred when the citizens of a nation have been moved by something more than their individual or family concern—with the reputation and standing of their nation as a whole.
  To that extent it is that kind of challenge that we now meet. It is not a challenge which calls for the fierce and ruthless qualities which a nation needs when it is meeting an aggressor. It calls not only for the qualities of tenacity of purpose and of thoroughness in which our nation has never been lacking, but for another in which I think we have yet something to learn, a capacity to accept and to act upon new ideas, and the need

  1239
  for this runs through every level of society.
  If we can exercise these qualities, the prize of material growth, with all that it means, both in comfort and in national dignity and honour, is before us, and is capable of being achieved.
  5.1 p.m.
  Mr. John Boyd-Carpenter: It is well known that there is hostility in Whitehall and competition between the Department of Economic Affairs and the Treasury. In this debate, that competition has taken a singular form, that of briefing their Ministers in such a way as to set going a competition to see which of them can speak longest and say least. On length, the Chancellor, I think, wins, but on paucity of content I think that the right hon. Gentleman the First Secretary has a very creditable lead.
  There was one matter on which I think the right hon. Gentleman really could have helped the Committee. He was asked quite firmly by my right hon. Friend what was the basis for the calculation that there would be economic growth this year at the rate of 3 per cent. If there is anybody who should be in a position to tell us what it is, if there is a real calculation to sustain this figure—it should surely be the right hon. Gentleman, the head of the Department which, as I understand was expressly set up for the purpose of fostering economic growth—though it is perhaps rather more than a coincidence that since the initiation of that Department there has not been any economic growth.
  It really is basic to the Chancellor's Budget statement that there should be a growth rate of 3 per cent. The Chancellor's argument about the very heavy level of public expenditure which he agreed he was accepting this year depends for its intellectual validity on this 3 per cent. being a real figure. If it is a real figure, based on serious calculations inside the Department, why cannot this Committee be told the factors and the calculations on which this 3 per cent. figure is arrived at? If this is not done, it simply will not carry credibility outside, and if it does not carry credibility outside the whole structure of the Chancellor's Budget will be seen to collapse.
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  I agree with one thing that the First Secretary appeared to be indicating, and that is that this Budget really offers nothing to help that process of improved productivity, and the process of economic growth about which he was trying to talk, and for that reason the First Secretary, very properly, hardly referred to the Budget at all. The right hon. Gentleman appears to accept the point which I shall develop in a moment—and this is the real criticism of the Budget—that it does nothing in that direction.
  If it contained measures so designed, no doubt the First Secretary would have related his arguments to them, and the fact that so skilled a debater as the right hon. Gentleman—and I have debated with him for many years now, both here and in what we might call for this purpose another place—could not fasten any part of the Budget on to his argument about productivity and growth shows that there is general acceptance that the Chancellor has made no contribution in that direction at all.
  What the First Secretary does not appreciate is that our criticism goes further. It is a criticism of what the Chancellor has not done, the criticism of allowing a growth of public expenditure at this level, and the maintenance of very high levels of taxation, both of which, in my view, are serious handicaps to economic growth and to the efficiency and productivity about which the First Secretary talked at some length.
  The right hon. Gentleman threw a gibe at certain industries and those in charge of them when he said that if only the ingenuity devoted to questions of taxation were devoted to the problems of production we should get along better. There is, of course, a great deal of force in that, but does not he see that it is the existence of excessive levels of taxation on industry and on persons which inevitably involves responsible people giving up far more of their time to considering the taxation consequences of what they do than it is in the national interest that they should give? If people are placed in a situation in which the taxation consequences of what they do may be more important to those whom they serve, their shareholders, than even an increase in productivity, it is inevitable that such attention should be given to them.

  1241
  What the right hon. Gentleman said is really making the point that I want to make, that industry and commerce are carrying an extremely high level of taxation, both personal and on industry, and that it is because of this that we are facing difficulties in competing with the industries and individuals of other lands who carry less of a load.
  The right hon. Gentleman talked about stimulating investment. The right hon. Gentleman and his colleagues must be desperately worried about the forecast for the level of private industrial investment during the coming year. But does not the right hon. Gentleman realise that far more important to those who make the decisions about industrial investment than the precise quantum of the grants they receive, or whether they get them three months earlier or later, is the question whether, if they make that investment and go forward with that enterprise, they will make a satisfactory profit and be allowed to retain a fair share of it?
  No amount of fiddling about with grants, no amount of encouragement, still less of exhortation, will get industrial investment going properly ahead as hon. Members on both sides are desperately anxious to see it do until those who have to make these decisions can see a clear road forward for the chance, not the certainty, of a profit, and the chance of keeping a fair share of it.
  Let the right hon. Gentleman recall that sometimes these enterprises go wrong. If they go wrong, the industry and its shareholders carry the whole loss. If he weights the scale against new initiatives by saying, "If you lose, it is your loss, but if you gain it is precious little gain for you", he will create a climate hostile to initiative and to enterprise. I believe this to be—and in a few moments I propose to say a word or two about this—the great weakness of this Budget, and, at the same time, to be the basic weakness of our economic position and the explanation of the stagnation with which we are faced.
  Before I do this I can only express regret that for all his admirable generalisations about prices and incomes, the First Secretary has not yet told us what he will do in legislative form. He made a statement before Easter and said that
  1242
  a further statement on what powers he proposed to take would be coming. It has not come today. He must realise that the fact that this is left uncertain even now, when the Budget statement has been made, is adding to the uncertainty of those who have to make decisions on both sides of industry. I have hoped that instead of the admirable generalisations that he gave us and the sentiments that he quoted he would tell us what the Government intend for a period not very far ahead—beginning in August.
  In his Budget speech the Chancellor said that this year was an "off year". How right he was! It certainly was for him. All this jolly nautical stuff about "steady as she goes" is a little dangerous if the ship happens to be on the wrong course and headed for the Seven Stones. In one sense I thought that the right hon. Gentleman was not quite sure on which side of the "Scillies" he was.
  The right hon. Gentleman dealt very sketchily with one immensely serious problem, namely, the rise in public expenditure against the background of the small rise, which he forecast—and for which we have had no evidence whatsoever this afternoon—of a 3 per cent. growth rate. The Committee will realise that to allow public expenditure to go ahead in this way, quite out of line with the growth of the national economy, is a new departure. It was the essence of the National Plan—rest its soul!—that these two should be brought together. Yet the increased rate of public expenditure that we see today is roughly in line with that contemplated in the National Plan, which was based on a growth rate of 3·8 per cent.
  Even if the right hon. Gentleman achieves this misty 3 per cent.—this un-backed assertion of 3 per cent.—there is a great gap between that and what can reasonably sustain this expenditure. I ask the Committee to recall the right hon. Gentleman's own statement in Cardiff, on 14th October, 1964, that
  "The whole basis of our case is that increased social expenditure will be financed out of the growing expansion of British industry."
  We asked then, and some people have asked today, what happens if there is not a growing expansion of industry.
  The right hon. Gentleman produced a very interesting argument yesterday. He

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  obviously realised the departure involved in the policy he was undertaking. He said that this increase was allowable this year because of the low level of private investment. I remind the Committee what he said yesterday:
  "First, public expenditure, notably public investment, will still rise rapidly this year. In our present circumstances I do not regard this as a cause for alarm. It is quite justifiable that during a period when private investment is declining public investment should be allowed to advance quite rapidly, so expanding the infrastructure of society and raising the collective standard of living. But, of course, the corollary of this proposition is that when private investments recovers there should be enough room for it."—[OFFICIAL REPORT, 11th April, 1967; Vol. 744, c. 990.]
  That sounds suspiciously like the observations of academic economists who proceed on the assumption that public expenditure can be turned off like a tap. The Chief Secretary will perhaps not dispute that those who have had experience of dealing with problems of public expenditure know that this is not so, and that if we want to achieve a reduction in the rate of increase of public expenditure—and no more than that—we have to take steps to bring it about years in advance. These public expenditure programmes have a momentum of their own.
  Let the Committee think of the point in practical terms. We cannot half-build a hospital and then decide that, as private investment is rising, we will leave it unfinished. We cannot grant a social security benefit and then suddenly reverse it because we need room in the economy for more private investment. Unless the Government, this year, attack the rise in public expenditure—which they are not doing—it is hopeless to expect that they will be able to cut it back sufficiently when and if, as we hope, private investment begins to rise.
  Mr. Heffer: Will the right hon. Gentleman explain how we can have the programme of your party, which calls—
  Mr. T. L. Iremonger: On a point of order. You have no programme or party, Mr. Probert.
  Mr. Heffer: If the hon. Member wants me to keep strictly to the unnecessary, rather out-dated and silly idea of calling hon. Members "hon. Members" on every
  1244
  occasion, perhaps the right hon. Gentleman will explain how the party to which he belongs can call for more roads, more schools, and greater expenditure in many directions and, at the same time, argue for cuts in public expenditure?
  Mr. Boyd-Carpenter: I shall be happy to explain that to the hon. Member, but at the moment I am dealing with the Chancellor's observations, and I do not propose to be diverted from them. I remind the hon. Member of what I have just quoted.
  The Chancellor has said that when private investment begins to recover the corollary of allowing public expenditure to go ahead this year is that it will have then to be cut back. I do not think that the hon. Member differs very much from me in thinking that unless this problem is tackled now and the Chancellor reverses his decision to allow a large increase in public expenditure this year he will not be able to do what he says will be necessary in those circumstances. I challenge anybody who has dealt with problems of public expenditure to dispute that.
  This leads us to a position in which, once again, the economy will be overloaded. Private investment will not have freedom to expand, because public expenditure will be very high, and the Government will probably then take the further disastrous step of trying to make room in the economy for the clash between private investment and public expenditure by increases in taxation, thereby making even worse the problem to which I want to refer. I ask the Chief Secretary, when he replies, to explain to the Committee and to his hon. Friend the Member for Liverpool, Walton (Mr. Heffer) how it is proposed to carry out the Chancellor's undertaking when private investment begins to increase.
  I want to direct myself to what seems to me to be the centre of our troubles, the reason for our slugguish private investment and the lack of zip and vigour in the economy. It is undoubtedly the high level of taxation, and especially direct taxation. The surcharge on Surtax, introduced last year and now, mercifully, to be dropped, was a mistake. It must have made things worse rather than better. Apart from that, it is useful to compare the rates of direct taxation in this country—especially in the higher

  1245
  levels of earnings—with those ruling in the countries of many of our principal competitors.
  With this object in view I put a Question to the Chancellor on 7th March asking him to set out—and he was good enough to do so in a table—how much of his income above certain high levels—£5,000, £8,500, £10,000 and £15,000—would be retained by a married man with two children in this country as compared with a married man with two children in the countries of our main competitors. I invite the Committee's attention to the answer.
  Up to about the £5,000 a year level, on the whole we are running fairly level with other countries and the man to whom I refer is rather better off than the man in Japan. But once one gets above that level, once one gets to the £8,500 a year level, a level not wholly unfamiliar to right hon. Gentlemen on the Treasury Bench—they would be the last people to say that it was an excessive salary for anybody to have, and I agree with them—it becomes very clear how heavily penalised is the Englishman. Of the income above that he keeps 43·3 per cent. as against 47·3 per cent. in America and 71·2 per cent. in France.
  I should say, in fairness, that at that stage the Japanese is still worse off. But when one reaches the highest figure which I have mentioned, £15,000 a year, the Englishman gets 16·25 per cent. of the excess, whereas the American gets more than twice as much and even the Japanese gets nearly twice as much. The Frenchman and the West German get nearly three times as much.
  That surely is the explanation of so much of the brain drain which has been worrying people. There was an extremely good and succinct letter in The Times the other day which simply said that if we took from the high earner a large proportion of his earnings and gave it to the low earner, two things happened—high earners went and low earners came. To support that suggestion I call in aid Professor Titmuss. I do not always agree with Professor Titmuss, who is probably best known as the spirit guide to the Lord President of the Council. He made a most interesting speech the other day to the British National Conference on Social Welfare.
  1246
  I quote from The Times of Tuesday:
  "After all, what could social workers be expected to do about 100,000 doctors, scientists and engineers which, Professor Titmuss told us, the United States had absorbed, and to some extent deliberately recruited since 1949?
  The Americans would, he said, have saved some 4,000 million dollars (£1,400 million) by not having to educate and train, or train fully, this vast quantity of human capital. They have spent more on consumption goods, less on public services. They had taxed themselves more lightly while imposing heavier taxation on poorer countries."
  Professor Titmuss was arguing this as an attack on what the wicked Americans were doing, but the Committee will see the moral that this is a clear indication that trained intellects are being lost by this country to countries which offer to that trained intellect a greater opportunity to retain a fair proportion of its earnings.
  One could argue the social case for taxing those with high earnings. There is plainly a strong case up to a certain level, but in a free world, or even in a free society, no matter what Professor Titmuss may say, people are entitled to go to places where they think that they can get the return for their abilities which those abilities can command. A country which in that respect gets out of line with other countries is greatly disadvantaging itself, and the problem will become much more acute if we go into Europe.
  Ministers tell us that they have good intentions and even that there may be good prospects of going into the European Economic Community. But under the Treaty of Rome we shall then have a system in which there is free movement of capital and individuals. Some Minister must tell us what is being done to reconcile our levels of taxation upon earnings with those in countries with whom we shall be co-operating. If we are in Europe and a man can take himself and his business to another part of the Community where he can get a much higher share of what he and that business can earn, it is perfectly clear in the light of what has happened already—according to Professor Titmuss and according to our own observations—that there will be a tremendous flow of both capital and brains from this country to other parts of the Community.
  If the Government are sincere in their alleged desire to take us into Europe—

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  and I have considerable doubts about the Prime Minister's intentions in this respect—they must face up to this problem—that no country in the Community can possibly sustain widely different levels of taxation on any level of income or any particular business activity, because, granted the condition of free movement of labour and capital, there will inevitably be a tremendous outflow. This is the kind of problem which will be set if the Government are serious about going into the European Economic Community.
  I return to the point which I want to leave with the Committee. The central cause of our stagnation and of our failure to grow, all the symptoms of which the First Secretary gave us so many details today, occur because in a free enterprise society there is no substitute for a man's desire to keep for himself a reasonable proportion of what he earns, and the desire of companies to do the same. It is, of course, a matter of infinitely delicate judgment what is the point beyond which it is not safe to go.
  I concede that it varies from time to time. But all the evidence now is that we have gone too far in this direction. As my right hon. Friend the Leader of the Opposition said yesterday, the Chancellor of the Exchequer has missed an opportunity to give a stimulus and incentive by reducing the levels of taxation upon earnings and upon profits. In this way he could have given a stimulus to the economy; and he has proposed no alternative or substitute method.
  It is not surprising that the Govern-men have fallen into the same difficulties as previous Socialist Governments. They do not understand, and they do not really like, a free enterprise, private enterprise, economy. They accept that there must be a mixed economy, but they do not accept that that mixed economy requires the dynamic of the pursuit of individual profit to keep it going. That is why with every Socialist Government the country has been in the same position. I can only conclude by slightly altering some words of Goldsmith:
  "Ill fares the land, to hastening ills a prey, Where men accumulate, and wealth decays."
  5.29 p.m.
  Mr. Austen Albu: In his capacity as an ex-Chief Secretary of the
  1248
  Treasury, the right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) has failed to raise the controversial temper of the Committee, although he tried his best in the last few moments of his speech. I shall refer to the core of his argument later, but I must say that I am slightly oppressed by the fog of equanimity in which the Chancellor's statement and Budget have been received—equanimity and almost unanimity. I must to some extent be more controversial, perhaps performing slightly the rôle of the small boy in the tale about the emperor's clothes.
  As I have recently left the Department of Economic Affairs, the Department which the Opposition so frequently criticise, I should like to say a few words about it. I found it a most stimulating Department, largely due to the energies and drive of my right hon. Friend the present Foreign Secretary in collecting around him an absolutely brilliant team. He forged it—it has been forged in the last year or two—into a powerful intellectual instrument for advice on economic policy. It has the great advantage, unique to a Government Department in our history except in wartime, of a mixed staff of civil servants, of senior industrialists and academic economists and economists from other walks of life.
  But although the irregulars, as they have come to be called—the economists from outside—make a valuable and stimulating contribution, the state of economic science is such that those economists with experience of managing the economy must continue to play the major part. In the Department there was the greatest freedom of discussion, and I hope that this continues to be so.
  The views which I shall express were developed in the Department and are well known to my right hon. Friend. But it is not the Department of Economic Affairs any more than the Treasury which determines major economic policy. My right hon. Friend the Prime Minister said in a recent television interview that when it came to questions of major strategic decisions—major long-term financial decisions and even short-term ones, of course, because one cannot very much concerned, and it was, of separate the long from the short—he was course, a Cabinet responsibility.

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  Within the limits of constraint on policy in which he has to operate, the Chancellor is doing all that is possible, and I think that this is recognised on both sides of the Committee. The nature of those constraints was brilliantly described by Mr. Peter Jay, in the first number of The Times Business News, and also, I thought, with a good deal of filial sympathy.
  This policy is, of course, orthodox—not necessarily the worse for that—and owes a great deal to the views of Professor Paish. It is not necessarily wrong to take those views into account because we could not have continued the relationship between the level of unemployment and the level of vacancies which held during 1965 and the first half of 1966.
  The Chancellor has now given us some information on how he sees the immediate future. I do not see why right hon. and hon. Gentlemen opposite or, for that matter, the public prints, should make such a mystery of this. There is none. At the moment, at least four independent short- or medium-term forecasts are published, three of them quarterly, and it is no secret that they do not greatly differ, at least within the margins of error, either from one another or from official forecasts. They are probably slightly more optimistic than the latter. I do not believe that official forecasts today can be so different from the careful forecasts of these bodies.
  What picture do they foresee? My right hon. Friend foresaw a rate of growth equal to the rate of growth of potential productive capacity of 3 per cent. I do not believe that he meant for this year—[HON. MEMBERS: "Oh."] It does not say so. I have checked this in HANSARD. I think that it is probably from the end of this year or from now to 1970. I do not know, because my right hon. Friend has not said so. Anyway, I am certain that we shall not get a rate of growth of 3 per cent. this year—
  Mr. Patrick Jenkin: Would the hon. Gentleman not agree that what the Chancellor said was that
  "… total output will rise by close to 3 per cent. between the end of 1966 and the end of 1967."?—[OFFICIAL REPORT, 11th April, 1967; Vol. 744, c. 993.]
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  Does not the hon. Gentleman agree that this is equivalent probably to a rise in output over the year as a whole of ½ per cent. over the previous year?
  Mr. Albu: I think more than that, but probably not very much. When this growth begins—and I believe that 3 per cent. is optimistic—the resultant increase in personal consumption that will be possible will be less than 2 per cent. a year. What is more, there will be a very slow revival of private investment. According to the National Institute of Economic and Social Research Review, the rise will be to a level of about 12 per cent. above that of 1964 by 1970—not a very substantial rise over that period.
  Of course, apart from the effect which this has on the underlying rate of increase of productive potential, which the Chancellor is counting on as being 3 per cent. this has a very serious effect on innovation and the structural change which is so important to us to maintain our competitive position—the change from one industry to another, the growth of some and the decline of others. This cannot easily take place without a continuing high level of investment.
  Moreover, if productive potential does rise, unemployment will rise unless some way of reflation is found. If it does not rise, unemployment will stay at its present level, in which case we must expect an increasing unwillingness by the trade unions to co-operate in increasing productivity. This is a very depressing outlook, which will put us even further behind other industrial nations. The Prime Minister has said that there is no easy way out, through an increase of personal consumption—the candyfloss society—or even through an increase in the social services. This would only lead, I think we all agree, to a further balance of payments crisis.
  The Prime Minister has said that the reflation must be led by export and investment. Are there any alternatives to such a policy? I preclude the use, advocated by some of my hon. Friends, of a great extension of controls. Economic theory is not sufficiently precise to allow any detailed control over more than one or two parts of the economy. Anyone who has recently been to Eastern Europe knows how rapidly it is moving away from controls to a market economy. There is nothing frightening about the

  1251
  phrase "market economy". It is merely an explanation of how people behave psychologically in the face of deterrents or incentives to spend or not to spend and to save or not to save. We cannot control the way people behave.
  Therefore, the number of physical controls which can be applied is very small. I believe that, for example, it is impossible to control prices—except for one or two—or profits. Certainly, they cannot be controlled in an economy with the freedom necessary for expansion—
  Mr. Biffen Mr. Biffen rose—
  Mr. Albu: Perhaps I might continue. This is not an easy speech.
  As regards incentives to investment in industry, whatever the value of tax allowances and grants, and so forth, may be—businessmen always want taxation reduced, but I am talking of incentives intended to produce certain increases in investment, and so forth—there is little evidence that they have much effect compared with the level of profitable demand. In 1963, the right hon. Member for Barnet (Mr. Maudling) increased investment and depreciation allowances and the Opposition have frequently claimed since we have been in power that this led to the subsequent boom. If that is true, it also led, of course, to the balance of payments crisis in 1964.
  The point is, did it in fact lead to that boom? No, it did not. By far the greater effect was on home demand created by reductions of personal taxation, plus the substantial increase in public investment. Out of the total tax reduction of that year, estimated at £269 million in the first year, capital allowances were estimated to come to £11 million. They were estimated to rise to £130 million in 1966–67. It was the rise in demand, in this case in home demand, which caused the boom and the subsequent rise in investment, as well as the troubles from which we have suffered ever since.
  Even in regional policy, I believe that the much maligned policies of the Board of Trade have been by far the most effective—the I.D.C. policy, the loans and the advance factories. Nevertheless, I welcome the proposals on the selective employment premium which have been
  1252
  tabled for discussion by my right hon. Friends but I hope that, in addition to our discussion and that in industry and throughout the country, full surveys will be undertaken, perhaps by the Government's own Social Survey, to try to test the validity of the hypothesis on which this proposal is based. To come back to my original point, economics is not an exact science and hypotheses are not proven theories.
  There are two other ways in which it is often suggested that we could resolve our dilemma. One is the reduction of Government expenditure—at home, mainly proposed by the Opposition, and overseas, mainly proposed by my hon. Friends on the Government benches. I agree with the importance of a rapid and substantial reduction of defence expenditure, both for its effect on home public expenditure and also for its effect on overseas expenditure.
  I also believe in a very selective policy, which, I believe, would be accepted in the City, on overseas investment. The case for this has been completely made by the Reddaway Report. The right hon. Member for Enfield, West (Mr. Iain Macleod) took this altogether too easily. I do not think that he has studied the Report properly or realised its implications which are for a selective policy on overseas investment. I believe in both these things—not merely for one year, but for a very long time—until we have got this thing right.
  If those things were done they would reduce the burden which our exports have to carry. They would, however, bring no immediate relief. If the long term is connected through the medium with the short term, we must try to do something much more quickly. Nor do I believe that by themselves those measures would produce a permanent solution.
  A proposal which is frequently made, generally by some of my hon. Friends, is for import restrictions or quotas. Apart from the effect of this on confidence in sterling following the end of the import surcharge, I believe that the general effect would be harmful. It would protect inefficient industries, it would involve further substantial administrative costs, it would be a difficult exercise, it would increase the rigidity of the economy and it would invite retaliatory action abroad

  1253
  the result of which is impossible to estimate.
  When I was in the Department, I tried to see whether we could not do a theory of games exercise on this problem such as is done at the Rand Institute in the U.S.A. The question would be, if A takes a certain course, what is the likely response of B? I was told that it would be impossible to make any sort of calculation to ascertain what effect the imposition of controls on imports would have on those with whom we trade overseas. In any event, if such restrictions were imposed, they could be for only a very short time.
  We face in the end the situation, which we all understand, that however much by increased competitiveness we may to some extent reduce our imports, we must have a far greater rate of increase of exports. The truth is that our proportion of world trade in manufactured goods is still declining, and still at the rate at which it has been declining for the last several years.
  This year we face a serious situation, mainly because one of the areas in which our exports have been rapidly increasing—Germany—now has its own economic difficulties, with the result that our balance of trade with Germany has been reversed. Presumably, exports could be made more competitive by a successful and rigid prices and incomes policy. Although I am in favour of the Government having reserve powers in this matter, nevertheless such a policy must be essentially voluntary. The most that we can hope to do with it is to restrain the annual rate of inflation to a more tolerable level. We cannot do more than that.
  Moreover—and here I come to some extent to the arguments of the right hon. Member for Kingston-upon-Thames—we lack any strategy for incomes, taxes and social benefits taken together. I believe that some work is being done on this. If, however, it is not already being done, I beg my right hon. Friends to make a thorough examination of all these matters, not separately, but taken together, as they must be. Within this I include the question of incentives for effort, to which the right hon. Gentleman referred. In passing, I think that it was a mistake to introduce so many tax changes before such a strategy had been worked out.
  1254
  So far I have not been very constructive, and I now come to what may not be very popular on the Treasury Bench. I am forced to the conclusion that the only way we can achieve in any reasonable period of time an increase in the rate of our exports is by a change in the exchange rate. I believe that this is the only solution. It would not only improve the competitiveness of our exports and reduce the tendency to imports, but, even more important, it would increase the profitability of exports and, therefore, encourage manufacturers to go after exports harder.
  In a debate in the House last July, the right hon. Member for Barnet (Mr. Maudling)—obviously he was moving towards that—said that he would have preferred a floating rate for the £. At the present time, however, and given existing circumstances, I doubt whether that would have the effect that is needed. The situation is now different. We are in a deflationary situation and most people agree that a measure of reflation is needed.
  If a change in the exchange rate were made, the slack now existing in the economy would be taken up in the only way that is acceptable and the only way which would not lead in the foreseeable future to another balance of payments crisis—by profitable exports. The investment would then follow. Investment will only follow the opportunity of profit, and the only profitable demand which we can afford to increase is that of exports. The investment would follow the increased demand and in the industries which most need it.
  I see no alternative to what I am suggesting. Unless an alternative is found or such a policy is adopted, I believe that we are in for a prolonged period of slow growth. Unless people are willing to forgo all increase in personal consumption, there can be no real improvements in social services beyond the relatively small amount that a reduction in defence expenditure would temporarily provide.
  The political and social dangers of such a course are serious. Just as I believe that the Suez debacle exposed our people suddenly and without warning to our military weakness and led in the following week or two to the most nasty mood which I have known in this country for a long time, and, possibly, to the loss in

  1255
  national confidence which we have also suffered for some time, so I believe that if now the Labour Government fail to achieve what the Opposition failed to achieve, if we cannot achieve a reasonable rate of growth comparable to that of our partners among the advanced industrial nations, we shall get a serious feeling of frustration. The electors will not necessarily turn to the party opposite, but perhaps to irrational political experiments.
  Fundamentally, I believe that in spite of the decision which has undoubtedly been taken by the Government to try to get into the Common Market, we have not yet as a country faced up to our true position in the world. We are still clinging to illusions about our political and our financial power. The responsibility for the course which we are following is that of my right hon. Friends in the Cabinet and nobody else. I beg them to bestir themselves before it is too late.
  5.47 p.m.
  Sir Henry d'Avigdor-Goldsmid: The hon. Member for Edmonton (Mr. Albu) gave us a fascinating excursion along the corridors of power. I was not at all surprised, when I heard his description of what was going on in the Department of Economic Affairs, that the casualties were numerous.
  We all value the hon. Member's "promotion" to the back benches if it leads to further speeches of the same stimulating nature as we have heard from him this afternoon. It contrasts, certainly in content and interest, very favourably with those which he used to deliver from a more restricted position. Perhaps, too, now that the hon. Member has changed with his hon. Friend the Member for Manchester, Cheetham (Mr. Harold Lever), he will find that his hon. Friend's rôle has fallen on his shoulders and he will enliven some of our passages on the Finance Bill. I hope so, indeed.
  I will not follow the hon. Member on the subject of devaluation because I have something rather germane to that to say at the proper place in my speech. Unlike most other right hon. and hon. Members who have taken part in the debate, I should like to say something about the Budget, because clearly this non-subject
  1256
  did not appeal to those who have as yet spoken.
  It was very well summed up in the old joke, of which I was reminded, of the punter who, on his way to the races, scrutinises the card with very great anxiety, sees himself faced with six almost hopelessly unsolvable problems and says, "What a day this is going to be. If only I could break even, I could certainly use the money". The country today is probably feeling that it has broken even and can use the money. I do not think that the non-Budget needs very much description.
  I am rather surprised that so many people have argued that the Chancellor of the Exchequer has played safe by doing nothing. When one is walking a tight rope, it is not the course of safety to stand still. This is the special danger in which the right hon. Gentleman has placed himself. I shall elaborate that a little. The right hon. Gentleman has taken powers to extend the use of the regulator for a further year. What is the power of the regulator? It is to apply gentle pressure or release on the economy if it is required, but I very much wonder whether in terms of the figures we have in front of us it can be counted upon to do this in future.
  Let us look at the various estimates, as qualified by the 20th July increases. Purchase Tax was estimated to bring in £688 million, the out-turn has been £686 million, and it is estimated that in 1967–68 it will go up to £735 million. It is true that revenue from oil went from a previous estimated £880 million to an outturn of £887 million, and that this year it is estimated to bring in £950 million. Spirits were estimated at £672 million, the out-turn was £687 million, and the estimate for 1967–68 is £780 million. Against this, tobacco was estimated to bring in £1,030 million, but the Tobacco Duty was not raised in July for the very good reason that it was thought that at that very moment the law of diminishing returns would be in operation—as it was, because the out-turn was £1,023 million and the estimate for the current year is £1,020 million.
  Those figures suggest to me that the power of the regulator to slow down the economy further is already prejudiced, and it is possible that at the end of the

  1257
  day the Chancellor of the Exchequer may very well find himself with a regulator which is impotent to take money out of circulation, as it is intended to do.
  The right hon. Gentleman commented that he could not afford to give back last year's 10 per cent. increase because it would cost £150 million but, having looked at Table 9 in Cmd. 404, it seems to me that he is budgeting for a current surplus of £1,185 million—the biggest Budget surplus ever. Incidentally, we used to talk of Budget surpluses, but it is now preferred to conceal them as borrowing requirements. The Budget surplus of last year was £1,149 million and, as I say, the Chancellor of the Exchequer is budgeting this year for a surplus of £1,185 million. In that £1,185 million I think that there is certainly room for a reduction in the rates charged in respect of the regulator. This reduction is needed in order that the regulator may be an effective weapon in the current year, if it is required.
  I turn now to one or two matters in which I have a special interest. Yesterday, according to col. 1001 of the OFFICIAL REPORT, the Chancellor of the Exchequer said that the ceiling on bank advances of 105 per cent. of the amount outstanding in March, 1965, is to be abolished, for the very good reason that it is no longer required. The present demand for advances has fallen so much that the ceiling is no longer effective.
  The right hon. Gentleman said that the London clearing banks and Scottish banks are also subject to the special deposits machinery, and this gives the Chancellor every opportunity of controlling their activities. However, he said in respect of what we might call the smaller banks that new arrangements are required:
  "… in order to secure from them an appropriate degree of restraint in their lending."—[OFFICIAL REPORT, 11th April, 1967, Vol. 744, c. 1001.]
  I want to put on record my reasons for suggesting that these new arrangements are unnecessary.
  When I went to my office today I made inquiries as to the number of forms and returns we send to the Bank of England without referring to specific transactions. I find that we supply the Economic Intelligence Department of the Bank of England with 200 separate returns every year. Among these, we
  1258
  supply a weekly statement of sterling claims and liabilities and, also weekly, a statement of foreign currency claims and liabilities. The Economic Intelligence Department has that information every week.
  Monthly, the Economic Intelligence Department receives a very wide embracing Form A containing banking statistics. This form is divided into 15 separate heads and includes all the details of any bank's activities. There is also Form BLC 1 and 2, which are really enlargements of the weekly ELCWs and FCWs. There are also returns quarterly, which are consolidations, and go into greater detail.
  My point is that the non-clearing banks are relatively modest in size compared with the clearing banks. The Bank of England, and, through the Bank of England, the Treasury, keeps a very close eye on their activities and information is available at any time on what is going on. I put it to the Chancellor of the Exchequer—who probably knows even less than I did of how many forms are put in—that he has complete control over these establishments.
  The right hon. Gentleman should also bear in mind the remark made by my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod), that in the City the chief instruments of discipline are the eyebrows of the Governor. This is a very important matter, because the City is a close community. The people operating there depend on trusting each other. An adverse comment from the Governor is very rapidly known and very rapidly repeated, and it is something to which no one would expose himself. I make the little suggestion to the right hon. Gentleman that he might stop asking his hon. Friends in the Department to find an appropriate degree of restraint and, instead, leave it to the common sense of the small units to follow the example of the larger units—
  Sir Ronald Russell: Can my hon. Friend say how much time is used in compiling those returns? Is not that a major problem?
  Sir H. d'Avigdor-Goldsmid: I am grateful to my hon. Friend for raising that question. Frankly, I would rather

  1259
  fill in the forms and be free to act than fill in the forms and not be free to act.
  There is a technical point which is of interest to the Chief Secretary—the unification of sterling. This is a sensible step. There has been no justification in the last few years for having a separate rate for security sterling, which was the rate payable to foreign investors who wished to sell their investments. Unification will be of benefit there. However, he is rather optimistic in thinking that he will be able to impose exchange control in the Persian Gulf and Hong Kong.
  As the Financial Secretary knows, there is no form of exchange control in the Persian Gulf States and any restrictions imposed on them have to be imposed from this end. As for Hong Kong, I have no doubt that leading British banks there are entirely amenable to anything he says, but a large proportion of the business carried on there is carried on by banks which are not subject to the same discipline. I wish the Chancellor well in his attempt to impose controls there.
  The Chancellor did not refer to the Bermudas and Bahamas, which are notorious places where sterling is exchanged for dollars. Are they thought to be too rich to need the discipline of exchange control? If the right hon. Gentleman wants to go in for exchange control, he will find instruments capable of carrying it out there. I do not think he will be able to do much in Hong Kong and certainly not in the Persian Gulf.
  This has been a good year for gilt-edged. The Government have been able to issue £2,000 million in new loans, which is a very great improvement, and they have paid £1,267 million off the floating debt, but it is no coincidence that the upsurge in the gilt-edged market has come with the recovery in sterling. They are very closely linked. I ask the Financial Secretary, although I do not expect him to answer today, if he can satisfy himself as to how much of the new investment in the gilt-edged market has come from hot money from abroad.
  These are figures which are not easily arrived at but they are worth investigation, because it is notorious that it is
  1260
  easy to swap dollars for three months or six months with an interest differential of between three-quarters per cent. and 1 per cent. Therefore, it is easy for the worst kind of hot money, which is kept in dollars all the time, to find profitable employment in the gilt-edged market for the short run. This is something about which the Chancellor should be thinking very hard.
  The Chancellor ended his speech on a great nautical metaphor: "Steady as she goes". I find in the Wall Street Journal of 11th April a very important article, which has since been contradicted by the U.S. Treasury but, as it was bound to be contradicted, it is worth quoting. A very well-informed article says:
  "The United States Government appears to be making a momentous switch in its policy for defending the stability of the dollar."
  It goes on to comment that the free stocks of gold in the U.S. Treasury are down to about 3·6 thousand million dollars, whereas foreign holdings in New York were something like 30,000 million dollars. In other words, if all foreign depositors in New York asked for gold, the U.S. would no more be able to find the gold asked than we could if we were placed in a similar position.
  This warning comes simultaneously from two of the most important banks in America, the Chase Manhattan Bank and the Bank of America. These are two of the most responsible institutions of a large size and with worldwide interests. They comment that the upshot to the exhaustion of the United States gold supplies would be a world financial crisis. I do not think we can discuss the state of this nation calmly and dispassionately without taking these very grave outside matters into consideration. I am not going to make comments as to whether a cold in New York gives us double pneumonia, but it must be clear to anyone in this Committee that if we talk in terms of a world financial crisis we would be major sufferers.
  This brings me back to what I started with. That is to ask the Chancellor whether he is satisfied that he has done everything in his power in this country to face the possibility of this international crisis. He mentioned, as reported in column 977–8 of the OFFICIAL REPORT, the useful international collaboration which is leading to a substantial plan to be put

  1261
  before the I.M.F. Governors when they meet at Rio de Janeiro in September.
  I wonder, incidentally, if that venue is a very happy one, although it may be very appropriate. Rio de Janeiro is a beautiful town, perched between the South Atlantic and high mountains, but it has a shanty town which is liable to fall down on the beautiful skyscrapers. We saw how this could happen only a few months ago when there were floods of a minor nature which brought the whole life of the town to a standstill for a fortnight. There was no electricity to take the lifts up 24 floors in the skyscrapers and there was a complete cessation of water supplies.
  This, I am afraid, is all too reminiscent of the sort of world monetary situation in which we find ourselves. That is why I ask the Chancellor most sincerely whether he is satisfied that, so far as his power allows, he has everything under control here. The newspaper article to which I referred spoke of this change in U.S. policy as
  "the monetary equivalent of a nuclear deterrent."
  The late Aneurin Bevan once spoke, with a great deal of disapproval from his colleagues on the back benches, about "going into the conference chamber naked." I ask the Financial Secretary most seriously that he should satisfy himself that we do not go into that conference chamber naked in September.
  6.8 p.m.
  Mr. Alec Jones: In making my maiden speech today, Mr. Probert, I am very conscious of the fact that there are here many time-honoured customs and conventions. If I should inadvertently break any of these, I claim the indulgence of the Committee.
  I am very proud to be the representative in this House of the Rhondda, West constituency, which has been represented here by many worthy figures, such as Mabon, Will John and Iorwerth Thomas, men who earned their right to be here by the part they played in the industrial and political struggles of South Wales. There were occasions when as a result of their efforts they earned a term of imprisonment. Although I seek to emulate them in certain ways, I trust that I may be saved from the cost of a prison sentence. My immediate predecessor was
  1262
  Iorrie Thomas. Not only was he my predecessor, but he was my friend. I have been very pleased to hear high tributes paid to him from both sides of he House, and to learn of the great regard in which he was held here.
  I have heard very pleasantly of his kindness to new hon. Members. I know of his hatred of hypocrisy. I know of his tenacity and determination to fight for things in which he believed. Above all, I have been pleased to hear since coming here of how hon. and right hon. Members appreciated the long years of service which Iorrie gave to this House and to my people of Rhondda.
  Rhondda is known throughout the world for coal and for its long history of political and industrial struggles. We began in 1871 with a population of 24,000 and rose to a peak of 163,000 by 1921, and we have now slumped to less than 100,000. The rise and fall in our population reflects the rise and fall of the coal mining industry and also the industrial stability and well-being of the people of Rhondda.
  As one who was brought up with the background of colliery accident and colliery explosion—explosions have taken place even in very recent years—I would not want to see a return to the old days. But I must express the very deep feelings of the people of Rhondda in telling our own Government that we had a right to expect that there would have been a halt to pit closures until alternative employment had been provided. An important consequence of the pit closure programme was the fact that the Rhondda Borough Council in January last year lost rateable value of £23,000. While this is made up from the rate resources grant, it certainly has the effect of stultifying local initiative.
  With the end of coal as the base of our economy, we in Rhondda are taking part in a new and ofttimes more bitter struggle than that in which we took part previously, because we must now seek to create a new industrial basis upon which to build a new future for our people, and from this Government more than any other the people of Rhondda expect the greatest possible assistance. I would say in passing that we do not believe that any attempt to reduce even our political

  1263
  representation at this juncture will help us in this struggle for a new Rhondda.
  Since 1934 Rhondda has been in receipt of varying forms of Government assistance. We have been called a distressed area, a special area, a development district and now a development area—all different names to express the same essential need. While the names have been changed, it is with regret that I must say that the needs and problems of Rhondda are still acute today.
  At present there is a high level of unemployment, about 9 pr cent., which is more than twice the average for the rest of Wales and four times the national average. These figures justify the protest which the electors of Rhondda made on 9th March. If we in Rhondda were able to find that our unemployment level was as low as many hon. Members consider the national average to be high, we should be celebrating this as a tremendous victory.
  I would say on behalf of our people, as evidence of the pride of the people of Rhondda, as evidence of our industry and as evidence of our thrift and willingness to work, that three quarters of the houses in Rhondda are owner-occupied. This in itself presents a very considerable problem when people talk rather loosely about the mobility of labour. What we seek in Rhondda is not some permanent Government assistance or charity. We have had examples of that for 34 years. We seek the reality of an industrial redevelopment which will enable us to stand on our own feet and build a future for ourselves.
  I appreciate and understand many of the actions which the Government have taken. I know that many plans have been made. But I must repeat the sentiments of Oliver Twist and say that we want more; we want the improvements which have been promised to be carried out a great deal more speedily. This afternoon we were told about advance factories and the fact that 100 have been allocated. This is good. It will be welcome not only in Rhondda but throughout the country. Two factories have been allocated to Rhondda: one in September, 1965, and one in May, 1966. But at the moment the word "advance" baffles me, because not yet have two bricks been laid one on top of the other. While I appreciate the
  1264
  difficulty of acquiring sites in the Rhondda and know the tedious and protracted processes of negotiations for the acquisition of land, I urge the Government to tackle these problems with the same urge, drive and energy as were shown during the war when land was needed for the construction of airfields and other military installations, for in Rhondda this is a war, a fight for our very survival.
  We welcomed the Industrial Development Act, 1966, because it now makes available to industrialists the largest inducements of all time to build new factories inside development areas like Rhondda. But I feel that there is still a reluctance to do so. So I urge the Government not to close their eyes to the desirability of setting up Government-owned and operated factories in those areas, because if private enterprise cannot or will not bring employment to areas like Rhondda I believe that the Government should take the next logical step and embark on new public enterprises. I ask all my right hon. Friends who head Departments of the Government to examine them to see whether inside them there are developments which could take place on the lines of public enterprise.
  I should be failing in my duty to my constituents if I ignored the effects of the Selective Employment Tax on areas like Rhondda. It is obvious that there is an adverse effect on the distributive trades in many areas, but to some areas it is proving particularly crippling. The Mid-Rhondda Co-operative Society, not a very big one, already pays £5,770 in Selective Employment Tax in six months. However, today I am concerned not only with the financial aspect but with the effect of the Selective Employment Tax on employment. That small co-operative society has been forced to cut its staff by 22. The Selective Employment Tax has been referred to as an instrument for the redeployment of labour. I beg hon. Members to appreciate that in an area like Rhondda there can be no redeployment of labour because no alternative employment exists.
  I welcome on behalf of Rhondda and many other areas the Chancellor's modest steps yesterday in modifying Selective Employment Tax for certain part-time people. I was very pleased to hear the Chancellor repeat words which

  1265
  we have uttered on many occasions about unemployment:
  "As regards unemployment … the problem is basically inside the development areas".
  This is something which we have felt in South Wales. I am sure that my colleagues from the North and from Scotland all feel the same way, that inside the development areas lie the chief examples of our high levels of unemployment.
  I liked the Chancellor's statement that:
  "… the position is still not nearly good enough."—[OFFICIAL REPORT, 11th April; Vol. 744, c. 984–5.]
  If I had been speaking in some other place I would have expressed that view, but in much stronger language. As a new boy here I am reluctant today to use the language that the situation needs and justifies.
  Finally, I turn to last week's proposal for regional employment premiums inside the development areas. That has been suggested to mean a £10 million or £12 million boost for the manufacturing industries of Wales. We in the Rhondda welcome any such step, but whilst accepting the principle I urge the Government to consider that it be made even more selective than they already suggest, because there are great differences of need inside the development areas. There are great differences in the levels of unemployment and in the extent of the problems of depopulation.
  While it is true that all parts of all development areas have need, it is equally true that some have a greater need than others. I suggest that we might have different rates of the regional employment premium in the development areas, and the criteria might well be the levels of unemployment and the extent of depopulation. Even as it is, I welcome the proposal, because the premium is likely to attract new industry to the development areas and particularly to my own area of Rhondda, but if it were made more selective, it would provide extra assistance and incentive, particularly to bad black spots of unemployment such as my area now is. To me and the people of Rhondda it would fulfil those essential ideals which we have held for a long time, those Socialist ideals of, "To each according to his needs".
  6.23 p.m.
  Sir Cyril Osborne: It falls to my pleasant lot to congratulate most warmly the hon. Member for Rhondda, West (Mr. Alec Jones) on a brilliant and modest maiden speech. Over the past 60 or 70 years, the House has been greatly enriched by the fine type of South Wales coal miner who has come here, and we remember with gratitude the hon. Member's predecessor as a modest man who was well informed on both local government and national matters. The hon. Member showed signs of maintaining that high standard which we have come to expect from Welsh representatives from the coal mines.
  I agree with the hon. Member that the greatest curse of the modern age is persistent unemployment. The fact that his people are suffering 9 per cent. unemployment at present gives him every reason to use infinitely stronger language the next time that he speaks. It was a pleasure to listen to him, and I hope that he will catch the eye of the Chair many times and that I shall be here to listen to him. I again congratulate him most warmly.
  It is strange how Ministers seem to make good speeches once they leave office. The hon. Member for Edmonton (Mr. Albu) whom I am sorry not to see here now, said that there will be no increase in production in 1967. He should know for he has just come from the Department of Economic Affairs. We know that Government expenditure will rise by £700 million, and therefore one of two things must result: there must either be substantially increased taxation or corresponding inflation. Since the Chancellor of the Exchequer said that there will be no increased taxation, we must expect considerably increased inflation in the coming year. Both sides of the House should face that.
  I believe that the Chancellor's Budget, which bitterly disappointed so many of his supporters below the Gangway, deserved a better Press than it received this morning. To me, it was a Micawberish Budget, imposed upon him by the international bankers to whom he owes so much, who have rescued him before, and who will have to rescue him again. We should remember that a Chancellor of the Exchequer, like everyone else when he is a debtor, is not a free agent. It

  1267
  seems to me that the Chancellor has become a willing prisoner of the "gnomes of Zurich", in whose name he spoke yesterday and on whose behalf he seemed to speak exclusively.
  In my opinion, he rightly puts the strength of sterling as a first priority. It was not the sort of full-blooded Budget that a Socialist Party with a 100 majority in the House could reasonably have expected, but I believe that the Chancellor is no longer a full-blooded Socialist. He has been converted by the international bankers, who trust and admire him, and the financial facts of life, into a mild capitalist. In that respect, he is following the footsteps of Philip Snowden. I think that that is the key to the situation.
  In his absence, I congratulate the Chancellor on his successful handling of the narrow aspects of our financial problems. It is no mean feat for him to have contained inflation in this country to 4 per cent. in an inflating world. I have just returned from South America, where even sound businesses must pay up to 70 per cent. for temporary bank accommodation; where the bank rate is 3½ per cent. per month, or 42 per cent per annum; and where wages are adjusted every six months, at the rate of 30 per cent. per annum. But the workers are worse off, because inflation is rising at 40 per cent. per annum, and prices are always in advance of increases in wages. I believe that it is against that evil that the Chancellor is trying to protect the British worker, and he deserves the support of both sides of the House in that.
  I also believe that he is to be congratulated on his export figures; but are the additional marginal exports being sold at a profit? Are the Government-controlled agencies pushing exports, even at a loss? Any fool can give goods away, and to sell exports at a loss is a mug's game, from the point of view of both companies and the nation.
  The Chancellor is also to be congratulated on balancing the nation's books and starting to repay our international loans. But how far is our improved gold and dollar reserve due to the influx of "hot" money which, at a turn of world political events, could go away as quickly as it came? Is our financial position as good as the Chancellor makes it out to be? The nation should be told.
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  The crucial point is that it is possible, individually or nationally, to have a fat bank balance and yet have an empty stomach. It is not merely the bank balance that matters. Industrial production is far more important than inflated gold and dollar reserves. The present industrial stagnation is the true measure of the Government's failure.
  As an ordinary business man I warn the Government of the trade position as I see it. I agree that this is from my own narrow experience, but I still speak as a business man. In some trades of which I have knowledge the outlook today is worse than it has been at any time since 1951. Short-time working, unemployment, and loss of profits are bedevilling many small family businesses. Many people, workers and employers alike, are losing heart. There is a lack of confidence which I believe will grow. This is the most serious problem facing us.
  The Chancellor's gravest problem is to get the whole nation—managers and employers, as well as workers—to do a really fair and hard week's work and to be prepared to adopt and use the latest techniques for industrial production. This is the core of our problem. The Chancellor will not get that extra production from all grades in industry by taxing people to death for working harder. He must allow people to keep more of the money they earn and let them spend it in their own way. This is the way to success.
  On the other hand, I hope that the Chancellor will stick to his stern financial controls for at least another two years. He will not get and maintain honest money until he deals with the basic causes of inflation which, generally speaking, are excessive national and local government expenditure, a swollen bureaucracy, and high taxation.
  I remind the Committee of one or two important figures. National and local government expenditure in the 10 years 1955–65 increased from £6,459 million to £13,334 million. Since 1964 the Government have employed 200,000 extra civil servants. If we assume that each civil servant costs £1,000 per annum, we have been charging ourselves an extra £200 million per year since 1964 to govern ourselves. We are over-taxed because we are over-governed. The one cannot be altered unless the other is altered.

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  I am glad that the Chancellor has not yielded to the unwise demands for the inflation of our economy at a rapid rate. Above all, he must not reflate the public sector to the detriment of the private sector, because it is the private sector that produces the profits which the Chancellor taxes at the rate of 60 per cent. or 70 per cent. and from which the welfare services are maintained.
  In the last 20 years the four major nationalised industries—coal, gas, electricity and transport—have employed about £8,000 million of public money. The Welfare State has not received a farthing from any one of those four great nationalised industries in taxation out of profits in the last 20 years. Had that money been invested normally in the private sector and produced, as we reckon, an average return of 10 per cent., of which the Chancellor would have taken at least 50 per cent., the Welfare State would have had £400 million every year to help pay for hospitals, schools and old age pensions. This is why I hope that when reflation comes it will be in the private sector and not in the public sector.
  I also hope that the Chancellor will not surrender to the pressure from both sides of the House of Commons for the ending of the prices and incomes policy. Such a policy was, and still is, urgently needed. I am not sure that a prices and incomes policy should not become a permanent feature of our national life, no matter which party is in power. With time and experience, adjustments would naturally have to be made.
  Whilst I was in South America I read a report, which I take to be true, that the hon. Member for Nelson and Colne (Mr. Sydney Silverman), who had apparently been attacking the Government, had said in one of his speeches or letters that an incomes and prices policy was pure Fascism. That is arrant nonsense. I believe that it is far more dangerous to allow incomes to be fixed by the trade unions in conjunction with, or in conspiracy with, employers' federations, without any respect for the prices the consumer must pay at home or the foreigner must pay abroad.
  In the last speech Mr. Frank Cousins made in the House—it was a brilliant speech, when he had ceased to be a Minister, a much more brilliant speech than any he made whilst he was a
  1270
  Minister—he said that the economic issues confronting the nation would not be solved in the House of Commons. That contempt for the House of Commons is far nearer Fascism than any Government-supported prices and incomes policy.
  In this modern world the Government, of whatever party, have no option than to take an effective interest in prices and incomes, for if, as I learned has happened in South America—the Committee will forgive me for referring to my trip again—the trade unions become more powerful than the Government, that is the end of liberty. Workers and trade unions have a right to put their point of view, but the Government must have the last word, no matter which party forms the Government. Therefore, I hope that the Chancellor will stick rigidly to the prices and incomes policy.
  Hon. Members opposite who have agreed with me so far will not agree with this. I appeal to the Chancellor to look afresh at the rate of Income Tax and Surtax he is imposing. Here I declare my personal interest. I am a heavy Surtax payer and have been for 30 years. I should like to see Income Tax and Surtax reduced by one-half. I believe that this would encourage men to take greater commercial risks, to accept greater responsibility, and to work much harder. That, in turn, would greatly increase the national income. Everybody would be better off.
  It is not a question of giving to the rich and taking from the poor. In my opinion, a reduction of taxes is the only way in which we can have a vastly increased national cake from which everybody can have a bigger slice. It is high time some hon. Members opposite abandoned the stupid, nonsensical belief that it is somehow a crime or a sin to be rich, either individually or nationally.
  The problem facing the Government and the Chancellor is this. The profit motive is the mainspring of the capitalist system. Last year Income Tax and Surtax was at the rate of 19s. 3d. in the £. Who can expect a sensible man to take extra responsibilities and risks to gain 9d. in the £? It is unreasonable, it is crazy. In addition, if a man is fortunate and far-sighted in other matters, and if he makes a capital gain, he has to pay 30 per cent.

  1271
  on that. When he dies, if he has been unwise enough not to pass his money on to his family, then his family may be faced with 80 per cent. death duties.
  The Chancellor may retort that no one pays 19s. 3d. on the whole of his income. The Chancellor will say that about 14s. 6d. is the average effective rate. I call that Civil Service hokus-pokus. It is not the average return that matters, it is the marginal bit that matters. A man asks himself, "What am I going to get out of it? Why should I build an extra factory; why should I take the extra responsibility? What am I going to get out of it?" There is nothing wrong with a man saying that. [An HON. MEMBER: "Public ownership."] The hon. Gentleman says "Public ownership". I have just tried to show that it has produced nothing but tragic losses. A Welfare State cannot live on losses.
  The Chancellor has to face this. If he is not to allow the capitalist system to work properly, if he is to destroy the profit motive, what will he put in its place? The hon. Gentleman the Member for Rhondda, West finished his speech with the cliché, "From everyone according to his ability." How can one get that? How does one make a person work who does not want to work? No one can deny that there is a minority of idle and good-for-nothing people in the country.
  Mr. Heffer: Hear, hear.
  Sir C. Osborne: What we have to face is: what is the alternative to the profit motive? Hon. Gentlemen opposite below the Gangway seem to think that "profit" is a nasty, dirty word, and that no one can make a profit unless he steals from someone else. That is such old-fashioned nonsense that I am surprised that hon. Gentlemen use it.
  We all know that about 30 years ago, in Communist Russia, under Marshal Stalin, results were achieved by the threat of Siberia and, if necessary, the tommy gun. Today in Soviet Russia the new rulers are wisely reintroducing the profit motive—
  Mr. Heffer: But not private enterprise.
  Sir C. Osborne: It is no good the hon. Gentleman the Member for Liverpool,
  1272
  Walton (Mr. Heffer) chuntering away in his seat. Perhaps when his turn comes he will tell the House what he will put in place of the profit motive, and how he will get people to work. The only way the system will be made to work to its maximum efficiency is to pay the men for the work and let them keep a much larger share of what they earn.
  It may be asked: why should the rich have more? It is the few exceptional men in industry who matter, as in sport. Hon. Members will recognise that if Aston Villa or West Bromwich could get Jimmy Greaves to play for them, it would make a difference to their teams. If one does not pay the exceptional men, one will not get the exceptional circumstances. The enmity and envy that the party opposite have always shown towards profit making and those fortunate in profit making is something which has done the country a great deal of harm.
  The Chancellor has to face this dilemma. He has either to let the profit-motive work properly or put something better in its place. I have not heard, in the 20 years that I have been in this House, one responsible Socialist Minister or, when in Opposition, a Front Bench spokesman say what the alternative policy is. The Chancellor said yesterday that we live in a mixed economy. The heart of the mixture which is nationalised always loses. How will he make the half that is privately-owned work properly?
  The Chancellor has to make very drastic cuts in Government expenditure—
  Mr. James Dempsey: Where?
  Sir C. Osborne: I expected that stupid intervention. We need a new Beveridge to investigate the waste and extravagances of the welfare services, and to stop a good deal of sponging on those services. The original Beveridge estimate for 1945 was £697 million, rising to £858 million for last year. The actual cost of those services last year was not £858 million but £3,681 million. This should be investigated. It does not necessarily follow that we are doing a lot of good for our people by pouring money out regardless. Unless this colossal expenditure is cut, there can be no serious reduction in taxation.
  I should like to see the Chancellor take a risk and take 2s. 6d. off Income Tax

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  and Surtax, and see if he does not get the bigger cake that I am sure he would get. I am certain that he would get such increased industrial efficiency that it would surprise him. If he will not take that risk, he has to come to some greater form of compulsion, of which hon. Gentlemen opposite think so much and which the trade unions oppose so bitterly. My plea to the Government is that we should get taxation down as quickly as possible, and we shall do that only by cutting Government expenditure. In the meantime, I hope that the Chancellor will stick to the rigid controls that he now exercises.
  6.48 p.m.
  Mr. William Edwards: I shall not follow the hon. Gentleman the Member for Louth (Sir C. Osborne) in his outline of our economic policy—very few people do, even on his own side of the House. I think that the Budget, rather than being the subject of a full four-day debate, could have been introduced as a Finance (Miscellaneous Provisions) Bill, and could have been given a couple of days' debating time. We have so many important Bills requiring much Parliamentary time that we should not spend four days debating this rather irrelevant Budget.
  I am also in some difficulty in that I have to follow my hon. Friend the Member for Rhondda, West (Mr. Alec Jones) who, in his excellent speech, outlined the problems of the Principality, as he saw them and as I see them. As one involved in the by-elections with which we were faced in the Rhondda, I know that there were only two factors which ensured my hon. Friend's arrival in this House. One was the loyalty of the people of Rhondda. Despite their chronic economic difficulties they supported the Government. The other factor was my hon. Friend's ability, which we have now witnessed.
  As this Budget is of rather a miscellaneous character, my speech will be something of a miscellany. There is only one thing that I can think of which commends the kind of Budget which we have had, and it is that it does absolutely nothing to disturb the bankers of Europe, and the view of the capitalists of Europe of our economy, particularly when we are trying to obtain entry to the Common Market. There is nothing in the Budget which offends any European capitalist or
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  any adviser of a European Government with doubts about our entry. There is nothing which offends against their economic thought.
  Since we are dealing with a miscellany, I should like to comment on one or two miscellaneous matters which are surprising by their absence. As a practising solicitor, when I heard that the Stamp Duty provisions were to be amended and that the lower level would be raised to £5,000 I was amazed this time, as I was amazed before, that the exclusion of the payment of Stamp Duty was not extended to mortgages. The man with £5,000 who can pay cash for a house gets away without paying Stamp Duty, whereas people such as those who sent Members on this side of the House to Westminster, who have to borrow money, pay Stamp Duty. It is time that we dealt with the situation. I am surprised that the Budget did not deal with this small amendment which is so long overdue.
  Provision could have been put in the Bill to deal with death duty relief on agricultural land. I have mentioned this matter before. In the last five or six years a situation has arisen which was never envisaged when the death duty relief for agricultural land was given. Farming incomes are falling. The profitability of farming per acre is going down and the price of agricultural land is going up. It is obvious that one of the main causes for the increase in the price of agricultural land is the considerable death duty relief which holders of agricultural land get.
  I know of one estate which holds agricultural land to the value of about £1 million, and the death duty relief which it is getting is considerable because the money is tied up in agricultural land. The advantage of death duty to some wealthy landowners, particularly elderly landowners, is so great that they do not have to bother about the way in which the land is farmed. They do not want to be worried with tenants. One landowner in my constituency, whenever a farm becomes vacant, razes the farmhouse to the ground and farms the land indifferently. He can afford to do so: he is a millionaire twice over. The death duty relief to his successors is greater than any profit which he could make out of farming the land properly.

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  It is time that the Labour Government looked anew at this situation and realised that there is no need to give incentives for investing money in agricultural land. The demand for agricultural land is already great, and there is absolutely no economic advantage to the country, to the Treasury or to agriculture in allowing this relief to large holders of agricultural land. The Treasury could give the relief only in respect of agricultural land which is let to a tenant. That is where the relief could be of advantage to farmers. The death duty relief could be given when land is bought and then let to young farmers who want to make their way in agriculture.
  I refer to one other omission from the Budget. Long before the Budget there was an indication that there would be reform on the question of child poverty. A strong indication was given in the newspapers—I do not know whether it was an inspired leak—that the Government were thinking about changing the family allowance provisions for large families. Not only have the Government not done that but they have not given any indication that they are thinking about it. They have indicated that they are thinking about other things—for instance, about changing the Selective Employment Tax—but we have had no indication that even thought has been given to the question of child poverty.
  We have heard about the problems of Rhondda. In my county of Merioneth we are facing a strange situation The people of the Rhondda who have become unemployed as a result of pit closures are getting high unemployment benefit as their income was higher than the national average. But the people in my constituency, while working, are getting far less for doing a week's work than they would get if they were unemployed and if they have three or four children.
  We have heard that the First Secretary of State has faith in his prices and incomes policy. I have the same faith in it. I will continue to have faith in it. But I can persuade the people in my constituency that there is merit in this policy, that it will help those who are not working in modern industries, that those who are not represented by powerful trade unions and that those who are getting a wage far less than the national
  1276
  average will have their income raised, only if I can tell them that they will get benefits from it. But those benefits are not coming. There is no sign in the Budget of the benefits being given to the people who need them most.
  In my constituency, council house rents have recently gone up in one area by 15s. a week. The average gross income of a forestry worker, farm worker or quarry-man is about £11. Men are taking home £9 10s., and they have to pay council house rents of £3 and maintain their wives and families on this inadequate sum. There is no indication in the Budget that the Government are trying to adapt the prices and incomes policy, not only to keep wages down when there are pressures on the economy, but to raise the standard of the lower paid worker and the worker who is not strongly represented by trade unions.
  Until this happens, we shall continue to have the kind of protest vote which we had in Rhondda. It is nonsense to say that the people of Rhondda were voting to have a Welsh National Government. They were not. They were protesting, and they will continue to protest. The very people who have sent us to the House and who have supported the Labour Party all their lives will not support us again unless we translate the policies which we sold them at the last election into Socialist policies.
  This Budget was a brief Budget. The speech of the Chancellor of the Exchequer was not a brief speech. But I do not think there is any need to comment at length on the Budget.
  There is only one other matter which I should like to mention. It was dealt with extremely well by my hon. Friend the Member for Rhondda, West. I refer to the position of my county in relation to the amendment of the Selective Employment Tax, which was proposed, not by the Chancellor of the Exchequer, but by the Department of Economic Affairs. According to the Green Paper, it is proposed to pay a premium of £2 per head for every worker employed in manufacturing industry. In my county, only 7 per cent. of the population is employed in manufacturing industry. Eighty per cent. of the population is employed in service industries. It is ridiculous that the Selective Employment Tax should be paid

  1277
  in respect of people employed in quarrying, agriculture, tourism and in all the other services which we have to provide for the tourists who flock—and thank goodness they are flocking—to our county.
  A far more sensible amendment of the Selective Employment Tax would be to abolish payment of it in the development areas. As my hon. Friend the Member for Rhondda, West said, one cannot go in for redeployment in an area in which the majority of people depend on service industries.
  However much money the Government give to try to promote the growth of industry in Wales, that growth will, in the final analysis, depend on the growth and development of industry in the Midlands. Perhaps the Chancellor is right, on the advice he gets, not to move forward in this Budget. But surely he could have approached a reflation of the economy without foreseeing disaster to the economy as a whole. If the prices and incomes policy means anything, it must mean that if some reflation occurred, there would not need to be a bout of inflation. Our economy in Wales will not improve and we will not get new industries coming to my constituency until there is an excess of employment in the Midlands—until there are more jobs than workers there.
  I was speaking to an industrialist who was thinking of coming to my county. An advance factory was being provided and everything that the Government could do was being done. The Welsh Office was doing all that it could do to try to attract him to the county, but he told me, "I would love to come to your part of the world, but I cannot think about moving industry out of the area in which I now am because in that area there is an unemployment rate of 4 per cent. I could not possibly talk about setting up a subsidiary company in Wales or in any other development area while the fear of unemployment exists in the area in which I am now providing the bulk of employment". Until we get some reflation, we will merely provide a structure to absorb work when that reflation finally happens, but we will not improve the position of the development areas until that reflation occurs.
  In my part of the world we have some manufacturing industries, but most of them are subsidiaries of large companies
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  in other parts of the country. I fear that if there were a payment of £2 a head for all persons employed in the subsidiaries in Wales, the large companies would apply two policies, the first to their main works and the second to the subsidiary companies. A large company would apply to its main works a policy of modernisation and investment in new plant and machinery, while it would save on capital expenditure at its subsidiary company. In the medium term, if this happened, we would reach a new situation in Wales, with modernisation occurring in the Midlands, and in five years' time the plant in Wales would be closed, it being out of date.
  We in Wales need a far more sophisticated policy to meet our problems, but the main thing we need is a reflation of the economy so that the economy as a whole can move forward—and when it is moving forward we can then ensure a more Socialist and equitable distribution of industry.
  7.4 p.m.
  Mr. Michael Alison: The hon. Member for Merioneth (Mr. William Edwards) used a good phrase when he dubbed the Budget a "Financial (Miscellaneous Provisions) Bill". It is evident that he disagrees with most of its miscellaneous provisions. I hope that the Minister is in a position to answer some questions about some of these miscellaneous provisions and, in particular, the Financial Statement 1967–68, because there are some miscellaneous provisions in that which need amplifying.
  On page 23, dealing with capital expenditure, there is a curious item headed:
  "Cash expenditure on acquiring company securities … £48 million".
  When the First Secretary was trying to reassure the C.B.I., I trust that he realised that the members of the C.B.I. read the small print on all documents and are not likely to be happy about a provision to spend nearly £50 million on acquiring company shares. Nor, I suggest, would his hon. Friends want such an amount spent on this exercise rather than on social provisions.
  Will the Minister comment on what the Government will have to borrow this year? Table VII, on page 14,
  "Exchequer Borrowing and Special Transactions"

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  looks as if it will have to be swollen a lot this year because the net borrowing requirement is up from £740 million to £940 million, an increase of £200 million to be borrowed. This seems to take no account of the prospect of having to put on the market something like £500 million worth of Government paper in respect of financing the acquisition for the National Steel Corporation of equity and stock shares in steel companies. How will these feature?
  Suppose the holders of this new Government stock want to off-load it immediately? How much do the Government then think that they will be able to borrow for other requirements? Do the Government consider that they will have to increase the floating debt? These questions are pertinent to the buoyancy of the gilt-edged market and inflationary tendencies. While the Budget is a miscellaneous Budget, we are entitled to clear answers to these questions.
  Although difficult in a Budget of this type, one must try to speak on a broader theme. The only real congratulations I am inclined to offer the Chancellor this year is that he has made the balance of payments the central theme of his Budget, rather than the residual theme, which has been the case in the past. The National Institute's review used a nice phrase to describe an in-built error in the National Plan when it referred to the "strong target element" in the balance of payments, which is a rather formal way of saying that the Government were trying to get to the moon in a minicab.
  The Chancellor has brought the balance of payments back to the centre of the picture, but it seems that although he has made it his central theme the prospects are not nearly as rosy as the apologists for the Government would claim. The whole justification for the squeeze and freeze and holding back of reflation—with the effects that this has had on constituencies represented by the hon. Member for Merioneth and other development areas—and the whole apologia for this is to strengthen the balance of payments. However, the record is a poor one if one considers what has been going on in the two years since the Labour Party came to power.
  I note from the Government's Economic Report that total imports for
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  the first nine months of 1966 were 5 per cent. higher than the average for 1965. Most striking of all is the fact that this is only 1 per cent. above the average for the past decade, during which time they were 4 per cent.—this in a year when the economy has been deliberately held back to strengthen the balance of payments.
  It is not very famous, particularly when one reflects that imports were deliberately held back in the latter part of 1966 in prospect of the lifting of the surcharge—they would probably have been much higher otherwise—and there is little to crow about in this increase. Ministers may claim that the figures are better than 1964. But there was one factor in 1964 to which not enough attention has been paid, a factor that will recur. It is that there was a quite sensational increase in stock building in 1964. The figure for stock building, which went a long way to distort the current balance, was more than the total of stock building for 1963 and 1965 put together.
  Although they made quite a lot of political capital out of the trade imbalance in 1964, there is no doubt the Government have been able to make a good deal of hard material capital out of 1964 in the shape of the very substantial volume of stock building, and they have lived off the fat of it in 1965. When they reflate, the stock building figure will increase again, and, if imports are already rising substantially, how much more serious will it be when reflation starts?
  Another figure which is relevant to some of our broader economic problems is that in 1966, in which investment by private industry is down on the previous year, we find that imports of "mainly capital goods" have gone up by 13 per cent. How do the Government account for that? They have succeeded in depressing investment and, at the same time, there has been a massive rise in imports of mainly capital goods.
  One explanation is that the public sector which has been expanding has been responsible. It is an interesting idea that the public sector goes shopping abroad on this scale, and no doubt the Government will pay attention to that. But the truth is that these imports of

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  mainly manufactured goods have come in this year because they are competitive. The reason why they are competitive is that a lot of capital plant is operating below capacity, unit costs consequently rise, and the squeeze has the reverse effect to the Government's policy. It raises the costs of industry and makes its products less competitive, and imports are sucked in in that way.
  Turning to exports, here again the picture is a very poor one overall. Again, one finds the staggering fact that in 1966, when everything is meant to be held back to make room for exports, exports of motor cars were 20 per cent. lower than in 1964, which was the year of maximum boom demand at home, and 17 per cent. below the average for the years between 1963 and 1965.
  Here are the Government choking back demand at home and increasing unemployment on the broad excuse that they are strengthening the balance of payments for the future; yet we find a 20 per cent. drop in exports of British cars compared with 1964. That surely suggests that the squeeze and freeze by the Government and the shifting of the emphasis to public expenditure has the reverse effect. It raises unit costs in industry, making exports more difficult, and has the contrary outcome to that which the Government want.
  The same is true of steel, which is another basic industry. In 1964, which was a year of great pressure on resources, steel exports went up steadily. In 1966, the year of squeeze and freeze to make room for exports, steel exports went down steadily. Again unit costs have risen due to under-utilisation of capacity resulting in fierce competition from abroad. This is the effect of a Government who are meant to understand how the economy works.
  These may be mere details, but they add up to a picture which is far from rosy. Taking it in broad terms, the volume of exports this year has increased at 3¼ per cent. which, according to the Government's Red Book, is
  "only a little above the average for the past decade."
  This is at a time when we have the highest level of deliberately contrived unemployment since the end of the war. It has produced this mouse of an increase in exports. It is quite laughable.
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  There are one or two other points which should be made about exports in the light of the way the economy is moving at present. One is the figure of exports to the United States, which should be a matter of concern to Ministers and particularly to some hon. Members on the back benches opposite.
  One satisfactory feature of the performance in 1966 has been the rise in exports to America. They have not only gone up by 50 per cent.-odd, but represent one-eighth of all our exports. I wonder whether Ministers have pondered how vulnerable they are here. If the United States take one-eighth of our exports, it is ironic to reflect on the attitude of some hon. Members who sit below the Gangway opposite and whose hearts are more in Moscow than in Washington, because, if the United States Government pursue the same policy in respect of commercial activities as the Iron Curtain countries—
  Mr. Heffer: The hon. Gentleman made a very interesting statement just now. Who are the hon. Members who are supposed to have their hearts in Moscow rather than in Washington? You.
  Mr. Alison: I always enjoy the interventions of the hon. Member for Liverpool, Walton (Mr. Heffer). He has some splendid contributions to make, and one of the things which I like most about him is that his heart is in the right place. I shall not be specific in his case and tell the Committee where it is.
  Mr. Heffer: Perhaps the hon. Gentleman would tell us where his heart is.
  Mr. Alison: Speaking for myself, my heart is in Yorkshire. However, there are hon. Members who have their hearts in different capitals. Some have them in Moscow, and others have them in Washington. Those who have their hearts in Moscow—and I make no apology for claiming that there are such—had better think when criticising the United States Government. If Washington pursued the same policies and treated trade as an instrument of politics rather than commerce, as the Iron Curtain countries do, Britain would be a puppet on a string, with one-eighth of her exports tied up in the United States.
  If the war in Vietnam comes to an end, with one-eighth of our trade lying in

  1283
  the direction of the United States and the possibility of severe recession in the United States, as happened after the Korean War, the prospects for this country are far from rosy. The Government have to recognise that a large number of our eggs in commercial terms are in the United States basket.
  All this adds up to saying that the prospects are not as rosy as the Government try to pretend in justifying this massive dose of freeze and squeeze, putting all previous Tory Measures into the shade, on the grounds that they are making room for exports. In the last two years there has been only a modest increase in the rate of exports, together with a massive increase in a great many of our imports, particularly in terms of machinery and capital goods. It is not a rosy prospect, and the Government have nothing to be pleased about.
  If the Chancellor has put the main emphasis in his speech on the balance of payments instead of leaving it as a residual, who has been the residual legatee in his Budget? As so often happens with a Socialist Government, it is the private enterprise business sector or, to use the right hon. Gentleman's phrase, the goose that lays the golden eggs. This is the sector which has been bashed, and it has been bashed in the interests of increasing substantially Government expenditure through the public sector.
  Now that we have the Chief Secretary to the Treasury with us, perhaps I might be allowed to dwell a little on the increase in Government expenditure, because there are one or two aspects of it on which I want to question him.
  First of all, how does he account for the fact that this year, the "Financial Statement", Paper 404, does not have that useful information at the back of it which the corresponding document had last year and which helped one to make an assessment of the volume of expenditure in the public sector and showed a continuity of presentation from that famous White Paper (Cmnd. 2915)?
  I remind the Chief Secretary that the famous White Paper 2915, of February, 1966, stated quite boldly and baldly in paragraph 16 that
  "the rate of growth of the aggregate of public sector expenditure … from 1964–65 to
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  1969–70 should not exceed 23 per cent. (i.e., an average of 4¼ per cent. a year) at constant prices."
  Indeed, it went so far in Table 3, on page 26, to point out what the volume of public sector expenditure would be in the year 1969–70, that is to say, the next financial year.
  We find that it was due to be about £13,000 million and yet, believe it or not, we have more than got there a year in advance. This with the economy stagnant.
  The Chief Secretary to the Treasury (Mr. John Diamond)The Chief Secretary to the Treasury (Mr. John Diamond) indicated dissent.
  Mr. Alison: The Chief Secretary shakes his head, but—
  Mr. Diamond: Is the hon. Gentleman giving us a comparison in constant figures, comparable figures, or prices at the time?
  Mr. Alison: The figure published in the White Paper was £13,295 million by 1969–70 at what were called "1965 survey prices". My calculation of the figure for this year 1967–78, is £13,577 million at 1967 prices. It therefore ought to be marginally devalued to compensate for the rise in prices between 1965 and 1967, but not to the extent of making the whole timetable of progression at the 4¼ per cent. per annum fall into line in the way the Government pledge themselves to do.
  My complaint is that the Government have obscured this by not producing the familiar table on the back page of this document which in last year's paper was Table 12 headed, "Reconciliation between total supply expenditure and total public expenditure". It would help if the right hon. Gentleman were to consider reproducing this at a later date for the benefit of those who follow these figures.
  I think that the problem with which we are faced in this huge growth of public expenditure is that it is the enemy and not the friend of a policy of making way for exports, as I have tried to show. I referred, in particular, to the example of the decline in the export of motor cars. One of the most serious aspects of this growth in Government expenditure is its effect on what the Chancellor was at some pains to spell out as the "growth of productive potential". Productive potential and the growth thereof is made up of two components. First, there is the increase or growth in productivity, namely, output

  1285
  per head, but associated with that there is secondly the growth in the number of heads from which to get the growth in output.
  Let me consider, first, the growth in productivity. It is plain that with the serious decline in industrial investment, particularly in the private manufacturing sector, caused by a decline in confidence, productivity per head and its growth will not be easy to maintain at the original level aimed for.
  But what about the growth in the number of heads to compensate for this? This is where we come up against the most serious aspect of the increase in Government expenditure, because the manpower prospects for the years to 1970 are poor. The population is expected to increase by three-quarters of 1 per cent. up to 1970, but the difficulty is that those who are users of public services, namely, children below 14 or 15 and old-age pensioners, will increase by a very much greater percentage, by about 2 per cent.
  This means that they are bound to pre-empt an ever-larger volume of Government expenditure without any increase in standards, simply through an increase in numbers. It means that without any expansion in terms of new ideas or gimmicks, or further governmental bodies, or an increase in civil servants, but merely to maintain the services at existing levels, they will pre-empt an ever-larger number of men and women to work in the public service. This is the most worrying aspect of the whole growth of Government expenditure, and the White Paper to which I have referred was quite explicit about this. Paragraph 21 said:
  "One fact of particular importance was the requirement of the health and education services together with public administration for some 500,000 extra people between 1964 and 1970, a requirement greater than the total increase of manpower expected to be available."
  One of the things that is happening as a result of this huge boom in Government expenditure is that they are taking up those who are being thrown on to the employment exchanges as a result of unemployment and sweeping them into the public sector, which has an insatiable demand for people. Is this in the interests of exports? I doubt it, and I can tell the right hon. Gentleman of three disadvantages of channelling manpower, an
  1286
  essentially scarce commodity, into the public services.
  First, it is difficult to see the contribution which it makes to exports, to increase for example the expenditure on amenities by local authorities which represent one of the places to which extra manpower is going. Secondly, it pre-empts an unusually large degree of skilled manpower, particularly in activities associated with the defence budget. Thirdly, and perhaps most serious, it is labour-intensive, and wages and salaries make up an unusually high proportion of its total costs.
  Not only is that true, but the public sector tends to be a pace-setter in fixing levels of wages and salaries where its employees are unionised. This is particularly true in Royal Ordnance factories. This means that there is an in-built tendency for public sector expenditure, which is increasing rapidly, to take more and more men out of exporting activities, and, at the same time, to increase the pressure on wages and salaries. This is the result of the Government's attempt to make room for exports by creating unemployment. It is no wonder that the export of British motorcars fell by 20 per cent. in 1966 compared with 1964.
  This all represents an intolerable programme of mis-management by the Government, and although the Budget is bitty and miscellaneous, the long-term damage to the country is incalculable. Until we get back to banning an increase in bureaucracy, and boosting business enterprise, we shall not get anywhere.
  7.29 p.m.
  Mr. Robert Sheldon: The right hon. Member for Enfield, West (Mr. Iain Maclcod) welcomed this method of introducing a Green Paper as a means of discussing new problems that come before us. I, too, welcome this method of introducing it, mainly because I know the difficulties which my right hon. Friend the Chancellor of the Exchequer has had in introducing new taxes and other measures.
  When my right hon. Friend announced the introduction of Corporation Tax, he was denounced for introducing uncertainty and instead of accepting the possibility of offering advice, which such an announcement made possible, all he

  1287
  received was a certain amount of derision from hon. Gentlemen opposite. When he tried the other method and introduced the S.E.T. by working it all out and then producing it before the House, he was berated for the anomalies thereby produced.
  In this sort of situation the Chancellor cannot win, but at least the Green Paper might be a method which might command the acceptance of the House. For some time I have been advocating a slowing down of the way in which we introduce our taxes so that they can receive this sort of consideration. Some of them are more suitable for examination by a special committee. I had hoped during the Second Reading of the Companies Bill that the second Companies Bill which we were promised would go before such a special committee. Perhaps the Green Paper might go before such a committee. I hope that this idea might commend itself to my right hon. Friend the Leader of the House.
  At this stage Government economic policy is becoming clear. We have heard the use of the phrase "export-led reflation". Many of us hoped that it would mean a big increase in exports, following which we might have a large increase in growth. It is now clear, however, that the term means that the reflationary screw will be kept down tight and will be released only as exports rise. As they rise the Treasury will do its sums and decide the amount of imports that can be allowed, the wage increases that can be permitted, the amount of inflation that can be tolerated, the level of unemployment that will be acceptable, and how much investment will fit in with this plan. In other words, the exports will determine the rate of economic advance. Because of this, assistance to exports by means of an export rebate, the rebate to manufacturers under S.E.T. and whatever assistance the Ministry of Technology can give, will command a higher priority now even than it did in the past.
  Some people talk about the success story of British exports, but when we examine the situation a little more closely we find that it has not been quite the success story that many people have been led to believe. It is not sufficient to talk about an increase in exports year by year. At a time when world imports—that is, the
  1288
  size of total world markets—are increasing at the highest rate ever it would be horrifying if our exports were not also increasing.
  If we study the position more closely we see that the size of the market we sell to, determined by the volume of world imports, has increased from 1961 to 1965 by 41 per cent., whereas our exports have increased by 25 per cent. Some people may be satisfied with a figure of 25 per cent., but we must compare it with the size of the market, which has increased by 41 per cent., and—to take one example—no motor car manufacturer would be satisfied with his performance if he could merely say, at the end of the day, "I have increased my business by 10 per cent. while the size of the market has increased by 30 per cent." The increase in our exports must be related to the increase in the size of the market, which is rising at an unprecedented rate.
  Taking last year's figures we find that the size of the world market increased by 9·1 per cent. as compared with the increase of 6·8 per cent. in our exports. It is clear that they have been far from enjoying the success claimed for them.
  There is another way of ascertaining the success of our exports, and this is by making a comparison between our exports and those of our main overseas trading competitors. The most comparable countries are Germany, France, Japan and, to a lesser extent, Italy. Last year Germany's exports expanded by 12½ per cent., France's by 8½ per cent., Japan's by 15½ per cent., and Italy's by 11 per cent.—compared with our 6·8 per cent.
  Some people may be satisfied with a much lower rate of growth and consequently, a much lower rate of exports than I would be prepared to accept. Some may be prepared to accept a snug corner in world markets. But we must remember that if at this stage we accept an inferior position it will not be long before people realise that they are not receiving the advantages of increasing prosperity which are being enjoyed by people in other parts of the world.
  We must also remember that if this is all that we can do with the present high level of growth of world imports, if world imports turn down or cease to expand so rapidly, we cannot expect that some

  1289
  aggressive exporters from other countries will fail to penetrate those markets which we might otherwise have hoped to keep as our personal preserves. I say this not to berate the performance of our exporters. I am fully aware of their difficulties and their need to be dealt with justly. I know that the policies of the Government have not been wholly successful in assisting them to deal with their problems.
  If the Government believe that our export efforts have been successful they may be inclined to accept that a policy of reflation which only follows a rise in exports, is a reasonable one. The true position is that our exports are expanding at a rate much less than that at which the size of the market they serve is expanding.
  It may be argued that measures are being taken to put the matter right. The First Secretary mentioned the Industrial Reorganisation Corporation, which is arranging to form mergers and to make companies more efficient and so be able to export more.
  My right hon. Friend also referred to the prices and incomes policy—which will reduce the level of inflation and so of our costs abroad—and investment grants, designed to encourage people to invest more and to install more modern machinery, thereby producing more cheaply in the end, and also industrial training schemes. These measures may help to improve the position but they do not take account of what is now going on in other countries, which are also taking steps to improve their economy. It is one of our national vices to compare our future plans with the present performance of other countries. The danger is that our performance in exports will be inadequate to support the economic policy which we desire.
  Four main economic alternatives are open to us, and a further spurious one. The first main alternative concerns the high level of Government expenditure overseas. This could be cut. The second is the imposition of a closer control on imports by means of import quotas or by other methods; the third is the implementation of a deflationary policy, and the fourth is devaluation.
  The spurious one is the prices and incomes policy. The Government must be involved in the question of the level of
  1290
  prices and incomes. They cannot opt out of it. I have always maintained that a Government who were successful enough to keep the rate of inflation down to ½ per cent. or 1 per cent. below that which it would otherwise have reached would surely be justified in putting a Minister in charge. The trouble is that the main advantages of such a policy take the form of long-term benefits as the policy is refined, and the difficulty arises because the Government are trying to solve short-term problems with essentially long-term methods.
  The first main alternative that I mentioned related to the high level of Government expenditure overseas, not least, the high level of foreign expenditure. Our Government involvement overseas costs us £472 million. Despite the improvements which have been announced in making offset arrangements with Germany our Government expenditure overseas this year is likely to cost us £450 million. The countries with whom we are competing for exports have nothing like this burden to carry.
  Germany and Japan have a surplus on Government expenditure overseas. They receive more because they have foreign troops stationed in their countries. France maintains an approximate balance, and Italy has a slight deficit. That is the enormous disadvantage from which we suffer. Cutting overseas expenditure by the Government would be a partial solution to our problem.
  The second alternative is a stricter control of imports by means of import quotas or other methods which would be allowed under G.A.T.T. I favoured this solution up to the beginning of our discussions with the Common Market countries. But because of the present arrangements to go into Europe, this alternative is made unworkable at present, although it is certainly something which we should be prepared to consider as and when the political situation becomes such that we can start thinking once again about using a measure of this kind.
  The third economic alternative is heavy and prolonged deflation, which is what we now have. The fourth is devaluation, followed or accompanied by a short, sharp period of deflation. Devaluation is needed in order to move industry towards exports by giving it a

  1291
  surplus capacity. The reasons why devaluation was not followed were political and not economic, and I do not believe that it is "knocking" sterling to say so. But it is worth stating that some of those who support the Government's decision not to devalue adduce economic reasons. It is essential to be quite clear that there are economic advantages in devaluation which we might consider at some time in the future when political developments might make it possible to do so.
  The economic advantages are obvious. There is an immediate rise in exports; if exports do not rise, there is a drop in the standard of living. There is not such a drop, in fact, because exports rise in two ways. First, goods at present competitive and selling overseas are able over a period of time to increase their prices. Over months, or even over a year, prices will creep up, and so in foreign exchange terms they will be selling not far short of the price charged before the change in the exchange rate.
  That is under a system of perfect competition, and I would remind hon. Members that international world markets are the nearest approach in this world to perfect competition. In fact, prices do rise in sterling prices and in overseas currency terms they sell at almost the same prices as previously.
  The other way in which exports rise is because new exports are created, goods which were previously not competitive become competitive because of the change of prices. Because of this, a large range of products now becomes internationally competitive. Those are the two methods by which goods competitive and selling well can increase their prices and so make a contribution to the sterling amount of exports and new exports can be created because goods not previously competitive become competitive. The result is a very large increase in exports and in new markets overseas, and, particularly important, the creation of new export industries.
  All this is obvious to industry. Following devaluation in the United Kingdom in September, 1949, the increase in exports amounted to 21 per cent. in the first year and to 47 per cent. over the first two years, a massive increase caused largely by the knife-edged nature of so
  1292
  many purchasing decisions in the international market.
  Mr. Charles Fletcher-Cooke: If the hon. Gentleman is advocating, as I think he is, an open mind on the subject of devaluation, as our international debt position is considerably worse than it was in 1949, if we were to devalue, would not the burden of repayment of the debt be enormously increased?
  Mr. Sheldon: Most of the debt is in sterling balances in this country, but I accept that some adjustment would have to be made. However, what is obvious from the figures is that those debts are small by comparison with the substantial increase in the amount of exports—a 49 per cent. increase in the first two years following devaluation in 1949. These are enormous figures which dwarf even the large figures of losses on sterling balances, which might not all need to be repaid immediately, if repaid at all.
  Mr. Anthony Kershaw: Will the hon. Gentleman now deal with the problem of the increased price of imports if we devalue?
  Mr. Sheldon: I thought that I had made it clear, but obviously I did not, that one needs an increase in exports to cover the increased cost of imports. Otherwise, there would be no need to increase exports. I was trying to point out that these two methods—increasing the price obtained for goods already selling and providing new exports—would give such a large increase as to make small by comparison the cost of the imports which we require, or at least to exceed that cost.
  It might be argued that what is required is a small negotiated change in the exchange rate, for example, 5 per cent. I suppose that some could adduce further reasons, such as the need to avoid retaliation. The figure of 5 per cent. is too small. It does not capture the imagination of exporters and show what new markets are open to them. It is a niggling increase which would make for merely minor adjustments here and there in trade.
  My second reason is that I do not fear the retaliation. We had it in 1949, but it had only a minor effect. It must be remembered that in 1949 we occupied

  1293
  a dominant position in world trade and that there were then few relatively undamaged economies. Who could now expect that Germany, with an increase in exports of 12½ per cent., or France with its concept of the value and importance of the franc and enjoying an increase in exports of 8½ per cent., or the United States enjoying a 10 per cent. increase in exports, would feel constrained to retaliate because we, a country occupying a much less important part of world trade than we once did, varied the exchange rate?
  However, as I have said, the real reasons, as we all know, are political and not economic. The political reasons are that undertakings have been given, undertakings most binding, and the position of sterling in the international markets is a reflection of that. I am saying that at least if we understand that the problems are political, when political solutions become possible, the matter might be considered again.
  In his Budget statement yesterday, my right hon. Friend outlined the need for a continued deflationary policy. It is not difficult to be successful in carrying out a deflationary policy. The application of the tourniquet is the one piece of medical treatment which the Treasury has fully mastered. The way in which investment and imports can be kept down by the Bank Rate and hire purchase and other fiscal and monetary measures, the way in which wage claims can be kept down because of the level at which unemployment is maintained, the way in which we are able to convince foreign bankers because of the punishment which we are prepared to inflict upon ourselves—all these ways are well charted and the paths are well trodden. To talk about success in such a policy is to talk about a victory which anyone can achieve for the asking.
  Last year, my right hon. Friend spoke of the need for his triple objective—high employment, growth and the £. The trouble is that real continued growth has been buried by our defence expenditure overseas and our excessive concern with the security of the £. Judging by my right hon. Friend's figures yesterday, the growth last year at 1½ per cent. and the year before at 2 per cent., will give an average growth rate by 1970 of 2½ per cent. Our growth rate will be less
  1294
  than half that of our main trading competitors overseas. I see nothing in our industrial organisation which should make us accept a position inferior to those of our main trading overseas competitors.
  Some might be happy with a growth rate of 2½ per cent. over that long period, but I remind hon. Members that it is impossible to proceed towards equality and fairnes without prosperity. It is far easier to achieve a fair distribution of wealth when it is being created, and almost impossible when it is not. As we saw yesterday, the money which should have been provided for the relief of child poverty, for distribution to pensioners, for slum schools and housing, will not come from increasing taxation of present incomes. It can come only from taxation on rising incomes.
  One point which the Chancellor is prepared to accept and about which I feel disturbed is the drop of 10 per cent. in industrial investment over this year. I do not accept that the alternative of public investment takes its place. The investment in industry will produce the exports which are required. It could have produced the growth this year and the growth and production next year and the year after. This production and investment is lost for all time. Even in a difficult year, surely we could have tried our utmost to preserve it. I am disappointed that even this limited objective was not accepted.
  7.51 p.m.
  Mr. David Howell: I agree substantially with the excellent speech which has been made by the hon. Member for Ashton-under-Lyne (Mr. Sheldon) and would like to turn to some of the basic thinking behind the Budget, in particular, the phrase "the growth of productive potential", which is now being peddled vigorously by Treasury publications and the Department of Economic Affairs, to which the Chancellor yesterday and the First Secretary today made copious reference. I should make it clear that I regard this phrase the villain of the piece.
  First of all, what does it mean? Broadly, it means that we are to believe that there is a rate of growth divinely ordained, which has been cooked up by the alchemists in the Treasury and Great

  1295
  George Street, which assumes that the economy is bound to grow at a maximum limit of about 3 per cent. This figure is apparently carved on tablets of stone and must be accepted. It is described in a document from the D.E.A. the other day, on the future of planning, which said:
  "… productivity potential is broadly the rate at which the national product could grow given only the physical limitations of manpower, capital and productivity, and assuming that there are no balance of payments difficulties."
  The argument is that all the Chancellor has to do is manage demand so that it does not rise as fast as the growth of productive potential and the way will be paved for lower costs, higher exports, and so on.
  It is my belief, and, I suspect, that of a number of people who have heard the Budget debate, that this concept is meaningless. There are two reasons. First—a minor one—the Chancellor has no tools and no knowledge with which to assess the growth of productive potential, whatever that means. As the D.E.A. document implies, professional assessments of the growth of productive potential have gone up and down like a yo-yo during the past year. No one is certain at any time what it may be and it has been revised considerably over the last 12 months.
  Now, suddenly, it is brought forward as a brand-new idea to which more and more weight must apparently be attached and we are told that this is definite and likely and that we should go forward on these lines. If that is the line to be taken, as the Chancellor does not know what this figure is or how to measure it, he will fail again. He will have to take panic measures in July or November to operate on the level of demand, without the remotest knowledge of the real situation and we shall be back again in the economic wasteland.
  That is the main reason why this phrase is one of which we should be deeply suspicious, particularly when it is endowed with this spurious scientific accuracy. Much more worrying than that is that, basically, the whole concept of growth of productive potential as something determined in the way the D.E.A. thinks is "mumbo-jumbo."
  One does not need to be 10 minutes outside the cloistered world of Great
  1296
  George Street, where this concept must have been produced, to know that new capacity in a firm is not installed along these lines, but determined by the drive and energy of management and its capacity to innovate, by the amount of resources and available cash in a firm, by the readiness to apply existing and new techniques, designs and processes and, of course, by close union co-operation in installing the new equipment and machinery.
  Government policy in this Budget could have operated in all those areas if it were not for the smoky and mystic concept of productive potential which is now drawn across the scene like a veil instead. These are the areas where policy should be advanced and where hon. Members on this side have advanced and will continue to advance a whole range of proposals which will have a decisive effect in accelerating the growth of production and operating favourably on exports.
  I have no doubt—I know that this view is shared in industry and outside—that if we are to consider the growth of productive capacity it could be accelerated by 100 or 150 per cent. Taking into account the growth of modern technology and available new techniques, the sky is the limit, and the potential for the growth of productive capacity in these firms is unlimited. Therefore, to bring in this phrase at this stage in public economic debate is grossly misleading and dangerous for two reasons.
  First, it diverts the policy and attention from the key areas which I have described. The most important by far is stimulus to innovation and the provision of incentives to get growth of new capacity at the necessary speed and along the right lines. Second, it conceals the fact that the basic limiting factor which the Budget is all about is the balance of payments policies which the Government are pursuing and it somehow suggests that there are other reasons why the Government should pursue these policies. There are other reasons, but it comes down to the key point of the balance of payments. That is the prime consideration behind this year's Budget.
  Whether, at the same time, anything has been done about balance of payments policy to get the economy to move forward is another question. Deflation is

  1297
  doing nothing about the balance of payments. Export and import movements have not gone in the way that some of the more glamorous and ambitious presentations of Government policy have suggested. If we want a balance of payments policy which will allow high growth, of which the country is perfectly capable, we must consider critically a number of important areas of which the Chancellor made little mention in his speech.
  The right hon. Gentleman mentioned them as alternatives, but I am not sure that they do not go together—the need to revise our whole attitude to current overseas Government expenditure and to export policies, particularly as regards taxation, where it is essential that we should begin to move now and not in the future towards the kind of policies which the E.E.C. is moving towards, which would allow substantial rebates and towards various other developments of export policy of a kind which the Government do not appear yet to have considered. Finally—this is the nub—it requires the Government to look again at exchange rates.
  If the Government close their minds to those predeterminates of balance of payments policy, they are forced back on deflationary Budgets and the mumbo-jumbo about productive potential which are used to cover up the basic difficulties. It is, therefore, worth bringing out the fact that this productive potential idea is a bogus concept. It is immeasurable, it is highly conducive to muddled thinking, and I do not understand why the Chancellor should have been seduced by it. It goes slap against the policy of his party, which fought two elections on the proposition that a high growth rate was achievable and would be achieved. It demonstrates sadly, again in a way which I do not understand, that the Treasury Bench has been dominated by academic and narrow theories about the economy which have no relevance to our position. I therefore say that the country deserves a better economic policy and also a better Chancellor, which, I hope, it will soon have.
  8.0 p.m.
  Mr. Eric S. Heffer: There are three aspects of the Budget and of the Chancellor's speech on which
  1298
  I wish to concentrate. Briefly, they are, first, the question of unemployment and the basic philosophy which apparently has been developed concerning this question in the Chancellor's speech; secondly, overseas expenditure and investment; and thirdly, a redistribution of wealth and the incomes policy. That is sufficient material for a speech of about an hour and a half, but I will try to keep it within the narrow bounds of a quarter of an hour. It is obvious that all these subjects are very much interconnected and complementary to each other.
  Last week—we have been discussing it again today—we were issued with the Green Paper, which undoubtedly will mean considerable assistance to areas like my own, Merseyside, and like the Rhondda, about which we had an excellent maiden speech this afternoon from my hon. Friend the Member for Rhondda, West (Mr. Alec Jones). I am all in favour of anything, even if I am not entirely satisfied with it, which can assist to bring industry and employment into areas such as Merseyside and the Rhondda. I make this clear because I want to develop the point about unemployment at greater length.
  I want it to be understood that I am entirely in support and in agreement with the Government in any measures which they take to reduce unemployment in the development or under-developed areas. That is support which I give wholeheartedly. My maiden speech in the House of Commons dealt precisely with the question of assistance to those areas.
  Obviously, we want to see the present imbalance changed. We must, however, look a little more deeply into the arguments which were developed by my right hon. Friend the Chancellor of the Exchequer in his Budget speech yesterday. We must scratch beneath the surface, because if we look at that speech we see that my right hon. Friend said:
  "… we are discussing the raising of the numbers employed by, say, 100,000 in the development areas."—[OFFICIAL REPORT, 11th April, 1967; Vol. 744, c. 985.]
  That would even up the imbalance, but it would leave us with precisely the present figure of unemployed, which is about half a million. This, we are told, would solve the problem.

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  We would then have the spread of unemployment much more evenly distributed throughout the country. The pockets of heavy unemployment would be reduced and I believe, on the basis of certain discussions in which I have been involved, that unemployment would increase in certain areas where it is at present almost non-existent.
  That is an interesting situation, but it is not a new theory or a new idea. For a long time we have been told by certain people, by Professor Paish in particular and by the Treasury in a different form, a whole series of different ideas but with the same basic premise that if we are to solve our balance of payments problems we must have a certain amount of slack, which means about 1½ per cent. or 2 per cent. unemployment, or, possibly, a little more.
  I remember when the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd) was rather sold on that idea and what was said by the then Opposition when it was put forward. It was said, quite rightly, that 2 per cent. unemployment as a permanent feature of our society was not acceptable to the Labour Party. I say to my right hon. Friends on the Front Bench that it is not acceptable to me now, and I am certain that it is not acceptable to the Labour Party throughout the country, either. It is not part of our philosophy, and it never has been, that we should have a semi-permanent or permanent position of 1½ per cent. to 2 per cent. unemployment.
  Mr. Biffen: Can the hon. Member also confirm from his researches that the Prime Minister has endorsed that after shake-out, unemployment would be expected to be at the level of 1½ to 2 per cent.?
  Mr. Heffer: When a Question was put to the Prime Minister in the House, and the figure of 2 per cent. was suggested, it caused a certain amount of unpleasantness, to say the least, but I have never heard it said that this would be a permanently acceptable figure. On the basis, however, of the arguments now put before us by the Chancellor of the Exchequer, it is obvious that around 2 per cent. is a permanently acceptable and, as we heard this afternoon from
  1300
  the Front Bench, tolerable level of unemployment.
  We have been told that we can have a steady growth rate of 3 per cent. and, at the same time, solve our balance of payment problem. But we cannot have a 4 per cent. rate of growth and a surplus in the balance of payments. To me, this is a very strange idea. Nevertheless, that is the theory that we are given. We can have a 3 per cent. rate of growth, which is 0·8 per cent. less than the figure envisaged in the National Plan, which is now long forgotten, and we can solve the problem of the balance of payments. The obvious point, however, is that this must be done with a level of unemployment of about 1½ or 2 per cent. It is high time we changed our views on the solution to all our economic problems.
  My hon. Friend the Member for Ebbw Vale (Mr. Michael Foot), speaking at the Labour Party conference after a speech by my right hon. Friend the Prime Minister—who said that the important thing was to root out conservatism in the country—suggested that we might root our conservatism, beginning with the conservative and orthodox thinking in the Treasury—a very good place to start. I suggest that my right hon. Friends start there, and that Professor Paish's ideas, which are accepted by the Treasury, should be rooted out, and that some Socialist ideas should infiltrate that Department. Let us have some Socialist solutions to our problems, not the idea of unemployment as a permanent feature. As I have said, that idea is not acceptable to me, and I am sure that it is not acceptable to any of my hon. Friends when they really think about it.
  I do not need to dwell on the subject of our overseas expenditure. My hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) dealt with it brilliantly, and one does not need to go over the same ground again and again. It is obvious that there are solutions to our economic problems other than those which the Government have adopted. I have said that my first speech in this House related to directing employment to such areas as Merseyside and the West coast of Scotland. My second speech, made now two and a half years ago, was on the need for the Government to carry out drastic cuts in particular military

  1301
  overseas expenditure. I therefore think that I can claim to be absolutely consistent.
  The Chancellor of the Exchequer referred yesterday to the £20 million involved in regard to Germany—excellent, though for one year only—and to the £100 million being taken out in regard to overseas expenditure. That is all fine, but it is not enough. It will not solve our problems. We have to recognise that we cannot continue to believe that we are a great imperial Power. We cannot continue to be a policeman of the world—we just cannot afford it, apart from anything else. If we must either have a 2 per cent. unemployment figure to solve the balance of payments crisis or get rid of our commitments east of Suez or elsewhere, I want us to get rid of our commitments east of Suez.
  If that is the choice, the choice is clear. In the meantime, we might consider a solution put up by my hon. Friend the Member for Edmonton (Mr. Albu) and others—devaluation. I shall not argue that aspect at any great length, as it is something that one does not talk about until after one has done it. But the Government must consider it.
  A prices and incomes policy is a very serious matter. The White Paper said that the Government were considering extending the powers under Part II of the Prices and Incomes Act. In a document put to a meeting of executives on 4th March, the T.U.C. said that it neither wanted Part IV to continue—which, in any case, was not to continue—but it did not want any of the powers contained in Part IV to be transferred to Part II. It did not want the activation of Part II, either.
  That is precisely what the Government suggest in the White Paper, though we do not know the exact details. We are as much in the dark about them as we were when we read the White Paper. My hon. Friend the Member for Ashton-under-Lyne quite clearly pointed out that the results of the incomes and prices policy have been marginal. Yesterday, the Chancellor of the Exchequer talked in terms of compulsory powers to keep wages down but in terms of appealing—appealing to those who control industry not to pay high dividends in the immediate situation. We therefore have com-
  1302
  pulsory powers over the workers' wages, but an appeal to the employers not to be too lavish in the distribution of dividends at the present moment. If any member of the Government believes that the workers in the factories and in the trade unions will swallow that, then, quite honestly, they just do not live in the same world that I do.
  Those workers and those trade unions are prepared to accept an incomes policy, but they want it to be a fair incomes policy. They also want it to be a voluntary policy operated by the trade unions themselves. I therefore appeal to my right hon. Friends not to get themselves into an unnecessary conflict with the trade unions, because in the long run that could do far more harm to our economy than leaving it to the Trades Union Congress to work out a long-term policy on incomes.
  We are deeply concerned about the philosophy lying behind this Budget discussion. The Times Business News today put its finger right on the spot when it said:
  "Mr. Callaghan has, in fact, changed his economic philosophy and has now accepted the orthodox view entirely."
  That is the charge we make. I accept that it is a very serious charge, but we are in a serious situation. We have to get out of that situation. We must have some Socialism in this Labour Party. I believe that Socialism is the real answer. That is also why I believe that we should see an expansion of public ownership.
  My right hon. Friend the Prime Minister wrote an excellent pamphlet in 1957 called "Post-War Economic Policies in Britain". I quote the following passage:
  "The question, therefore, is whether the disappearance of the devaluation danger will lull Britain into a false sense of security and encourage her to continue her policies of sacrificing economic strength to personal comfort or whether we shall not, now, seize this, our final opportunity, living as we are on borrowed money and borrowed time, to take all the measures necessary to make our economy strong and virile.
  We must turn now to examine the specific techniques needed for controlling the economy. I list five of these:

  1. physical controls;

  2. monetary techniques;

  3. positive incentives—subsidies, guaranteed orders, etc.;

  4. fiscal weapons;

  5. public ownership."

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  I recommend my right hon. Friends on the Front Bench to reread that pamphlet, to look at the philosophy that underlies it, and to reject that which has been argued by my right hon. Friend the Chancellor of the Exchequer in his Budget speech.
  8.20 p.m.
  Mr. T. L. Iremonger: I am very glad indeed to follow the hon. Member for Liverpool, Walton (Mr. Heffer). Although we stand some way apart in the political spectrum, I sympathise with him and share the disgust he has expressed, not so much with his Chancellor as with all Chancellors, because he complained that the orthodox Treasury view had prevailed over the doctrines of his party and that now, after a very short time in office, his Chancellor is adopting orthodox Treasury policy instead of Socialism in his case; and I might have made the complaint that over many years my party's Chancellors adopted orthodox Treasury policy instead of Conservatism.
  I understand very well how embittering it is for the hon. Member to find that he is supporting a Chancellor who is not following policies which he may think good, although I think they would be disastrous. I entirely sympathise with him. He has indeed been very conformist in this debate. We expect rather extreme speeches from the hon. Member, out of tune with most of his hon. Friends, but that has not been at all the case today. He has been very much in tune with the chorus of unrelieved scepticism and disappointment which hon. Members have expressed throughout the day. There has been no praise at all for this Budget.
  I want to make one comment on the hon. Member's speech, because he made one point which is popular, but misleading, on the Left-wing of the Labour Party. When he talked about 2 per cent. unemployment being absolutely unacceptable I do not know whether he imagined that that implies dole queues and people permanently out of work. If that were so it would, of course, be totally unacceptable. But when economists talk about 2 per cent. unemployment they are merely envisaging something rather less than the acute shortage of labour which we normally have and which has
  1304
  bedevilled the economy since the war. I do not know whether it is a genuine misunderstanding on the part of the Left-wing of the Labour Party, but if it is not they should not mislead the country by making these statements about it.
  Mr. Stanley Orme: When we talk about 2 per cent. unemployment it means 470,000 fully unemployed, absolutely unemployed. In regions such as I represent when a man becomes out of work at age 50 or 55 he is not easily retrainable or employable again. That is why we are opposed to the level of 2 per cent. I am not trying to make a party point, but this is why there is feeling in the country generally and why we feel emotional about it. One person unemployed might be only a statistic to the economist, but his unemployment is a reality to himself and to his dependants.
  Mr. Iremonger: I sympathise with the hon. Member and accept the sincerity of what he has said, but I do not think his emotional involvement is quite just to the economist's argument. It is perfectly possible to accommodate the state of affairs he wants with the ability of the economy to hold down the general level of demand and thus avoid inflation, which is the basic problem of the British economy and has been for the last 15 years.
  I want to end my speech by 25 minutes to 9. Therefore, I should like to make my main point fairly quickly. I wish to draw to the attention of the Chancellor and to commend to him and to his hon. and right hon. Friends the importance to the economy of working women, especially the married woman who works, and the importance of putting right the many injustices which they suffer under our taxation system. I do not know whether the Chancellor has fully accepted the importance of these hard facts. One wife in every three is working and the total of wives who are working and have worked and will work when circumstances permit brings the proportion to very much more like two-thirds of all married women.
  In 1963, 53 per cent. of employed women were married. That represents an increase of 20 per cent. since the turn of the century. A report from the Ministry of Labour Research Unit estimates

  1305
  that there will be an extra 1 million women fully employed by 1980. The increase in the employment of married women is therefore one of the most significant trends in employment patterns of the whole century, and it is common to many European countries, to Australia and New Zealand, to the United States of America and to the Union of Socialist Soviet Republics.
  Traditionally, the majority of working wives and mothers come from the lower income groups but now the movement is very much more into the middle range of income groups. A study by Simon Yudkin and Anthea Holme entitled "Working Mothers and their Children" stated that 1,011 mothers out of 1,209, when questioned, gave finance as the prime motive for their starting to work or returning to work. I ask the Chancellor to recognise that the taxation of mothers working is of major importance in the economy, since the shortage of labour I mentioned is the prime factor in inflation and inflation is the prime factor in limiting growth; and the availability, therefore, of an important source of labour can be influenced by increasing through less unfair taxation the incentive to married women to work.
  I should like to see all cost of providing help in the home for working mothers tax-free. I should like to see the whole vicious and pernicious system of joint taxation scrapped entirely; especially in reference to Surtax, because professional women married to professional men cannot work without bringing the joint income into the Surtax and the higher Surtax brackets. This is bitterly resented in principle, and in practice it often operates as a total deterrent. It is also particularly and peculiarly socially damaging in its effect on the supply of doctors and other comparatively high income earners such as teachers and lecturers.
  I hope that when my right hon. Friend winds up the debate he will make this a main point of his and the party's policy. This is a particularly good year in which to make the point, because the Budget is a comparatively unenterprising one, and, even if we can sympathise with the Chancellor's limitations, surely this is the time for making comparatively inexpensive adjustments to the taxation system which will be of enormous general economic benefit. I hope that the policy of
  1306
  relieving the tax burden on working women, especially working wives, will continue in successive years to be part of the policy of the Conservative Party.
  I would tell my right hon. Friend that it is especially important that right hon. and hon. Gentlemen should put this forward. It comes very ill from hon. Ladies. It is proper that the point should be made by hon. Gentlemen. There is nothing men hate more than women getting a fair deal. If there is anything they hate more than women getting a fair deal it is women having the face to ask for it. Therefore, it ill becomes us to leave it to hon. Ladies; we should do it for them. I hope that we can now make a start in an area of policy which has been shamefully neglected by successive Governments, not least by the Conservative Party which has the taint of being anti-woman, and I should like it to start this year in giving a lead to the other side of the House and guaranteeing that when we sit on that side of the House we shall have a policy well in hand for putting into effect.
  There is one point that I should like to make to the Chancellor as he happens to be here. I well remember his saying in the Labour Party conference in 1965 something which comes to my mind with peculiar force and poignancy just now. There was an attack from the floor of the conference by, I think, Mr. Harry Nicholas, the leading spokesman for the trade union interests, who was objecting to the prices and incomes policy, which was then in its early day of formulation by the Labour Government. Mr. Nicholas said that the prices and incomes policy was like telling a man whose car had broken down to get out and push and offering him a corn plaster when what was needed was a new engine. It was a very powerful and persuasive argument.
  I happened to be watching on television—they did not allow me into the Conference—and I saw the Chancellor rise to reply to the debate. I thought that he handled it extraordinarily well. Very fairly, he repeated the joke about offering the man a com plaster, and then he said that what Mr. Nicholas had demanded instead of the corn plaster was a new engine. He paused and held up the drab grey publication, the National Plan, which had just come out, and said, all friendly an avuncular, "But Harry! This

  1307
  is the engine", and he patted the National Plan. I thought that that was a very effective debating point, and it was a perfectly fair argument to Mr. Nicholas, but he must be feeling pretty sick now because he has got his corn plaster and has seen the engine put down the tweeny—on the scrap heap.
  If there is one thing that the Budget—one cannot call it a Budget; there is no programme or plan—the Chancellor's speech made clear is that he has scrapped the National Plan. The whole of the 4 per cent. concept has gone. Therefore, he is saying to his Left-wing supporters, like the hon. Member for Walton and Mr. Nicholas, "What we persuaded you was the proper price that you would have to pay was a fraud, and the engine that we were offering you that would make the economy go and justify all the sacrifices that we were asking of you has broken down and will not work and you are not going to have it. All you have got is a voluntary prices and incomes policy that is now being made compulsory."
  It seemed pathetic to me when I heard the hon. Gentleman talk just now about Socialism. What we have now is a firmly established system of bureaucratic Fascism.
  8.35 p.m.
  Mr. Terence L. Higgins: The speeches we have heard today have been every bit as lively as the Chancellor of the Exchequer's Budget was dull. As far as I can recall—and I think that I have missed only one speech this afternoon—not a single speech was pro-Government, on balance, apart from that of the First Secretary.
  The Committee would wish me to express our congratulations to the hon. Member for Rhondda, West (Mr. Alec Jones) for a very fluent and able speech. He fufils the tradition of the oratory of those who come from Wales. The hon. Member represents a constituency with very grave problems at present, and no one would dispute that in him his constituents have a very powerful advocate. We look forward to hearing him further in the future.
  Some time ago, on 17th April, 1956, Mr. Harold Macmillan made a famous remark. He said that it seemed that our statistics
  1308
  were too late to be as useful as they should be:
  "We are always as it were, looking up a train in last year's Bradshaw."—[OFFICIAL REPORT, 17th April, 1956; Vol. 551, c. 867.]
  Times have changed; Bradshaw no longer exists—more's the pity—and two things have happened concerning the Government's economic Bradshaw. First, the trains are running a great deal slower in terms of economic growth, and, secondly, a good many interesting pages have been torn out covering the information we get from the Chancellor. I shall return to those two points later.
  First, I think that it is necessary to stress, in the general euphoria which seems to have surrounded the Government following recent balance of payments figures and the public relations talk of the success of the Government's economic policy, something that was pointed out from the back benches opposite this afternoon. Anyone can secure a favourable balance of payments if he is prepared to do so at the expense of suppressing economic activity in other ways, suppressing economic growth, investment, and so on. The crunch comes when the country tries to reinflate, after that exercise has been completed. The crucial question then is to what extent the necessary structural changes have been carried out by the Government in the meantime.
  During the last six years of Conservative government, we achieved a growth rate in the national income of 25 per cent., which was equal to that which was promised in the Government's aborted National Plan, and a great deal more than the rate of growth which we seem likely to achieve in the period which was covered by the National Plan. Even on the optimistic estimates which the Chancellor is now making, it seems unlikely that we shall achieve a 15 per cent. rate of economic growth over the six years.
  This all sounds dull, statistical stuff, and I am sure that the hon. Member for Liverpool, Walton (Mr. Heffer) would be the first to say that we must have fewer dull statistics. But when we think what the loss of economic growth means in terms of hospitals, roads, schools or rising standards of living, hon. Members on both sides of the Committee can regard that figure as very unfortunate. This was exemplified in an article in the Sunday Times on 9th April, headed,

  1309
  "Lost and Gone for Ever", because it is a fact that we cannot now hope to recapture the growth we have lost, particularly the investment on which we rely for future growth.
  I return to the point that the Chancellor appears to have eliminated from his Bradshaw some of the more interesting pages concerning the future outlook. Everyone on both sides of the Committee would subscribe to the view that the fact that the Budget is diminishing in importance as an annual event is good. But I hope that all of us also agree that the more information that can be got into the annual Budget speech the better it is for hon. Members, because we can then debate the matters with which we are concerned in economic policy on a sensible and factual basis.
  Before turning to discuss the question of economic policy and economic forecasting in some detail, may I say how delighted I am that the hon. Member for Manchester, Cheetham (Mr. Harold Lever) is to reply to the debate. It has been pointed out in the debate today that a number of ex-Ministerial speeches are a great deal better than the speeches made by the same hon. Members when they were in office. I am sure that the reverse will not be true and that we shall hear a scintillating speech from the hon. Gentleman who has come from the back benches into office.
  I shall listen with great interest to what the hon. Gentleman has to say, because he sat in the Chair during the long nights in Committee on the Prices and Incomes Bill. Throughout that time not for one moment, even at the end of a 26-hour sitting, was it possible for anyone to discern exactly what the hon. Gentleman thought about prices and incomes policy. Not for one moment did he deviate from impartiality. Therefore, I and a number of other hon. Members who served on that Committee are eagerly waiting to hear the hon. Gentleman's pronouncements on this subject.
  We recognise, too, that on the two previous major Finance Bills in 1965 and 1966 the hon. Gentleman spoke with a very great deal of technical expertise. For this reason, too, when he comes to the Dispatch Box this evening to make his maiden speech from that position we shall listen to him with great respect.
  1310
  In contrast, if I may say this without embarrassing the hon. Gentleman, when the Chancellor is here, the hon. Gentleman's expertise is somewhat different from that of the Chancellor himself when talking on economic affairs. Indeed, I think that it would be true to say of the right hon. Gentleman that he falls over backwards, to say that he is not a professional, though perhaps he might concede he is an amateur who does it for a living.
  In this context, it is relevant to refer to a pathological fear of forecasts which the Chancellor seems to display. In a debate in Committee on last year's Finance Bill we pointed out that the Chancellor would have to use the regulator, as indeed he has had to use it during the past year, and we tried to get from the Chancellor a certain amount of information on forecasts.
  The Chancellor replied in this way:
  "As everybody knows, I am neither an economist nor a statistician; I do not have a trained mind. I merely dance to an old Hungarian tune. But I have been in politics for 21 years, and have survived. The lesson that I would offer to the hon. Member"—
  that is, myself—
  "if I may in all humility, is always to pay a proper respect to arithmetic and a proper disrespect to forecasts."—[OFFICIAL REPORT, 16th June, 1966; Vol. 729, c. 1854.]
  The reference to arithmetic was perhaps not as fortunate as it might have been, because later in those debates we got into somewhat of a tangle as to the reason why the Corporation Tax rate was the rate it was. We never received from the Chief Secretary a satisfactory explanation for what my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) described as a schoolboy howler.
  Why should the Chancellor be so cagey about giving a coherent economic forecast in addition to some of the variables which he released in his Budget statement? This year's out-turn on the Budget surplus, which was supposed to be £1,047 million, turned out to be £738 million, which is an error of about one-third. The error on the National Plan is about one-third. So it does not seem reasonable that the Chancellor should feel inhibited about giving economic forecasts merely on the ground that they might turn out to be wrong and be embarrassing.

  1311
  The two instances I have mentioned have not embarrassed the right hon. Gentleman. Why, therefore, should he feel unable to give adequate economic forecasts? We know that adequate forecasts are prepared. A book has been published by the O.E.C.D. on how the Treasury prepares its forecasts. Therefore, we might reasonably hope that the right hon. Gentleman will publish the figures. It is true that the right hon. Gentleman has quoted rather more this year by way of forecasting the various variables than he has done previously—
  The Chancellor of the Exchequer (Mr. James Callaghan): More than the Tory Government did.
  Mr. Higgins: As to one or two particular figures, yes, but on balance, certainly last year, the right hon. Gentleman was far less forthcoming. This year he has merely gone some of the way towards what was estimated previously.
  Surely the time has come when this country can produce coherent economic forecasts. As has been pointed out, the National Institute and other bodies produce these forecasts. There is no reason why the Government should not fill in the gaps—in particular, the figures for stocks and for housing, which are still missing, total final expenditure, which is still missing, and the figure for consumer expenditure.
  I hope that the Chancellor will change his attitude on this matter and provide the Committee with a reasonable basis on which it can formulate an economic judgment. In the absence of such a coherent forecast I want to consider the Budget judgment which the right hon. Gentleman the Chancellor has put forward. Primarily, it is concerned with the relationship between the productive capacity of the country and the aggregate demand which there is likely to be for the products which the national economy is making.
  A great deal of this debate has been concerned with the figure which has suddenly crept in—this concept, so heavily criticised by my hon. Friend the Member for Guildford (Mr. David Howell), of a figure for "productive potential". The figure of 3 per cent. which the Chancellor has quoted was also vigorously
  1312
  attacked by my right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter). It would be true to say that we on this side of the Committee were extremely surprised to hear the First Secretary say, in his speech, "This is a rate which can be achieved without extra effort."
  I would like to examine the statistical validity of this figure, because it is at the heart of the Chancellor's judgment. We have some guidance from the 1966 Economic Report, which the Government have recently published. It turns out this figure of 3 per cent., on which the Government are relying so heavily, and upon which the Chancellor leaned heavily in his television broadcast last night, is a rather optimistic statistical extrapolation of the figures for 1960 to 1965. The Report goes on to point out that there have been some changes since then, the standard working week has been reduced, and there have been a number of untrained entrants coming in. The Report goes on to point out that both these factors have subsequently diminished in importance, but, none the less, the Government stick to their estimate.
  It is surely clear to the Committee that whether the figures achieved from 1960 to 1965 for a reasonable basis for extrapolation depends on two things. The first is the policy of the Government. The period which is being used as a base is a period of Conservative Government, with Conservative policies and the extrapolation is being made into quite a different period, when the Government are pursuing policies which, if they are not as Socialist as the hon. Gentleman the Member for Walton would like, are at any rate, not those which we on this side of the Committee would support.
  The second point is that this figure must clearly depend on the level of investment, and on improvements in technology. The fact is that investment has actually declined over the last year and the rate of investment has fallen by something over 10 per cent. Therefore, there is no reason to suppose that the underlying growth of productive potential, on which the Chancellor relies, is as high as he suggests. The same is true of technology, because, clearly, new technology can be incorporated through new investment.

  1313
  I suggest to the Committee that we should look askance at the figure put forward in the Chancellor's thinking. I feel that it is mere wishful thinking, such as we had in the National Plan, when there was a target figure of 4 per cent. Now, because of their disastrous performance, the Government have said, "We will have a quite different figure. Let us have a nice round figure of 3 per cent." There is no basis for estimating one's whole Budget judgment on such a singularly tenuous foundation.
  In a radio broadcast last night the Chancellor said that the way in which this 3 per cent. figure was to be achieved was up to his right hon. Friend the First Secretary. This afternoon his right hon. Friend put forward a most remarkably nebulous collection of devices to achieve this end, including one single example of a slight improvement owing to work study, where it seemed to him, that the figure for the rate of return on capital which had been achieved was not really relevant to the exercise. We do not think that quoting a single example provides the basis for saying that national growth will go up by 3 per cent. per annum. The other policies which he advocated were no more plausible.
  There are policies which the Government might reasonably pursue in order to achieve the objective which they have set themselves. They might be described rightly as the Paish policy, which, as the hon. Member for Walton said, the Government seem firmly committed to, keeping a higher level of unemployment over the long term; then cuts in Government expenditure; then incomes policy; and then regional policy. I should like to discuss those four points.
  First, the Paish policy depends on the Government achieving a reasonable balance between productive potential and the level of aggregate demand. It has been said that this is a neutral Budget. In the sense that tax changes in the Budget are neutral—that is, no significant change in the tax rates is anticipated—that is true. But the Budget will not keep the economy on the same course, because the borrowing requirement has been increased very substantially, and this is bound to raise aggregate demand, presumably, in the Chancellor's view, in line with the 3 per cent. increase in productive potential. I hope that the
  1314
  Government spokesman, when he replies, will tell us whether that is so.
  If it as so, and the borrowing requirement is to be used to reinflate the economy in this way, we need to know to what extent credit is to come from the banks. The Chancellor of the Exchequer says that he will have to avoid borrowing from the banks as much as possible, because if he does borrow from the banks naturally it will be used as the base for further credit-creation. We shall get what is known in technical parlance as a credit multiplier, and the extent to which Government borrowing is inflationary or reinflationary will depend very much on this. I hope that we shall hear from the hon. Gentleman how much he expects to borrow from the banks and how much he expects to get directly from saving, because it makes a real difference to the figures which the Chancellor must consider in making his Budget judgment.
  If we turn from the monetary side to the real assets side—in other words, the usual Keynesian break-down into consumption, investment, Government expenditure and overseas balance—we come to an interesting point which has arisen in the debate, namely, the split between private investment and public investment. The Chancellor of the Exchequer said yesterday.
  "In our present circumstances I do not regard that"—
  that is, the growth in public expenditure—
  "as a cause for alarm. It is quite justifiable that during a period when private investment is declining public investment should be allowed to advance quite rapidly so expanding the infrastructure. … But, of course, the corollary of this proposition is that when private investment recovers there should be enough room for it."—[OFFICIAL REPORT, 11th April, 1967; Vol. 744, c. 990.]
  We now have the remarkable proposition from the right hon. Gentleman that the rise in public investment which was originally based on the miscalculations in the National Plan was, almost by design, intended to fill the fall in private investment which has taken place. He goes on to assure us that as soon as private investment increases the Government will immediately cut back on public investment.
  We have to ask which twin is the residual. It is not good enough to say that public investment will always fill any gap left by private investment since the real

  1315
  growth of the economy and the real increase in production must depend primarily on private investment and not on public spending, much of which is not concerned with producing further output.
  The second point which one needs to make—and perhaps here I can put a nautical analogy to the Chancellor—is how will he stop the ship—in this case the ship of public expenditure—because he knows that it takes a long while to stop a ship when it has got up reasonable speed. Like my right hon. Friend the Member for Kingston-upon-Thames, I found utterly implausible the idea that suddenly, any time between now and 1970, he can cut back public expenditure in order to allow private investment to go up.
  If the right hon. Gentleman intends to do this, we are entitled to ask what public expenditure he thinks he will sacrifice if we find private investment picking up again. If we do not have a reduction in public expenditure at the same time as private investment picks up, we will find ourselves in the same position that we were in last July, because the aggregate amount of demand for the resources of the economy will increase beyond capacity.
  How might we reasonably attain some increase in output in the coming period? My hon. Friends and I feel that the Chancellor has, even within the limits set by his policies of the last 18 months, failed to take this opportunity to change the pattern of taxation. We welcome his statement yesterday in which he said that he was in favour of profits. At the same time, however, he said that increased dividends would be a bad thing. The two remarks, taken together, must mean that companies already in business are going to have a considerable increase in liquidity. They will be forced to plough back the profits.
  The Chancellor tried to do the same thing with Corporation Tax of 1965. It can reasonably be criticised on the ground on which my right hon. Friend the Leader of the Opposition criticised it then—that it would lead to the survival of the fattest. We do not believe that it is a reasonable policy to encourage profits but to discourage, in every possible way, the distribution of those profits. If we
  1316
  are to encourage new and growing firms and the mobility of labour—and the former is every bit as important as the latter—it is necessary that dividends should be paid and that funds should flow into the stock market and thence into other activities which can offer the best rate of return.
  Over the last few weeks there have been many Prayers against prices and incomes Orders, and it might be helpful if I commented on the incomes policy at this stage. I would be glad if the Minister would make it clear what allowance the Chancellor has made in his Budget judgment for the bunching of wage claims which have taken place during the period of the freeze. We find ourselves in an extraordinary position, for instead of there being the usual situation at the end of a period of deflation—with wage claims being negotiated on the basis of the existing economic situation—we have at the moment a number of wage claims already negotiated when demand was much higher. These claims will become effective as soon as the six months' freeze period comes to an end.
  What estimate has the Chancellor made in his Budget judgment of the increase in aggregate demand through personal incomes which is likely to take place as a result of the defreezing process? If the Minister cannot reply tonight, I trust that the Chancellor will look into the matter and answer my question when he replies to the debate on Monday night.
  The second point that should be made clear in regard to the incomes policy is that the Chancellor yesterday quoted approvingly Mr. George Woodcock as having said, in effect "We must have either an incomes policy or a threat to employment, deflation, and so on." The Chancellor seemed to ignore the fact that we have had both a compulsory incomes policy and a greater level of unemployment—as well as deflation, stagnation and a fall in investment—all at the same time. It is no good the Chancellor quoting George Woodcock as saying that these two are alternatives when he is imposing both at once.
  We have had a growing move towards compulsion and intimidation in the incomes policy, which my hon. Friends and I have consistently opposed. It involves

  1317
  a great deal of unfairness and discrimination and this is likely to increase, we cannot put much weight on an incomes policy if it involves, as the First Secretary implied today, either compulsion or merely a degree of ear-stroking, with the Government merely saying, "You should not put in your wage claims". We are much more convinced that an economic policy depends on the successful control of the level of aggregate demand in the economy.
  I now want to say a few words about the Green Paper. It is true that when we were in Government we put forward a draft Bill on a particular subject. As a means of stimulating and encouraging discussion on tax changes, the Green Paper is a useful innovation. Like my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod), I do not propose to put forward any clear cut ideas. I wish merely to express one or two thoughts on the subject.
  It is argued that the new subsidy to the regions will be self-financing, on the ground that this balances up the regions. No one has advocated more strongly than I the fact that we need a regional policy which balances up the regions, because we could then operate the economy at a higher level of performance. But any policy which succeeds in achieving that objective will have the same self-financing advantages as the Government's own proposal, always on the assumption that the Government's proposal succeeds in bringing more efficient industry into the regions, which many of us would doubt.
  In discussing the Green Paper, therefore, we must consider all the possible alternatives, for example, by way of improving communications to the regions, which would also prove self-financing in the way that the Green Paper suggests, but which may be a better way of achieving balance. Certainly, the elimination of this regional disparity is a very important point.
  The hon. Member for Edmonton (Mr. Albu) said that clearly the Prime Minister and the Cabinet must take the overall responsibility for economic policy. He was absolutely right in that respect, because it was the action of the Prime Minister in dividing authority between the Treasury and the Department of Economic Affairs in 1964 which was largely responsible for the crisis situation
  1318
  in which we found ourselves last July: the Chancellor's constant tax increases since the Labour Party came to office in October, 1964, until July were not sufficient to compensate for the wage claims which were brought about by the statements that the Government would have an incomes policy, which they failed to do so up to the period of compulsion and the July measures. Responsibility must fall on the right hon. Gentleman the Prime Minister for the division of responsibility. We are still paying a heavy price for it.
  In that connection, it must be pointed out that the Prime Minister is inclined to change the economic definitions in his own favour. That was certainly true in the exchange on the national dividend on 21st March, 1967, when he defined the national dividend, which hitherto in economics has been regarded as the same as the national income, as the marginal increase in the national income. I asked the Prime Minister whether his definition was different from that in economic textbooks, and he said that he had never seen the phrase "national dividend" described in an economic textbook, but that if I gave him a copy of the Victorian textbook which I read he would look at it.
  The definition of the national dividend certainly goes back to Victorian times. But the definition is to be found in Keynes's "The General Theory of Employment, Interest and Money", on page 37. It is remarkable that the Prime Minister is not familiar with Keynes's "General Theory" because, even amongst Oxford economists, it might be regarded as a very important document. Surely the Prime Minister cannot have forgotten about it. Are we to believe, therefore, that he had not adequately studied it?
  Perhaps, in conclusion, I might read a little from the final paragraph of the "General Theory", which has been the most influential economics book in the last 100 years. It says:
  "… the ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than it is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. I am sure that the

  1319
  power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas."
  I suggest that it is not good enough for the Prime Minister or other Ministers of the Crown to juggle the definitions which are normally advanced in economic theory to introduce new concepts, as the right hon. Gentleman has in his Budget and Economic Report, and then expect to produce a meaningful and helpful Budget.
  9.5 p.m.
  The Joint Under-Secretary of State for Economic Affairs (Mr. Harold Lever): First, I have the great privilege of congratulating my hon. Friend the Member for Rhondda, West (Mr. Alec Jones) on what I thought was an outstanding maiden speech. We have come to expect a very high level of passion and intelligence from Members from that area of the United Kingdom, and my hon. Friend by no means let down the standard with the splendid speech he made today, which I think was appreciated on both sides of the House. I must confess that I am a maiden winder-up on behalf of the Government, but happily there will be no opportunity for anybody either to congratulate me or to withhold congratulations, whichever is thought more appropriate at the end of my speech.
  A great deal of the criticism which has been directed to the Chancellor has been based on a misconception. Various adjectives have been applied to the Budget. It has been said to be dull, unimaginative, and the like. I think it should not be forgotten that the Chancellor's objective is not to provide entertaining television material, or even an adequate subject for an amusing debate in this House. His object, and we ought not altogether to lose sight of it, is to make appropriate fiscal changes, and these changes are what we consider to be appropriate in the present circumstances.
  I think that the devaluation of the high drama of the Budget must be accepted as part of the modern concept of how the Budget should be framed, and what purpose it should serve. The old concept, if I might adopt my right hon. Friend's sailing metaphors, of setting the automatic pilot on Budget day and hoping the ship will be able to steer to that course throughout the year without
  1320
  interruption, has gone. Frequent intervention is required, and the original excitement and interest of the Budget necessarily to some extent goes.
  My right hon. Friend is entitled to use sailing metaphors, because to my knowledge he has had the experience of sailing in circumstances in which he required the greatest skill and valour. He sailed under the skippership of my hon. and learned Friend the Member for Northampton (Mr. Paget), and with me as crew. I think that the House will readily forgive any number of sailing metaphors for a man who has earned them in that manner.
  The right hon. Member for Enfield, West (Mr. Iain Macleod) rather dismayed me this afternoon. He said that we ought to have a little gentle reflation. He thinks that the Chancellor is holding back. I rather think he takes the view that all Chancellors hold back on this. It is sad to see the right hon. Gentleman so soon anxious to tread the primrose path which has resulted in so much difficulty for our country, and so much difficulty for his party.
  I think that we ought to examine this. The Tory experience in regard to reflation was based upon the belief that there was a simple technique for expanding our economy. All we had to do was to foster demand at any place that it was convenient, to give it a fillip, and with a little courage, a little persistence, and a little borrowing from international bankers, the inevitable rise in the balance of payments deficit would be covered by an inevitable growth in exports shortly after. This was a splendid theory, and the first part of it seemed to work, namely, the reflation of demand. The trouble was that after the demand had been inflated in this way there came the balance of payments difficulties which were not solved in the automatic manner that the captivating theories of the Tory Chancellors should have indicated.
  Each Tory Chancellor tried this theory. Each went through a period when he was applauded and admired. That was when the lift was going up, and his political reputation was ruined when the bills came home to roost. The last Tory Chancellor, the right hon. Member for Barnet (Mr. Maudling), carried it to the extreme limit. I am not challenging the motives and good faith of Conservative Chancellors.

  1321
  They were acting on a theory which they thought would work. I am ready to concede that the road to the I.M.F.'s borrowing office is paved with the good intentions of the right hon. Member for Barnet. This is little consolation to those of us who seek to get the economy on a sound basis which can be permanently maintained.
  If we analyse the situation we see that the fault of previous Chancellors was that they knew how to get growth and they knew how to get a balance-of-payments balanced—at least temporarily—but the combination of the two completely eluded them. This was the central fault of Conservative Governments. Our task—and I do not pretend that we have solved all the problems connected with it—is precisely to find a combination on which we can sustain the long-term achievement of growth and prosperity with a permanent and reliable balance of payments surplus.
  The only way in which we can do that is not, the moment we see a breathing space, to be tempted by the siren cries of the right hon. Member for Enfield, West into a speedy reflation. The only way to go forward is to approach reflation on a much sounder basis than has ever been done in the past.
  The first thing to be done is to improve the industrial structure. This we have been labouring at with some intensity ever since we came to office. The N.E.D.C. and the E.D.C.s have fulfilled and are fulfilling a task in relation to our industrial structure which is of vital importance to our prospect of establishing reflation in due course on a sound and sustainable basis. Moreover, the existence of the N.E.D.C. and the E.D.C.s, and the nature of their work, confirm that this Government can and will co-operate with industry. We have received the co-operation of industry and this will develop in the most desirable way.
  A useful instrument of this policy is the Industrial Reorganisation Corporation. We have not had a great deal of results so far, because these are early days, but from the very promising work in the pipeline there is no doubt that this Corporation will play a significant part—by persuasion and not by secret, back-door methods—in providing information and supplying capital when and where it is needed in our struggle to improve the industrial
  1322
  structure and to give us a better send-off for our reflationary efforts when the time arises.
  A second point to which we attach the greatest importance in preparing the basis for a durable reflation which we can sustain without running into the classic balance of payments difficulty concerns our regional policies. Here my hon. Friend the Member for Rhondda, West has made a comment which we find interesting. The whole purpose of the Green Paper was to invite criticism so that the Government could give it due consideration. Not only in respect of the Green Paper proposals but by other actions in the regions the Government have taken tremendous steps to bring about a better balance in employment and industry as between the under-developed parts of the country and the places of high employment.
  Here again, there is another vital factor in terms of the structure of the basis on which we hope to go forward and sustain reflation. We have paid attention to exports to an extent not seen under previous Governments. We have brought about a climate in which business people and workers have become export conscious. Attention to this point is one of the necessary preliminaries for a balance of payments in which we can reflate without inflating back to square one.
  I will not list the other striking measures we have taken to ensure that we do not need to go through the same old unprofitable routine of stop-go, spree and hold-back that has, unfortunately, been our experience in the past. When it comes we shall make every effort to give the reflation a capital investment emphasis, both in private and public industry. We shall do so for public industry because that improves the infrastructure of our economic society, and we shall give it to private industry for obvious reasons.
  It should be noted that those hon. Members like the hon. Member for Worthing (Mr. Higgins), who separated into compartments private and public investment as if the two had no relation to each other in the economic effort of the country, ignore the fact that great amounts of public investment have a direct bearing on our economic aims.

  1323
  I was interested to note that when he was discussing what we might do to improve efficiency in the development areas, he thought that we might think in terms of improving communications and matters of that kind. I would have said that that was a very satisfactory approach, but, of course, it involves immense public investment. I am sure that the hon. Member is far too intelligent to value private consumption, even of a capital kind, relating to Bingo halls, for example, more than, say, an electricity generator, which is public investment—not that I wish to suppose that all private investment is on Bingo halls or that there is any objection to Bingo halls in themselves.
  Mr. Alison: Is the hon. Gentleman aware that the Chairman of the Electricity Council has just announced a 15 per cent. reduction in investment in electricity generating capacity?
  Mr. Lever: There is no pleasing the hon. Gentleman. If we maintain sensible and effective control over the nature of public investment, we are told that that is driving back capital investment. If, on the other hand, we encourage it and promote it and finance it, we are told that we are squeezing out private investment and depriving the country of the prospects of a mixed economy. The hon. Gentleman cannot have it every way. [An HON. MEMBER: "Of course he can."] He had a jolly good try in his speech, but it does not follow that he was entirely convincing. As an interventionist from the back benches, he might take some comfort from the fact that, in public expenditure, economic investment has been proceeding twice as fast as social investment, so he has no complaint on that score.
  I will not say much about the prices and incomes policy. I am not a great expert on the details because, since being Chairman of the Committee which dealt with the Bill, a fact to which the hon. Member for Worthing so generously referred, a merciful First Secretary has not put me in that department. Either he feared that I knew too much, or that I had had enough of it. At all events, the prices and incomes policy has fallen on shoulders broader than mine.
  However, this too is a vital element in the preparation of our plans for the re-
  1324
  flation of the economy and the progress for which we now look, and it is one of the things on which we rely. That does not mean that we expect everybody to behave in perfect conformity with the desires of the Chancellor and of the First Secretary, although we all know that it would be a much better world if they did. However, we have resigned ourselves to some of the facts of life. We are confident that we shall have a reasonably successful prices and incomes policy, and we are confident that we shall get the co-operation of both sides of industry in our purposes, because it is widely recognised that our future sustained prosperity depends on the formulation and acceptance of some such policy.
  I do not want to pass, as though it were a dark side of the Government, what is done through public expenditure of the non-economic kind on behalf of our beliefs in social justice and our sense of moral obligation to our people. I will not say very much about it, but I should like to say to those hon. Members who have very largely the same priorities in this sort of issue that we have, that there is nobody in the House who recognises more than I do the need for material incentives in all aspects of our national life. Of course, these are not the only incentives which make people work, in all fields of activity, but, on the other hand, they form a very valuable incentive. I must say, to those hon. Members who worry all the time that the Government see as one of our priorities the provision of greater social justice and the discharge of moral obligations to the less privileged members of our community, that one could not possibly succeed in one's material aspirations in modern Britain, and one could not organise or plan or hope to succeed in one's arrangements for sustained prosperity for the country, if one did not also plan for the needs of so many millions of people who, in spite of very general prosperity, have been left behind in the economic race. Whether it is because of old age, or by reason of sickness, or even because of some lack of talent is beside the point.
  We ought to make it clear—I hope that my hon. Friends will bear this in mind, as some of them question the sterner measures which the Government are obliged to take—that the Labour

  1325
  Government were not brought into being to organise a consensus between the opulent and the affluent, and discard unheeded all the millions of people in our society who still have a grim time. I am not saying that any hon. Member wants to organise such a consensus, but we ought not, when there is a good deal of tough talk going around, to ignore that, even on the basis of material achievement, a Labour Government cannot succeed unless we have some regard to these moral obligations.
  Above all, I must emphasise that, when we come to reflate, as will be seen from the list of work which we have done, we will not rely—this was the great weakness of the Tories when they handled this matter—only on fiscal and financial means. The Tories concentrated practically the whole of their reflationary policy either on fiscal or financial steps—relaxations of credit, reductions of taxation, and the like—which are all splendid means for reflating an economy but must be accompanied by an immense range of effort, some indication of which I have given, to make this possible of sustained, uninterrupted achievement.
  I share the desire of the right hon. Member for Enfield, West for making a break-through out of the kind of box in which this country has got itself, but I hope that he will not mind my saying that it is not an oratorical or journalistic break-through which we much achieve. We must tackle the specific problems and take the specific measures along the lines which I have sketched if we are to make this break-through. Mere reflation such as is now demanded, without this preparation and these emphases, will land us in the same trouble which we were in before.
  My right hon. Friend has been criticised for his lack of courage in this Budget. I think that he has shown great courage in bringing in what was an appropriate Budget, and in restraining himself from any temptation of gimmickry or flamboyance which was not relevant to our situation. My old school motto was Sapere aude, which, for the benefit of hon. Members who went to those other schools which are now not so popular on either side of the House, I will translate as "Dare to be wise". I must congratulate my right hon. Friend. He had the courage to be wise and do what he thought to be right, even if it
  1326
  deprived our television commentators of their material, and bore in mind that his chief task was to deal with our financial situation rather than any kind of vaudeville or tendency to turn politics into a spectacle.
  The hon. Member for Louth (Sir C. Osborne), in his untiring pursuit of unattainable objectives, continued to press upon the Government a request for relief from taxation and rather old-fashioned things in other ways. I must confess that in some ways I can share his preference for the ideas of the nineteenth century; what I cannot share is his illusion that that is the century in which we are operating.
  I do not know what his access is to international bankers. They have confided in him that my right hon. Friend is thoroughly and completely in their charge, but I can assure him that there is no foundation for any such supposition. Alas, we could wish sometimes that the international bankers were as systematically in control of our financial policies as is alleged. It would save a good deal of time in the Treasury and the D.E.A., where we labour long hours in pursuit of these policies. Anyone who wishes to retain these somewhat exciting fantasies can continue his demonological oratory and denounce the Government. It does not hurt him and it certainly does not hurt the Government.
  I sympathise in some ways for the hon. Member is on to a point which many have made about the need for incentives. As regards taxation in relation to incentives, the level of our Corporation Tax is lower than that of virtually any of the larger Western countries. Even allowing for Income Tax deducted from dividends, the total taken from profits in this country is well below that taken from most of the Western European countries. Income Tax at the higher grades, except at the very high grades of Surtax on income, is not out of line with what is common in Europe At the higher levels, I agree that that is not so. I do not have time, fortunately perhaps, to go into too many details. I can only tell the hon. Member for Louth that he did not need to declare himself as one of the Chancellor's geese to insure against himself being killed by any hon. Member on this side. We welcome the hon. Member's declaration of

  1327
  rôle and I ask him to assume that it is likely to continue.
  The right hon. Member for Enfield, West is, I think, wrong on a small point about Australian investment. He said that the Australians think that our stopping of investment is permanent whereas the Americans' is temporary and that the Americans have been more favourable than we have. That is not so. On portfolios the Americans have imposed a tax on direct investment. The only advantage that the American has over the British investor is that he gets a higher tax relief under the Double Taxation Agreement, but that is because his Corporation Tax is at the higher rate of 50 per cent. as against our 40 per cent. If the hon. Member can persuade my right hon. Friend the Chancellor of the Exchequer to move our Corporation Tax up to 50 per cent., he will put British investors in the same position in Australia as the Americans.
  I will not go into detail with the hon. Member for Barkston Ash (Mr. Alison), who has tried to make our flesh and that of the C.B.I. creep at the thought of the Government acquiring economic securities and the like. This will all be explained to the hon. Member tomorrow. I do not have the full details, but his fears of acquisition as a threat to private industry are insubstantial to the point of being a matter for humour rather than for serious contemplation.
  The hon. Member for Ilford, North (Mr. Iremonger) was disappointed with my right hon. Friend, but he was disappointed with all Chancellors of the Exchequer. Why should my right hon. Friend be any exception? Apart from the hon. Member's assertion that the Conservative Party dislike intensely giving women a square deal, there was nothing to which anybody could take exception in his speech.
  I want to deal with one final point, and that is unemployment. It has been asked "What do we regard as a tolerable rate of unemployment?" I am
  1328
  bound to tell my hon. Friends that there is no rate of unemployment that we would regard as tolerable in that sense. I fully sympathise with everything that my hon. Friends feel on the question of unemployment. Any unnecessary unemployment is intolerable.
  The only unemployment which we can accept is the lowest rate of unemployment consistent with steady growth and paying our way in the world. In the long run, that will be the least unemployment that we experience. Merely to drive up employment swiftly at this point to bring another crisis and large scale unemployment upon us would not be to the advantage of the most defenceless members of the community.
  Any fool could bring down unemployment temporarily. We want to bring it down permanently and on a solid, reliable and sustainable basis. My hon. Friends must believe that my right hon. Friend feels—indeed, every member of the Government feels—as strongly about unemployment as they do. I assure my hon. Friends that there are no cynics in the Government.
  Mr. Heffer: Is my hon. Friend repudiating the Paish idea?
  Mr. Lever: I wish that my hon. Friend had had the opportunity of raising the point. I am at the conclusion of my speech and we will, no doubt, have the opportunity to discuss this on more than one occasion. I assure my hon. Friend that there are no cynics in the Government. Our ideals and purposes are intact. Those ideals are the sustained prosperity of the country to economic success and the achievement of a social justice and the moral ideals to which we have all subscribed.
  Whereupon Motion made, and Question, That the Chairman do report Progress and ask leave to sit again—[Mr. Ioan L. Evans]—put and agreed to.
  Committee report Progress; to sit again Tomorrow.

  FRAUD INVESTIGATION
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Ioan L. Evans.]
  9.30 p.m.
  Mr. Edward Lyons: Large-scale fraud may be said to be today's fastest growing industry. It is perpetrated increasingly on a national scale with national organisation, through subsidiaries of main companies, through national advertising and, in the case of some types of fraud, through branch establishments in the country. It is interesting to note that the Fraud Squad was created after the last war because Servicemen, people without business experience, were returning home with gratuities, and a number of people were determined to devise means to pry those gratuities from them.
  Today, there are no gratuities, but as society grows richer and richer more and more people have substantial savings, and even those who do not have savings often have incomes at a level which makes an oppressive instalment contract worthwhile. Even the housewife is worth attention. Where the war-time gratuities made crooks wet their lips, the crooks positively drool over the thought of this fantastic modern wealth in the hands of so many people who are commercially naïve.
  There is, of course, a willingness in people to believe in get-rich-quick schemes. The modern confidence trickster is often highly educated, or may be a salesman trained in American methods. Subtlety is now used, and a growing variety of schemes have been devised: hair clinics, health clubs, pig breeding schemes, casino betting systems, insurance swindles, laundry and automatic vending frauds, instalment contracts distinctly burdensome false claims for Government subsidies, and now, in some cases, choosing one's mate by computer. There are also company frauds of great complexity, thought of and manipulated by top-class brains. The rewards of fraud can be very high—they come from those who also wish to get rich very quickly. Mr. Maurice Viner, a distinguished barrister, has formulated a new liberty of the citizen—the liberty to be "done". With
  1330
  an increasing population and prosperity we must accept that fraud will continue to increase.
  What are the resources at present being used to deal with fraud? The City of London Fraud Squad is said to have 18 men; the Metropolitan Fraud Squad is said to have rather more. It is said that the investigation department of the Board of Trade has 17 men. It has been said that in the City of London one must defraud someone, or some people, of more than £1 million if one wishes to rate more than a sergeant. The Sunday Times has called the Fraud Squad, the Board of Trade and the Directorate of Public Prosecutions "this old triangular machine"—a machine designed in a bygone age to meet fraud that bears very little resemblance to the scale and complexity of fraud today.
  In the country at large, some police forces have fraud squads, other do not. Those squads that exist tend to be small, undermanned and to be treated badly for promotion. To handle the legal end of fraud, the Director of Public Prosecutions has on his staff 40 lawyers, who handle 6,000 cases a year, many of which are not, of course, cases of fraud. That means that each lawyer deals with about five cases a day. The people working for the Director of Public Prosecutions cannot concentrate on one fraud at a time, no matter how complex it may be. They have to fit in their study and preparations with their other work.
  So far as I know, none of the bodies I have mentioned employs chartered accountants and none has a solicitor specialising in company law. Police officers go to the fraud squads for a period, and then return to their units.
  The police and the Board of Trade officials and those working in the Directorate of Public Prosecutions are able and conscientious and, for their numbers, achieve good results, but at present there is administrative constipation, as one newspaper said. There is a terrible burden on fraud squad officers both physical and mental. In theory they should be able to call in outside professional help. The Fraud Squad is entitled to call on a firm of accountants. Last year the Squad paid £15,000 for the services of accountants, but one does not get much advice for £15,000.

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  The Board of Trade calls in outside inspectors to carry out investigations. A barrister or accountant inspector has to try to fit in inquiries with his usual professional work and this causes great delay. The confidence of a detective might conceivably be impaired if he has strong feelings about social class, because he is dealing sometimes with people of a public school background operating in plush offices and flanked by accountants and lawyers.
  Separate staffing of these different groups results in duplication of work. Inadequate staffing results in long delays in bringing an accused to trial. Overloading can mean a reluctance to take up less weighty frauds although such frauds may be fairly common. The effects of delay are terrible. One knows of cases where there has been five years delay from the discovery of a fraud to its prosecution. The money can have gone, the accused can have disappeared, witnesses may have died, recollections grow hazy among the remaining witnesses so that counsel may have a field day lengthily cross-examining and dilating on the contradictions of those failing memories.
  If the man is innocent he has had a charge hanging over him for many years which may have had serious effects on his health, his peace of mind and his reputation. It was said in Magna Carta:
  "To no one will we deny justice.
  To no one will we delay it."
  But in a case of fraud this often happens and there is the strain of the period of waiting. Delay may also mean that a fraud can continue to be perpetrated on the public longer than ought to happen. The Director of Public Prosecutions does not begin investigations until a case is referred to him by another agency. That might be a long time after the case first comes to light.
  What is required to remedy this situation? I propose a specialised unified body with headquarters in London and branch offices in the regions. It should take over fraud from the Director of Public Prosecutions, company investigations from the Board of Trade and absorb the City and Metropolitan Fraud Squads. It should have on its
  1332
  staff chartered accountants and solicitors with prosecuting experience. There should be enough police officers in the new commission to produce a proper pay structure considerably higher than that for ordinary officers in the police force. There should be reasonable prospects of promotion. It should attract graduates to the police force.
  The Board of Trade could second personnel to the commission for limited periods of time, as other agencies might also do. Officers could also be loaned additionally from other police forces when required. At headquarters top-class accountants should be available to the commission's branches in London and the regions. If this sounds a terribly large-scale operation, it should be remembered that in America the Securities and Exchange Commission employs more than 1,500 professional men. Specialisation should also produce more "know-how" and, therefore, speedier investigation.
  The commission should deal not only with frauds of a complex commercial kind, but also with appropriate consumer frauds, and not only frauds reported to it, but should go out to discover where frauds are, and that is not as difficult as it sounds. S.E.C. seeks to nip fraud in the bud. For example, its officials scrutinise all newspapers and magazines for advertisements. In this country, it could be done with advertisements, news, trade offers and personal columns. All those could be scrutinised to see whether anything looked suspicious and worthy of investigation.
  Another advantage of the commission would be that information about frauds will flow in centrally through the regional offices to headquarters. For example, if at the moment there is a complaint by a Leeds consumer to the Leeds police, the advice that he might get is "It is a civil matter". The Leeds police will not know that a similar complaint has been made by a Birmingham consumer, another by a Cardiff consumer, and so on.
  But if fraud was handled regionally and nationally by one organisation then within a few weeks of a new fraud being perpetrated nationally—for example, in relation to health clinics—enough information would be flowing in centrally

  1333
  for the commission to be aware that there was another national fraud, and it could take action quickly. The channelling of information would be a useful result of the establishment of such a commission. It would be an advantage for it to be known that action could be taken quickly. The terrible thing about frauds in this country is that they can go on for years before there is movement to stop them.
  Another advantage of the commission would be that knowledge of the various frauds would be pooled into fewer hands so that there would be greater knowledge and expertise at the centre. In a real sense, the commission would not only be a scrutineer, with teeth, of business practices but would also, for the first time in this country, fulfil the rôle of an effective consumer watchdog.
  What should the powers of the commission be? In addition to the normal powers of the police and the normal powers of the prosecution department, the commission should be given power to stop advertising when it is reasonable to believe that it is directed to gulling the public into parting with their money.
  Mr. Speaker: Order. I hesitate to interrupt the hon. Gentleman. I presume that all this can be done under present legislation. If he seeks the new powers by legislation, he cannot advocate this on the Adjournment.
  Mr. Lyons: I am much obliged, Mr. Speaker.
  I would advocate for the commission occasional broadcasts on radio and television telling the public about the latest type of fraud so that people would be forewarned. I submit that such broadcasts, if made in good faith, should be exempted from normal actions for defamation; in other words, they should be privileged.
  The members or officers of the commission could, as weights and measures inspectors do, pose as customers and also as investors. They could, one hopes, institute codes of business conduct and codes of doorstep selling and in this way influence in a deterrent fashion switch selling and other vices.
  If it simply becomes an enlarged, effective, well equipped, well manned, modern fraud squad, the commission will
  1334
  be well worth while. But an alternative is open to the commission, and that is to become an organisation to fight not only big-time fraud but consumer fraud so fiercely as to make British commercial life of so high a standard and of such integrity that the world will look at it in admiration. In this modern world we must look to the weapons we use to fight modern criminals operating on an ever-increasing scale. I therefore urge the setting up of such a commission with proper powers and staffing, so that we can protect the public rather better than hitherto.
  9.45 p.m.
  The Minister of State, Board of Trade (Mr. George Darling): My hon. Friend the Member for Bradford, East (Mr. Edward Lyons) has drawn attention to many kinds of frauds perpetrated by what is, in fact, a minority fringe of so-called businessmen. It is worth pointing out that of the 500,000 or so companies operating in this country the number that could be described as fraudulent is relatively very small, and that the vast majority of businesses in this country are conducted perfectly honestly. We share my hon. Friend's concern about that fringe of dishonesty, which is, perhaps, likely to increase as our complex society becomes more complex and complicated, unless we take adequate steps to deal with it.
  My hon. Friend said that the organisations we have today to investigate frauds and, where need be, prosecute are out of date and thoroughly inadequate. I do not accept all his criticisms of our present organisations—the Board of Trade Investigation Department, the Fraud Squad, and so on. Many of his criticisms in that respect are exaggerated, but I agree that there is a need for improvement in both organisation and methods. Since the present Government came to office we have made many improvements, and have studied how best to create a better fraud investigation system. By this Adjournment debate my hon. Friend has anticipated the announcement of the proposals we shall shortly make.
  Although I was very interested and impressed by his very wide-sweeping proposals we consider that what we shall propose before long will do the job much better. I cannot tonight tell him what our proposals will be, and I think that

  1335
  to do so would be out of order, because a certain amount of legislation will be required. But I assure him that he has not long to wait.
  I wish to deal with one or two points which I think will be in order, particularly concerning his criticisms of our present methods of doing things, and his first suggestion that something like the United States Securities Commission would do the job better here. I understand that the Commission is not so much a fraud investigating unit as a body trying to protect investors in connection with dealings in securities, and so on.
  The work of that Commission was examined by the Jenkins Committee, which looked into company law, and the Committee was not persuaded that a system of control on the United States model would work as well in Great Britain as the more flexible, though perhaps theoretically less perfect, system which has grown up here. There were very good reasons for that.
  The main difference between our two systems is that in the United States there is no single body like the Federation of Stock Exchanges such as we have and, as the American witnesses to the Jenkins Committee pointed out, the size of the United States, its scattered security markets, the existence of 50 different State Governments and the past history of the security business, made strong centralised control in Washington very important.
  The way we deal with this matter—I am talking about the usual run of commercial frauds—is provided for in the Companies Act, 1948. Under Section 164, the Board of Trade can appoint inspectors to investigate the affairs of a company on the application of the requisite number of shareholders, etc., if the applicants have a good reason for investigation. Under Section 165 the Board of Trade must appoint inspectors if the company declares by special resolution that something is going wrong and it wants an investigation. In addition, the Board of Trade can, on its own initiative, if there are circumstances suggesting fraud, misfeasance, and so on, put inspectors into the company.
  Obviously, there are weaknesses, because the Board of Trade must act on
  1336
  information and advice before anything can be done. There are also weaknesses in that the Board of Trade's inspectors are circumscribed in many ways. I will not go into these matters now, because they have been the subject of our inquiries to see if we can find a better way of doing things.
  The investigations, as presently carried out, are necessarily private. The inspectors must make a report to the Board of Trade when the investigation is completed. When the inspectors have made their report, their functions cease. If the report discloses that a criminal offence may have been committed, the Board of Trade, under the Companies Act, has to refer the report, in England to the Director of Public Prosecutions if the Board of Trade considers that a prosecution should be undertaken by him, and in Scotland to the Lord Advocate.
  Because of the way that the information has been given to the Board of Trade's inspectors, the question of taking action for a criminal prosecution must start all over again, because the witnesses who have given information to the Board of Trade under the compulsory powers of the Board of Trade's inspectors must now produce evidence voluntarily on which a criminal prosecution can be substantiated. This is another problem which we have to deal with.
  My hon. Friend went on to describe a very wide-ranging commission, to which he suggested that many more lawyers and accountants should be appointed. I assure him that one of the reasons for delays in dealing with many cases which have come before the public eye—I will not name them; we all have them in mind—is a shortage of manpower in these grades. If my hon. Friend can tell me where to get these lawyers and accountants with the proper qualifications to do this work, I shall be very glad to have discussions with him.
  My hon. Friend mentioned the size of the various bodies which deal with commercial fraud. There are criticisms of the amount of time taken by the Board of Trade's inspectors to complete their investigations. The subject matter of these investigations is frequently very complicated. Moreover, generally speaking, the Board of Trade appoints professional men who are in private practice to do this job—barristers-at-law and accountants. They can hardly be expected to neglect

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  their practices, though in fact—tribute must be paid to them for this—they sometimes do.
  The average time taken in completing and reporting on an investigation is about 16 months. I agree with my hon. Friend that in many cases that is too long. Some of the more complicated cases are likely to take quite a time, anyhow.
  To try to speed things up, the Fraud Squad has recently been strengthened, and it is, therefore, able to deal more expeditiously with cases arising from the reports of Board of Trade inspectors. In addition, the Board of Trade, in order to carry out its functions under the appropriate Sections of the Companies Act, has a small section staffed by accountants, or officers with accountant experience. This section has been recently strengthened, too. We also have another investigation section, staffed by former police officers with investigation experience, many of them from the Fraud Squad. This section has also been extended, and now makes preliminary inquiries in cases of suspected company fraud, which is of considerable help.
  We intend to go on strengthening both the administration of the legal branches concerned with fraud, but the recruitment of the appropriate people with legal or accountancy experience is very difficult indeed.
  On the general proposition that my hon. Friend has put forward, frankly, out of
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  experience, we doubt whether there would be any advantage in merging the branches of the Board of Trade concerned with commercial fraud with the activities of the Fraud Squad and the Director of Public Prosecutions, and so on. Our view is that there is more to be gained by securing much closer co-operation between these bodies, and we will be coming along with proposals very soon to deal with this co-operation and other methods of investigation.
  My hon. Friend went on to talk about widening the powers of the commission that he was talking about to deal with frauds under consumer protection. We have given a great deal of consideration to this in the Board of Trade, and many of us gave a great deal of consideration to it before the change of Government. I am quite convinced, and the more that I look at the problem, at the kind of fraud with which we have to deal, misrepresentation, misleading advertising and all the rest, the more convinced I am that—and this will be my only word on this point, Mr. Speaker—the Protection of Consumers (Trade Descriptions) Bill is by far the best way, and the right way, of doing the job. I hope that we will not have long to wait now before that Bill is on the Statute Book, too.
  Question put and agreed to.
  Adjourned accordingly at two minutes to Ten o'clock.