Commons Sitting of 24 November 1969

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
ORAL ANSWERS TO QUESTIONS
  SOCIAL SERVICES

    Broadmoor Special Hospital (Staffing)
    Mrs. Renée Shortasked the Secretary of State for Social Services if he will make a statement about the staffing position at Broadmoor Special Hospital.
    The Secretary of State for Social Services (Mr. Richard Crossman): As the answer includes number of figures, I will, with permission, circulate it in the OFFICIAL REPORT.
    Mrs. Short: Does my right hon Friend recall that in evidence given to the Parliamentary Estimates Committee that in-vestigated the special hospitals, we were told that, concerning medical staff, Broadmoor is worse off that Grendon, although it has more difficult patients to deal with, and, concerning nursing stuff, there was a shortfall of about 50
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    nurses? Can my right hon. Friend say whether the figures that he is to circulate will show an improvement on that position?
    Mr. Crossman: Yes, I think that I can.
    Following are the figures:

    BROADMOOR HOSPITAL STAFFING POSITION ON 1ST NOVEMBER, 1969

    Authorised Number

    In Post (whole time equivalents)

    Medical Staff

    12

    10½

    Nursing Staff:

    Male

    277

    262

    Female

    90

    74

    Occupations Officers

    30

    30

    Professional and Technical

    12

    12

    Ancillary

    85

    81

    Executive and Clerical

    34

    34

    Totals

    540

    503½

    Abortion Act (Equality of Treatment)
    Mrs. Renée Shortasked the Secretary of State for Social Services what improvements he intends to introduce in the operation of the Abortion Act in order to ensure that all women in every regional hospital board area have equality of treatment.
    Mr. Crossman: Officers of my Department are making a series of exploratory visits to selected areas in the country to study the effects of the Act upon the hospital service. In the light of their findings I shall consider what further action is needed.
    Mrs. Short: As my right hon. Friend is on record as saying that he regrets the difference between the regions and also the attempts at self-help which organisations like the Birmingham Pregnancy Advisory Service have set up, can he tell the House what he intends to do to ensure that the Act is properly operated?
    Mr. Crossman: If my hon. Friend is thinking about conditions in the West Midlands, I shall be making a decision about the possibility of opening a nursing home in the immediate future.
    Mr. Brooks: Is my right hon. Friend aware of certain allegations that in some parts of the country women are being denied abortions unless they simultaneously agree to be sterilised? Does he agree that, while this operation might become eminently desirable in certain circumstances, it is improper if pressure of this kind is put on women?
    Mr. Crossman: I have not heard of the allegation which my hon. Friend mentions. If he will put it to me in writing, I will certainly investigate it.
    Sir B. Rhys Williams: Will the right hon. Gentleman bear in mind that the object of the Health Service is to save life, not to end it?

    Widow's Pensions
    Mr. William Hamiltonasked the Secretary of State for Social Services what recent representations he has received concerning the position of those widows under 50 years of age who receive no pension; and what steps he intends to take to alleviate their circumstances.
    The Minister of State, Department of Health and Social Security (Mr. David Ennals): My right hon. Friend and I have had a number of individual representations on this subject, both directly and through hon. Members. My hon. Friend knows that the Government share his concern about the age 50 condition for widow's pension and that the proposals for the new scheme include provision of a scaled down flat-rate pension for existing widows who were aged between 40 and 50 at widowhood or when their widowed mother's allowance ceased.
    Mr. Hamilton: Is my hon. Friend aware that that does nothing in the mean-
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    while for those widows who are suffering considerable hardship? Will he further consider the matter with a view to alleviating that position until such time as the benefits accruing from the new scheme come into operation?
    Mr. Ennals: There has been an increase in the widow's pension level from 3rd November. As for the date when application of the new scheme can come in, we must await the Bill.
    Lord Balniel: As we welcome the part of the White Paper which is designed to end the rigid age barrier which stops widows getting a pension, may I ask what would be the cost of bringing this part in before 1972?
    Mr. Ennals: I should need notice of that question.

    Hospitals (Electrical Fittings)
    Mr. William Hamiltonasked the Secretary of State for Social Services if he will make a statement on the progress being made in the standardisation of electrical fittings in National Health Service hospitals.
    The Joint Under-Secretary of State for Health and Social Security (Dr. John Dunwoody): The importance of adopting a standard socket outlet to enable appliances to be readily connected at any point in a hospital where they may be needed has been stressed in the past at meetings with the engineers of hospital authorities.
    Mr. Hamilton: Can my hon. Friend say what progress has been made in this regard in the last few years, and whether there is any evidence that lives have been lost or put in jeopardy resulting from failure to expedite the process of standardisation in this sphere?
    Dr. Dunwoody: On the second part of the question, I have no direct evidence that this is so, and I have examined at least two cases. We are making progress in standardising electrical equipment. Our aim is to provide a sufficient number of 13-amp sockets for the convenient use of mobile appliances throughout all hospitals either by rewiring or by replacing existing 15-amp points with 13-amp points.

    Invalid Vehicles
    Mr. Martenasked the Secretary of State for Social Services what proposalshe has for disabled vehicles for haemophiliacs.
    Dr. John Dunwoody: Haemophiliacs will continue to be given priority for the improved three-wheelers now available, and for those with automatic transmission in due course. The interiors are specially modified when necessary.
    Mr. Marten: Would not the hon. Gentleman agree that haemophiliacs are a rather special case, in that internal bleeding and haemorrhage can come from a knock while driving three-wheeled vehicles? Will he look at this again, as the number of haemophiliacs who require vehicles is very small?
    Dr. Dunwoody: I agree that in certain respects haemophiliacs present a special problem, but so do many other groups who claim three-wheeler vehicles or improvements in the present service. We provide extra padding in these vehicles when this is necessary, and I assure the hon. Gentleman that we shall take into account the claims of haemophiliacs, as we shall of the other groups, if the opportunity arises to extend this service.
    Mr. Martenasked the Secretary of State for Social Services if he will make a further statement on vehicles for disabled drivers.
    Dr. John Dunwoody: My predecessor made a statement in reply to a number of Questions on 27th January. Production of 2,000 three-wheelers with improved suspension began in June, and 20 three-wheelers with automatic transmission will begin trials later this year. Full-scale production of the automatic three-wheeler is expected by the end of 1970.—[Vol. 776, c. 929–32.]
    Mr. Marten: But is the hon. Gentleman aware of a recent case in my constituency where a disabled driver who was paralysed from the waist downwards spent 14 hours upside down in a ditch all night because his three-wheeler was blown off the road in a high wind? Does not that show the inherent instability of what one hon. Gentleman opposite has called a sardine tin on wheels? Will the hon.. Gentleman look at this again?
    Dr. Dunwoody: If the hon. Gentleman will send me details of the case, I shall look into it. The accident record of these vehicles is exceptionally good, and no difficulty is found in obtaining insurance at normal rates for the drivers of them.
    Mr. Peter M. Jackson: My hon. Friend knows that there has been much criticism of these vehicles by disabled people, and that that has been substantiated to some extent by the Consumer Association Which? report. Would he consider it proper to give a cash allowance in lieu to those disabled people who would like to purchase four-wheeled vehicles?
    Dr. Dunwoody: That is a much wider question. I do not at the moment think that I should feel able to do that. We have to consider not only the people who have vehicles and who would like four-wheeled vehicles but all those denied any vehicles because of the criteria that we lay down. Nevertheless, the service is exceptional. We have the finest service in the world, and we are spending twice as much on it as we were five years ago.
    Mr. Dean: I think that it was the Joint Under-Secretary of State who, in a previous incarnation, referred to a sardine tin on wheels. Can the hon. Gentleman say what is being done to make use of the new powers which Parliament has provided, both to improve the vehicles and to extend the categories of disabled people who can be provided with these vehicles?
    Dr. Dunwoody: Improvements are constantly taking place in the vehicles, and, as the hon. Gentleman knows, we are bringing out a new vehicle with automatic transmission. The Which? investigation referred to has spoken very well of it. I think that we can look forward to this providing a very much better service to many people who are somewhat critical of today's three-wheeler vehicles.

    Hearing Aids
    Mr. Robert Howarthasked the Secretary of State for Social Services if the investigation of improved and more compact hearing aids has been completed; and if he will make a statement.
    Dr. John Dunwoody: Development of a new body-worn hearing aid of about the same size as the present ones, but with improved performance and a wider range of facilities, is continuing but not yet completed.
    Mr. Howarth: Is my hon. Friend aware that one of the complaints that I have received is that there is a considerable amount of clothing noise with the body-worn hearing aids? Is there no prospect of moving to the head-worn variety which appear to be so much more satisfactory?
    Dr. Dunwoody: Clothing noise is a problem with body-worn aids, although the new body-worn aid that we hope to introduce will be considerably superior, technically, to any ear-level aids available. The question of ear-level aids comes up in a separate Question from my hon. Friend.
    Mr. Robert Howarthasked the Secretary of State for Social Services what has been the result of experimentally supplying children with head-worn hearing aids; and if he will make a statement.
    Dr. John Dunwoody: The experimental issue of ear-level aids is not yet complete, and a year's experience with each aid will be required before the results of the experiments can be fully assessed.
    Mr. Howarth: Will the experience from this experiment possibly lead to supplying adults with head-worn aids? Has my hon. Friend any observation to make on that?
    Dr. Dunwoody: I think that the results of this experiment will be of great value in deciding whether we should go ahead with the provision of ear-level aids. The main advantage of these is the cosmetic rather than the technical one, but this is no reason why we should not look at it.
    Mr. Scott-Hopkins: Is the hon. Gentleman aware that there is a great deal of dissatisfaction among the disabled over the existing provision of these hearing aids? Will he look into the whole question of the type and kind which is at the moment supplied by the National Health Service and what can be obtained from the private sector? The ability to switch is not there at the moment.
    Dr. Dunwoody: I think that technically the hearing aids provided today and the
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    ones that we hope to provide next year are vastly superior to the great majority provided privately. The private ones have a cosmetic appeal but not a technical one.
    Mr. Atkinson: Even though my hon. Friend says that these aids have a cosmetic appeal, would he not agree that the price of these aids is about 12 to 13 times the manufacturing price, and will he therefore consider sending this to the Prices and Incomes Board?
    Dr. Dunwoody: The question of referring this to the board is a different point, but I agree with the implication of my hon. Friend's question.
    Mr. Arthur Davidsonasked the Secretary of State for Social Services if he will make a statement on the provision under the National Health Service of hidden hearing aids to the deaf.
    Dr. John Dunwoody: Ear-level aids are being provided, experimentally, for those school-children over the age of seven for whom they are clinically suitable.
    Mr. Davidson: Does not my hon. Friend agree that it is psychologically difficult enough for a school leaver who suffers from deafness to have to adjust to the stresses of a new job without the additional disadvantage of having to proclaim his or her difficulties to the world by wearing a hearing aid which is ugly and visible to everyone? Would not he agree that the provision of a hidden hearing aid would be the most important treatment for the deaf?
    Dr. Dunwoody: I agree that psychological difficulties are faced by young people in the situation outlined by my hon. Friend, but children at school face even greater psychological difficulties and for this reason they deserve priority during the experimental stage. After a period of 12 months, when we can assess the success or otherwise of the experiment, I think that we ought to consider the possibility of an extension to other categories.

    Pensions
    Mr. Boyd-Carpenterasked the Secretary of State for the Social Services whether in his forthcoming legislation he intends to seek powers to alter existing

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    pensions schemes in the public and private sectors.
    Mr. Crossman: Powers will be sought, similar to those included by the right hon. Member in the National Insurance Act 1959, to facilitate the consequential modification of occupational pension schemes by those responsible for them.
    Mr. Boyd-Carpenter: Following the very respectable precedent which the right hon.Gentleman cited, will information be given at the same time about the extent to which these powers are intended to be used in the public sector for which Ministers are responsible?
    Mr. Crossman: The provisions will lay clown how they should be used, mainly to qualify the contracting out and to meet the statutory requirements on preservation of occupational pension schemes.
    Mr. Dean: On previous occasions the right hon. Gentleman has referred to a cut back. Today he talked about modification. In view of the great uncertainty which exists at the moment in public service pension schemes, and, indeed, in private occupational schemes, can the right hon. Gentleman say when these negotiations in the public service are likely to start?
    Mr. Crossman: I think that the hon. Gentleman is confusing two different things I was asked whether powers would be taken to enable occupational pension schemes to modify themselves in the light of the new scheme. This has nothing to do with a cut-back at all.
    Mr. Fortescueasked the Secretary of State for Social Services what advice he has received from the National Association of Pension Funds about earnings-related state pensions.
    Mr. Crossman: The association has publicly stated the view on earnings-related State pensions which it put to me.
    Mr. Fortescue: At Question Time three weeks ago the right hon. Gentleman indicated that it was his belief that there was general agreement about the desirability of an earnings-related State pension scheme. Does the Minister agree that the views expressed by the National
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    Association of Pension Funds are somewhat counter to that belief?
    Mr. Crossman: I hesitate to correct the hon. Gentleman, but I think I said that the popularity of earnings-related schemes had been clearly demonstrated by the existence of 65,000 of them in the private sector. It is because we are encouraged by that belief that we are starting the State earnings-related scheme to follow the work of the pioneers.
    Mr. Winnick: Is my right hon. Friend aware that whatever difficulties have to be ironed out in the scheme, many people at work will be pleased that when they retire they will not have to face the poverty which so many retired people are facing now?
    Mr. Crossman: That is something which we should not forget. Nor should we forget that at least 25 per cent. of the working population are not, and cannot be, covered by occupational pension schemes.
    Mr. Fortescueasked the Secretary of State for Social Services what is his estimate of the number of pensioners in 1972 who will be ineligible to participate in the proposed earnings-related state pension scheme.
    Mr. Ennals: People who are already retirement pensioners when the earnings-related pension scheme begins will not pay contributions under that scheme.
    Mr. Fortescue: I should be grateful if the hon. Gentleman would answer the Question and tell me what will be the number of such people in 1972. As both the Prime Minister and the Secretary of State have said continuously that the object of their new scheme is to prevent a divisive effect among pensioners, to prevent pensioners being divided into two nations, in the words of the original White Paper, does not the hon. Gentleman agree that from 1972 onwards there will be an additional division among pensioners which will last until at least the end of the century?
    Mr. Ennals: The answer to the first part of that question is that it is estimated that by April, 1972, there will be about 7½ million retirement pensioners. The answer to the second part is that the Government's decision that every two

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    years all pensions, both existing pensions and those under the new scheme, are to be uprated will mean that old pensioners will share in the rising standard of living. If the previous Administration when in power had given that same pledge the plight of pensioners today would be better than it is.
    Lord Balniel: All those 7½ million pensioners will be held down on a flat-rate pension whereas the younger people will be placed on an earnings-related pension? Does not this mean, by definition, that the young will do better than the older people and that there will be a widening gap between the two generations? Surely that is wrong.
    Mr. Ennals: It certainly means that those who pay the new rates of contribution to the new scheme will receive the new rates of benefit from it. The noble Lord says that they will be held down. It is not the intention of this Government that existing pensioners should be held down. It is our intention that they should have their levels raised and should share in rising standards of living.
    Mr. Marks: Is my hon. Friend aware that hon. Members opposite would do nothing about changing the present inadequate pension scheme? In the meantime—before 1972—will my hon. Friend do everything in his power to arrange for annual reviews of standard rate pensions, so that they can come within reach of the new scheme, with an adequate pension, by 1972?
    Mr. Ennals: In answer to the second part of my hon. Friend's supplementary question, we shall be able to debate this when the Bill is before the House. As for the first part of the question, the decision to have a biennial review is of extreme importance to the pensioners, because at one stage when the previous Government were in power they had to wait for 3½ years before they had an increase to cover the rising cost of living.
    Sir B. Rhys Williams: Will the hon. Gentleman tell the House why he proposes to bring in a scheme which will give most money to people with the least need?
    Mr. Ennals: That is not so. We are proposing to bring in a scheme because the present scheme does not ensure that
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    people can retire with an adequate pension on which they can live.

    Battered Baby Syndrome
    Mr. Croninasked the Secretary of State for Social Services, in view of the increasing number of small children brought into hospitals severely injured as the result of assaults by their parents, what measures he will propose to improve this situation.
    Dr. John Dunwoody: My right hon. Friends the Home Secretary and Secretary of State for Social Services intend to issue guidance to local health and children's authorities and are considering the form it should take.
    Mr. Cronin: Would it not be more helpful if my hon. Friend were to introduce measures to make it obligatory for doctors to report all such cases as this to an appropriate child protection society?
    Dr. Dunwoody: I realise that this battered baby syndrome is notifiable in some countries abroad but I am not convinced that it would help to solve this difficult problem here. What we could do, in conjunction with the societies to which my hon. Friend refers, is to inform those medical practitioners, such as general practitioners and casualty officers, who are most likely to deal with these cases. I pay tribute to the work which the N.S.P.C.C. has done in this field.
    Sir G. Nabarro: How does the Minister propose to deal with the phenomenon that most of the bestial cases occur while the parents are listening to and watching television in the evenings and beating their children up for interfering with their pleasure? How can a doctor deal with a situation of that kind?
    Dr. Dunwoody: The position is not as simple as the hon. Gentleman makes out. These cases usually arise in severely disturbed families. It is nothing to do with television. There is an important preventive aspect of this work; namely, ensuring that these cases are recognised and the unfortunate children—and their brothers and sisters—are not injured again in the future.

    Tonsillectomy
    Mr. Croninasked the Secretary of State for Social Services if he will institute an inquiry with appropriate professional

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    representation into the purpose of the large number of tonsillectomy operations performed on children in Great Britain.
    Mr. Crossman: I am arranging a meeting to consider this in association with the Medical Research Council.
    Mr. Cronin: I am grateful to my right hon. Friend for that reply, but will he bear in mind that this operation is sometimes performed 20 times more frequently in some areas than in others and that a thorough investigation into the circumstances of the operation might save much unnecessary suffering and occasional deaths?
    Mr. Crossman: I have a good deal of sympathy with my hon. Friend on this matter. I reckon that £3 million a year is spent on these operations. There is a profound difference of opinion in the medical profession about their value. The last research came to no agreement. I am hoping to get more success with the second round of investigation.

    Adele Shaw Orthopaedic Hospital, Kirkbymoorside (Closure)
    .19. Mr. Turtonasked the Secretary of State for Social Services on what date he proposes to close the Adele Shaw Orthopaedic Hospital, Kirkbymoorside; and whether he is satisfied that alternative facilities will be available by that date.
    Mr. Crossman: The hospital will not be closed for in-patients until alternative facilities are available. This will probably be next spring. Facilities for outpatients, including simple X-ray and physiotherapy, will continue.
    Mr. Turton: Is the Minister aware that recently the senior surgeon at Scarborough complained of serious overcrowding and shortage of staffed beds in hospitals throughout the area? Will he therefore reconsider his decision to close this hospital in the spring, because of the widespread concern about what is regarded as a very precipitate decision?
    Mr. Crossman: The right hon. Gentleman should not consider the action precipitate. I gather that all the children about whom we have taken special trouble will be- successfully placed—long-stay child patients by next January, and orthopaedic patients by the end of February—and
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    then there will be a total closure of the in-patient department of the hospital.

    Occupational Pension Schemes
    Mr. Bittenasked the Secretary of State for Social Services what is the estimated number of employees currently covered by occupational pension schemes; what percentage this represents of the total number of employees; and what has been the estimated growth in numbers covered by occupational pension arrangements during the past five years.
    Mr. Ennals: The latest available estimates relate to the end of 1967, when about 12,200,000 employees, representing 52 per cent. of all employees, were members of occupational pension schemes. Over the previous four years membership had increased by 1.1 million.
    Mr. Biffen: As the Leader of the House has indicated that there may be a third White Paper on the Government's superannuation scheme, would this not be a suitable occasion for a timely repentance by the hon. Member and his Ministry? Will they authorise only that kind of Government scheme which will encourage this welcome growth in occupational schemes?
    Mr. Ennals: I want first to make it clear that there have been three White Papers already concerning the new scheme. The first, published in January, set out the general terms. The second, dealing with the short-term benefits, was published in July. The third, published two or three weeks ago, dealt with the partially contracted-out terms. When the Bill is published there will be another White Paper, as an Explanatory Memorandum accompanying it. As to the hon. Member's main supplementary question, it would be absurd for the Government not to go boldly forward to decide that we must provide much better social security provisions for those who have no occupational pension to depend upon, and to adjust our provisions so as to enable us to work in close partnership with occupational schemes.
    Mr. Molloy: Is my hon. Friend aware that many of the direct and surreptitious attacks coming from hon. Members opposite are born either because of a touching on that remote phenomenon—the Tory conscience—or because they are

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    jealous of what we are doing? Will my hon. Friend continue in this way to assure 12 million of our people that when they retire they will be cared for and looked after and not ignored as they were by the party opposite?
    Mr. Ennals: My hon. Friend has obviously a much clearer understanding of the Conservative viewpoint on this matter than I have. I am anxiously awaiting the day when the Conservative Party can explain just what it does think on this extremely important question.
    Mr. Boyd-Carpenter: In view of what the hon. Gentleman has said in answer to this and an earlier Question, about what happened under a previous Administration, is he aware that under that Administration pensioners received substantially larger increase than are guaranteed by his right hon. Friend's proposals?
    Mr. Ennals: As the House knows, the increases under the present Government have helped to raise the real value of the pension, and under the new scheme not only will existing pensioners be guaranteed a share in the rising standard of living but new pensioners will be able to take full advantage of the new scheme.
    Lord Balniel: Why does the Minister avoid answering the questions put to him? Is it not a fact that the rise in the real purchasing power of the pension under the Conservative Administration was over 50 per cent., whereas the rise under the present Government, including the recent increase, is 20 per cent?
    Mr. Ennals: We have had only five years in office, and the noble Lord and his party had 13 years. I can assure him that by the time my Government have been in power for 13 years we shall have a very proud record.

    Hospitals (Commonwealth Doctors)
    Mr. Biffenasked the Secretary of State for Social Services what is the estimated proportion of hospital doctors employed by the National Health Service originating from new Commonwealth countries; and what change in this proportion has occurred over the past four years.
    Mr. Crossman: Seventeen per cent' of hospital doctors employed in National
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    Health Service hospitals in England and Wales at 30th September, 1968, were known to have been born in Commonwealth countries other than Canada, Australia or New Zealand. At 30th September, 1965, the earliest date for which information is available, the proportion was 15 per cent.
    Mr. Biffen: Is there any branch of the hospital service which is particularly heavily dependent on overseas doctors? Has the right hon. Gentleman's attention been drawn to a recent suggestion that of doctors below senior registrar level those coming from overseas account for 48 per cent. of the total employed? I appreciate that this is wider than the terms of my original Question.
    Mr. Crossman: It is a rather different question. The hon. Gentleman is right to say that if we take the junior levels the percentage is much higher. That is precisely why we decided to implement the Todd Commission recommendations and to provide 1,000 more medical places in our schools, so as to replace them, because we think that there should not be such a high proportion of our younger doctors coming from countries overseas where they are badly needed.
    Mr. Snow: Notwithstanding the anxiety of my right hon. Friend and all hon. Members on this side of the House, is it not a fact that the National Health Service training facilities are a most important factor in improving world health generally?
    Mr. Crossman: I think that that is so, but they would probably be an even bigger factor if we had a higher proportion of our doctors trained here, allowing a higher number of those who come here to go back.

    Thalidomide Sufferers (Compensation)
    Mr. Edward M. Taylorasked the Secretary of State for Social Services if he is aware that a number of the children affected by the drug thalidomide are unable to obtain compensation obtained by others; and if he will take steps to remove this anomaly.
    Mr. Crossman: I understand that the distinction here results from the operation of the Statute of Limitations and I am afraid I have no power to intervene. I

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    shall be writing to the hon. Member about the case of which he sent me particulars.
    Mr. Taylor: Is the right hon. Gentleman aware that my young constituent, Elizabeth Kelly, and only six other young people are prevented from obtaining a settlement from the company which is available to the others similarly affected simply because of a legal anomaly? Is there no action he can take? Could he perhaps make an appeal to the company concerned?
    Mr. Crossman: I, too, am disturbed about this case. It is not a legal anomaly but part of our present legal system which excludes this girl from the chance of a settlement. I would like to discuss the case with the hon. Gentleman. I do not at present see what I can do, but i would like to try very hard to help.

    Birth Control Advice (Unmarried Persons)
    Mr. Peter M. Jacksonasked the Secretary of State for Social Services whether, in view of the Latey Report, he will amend paragraph 12 of his Circular 15/67 on "Birth Control Advice and treatment for the Unmarried".
    Mr. Crossman: This is not necessary. I am sure local authorities can be relied on to relate the change in the age of majority to this and other services.
    Mr. Jackson: That is a far from satisfactory reply. Is not my right hon. Friend aware that both local authorities and the Family Planning Association are dragging their feet over the provision of adequate birth control services for the unmarried? Will he send out an amending circular?
    Mr. Crossman: I think that if my hon. Friend studies my Answer he will find that it was correct. The question of services for the unmarried is not the same as the question of services according to age. As far as I know, services for the unmarried are being increasingly given in local authorities. This is not the question my hon. Friend asked me.

    Pensions (Disabled Persons)
    Mr. Ashleyasked the Secretary of State for Social Services if he will make a statement on the action he intends to
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    take to help those disabled who will not benefit from the proposed constant attendance allowance and invalidity pension.
    Mr. Ennals: The new benefits we propose are designed to help those disabled people who suffer most hardship. These include all who are so seriously handicapped as to need a lot of help from other people in the ordinary functions of daily living, people of working age with a disability which keep them off work for a long period, and those who will never be able to work again.
    Mr. Ashley: I appreciate the new benefits, but my Question asked about the thousands of severely disabled people who will not receive them. Will my hon. Friend be more specific, and say "None" if he means none, and recognise that his Answer will cause profound concern among the disabled?
    Mr. Ennals: My hon. Friend perhaps under-estimates the importance of the new invalidity pension and the constant attendance allowance. Severely disabled people incapable of full-time work are already entitled to sickness benefits and supplementary benefits, or both, and they will continue to be so entitled.
    Mr. Prior: What estimate has the Minister of the numbers who will be helped by the constant attendance allowance? Is it not intolerable that this does not come in until 1972, and that more is not being done now for the many thousands of disabled who will not be helped by the Government's plans?
    Mr. Ennals: I would not care to give an estimate now. This sort of figure will be given when the Bill to provide for the allowance is published. The hon. Gentleman uses the word "deplorable", but we must recognise that this is the first time such an attendance allowance has been introduced, and I am surprised that, instead of carping, the hon. Gentleman is not congratulating the Government on introducing a Measure that his party never thought of.
    Mr. Dean: We welcome this move forward, but does not the hon. Gentleman agree that it should be a much higher priority in the state of present knowledge than writing pension cheques for the next generation to honour?
    Mr. Ennals: It is not just a question of writing pension cheques which the next generation will honour. We are doing two things in the new scheme. By paying at new rates we are establishing an entitlement to higher rates of benefit, but we are also paying for the pensions of those who today are pensioners.
    Mr. Ashleyasked the Secretary of State for Social Services if he will institute a Departmental study into methods used by other countries to provide pensions for all disabled persons, with particular reference to their suitability for Great Britain, from information available from international sources.
    Mr. Ennals: We already have a good deal of information about the provision for the various classes of disabled people in other countries. We have taken this into account in formulating our own proposals for the new earnings-related invalidity pension and the attendance allowance, in which we have thought it right to give priority to those who are hardest hit.
    Mr. Ashley: Is my hon. Friend aware that some countries give more generous provision for the disabled than we do? I welcome the new proposals, but is any study being made of the proposal for a pension for disabled housewives?
    Mr. Ennals: I could not accept my hon. Friend's generalisation that other countries make more generous provision for the disabled than we do. There are one or two cases where we must look with admiration at them, but in general the provision made in this country, certainly under the new scheme, will put us way ahead of most other countries.
    Miss Quennell: Will the Minister consider publishing the considerable information that he says his Department has, so that Members concerned about the problem of disablement in this country have a chance to make comparative studies?
    Mr. Ennals: Yes, Sir. As I think the hon. Lady knows, the Government Social Survey has been conducting a study of disability in this country. The study is already completed and the material is being analysed. We hope that at least some of it can be published to be considered when Parliament is considering
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    the new constant attendance allowance, and then the remaining part of the report will be published during the next year.

    Birmingham Regional Hospital Board (Minister's Visit)
    Mr. Christopher Priceasked the Secretary of State for Social Services if he will make a statement on his visit to Birmingham to investigate the affairs of the Birmingham Regional Hospital Board on 21st November.
    Mr. Crossman: The main object of my visit was to discuss the internal and public relations of the board. It unanimously agreed with me on the need at one and the same time to observe the normal rules of confidentiality following the model of, for example, the Birmingham City Council and simultaneously to improve the present quite inadequate flow of information from the board to the public.
    Mr. Price: In thanking my right hon. Friend for coming to Birmingham and for all he did with the board, may I ask what guarantee he can now give that the flow of information will improve and that there will be greater public participation at early stages of planning in the schemes of this hitherto thoroughly secretive hospital board?
    Mr. Crossman: I do not think that I would accept the word "secretive" of the hospital board. I would put it this way. The board, with an enormous area stretching from Stoke in the north right through to Stratford in the south, had particular difficulties with information. I have given consent to the appointment and building-up of an information unit, and my own information officer will be making a visit to ensure that it is done in a professional way. No professionals can guarantee it, but I think that we have a good chance of improving it a good deal.
    Mr. Dance: Would the right hon Gentleman agree that it is not so much a flow of information which is wanted from the hospital board but a flow of finance from the central Government to carry out this commitment?
    Mr. Crossman: That is a different question, on which the hon. Member can put down a Question to me.
    Mr. Speed: Would the Secretary of State agree that one of the ways to resolve the problem would have been to split the board, which covers a very large area, into two and enable the many areas not at present represented on the board because of the size of the area to have effective and personal representation?
    Mr. Crossman: I had informal discussions with the board this time about this and I was struck again by the not quite unanimous but overwhelming opinion that administratively and medically the area is a defensible one and that it would be difficult to divide it without cutting off part of it from any teaching hospital. That would make the cut-off area a weak and ineffective unit.

    Family Planning Services
    Mr. Peter M. Jacksonasked the Secretary of State for Social Services when he expects to receive the report undertaken by the Social Survey Department into the provision and adequacy of existing family planning services.
    Mr. Crossman: I have nothing yet to add to my Reply to my hon. Friend the Member for Bebington (Mr. Brooks) on 14th July.—[Vol. 787, c. 20.]
    Mr. Jackson: I am not familiar with the terms of that reply, but am I right in thinking that my right hon. Friend will have the report some time next year? Moreover, may I press him to give the House an assurance that he will not wait for publication of the report before he begins to press the various authorities throughout the country which are not yet providing an adequate service?
    Mr. Crossman: I can certainly give the assurance asked for in the second part of that question, because I am pressing the authorities already and I am not at all content that they are doing all they can even with their limited resources. The survey will be a big and thorough one. The Government's Social Survey hopes shortly to embark on a pilot survey, and the big survey will commerce next year. We should be getting results finalised and tabulated by the end of the year.

    Pensions (Dentists)
    Mr. Scott-Hopkinsasked the Secretary of State for Social Services how many dentists between the ages of 60 to 65 years are not in receipt of the full pension to which they are entitled.
    Dr. John Dunwoody: I know of none, but the pension of a dental practitioner who has retired from the National Health Service and who resumes practice, or who undertakes further employment paid for from public funds, is reduced if pension and earnings together amount to more than the practitioner's highest rate of earnings before retirement. I estimate that such a reduction applies to about 100 practitioners in the age group mentioned by the hon. Member.
    Mr. Scott-Hopkins: Is the Minister aware that it is in the cases which he has mentioned and to which I particularly refer that the bunching of receipts from part-time work under the National Health Service sometimes takes place, with the result that the annual total is below the limit of abatement of pension to which a practitioner is entitled?
    Dr. Dunwoody: As the hon. Member knows, provision for abatement of pensions as a result of re-employment is a normal condition of public service schemes. If, however, the hon. Member has any particular problems on the lines mentioned by him perhaps he would care to write to me about them.

    Dental Anaesthesia
    Mr. Scott-Hopkinsasked the Secretary of State for Social Services whether he will inquire into the practices adopted by some dental practitioners of administering intravenous anaesthetics without the attendance of any other suitably qualified person; and if he will make a statement.
    Mr. Crossman: I have already received advice on this subject in a report on dental anaesthesia by a joint subcommittee of my Standing Dental and Medical Advisory Committees. This concludes that the practice of a dental surgeon acting as his own anaesthetist is to be deprecated, irrespective of the

    23
    method of induction he employs. Consultations with the British Dental Association on the action to be taken are in progress.
    Mr. Scott-Hopkins: In saying how grateful I am to the right hon. Gentleman for that reply, may I also say that I share his anxiety and that of many other people about some of the existing practices and that I shall look forward to hearing what he has to say at a later date?

    General Medical Practitioners (Breach of Terms of Service)
    Mr. Goodhewasked the Secretary of State for Social Services whether he will publish figures for the past five years showing the number of cases where patients have made allegations of breach of terms of service by general medical practitioners, and the number where no breach has been found by the Service Committee.
    Mr. Crossman: Such figures have already been published up to 1968, in the Annual Reports of my Department and its predecessor.
    Mr. Goodhew: If the extra figures which are due to be published indicate, as I suspect, that there is an increasing number of allegations, would the Secretary of State care to say whether he agrees with me that this is due to an increased inclination to complain rather than to a lowering of standards in the Health Service?
    Mr. Crossman: If the hon. Member looks at the published figures, I think he will find that they do not show a steady increase. I do not think that the deduction made by the hon. Member can be drawn from them.

  POSTS AND TELECOMMUNICATIONS

    Post Office Board (General Directions)
    Mr. Doigasked the Minister of Posts and Telecommunications (1) if he is aware that an effective dog repellant is now being manufactured in Great Britain which does not require any change in the Firearms Act, 1968; and if he will now give a general direction to the Post Office to supply this to postmen who request it;
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    (2) if he will give a general direction to the Post Office to abolish or modify the telephone installation charge for users who move to another house.
    Mr. Atkinsonasked the Minister of Posts and Telecommunications if he will give a general direction to the Post Office Board that 4d. and 5d. mail should not be separately sorted on Fridays.
    Mr. Moonmanasked the Minister of Posts and Telecommunications if he will indicate the number of people who have taken out a Giro account; and what the current financial position is.
    Mr. Ashtonasked the Minister of Posts and Telecommunications if he will give a general direction to the Post Office Board regarding the siting of post offices and the services to be provided by existing post offices
    Mr. Crouchasked the Minister of Posts and Telecommunications if he will issue a general direction to the Post Office Board to issue commemorative stamps on the occasions of the anniversary of English saints.
    Mr. Dudley Smithasked the Minister of Posts and Telecommunications if he will give a general direction to the Post Office Board to discontinue their policy of abandoning postmarks for individual towns in favour of larger groupings where those towns have a significant cultural and historic interest, and are valuable as part of the country's tourist industry.
    The Minister of Posts and Telecommunications (Mr. John Stonehouse): With permission, I will answer this Question and Questions Nos. 36, 37, 38, 43, 53 and 54 together.
    No, Sir; these are matters for the Post Office.
    Mr. Speaker: Order. It helps the Chair to know in advance which Questions are being answered together.
    Mr. Doig: On Question No. 35, is my right hon. Friend aware that this is one of the reasons why difficulty has arisen in recruitment? Is he aware that in other countries postmen can have these repellants? Will he not reconsider his decision?
    Mr. Stonehouse: My hon. Friend has established a reputation as an expert in the problems of repelling dogs, and I know that the Post Office will respect his view and take note of it.
    Mr. Atkinson: May I insist that my right hon. Friend gives a decent answer to Questions as they appear on the Order Paper? It is not good enough to lump them together in this way and attempt to score a political point when he knows that the argument concerning the corporation is still proceeding? Is my right hon. Friend aware that in many areas there are no Saturday morning deliveries, and, at best, there are some areas in which there is a delivery on alternate Saturday mornings? Therefore, if both the 4d. and the 5d. post are delivered simultaneously on a Monday morning, what benefit does a person who uses the service get from using a 5d. stamp on a Friday?
    Mr. Stonehouse: It was the decision of Parliament that the operational details of running the postal service should be transferred to a corporation. It was so transferred on 1st October. It is, therefore, up to the Post Office, and not for me, to consider the proposals now being put forward.
    Mr. Doig: On a point of order. As my two Questions were on quite different subjects but the Minister's answer did not cover them, am I now entitled, Mr. Speaker, to put a supplementary on the second Question?
    Mr. Speaker: No. There is no such entitlement.
    Mr. Atkinson: On a point of order. Am I not entitled to an answer to my Question, Mr. Speaker, if it has been accepted for the Order Paper?
    Mr. Speaker: The hon. Gentleman is entitled to an answer. The Minister is entitled to answer the Question in the way he chooses. That is a matter for the Minister.
    Mr. Arthur Lewis: Further to the point of order—
    Mr. Stonehouse: May I make it quite clear, for the benefit of those who did not hear, that my answer to each of these Questions was, "No, Sir"? I do not propose to give a general direction in the particular case requested. That was the
    26
    Answer also to Questions No. 36, 37, 38. 43, 53 and 54.
    Mr. Rankin: On a point of order. May I draw attention to the Ministers previous answer defining his position? If he has been appointed Minister of Posts, Mr. Speaker, ought he not to answer, or be liable to answer, Questions dealing with the posting of letters?
    Mr. Speaker: The right hon. Gentleman's answer was perfectly in order. That is all I am concerned about.
    Mr. Prior: Would it not be a courtesy to the House at least to let hon. Members know that their Questions will not be answered, so that they need not come here and wait for that service? Second, on Question No. 38, surely the Minister can indicate the number of people who have opened a Giro account. Surely that is something which we could be told without all this fuss.
    Mr. Stonehouse: In its Report each year, the Post Office gives the number of Giro accounts. If I were to accept that an answer had to be given concerning the number of individual accounts every time a Member put down such a Question, this would interfere with the detailed operation of the Giro service by the Post Office, which acts in competition with other banking organisations. This House made a decision that the business of the Post Office should be run as a corporation and it is now my responsibility, as the Minister sponsoring the Post Office, to ensure that it is subjected to no more cross-examination on its operational details than is any other public authority.
    Mr. Moonman: Would not my right hon. Friend agree that, had he not attempted to lump all these answers together, it is possible that he could have answered my Question No. 38 about the Giro account? Is he further aware that it will disturb many hon. Members if he persists in this sort of reply? Will he either mutter or think aloud, even if he cannot give the answer, as to what he is doing about publicity and public relations in order to build up the Giro service? Failing to answer here will not help the publicity.
    Mr. Stonehouse—
    Mr. Atkinson: Before my right hon. Friend answers that question, may I raise a point of order, Mr. Speaker?
    Mr. Speaker: Raising points of order holds up Question Time. The hon. Gentleman has had a good run already.
    Mr. Atkinson: I realise that, Mr. Speaker, but it is the Minister who is interfering more with Question Time than I am by points of order. I have put a legitimate Question on the Order Paper and hon. Members have a right to expect a reasonable reply from a Minister. If he is not prepared to give the House a reply to a Question, he should no longer remain a Minister.
    Mr. Speaker: Order. I have ruled on that point of order already. No Minister is bound to please an hon. Member with his answer.
    Mr. Crouch: On a point of order. Mr. Speaker. I protest most strongly that the Minister, coming here this afternoon with barely 15 minutes in which to answer Questions, has lumped together half-a-dozen on which he is not prepared to give an answer. Whether I, by my point of order, prevent other hon. Members getting answers or not, I submit that we have witnessed a grave reflection on the Minister's approach to this House and I beg you to consider the matter.
    Mr. Speaker: The Chair has considered all that has happened but what has happened is in order. Mr. Crouch.
    Mr. Crouch—
    Mr. Moonman: On a point of order. Mr. Speaker, my supplementary did not receive an answer from the Minister, in whatever form he cares to put it, because of points of order. I have a right to a supplementary answer.
    Mr. Stonehouse: The Giro business is a matter directly for the Board of the Post Office Corporation, which has this matter well in hand. It would not be appropriate for me, when Parliament has decided to put the commercial operations of the Post Office into the hands of the board, to attempt to answer on details about which the corporation is directly concerned.
    Mr. Crouch—
    Mr. Speaker: Mr. Crouch—supplementary question. Perhaps the hon. Gentleman is not aware that his Question
    28
    was answered with No. 35. Does he wish to put a supplementary question?
    Mr. Crouch: I was not aware that I was being called for a supplementary question, Mr. Speaker, but if I am I would put it to the Minister that I am concerned that he should take note of the fact that there is festival taking place in this country next year—the Becket Festival, commemorating the eighth hundredth anniversary. If it is possible for the right hon. Gentleman to give a general direction to the new department to issue a special anniversary stamp, he has surely the right to give this matter such consideration. I ask him, therefore, to give special consideration now to this question.
    Mr. Stonehouse: I had given consideration to this matter and I have decided that it would not be appropriate for me to use the weapon of a general direction in this case.
    Mr. Speaker: Mr. Kenneth Baker—Question No. 40.
    Mr. Kenneth Baker—
    Mr. Eadie: On a point of order, Mr. Speaker. What Question are we at now?
    Mr. Speaker: As in the case of similar nationalised boards, the hon. Gentleman will learn which Questions he can ask by grim experience.
    Mr. Eadie—
    Mr. Speaker: Order. The hon. Gentleman can raise his point of order at the end of Question Time.
    Mr. Eadie: On a point of order, Mr. Speaker.
    Mr. Lubbock: Not in Question Time.
    Mr. Eadie: I have been in the Chamber all the time. It is not a question of experience but of hearing. I asked you, Mr. Speaker, what Question we are at.
    Mr. Speaker: We are at Question No. 40.

    Post Office Corporation (Capital Expenditure)
    Mr. Kenneth Bakerasked the Minister of Posts and Telecommunications whether he will publish the capital expenditure programme for the Post Office Corporation for the next five years.
    Mr. Stonehouse: I would ask the hon. Member to await publication of the forthcoming White Paper on Public Expenditure.
    Mr. Baker: Why this delay? The right hon. Gentleman does not seem to have much of a job as Minister answering Questions in the House. Why does he not spend time preparing the capital expenditure programme, which has been delayed for nine months? As the Post Office spends over £1 million a day in capital, will we have a chance to discuss the programme when it is published?
    Mr. Stonehouse: This programme has been worked out in association with my co leagues, and the details will be released shortly.

    Telegram Service
    Mr. Kenneth Bakerasked the Minister of Posts and Telecommunications what general directions he proposes to give to the Post Office Corporation regarding the future of the telegram service.
    The Parliamentary Secretary to the Ministry of Posts and Telecommunications (Mr. Norman Pentland): None, Sir.
    Mr. Baker: As the telegram service loses over £2 million a year, and as every telegram sent loses 6s., when is the Minister going to do something either to make the service more efficient or to discontinue it, apart from life and death messages?
    Mr. Pentland: It is now for the Post Office to formulate its own plans for its own future services. Once it has done that, the Minister himself will look at it.
    Mr. Bryan: Will the hon. Gentleman explain how he saw his way to answering Question No. 41, which is about the detailed operations of the Post Office, while the right hon. Gentleman refuses to answer a dozen other questions for that very reason?
    Mr. Pentland: I was asked by the hon. Member for Acton (Mr. Kenneth Baker) what general direction the Minister proposed. I said, "None".

    Telephone Service, Wester Lochaber
    Mr. Russell Johnstonasked the Minister of Posts and Telecommunica-
    30
    tions when a television service will be generally available in Wester Lochaber.
    Mr. Pentland: The B.B.C. and the I.T.A. tell me that their joint programme for extending television service has not yet reached the stage of planning for places so thinly populated as Wester Lochaber.
    Mr. Johnston: Is the hon. Gentleman aware that this is unsatisfactory? Large areas all over the country cannot look forward in the foreseeable future to any television service at all. Should there not be some provision for the B.B.C. to provide a piped supply?
    Mr. Pentland: No, Sir. As the hon. Gentleman knows, only a fraction of the population of Wester Lochaber would be served from a single relay station, and the smallest number of sets served by any low-powered relay station in existence is 1,000.

    Television Licence Evasions, Scotland
    Mr. Eadieasked the Minister of Posts and Telecommunications what is the total sum of money currently being spent in Scotland towards detecting users of television sets who are evading licence payment.
    Mr. Pentland: The Post Office tells me that this information is not easily available. Throughout the United Kingdom, some £800,000 is being spent on counter-evasion measures in 1969–70.
    Mr. Eadie: Can my hon. Friend confirm that the figure of detection in Scotland is not available because Scots people are more law abiding than people elsewhere?
    Mr. Pentland: I know that the Scots are very law abiding but the direct answer is that the Post Office cannot break down these figures of investigation work into areas because it obtains them by sampling methods aimed at producing the total cost and not the costs in particular areas.
    Sir G. Nabarro: Having regard to the fact that the total loss of revenue for radio and television licences is estimated at £7·5 million out of £79 million collected, is this not an inordinately high percentage? Is it not time the Minister changed the whole system, scrapped licensing altogether and attached an

    31
    equivalent cost to the capital cost of the machine or set itself in the first instance?
    Mr. Pentland: That is a much wider question. If the hon. Gentleman will put it down, we will be prepared to answer it.

    Telephone Services (Ministerial Responsibility)
    Mr. Eadieasked the Minister of Posts and Telecommunications what changes have now taken place in the administrative machinery of his Department in relation to his responsibility to the House concerning the telephone services.
    Mr. Stonehouse: My responsibilities for the telephone service are defined in the Post Office Act 1969, and have not changed since my Ministry was established on 1st October last.
    Mr. Eadie: Is the Minister aware that many hon. Members would like some reassurance that they can raise matters concerning the telephones without in any way being thwarted because of the machinations and reorganisations that have taken place?
    Mr. Stonehouse: I am sure that that would be the wish. The Post Office Corporation is very anxious to deal with any inquiries that may be made to it, and I know that any correspondence addressed to the chairman is dealt with very speedily indeed.

LOCAL RADIO STATIONS
The following Question stood upon the Order Paper:
Mr. JAMES JOHNSON: To ask the Minister of Posts and Telecommunications what plans he has to establish a local radio station for Humberside; and if he will make a statement.
Mr. Bryan: On a point of order, Mr. Speaker. We are informed on the tape that the Answer to Question No. 55 will contain a major statement on radio policy. May I ask you whether the Minister sought your leave to answer the Question at the end of Question Time, or has he, once again, run away from the Question?
Mr. Speaker: Order. I cannot answer the last part of the hon. Gentleman's supplementary question. The Minister has not indicated to the Chair—[HON. MEMBERS: "Oh."]—that he wished to answer the Question at the end of Question Time.
Mr. Lubbock: Further to that point of order, Mr. Speaker. If it is the Minister's intention to make by means of a Written Answer a major statement on policy, how does it come about that the news of that statement appears on the tape before the Minister has had a chance to answer it and before any hon. Member has seen it? Will you strongly deplore the practice of Ministers giving Written Answers to Questions which are much more appropriately dealt with in the form of a statement?
The Minister of Posts and Telecommunications (Mr. John Stonehouse): Further to that point of order, Mr. Speaker. I am in the hands of the House. As hon. Members know, my position in the order of answering Questions was put down rather late for today, with the result that, perhaps, Oral Questions that are late in the list are not reached. But if it is the wish of the House, I will now, with permission, Mr. Speaker, answer Question No. 55.
Hon. Members: Hear, hear.
Mr. Speaker: Order. It will help the Chair if the Minister now announces which Question it is that he proposes to answer.
Mr. Stonehouse: I propose to answer Question No. 55—
Mr. Hugh Jenkins: On a point of order, Mr. Speaker. Before the Minister replies—
Mr. Speaker: Order. The Minister is not replying. He is telling the Chair, as he failed to tell the Chair earlier, which Question of his he is answering. It is Question No. 55.
Mr. Hugh Jenkins: I wish to complain, because the Minister apparently intends to make an important statement on the policy of the B.B.C. radio in this fashion. It seems to me that the Minister is treating the House with insufficient respect. If the Minister intends to make such a

33
statement, it should be a proper statement and, preferably, associated with a debate on the subject. If the Minister is to come here, and, in answer to a Written Question—
Hon, Members: Oral.
Mr. Speaker: Order. I am seized of the point of order from both sides. Some hon. Members object because the Minister was not going to answer the Question, and some now object because he now seeks to do so.
Several Hon. Members Several Hon. Members rose—
Mr. Speaker: Order. The Chair can do many things, but it can take only one point of order at a time. Sir Ian Orr-Ewing.
Sir Ian Orr-Ewing: The particular facility now being offered places the Liberal and Conservative Oppositions in a difficult position, Sir. When a statement is made, which is desirable, we are given notice of it. That practice leads to informed questions, which is much more useful 10 the House than springing questions at short notice when we have had no opportunity of studying a statement. It is not desirable to have this statement at the end of Question Time, when we will have had no opportunity of a considered reply.
Mr. Speaker: I have followed the course of the points of order. The case is exactly as I have said. There were protests from the Opposition Front Bench that Question No. 55 was not to be answered at the end of Question Time: there are now protests that it is to be answered at the end of Question Time. This is an example of British freedom.
Mr. Strauss: On a point of order, Mr. Speaker. Does not this procedure raise a dangerous precedent? It has always been accepted that if a Minister is to answer an Oral Question that is not reached, he must give notice to you beforehand. If he does not do so, the Question is not answered. What I am worried about is that if this old procedure is broken by a precedent today, it may often happen that a Minister who is not able to answer a Question, because it has not been reached, will be pressed by two or three hon. Members, or a certain section of the House, to answer that Question.
34
Today's precedent will be quoted and he will be pressed to answer the Question. That will be followed by pressures being put upon him to answer even further Questions. It seems to me that the whole of Question Time might get into disarray if the old procedure whereby Mr. Speaker is given notice of a Minister's intention to answer a Question is not followed.
Mr. Speaker: I am seized of the point. The right hon. Gentleman speaks from a wealth of experience. The rule is not quite as cast-iron as he suggests. In history, it has been known for pressure to be put on a Minister to answer a Question that has not been reached. Occasionally, he has yielded. That is what he has done in this case.
Mr. Bryan: On a point of order, Mr. Speaker. I want to try to be helpful. We on this side will be quite satisfied if we can have a full statement tomorrow.
Several Hon. Members Several Hon. Members rose—
Mr. Speaker: Order. I can take any number of points of order provided that they are raised one at a time.
Mr. Peyton: Following on the point made by the right hon. Gentleman the Member for Vauxhall (Mr. Strauss), one of the things which worries us is that the Minister had obviously contemplated answering the Question, because news of his intention to make a major statement has appeared on the tape. What we are complaining about is that Ministers almost make a habit of failing to communicate these intimate thoughts of theirs to the House beforehand.
Mr. Speaker: Order. This point, too, has been raised many times in the House. It is not a matter for Mr. Speaker at all.
Mr. James Johnson: On a point of order, Mr. Speaker. As Question No. 55 is my Question, perhaps I may be allowed to say that if it were for the convenience of the House and of you, Sir, I would be perfectly happy if it were answered tomorrow, and if hon. Members—
Mr. Speaker: Order. Since the Minister of Posts and Telecommunications responded to the wish of the House just now, he may perhaps concede further and not make a statement until tomorrow.
Mr. Stonehouse: Further to that point of order, Mr. Speaker. I am very willing to respond to the wish of the House—
Mr. C. Pannell: On a point of order—
Mr. Speaker: Order. With respect, the Minister is addressing me: he is on a point of order.
Mr. Stonehouse: In my own defence, in view of the points raised this afternoon, it was by the wish of the House that I was placed to answer Questions from No. 35 every fourth Monday. That was the wish, apparently, of those who arrange the business of the House. It was not my wish, Mr. Speaker, that this important Question should have been so far down the Order Paper that it has not been reached orally. But I am certainly very willing to respond to the wish of the House, and I will see that my reply is given to the House tomorrow.
Mr. C. Pannell: On a point of order, Mr. Speaker. Is it not the fact that, in the normal way, if this Question had not been reached the Minister would have given a Written Answer which would have been issued this afternoon? Out of courtesy to the House, and at the direct request of the hon. Member for Howden (Mr. Bryan), who presumes to lead on these matters for the Opposition, my right hon. Friend bowed to what he considered to be the will of the House. I should have thought that this sort of courtesy to the House should be greeted with approbation and not with condemnation. Let him get on with it.
Mr. Speaker: Order. I think that the right hon. Gentleman has put very clearly half of the point I made. There was a request that the Minister should answer: there was, however, an equally violent request that he should not answer. I think that we can now leave it that the Minister will answer the Question tomorrow.
Mr. Kenneth Baker: Further to that point of order. I am rather reluctant to leave it because we are in a farcical situation in which every evening paper will have it, every morning newspaper tomorrow will have it, and we are graciously to be told about it tomorrow afternoon. [Interruption.]
Mr. Speaker: Order. I have said very often that we are a free society. That means that different people have different opinions at a certain moment of time. That is evident at the moment. We are dealing with telecommunications.
Mr. Pavitt: On a point of order. May I be told whether Question No. 49 has been answered or not?
Mr. Speaker: It has not been answered.

FALKLAND ISLANDS
The Secretary of State for Foreign and Commonwealth Affairs (Mr. Michael Stewart): With your permission, Mr. Speaker, and that of the House, I wish to make a further statement on the Falkland Islands.
Last Friday, letters were sent by my right hon. and noble Friend Lord Caradon and by the Argentine representative to the United Nations, to the Secretary-General. The letters were published late that day.
The text of my right hon. and noble Friend's letter—and a translation of the other letter—have been placed in the Library, and are being circulated in the OFFICIAL REPORT.
The letters state that the two Governments have continued negotiations and that, although divergence remains, special talks will begin early next year to promote free communications and movement in both directions between the mainland and the islands. Her Majesty's Government's position on the central question remains unchanged.
I believe that the House will regard this as a welcome development.
Mr. Wood: Is the right hon. Gentleman aware that we are very grateful for the statement he has made? I am glad that direct communications look like being eased between the islands and the mainland, but, in connection with communications, will the right hon. Gentleman tell us whether he has given consideration to the possibility of an air link between the islands and Chile, which, I believe, is more important?
Secondly, is the right hon. Gentleman aware that we accept the assurance he has given this afternoon, and often repeated before, on what he described as

37
the central question, but if the Argentine continues to want sovereignty and the Falkland islanders want to retain connection with Great Britain will the right hon. Gentleman tell us whether he is optimistic about what I think the letters describe as a definitive solution of the problem?
Mr. Stewart: On the last point, I really cannot say what the prospects are for a definitive solution. At present, we have made our attitude on this quite clear and the Argentine Government have made theirs clear. As the recent letters say, the divergence remains and I think that we must leave it there.
On the question of an air link with Chile, there is, of course, at present no airfield in the Falklands, but an airfield feasibility study was carried out by experts of the Board of Trade this year for the islands and their report is under study.
Mr. Hooley: Is my right hon. Friend aware that the continuation of the civilised dialogue between the United Kingdom Government and the Argentine Government on this matter is very much welcomed on this side of the House?
Mr. Stewart: I believe that that is so and that it is welcomed by everyone who has studied this problem and wishes the islanders well.
Mr. Clark Hutchison: Does the Foreign Secretary recognise that the best way of improving communications is the establishment of an airfield in the Falklands? Can he press forward with this? Secondly, if he wants a solution to this problem of the Argentine, is not the best way to terminate the talks once and for all?
Mr. Stewart: I think not, because this present development, although modest, is a welcome development and we would not have got it if we had terminated the talks. As I said, the airfield feasibility study is now under study.
Mr. Blackburn: Do I understand that future discussions with the Argentine Government will be concerned mainly with communications?
Mr. Stewart: No, Sir. That is not exactly the position. For some time we have been continuing discussions with the Argentine on the whole issue, including what I call the central issue, but now,
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within the framework of those negotiations, there will be these special talks which will be concerned solely with the promotion of communications and movement.
Sir F. Bennett: The Secretary of State will, I think, agree that all Argentine comment has been that they have been interested only, and are interested only, in the talks in communications with the idea that improved communications will ultimately lead to a change of heart by the Falkland islanders. Can the right hon. Gentleman say, in view of the comment which has appeared in British newspapers, whether he shares the hope of that objective, or the contrary?
Mr. Stewart: That is a point of view which anyone can take if he likes. What I am concerned with is immediate policy. It would be quite foolish if, because the Argentine Government held that view, although that is possible, therefore we ought to try to prevent communications being improved.
Mr. Dalyell: In the airfield feasibility study, could consideration be given in cost calculations to the possibility of a project for military aid to the civil community which in some way would reduce the direct cost to the Treasury?
Mr. Stewart: That is going a little wide of my statement, but I will look at it.
Mr. David Steel: While I welcome the talks on communications, can the right hon. Gentleman say, since the letters refer to a dispute over sovereignty, whether the Government have ever formally abandoned the position adopted by our representative at the United Nations on 18th September, 1964, when he said that the Government could not contemplate discussions with the Argentine on the question of sovereignty?
Mr. Stewart: I do not recollect that exact statement, but clearly we have abandoned that because we are negotiating in these discussions, but throughout the discussions we have made quite clear what our view is.
Mr. Biggs-Davison: Since the Foreign Secretary has said that the difference between the two Governments is absolutely clear—and we welcome that—may we take it that it is fruitless further to discuss sovereignty in future talks? May

39
we have an assurance that it will not be discussed?
Mr. Stewart: No, I do not think that it would be sensible to do that. These talks, despite a profound difference of opinion, have been conducted as my hon. Friend the Member for Sheffield, Heeley (Mr. Hooley) said, in a civilised manner, and it is sensible to continue them.
Sir Ian Orr-Ewing: Will the Foreign Secretary give an assurance that he will persuade the Secretary of State for Defence not to demobilise the territorial voluntary defence force there, where it is sadly needed, as it has been abolished in this country?
Mr. Stewart: That is a question which should be put to my right hon. Friend the Secretary of State for Defence.
Following are the letters:
Letter addressed to the Secretary-General of the United Nations by Lord Caradon, United Kingdom Permanent Representative to the United Nations.
21st November, 1969.
Your Excellency,
I have the honour to address you in connection with the question of the Falkland Islands.
Following my letter of the 19th of December, 1968, to Your Excellency, the Government of the United Kingdom of Great Britain and Northern Ireland have continued negotiations with the Government of the Argentine Republic with the common objective of settling as soon as possible the dispute concerning sovereignty over the Falkland Islands in a definitive and amicable manner, taking duly into account the interests of the inhabitants of the Islands, in accordance with Resolution 2065 (XX) and the consensuses adopted by the General Assembly on 20th of December, 1966, and 19th of December, 1967.
I now have to inform you that, although divergence remains between the two Governments regarding the circumstances that should exist for a definitive solution of the dispute, it has been agreed that, within the general framework of these negotiations, special talks with a view to reaching agreement on practical measures for the implementation and promotion of free communications and movement in both directions between the mainland and the Islands, will take place early next year at a mutually convenient time.
Both Governments will continue their efforts towards a definitive solution of the dispute and will report again to Your Excellency in due course.
On behalf of my Government, I request Your Excellency arrange for this letter to be circulated as a document of the General Assembly.
(Signed) CARADON.

FALKLAND ISLANDS

  UNOFFICIAL TRANSLATION
  Letter addressed to the Secretary-General of the United Nations by Sr. Ruda, Argentine Permanent Representative to the United Nations
  21st November, 1969.
  Your Excellency,
  I have the honour to address you in connection with the question of the Malvinas Islands.
  Following my letter of the 19th of December, 1968, to Your Excellency, the Government of the Argentine Republic have continued negotiations with the Government of the United Kingdom of Great Britain and Northern Ireland with the common objective of settling as soon as possible the dispute concerning sovereignty over the Malvinas Islands in a definitive and amicable manner, taking duly into account the interests of the inhabitants of the Islands, in accordance with Resolution 2065 (XX) and the consensuses adopted by the General Assembly on the 20th of December, 1966, and the 19th of December, 1967.
  I now have to inform you that, although divergence remains between the two Governments regarding the circumstances that should exist for a definititive solution of the dispute, it has been agreed that, within the general framework of these negotiations, special talks with a view to reaching agreement on practical measures for the implementation and promotion of free communications and movement in both directions between the mainland and the Islands, will take place early next year at a mutually convenient time.
  Both Governments will continue their efforts towards a definitive solution of the dispute and will report again to Your Excellency in, due course.
  On behalf of my Government, I request Your Excellency arrange for this letter to be circulated as a document of the General Assembly.
  (Signed) JOSE MARIA RUDA.

BILL PRESENTED
  GAS
  Mr. Anthony Wedgwood Benn, supported by Mr. Secretary Ross, Mr. Secretary Thomas, Mr. Harold Lever, Mr. Dick Taverne, Mr. Alan Williams, and Mr. Reginald Freeson, presented a Bill to make further provision with respect to the Gas Council, area gas boards and gas consultative councils, and to amend the enactments relating to gas, and for purposes connected therewith: And the same was read the First time; and ordered to be read a Second time tomorrow and to be printed. [Bill 20.]
ORDERS OF THE DAY

  LOCAL AUTHORITIES (GOODS AND SERVICES) BILL
  Order for Second Reading read.
  3.48 p.m.
  The Joint Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. Arthur Skeffington): I beg to move, That the Bill be now read a Second time.
  It has been my fortune for five years to be associated with rather massive Bills whose length has been equalled only by their complexity, but this Session I have had rather greater fortune in that it has been my task to introduce several short but modest, and I hope equally useful, Bills. I now bring forward this Bill, which is, in that category. I believe that it will commend itself to the whole House since its main purpose is to save ratepayers' money and to enable local councils to work much more effectively by being able to work in co-operation. [Interruption.]
  Mr. Speaker: Order. Will the hon. Member please take his seat? Mr. Skeffington.
  Mr. Skeffington: This is not the first time that a Bill of this type has been before the House. A similar measure was introduced two years ago by my hon. Friend the Member for Bethnal Green (Mr. Hilton), who, I am glad to see, is here today. On that occasion the House failed to reach a decision largely, I think, because there was some misunderstanding about some parts of the Bill.
  I recall in our debates then, apart from the general warm support from hon. Members on this side of the House, that the Bill met with the warm approval of the hon. Member for Honiton (Mr. Emery) who, I am glad to see, is also here. I should begin by saying that the Bill is wanted by the local authority associations, all of them having joined in a communication which we received in July asking for legislation to be introduced as soon as possible.
  In May, 1967, the Government produced a White Paper on Public Purchas-
  42
  ing and Industrial Efficiency. This was a result of a study set in motion by the Government, by which it was hoped to lay down general principles whereby public authorities could make considerable economies on purchases, promote greater industrial efficiency and achieve a reduction in the vast numbers of varieties of goods or services. This would be very much easier for all concerned, and, as a result of greater standardisation, would improve the quality of the goods and materials and lead to better value for money.
  After the White Paper, the Government undertook to hold discussions mostly with the public industries and local authorities and the Minister of Housing invited the local authority associations and the Greater London Council, which has always had a great interest in this question, to join with the appropriate Government Departments and review the whole matter and produce practical recommendations.
  The committee met under the able chairmanship of Mr. A. L. Burton, a former Lord Mayor of the City of Westminster, and it produced an admirable and penetrating report in October of last year. I am sure that hon. Members will have read it. I would like to take this opportunity of thanking Mr. Burton and all his colleagues for the first-class job they did in a somewhat difficult field, for the speed at which they operated and the helpful and constructive recommendations which were made. The report of the joint review body, as it is called, for local authority purchasing, made a number of recommendations, two of which I must raise. The first was that the Government should set up a national advisory body to promote more efficient purchasing, and the second was that there should be early legislation enabling local authorities to co-operate in bulk purchasing.
  The matter was considered by the Government and the local authority associations who have accepted the recommendations. This is one of the reasons why the Bill is now before us. The local authority view was very emphatically that the statutory power enabling local authorities to do this work was essential before we could have a useful or effective national advisory body.

  43
  This is one reason why the Bill has come forward, backed by this impressive report and the unanimous approval of the local authorities. I will not now canvass the obvious and desirable savings that can be effected by larger purchasing. As the review body report points out, savings can be achieved not only by purchasing in bulk but as a result of purchasing by those who are specialists. That is almost equally important.
  There are examples in commerce and other areas of industrial life. It would be unnecessary for me to inflict such examples on the House, but it is worth while to refer to a few recent examples mentioned by the review body. In one case mentioned on page 4, a county borough purchasing organisation sponsored an inquiry into its fuel policy with the ultimate result that it was able to save £30,000 a year.
  Another example, on page 5, to do with furniture, secured overall reductions of 23 per cent., while a further example about printing shows how, through the help of specialists, a local authority was able to get a reduction of 40 per cent. Hon. Gentlemen can no doubt give other examples. I could myself. I was for many years a member of the London County Council, which used to purchase on behalf of the London boroughs. The G.L.C. still does this, and with ever-increasing volume of business. I gave the figures on the last occasion and they were considerable.
  The Bill enables local authorities to do four things, clearly expressed in Clause 1. It enables them and other public bodies to co-operate in purchasing goods and services. It allows a local authority to purchase on behalf of these other "public" bodies which I shall refer to presently. This happens now when a county council purchases on behalf of a number of district councils, with considerable savings. However, these authorities can do that only by virtue of their own legislation. The G.L.C. does it through the 1963 Act, passed by a previous Administration and carrying on what had been the practice of the L.C.C. When an authority does not have its own Act, it may not undertake any action for which there is no special or general provision. The doctrine of ultra vires will apply.
  44
  Certainly, anything which is done by a local authority which is not covered in some way by legislation exposes it to scrutiny by the district auditor or in some other way. The result is that a considerable amount of co-operation which could flourish does not flourish at the moment because of these difficulties.
  The first thing that the Bill does is to enable the local authority, at its discretion—there is no question of forcing a local authority to do this; it is the choice of the local authority—to use this form of co-operation and to purchase goods or material for another body specified in the Bill—either another public authority or another public body which I shall define in a moment.
  The second thing which the Bill does, in Clause 1, is to enable an authority to provide another with professional or technical services. This cannot normally be done unless legal power has provided for it. The sort of obvious case—although there may be many examples—in which the greatest gain will arise is that of management techniques. We all remember the great innovation by the Borough of Coventry, 16 or 17 years ago, when that city asked for an investigation to be made by a Government team, and enormous savings resulted.
  Many of the larger authorities maintain a special management unit to which every department is subject, whereby they can see that the department functions most efficiently by using the most up-to-date techniques and machinery and by keeping in touch with the best commercial or adminstrative practice.
  The larger units obviously do this, but small rural or even urban district councils certainly would not have a permanent unit of this kind. Although I know that some of them have had ad hoc investigations, this really is not as useful as being able to have the advice of a neighbouring authority if both sides want it—I emphasise that—so that this expert specialist service can be available to the smaller authority.
  Sometimes this will not necessarily result in a massive economic saving, although we know from the figures that this does happen, but it often results in far better understanding between the authority and members of the public because of the arrangements which can be

  45
  made by means of modern techniques even in dealing with complaints and with difficulties which may arise.
  I warn: to emphasise the importance of this aspect of the Bill by putting on record one other fact. About two years ago, in a report by the National Board for Prices and Incomes, attention was drawn to the fact that in some sections of local authority managed labour the productivity was very low, as indeed was the remuneration, and as a result, I am glad to say, both sides—the local authorities as employers and the trade unionists—got together to improve productivity and remuneration. Following these work studies, about 900 schemes covering about 50,000 workers have been introduced and there has been an increase in productivity and in remuneration.
  Having paid tribute to both sides—the local authorites and the employees—may I say that I realise that 50,000 workers represents a small proportion of 700,000 manual workers in local government. But without becoming involved in the subject of recent industrial disputes, I should like to express my view that if there had been this sort of work study in some areas we might have avoided the disputes which inconvenienced a large number of Londoners a few weeks ago. This Bill will enable the use of expert services in this field and wherever else it may be appropriate.
  The third way in which Clause 1 can help is in allowing the use of any vehicle or plant or other apparatus by another authority. A great deal of this apparatus is expensive. Earth-moving equipment is one example, and there are many others. It is obviously to the advantage of the greater authority as well as the smaller if it is possible for this plant to be shared. A most obvious example is in the use of technical apparatus like the computer.
  I do not want to give the impression that nothing has been done in this respect. In fact, it is very encouraging to report that, thanks to the organisation of local authorities themselves, namely, the Local Authorities Management Services and Computer Committee, there are nearly 240 computers in the local authority service. Although I believe that occasionally some authorities have been able to share their computers with others, they may
  46
  well have been at risk in doing so as the law now stands.
  It is a fact that with this kind of equipment, as with so many other things, the larger and more effective computer is the more expensive. It is the one that gets through a task quicker and, as we all know from our experience, it is often the one where the machine has time to spare. This is again an example of the way in which the Bill can help and carry on the very good work which the authorities have done themselves.
  Mr. Eric Lubbock: Can the hon. Gentleman say whether there is provision for one local authority which has developed programmes for use in a particular sphere of activity to be able to sell those programmes to another authority? Will it be possible, for instance, if the G.L.C. has developed a programme, for that authority to sell it, say, to the Kent County Council?
  Mr. Skeffington: The matter is entirely one to be arranged between one authority and another. From our discussions we imagine that the terms will normally cover the cost of providing replacements, and so on. It will certainly be possible for this to be done if an authority so desires it. Indeed, I very much hope that this will be the case.
  The fourth provision, in Clause 1(1)(d), will enable one authority to carry out maintenance work on the land or buildings of another authority. In this case the smaller authority may be able to help the larger, instead of the other way round. A very simple example will make this clear. Nearly all local authorities have a maintenance unit for their buildings, and it is very sensible that they should. It is quick, effective and cheap. It may be that there are buildings belonging to a county authority which require attention. The county depot may be 40 or 50 miles away. Nothing could be more simple and more a saving of time than to allow the district council's maintenance unit to do the work, if the county council so desired. That is the sort of case which paragraph (d) will cover.
  I come now to subsection (4) of Clause 1 and the reference to "public body". It will be seen that the expression "public-body" includes any local authority—that is the purpose of the Bill—but it includes

  47
  also, among others, a parish council. A parish council may receive help though not give it. Obviously, a parish council would not be able to give the kind of help about which we are speaking now, but the Bill makes clear that a parish council may receive help under these provisions.
  Now, reference to other public bodies. There are a number of bodies performing public functions today which do not fall strictly within the definition of a local authority. Obvious examples are a police committee or a hospital board. Again, if the parties desire—it is entirely for them—it will be possible for arrangements to be made between them if the Minister certifies by order that the body concerned is such a public body, that is, a body performing public functions. The House will see the importance of the definition in that respect. If the Minister makes an order and the House approves—it will be subject to annulment—it will be possible for help to be given to the other body.
  That was the simplest way of expressing the matter. One could have had a very long definition, but in that way one might well have excluded some body which ought to have been covered. As the matter stands, however, the Minister must be satisfied that it is a public body, that it is performing public functions, and, if he is so satisfied and the House does not object to the order, the help can be given. I suggest that that is a reasonable safeguard and a sensible way of doing it.
  Some authorities have these powers already. Fifteen county councils have powers to supply goods and materials to borough or district councils within their area—the first such private Act was passed as long ago as 1936—and 16 authorities have power to share vehicles and certain other equipment. Last Session, powers of that nature were given to the Lancashire and Cheshire County Councils. I have already referred to the Greater London Council and the identical powers given to it under the 1963 Act.
  To set at rest any fears which may be entertained, the sort of fears which, unfortunately, prevented our reaching a decision when the question was last before us, I should mention two things which the Bill does not do. It does not
  48
  allow an authority to do new building. Clause l(l)(d) refers to maintenance. It will not be possible for a local authority building department, or, to take the example in its worst form from the Opposition's point of view, the form which might alarm some people, a direct labour department, to start building new housing or for a hospital board, or something of that kind.
  I dare say that some of my hon. Friends will regret that that is so, but what we are doing at this stage in this minor Measure is what the local authorities wanted, what was recommended, and what the study group thought would be wise.
  Mr. Peter Emery: While on that point, the Minister might shorten some speeches if he told us what the view is about extensions, which is referred to in subsection (4). Obviously, the word "extensions" could be open to wide interpretation. Some people might well say that it would cover quite major building. I hope that that is not the Minister's intention.
  Mr. Skeffington: Perhaps the hon. Gentleman would read the report in this connection. I confirm that what is intended by extensions is the sort of thing which may now be done within the competence of the smaller maintenance units. It is certainly not new building in the usually accepted sense of the term. We shall make that clear in the guidance which we shall issue in due course to the authorities concerned. I hope that that will set the hon. Gentleman's fears at rest.
  Mr. W. S. Hilton: Will my hon. Friend make clear also, in view of the apprehension felt by some hon. Members opposite, that the reference to maintenance in the Bill is exactly as it appeared in the London Government Act, 1963, passed by a Conservative Administration?
  Mr. Skeffington: I am glad that my hon. Friend has emphasised that. I have already said that the powers of the Greater London Council are precisely the same in this and in most other respects as in the Bill.
  To allay any other fears, I should add that this is not a greater charter for the extension of municipal trading. I should not mind making the case for that again

  49
  on an appropriate Measure, but all that the present Bill does is to enable services which local authorities are now empowered to provide to be shared among the categories of recipient which I have mentioned.
  Clause 2 prevents anything in the Bill prejudicing powers which local authorities already have. There is nothing here which is in any way in conflict with them, and that should be stated. Subsection (2) enables an authority to come to the Minister and ask him, by order, to repeal or amend any of its own Acts where they have become either unnecessary or repetitive as a result of this Bill. It is purely a tidying-up provision as is usual in these circumstances.
  I hope that I have not wearied the House with too much detail. This is a modest though useful Measure. It follows the recommendations of a specialist committee. It is urgently required by the local authorities, and I hope that on this occasion its purpose will be accepted and the Bill will be given a Second Reading.
  4.17 p.m.
  Mr. Peter Walker: I thank the Parliamentary Secretary for his explanation of the Bill. Perhaps I may congratulate his hon. Friend the Member for Bethnal Green (Mr. Hilton) on seeing before the House a Bill which basically follows his original conception, his purpose now having been adopted by the Government. Incidentally, he is fortunate in having it before the House on its own and not followed by a blood-sports Bill such as encouraged on the previous Occasion a certain amount of oratory which might otherwise not have been displayed.
  The Parliamentary Secretary has endeavoured to make clear two of the non-objects of the Bill. First, it is not to extend municipal trading. Secondly, it is not to allow an extension of activities by direct works departments in new building. We welcome that assurance, and we shall move Amendments in Committee to give what we regard as necessary greater certainty on that point. I associate myself with the hon. Gentleman's remarks in thanking Mr. Burton, the chairman of the joint review body, and those who worked with him in preparing a very interesting and important report.
  50
  Undoubtedly, it is necessary today to do everything possible to improve the efficiency of purchasing by local authorities and the utilisation of both their manpower and their equipment and goods. When we realise that about £8 a week for every family of four is now administered and spent by local authorities, we recognise the enormous scope for improving efficiency in this sphere.
  I must express slight concern here. If a number of local authorities join together in future to purchase goods in greater bulk, I hope that they will acquire the skilled management to do that purchasing. It is one thing to decide that there is an advantage in buying a large volume of goods, perhaps making one or two inquiries and putting in a large order, thinking that one has made a saving, but one may discover that one has warehouses full of goods of perhaps inferior quality at nothing like the competitive prices that could be obtained.
  In industry, the buyers are highly paid and skilled. Much of the difference between a profitable industry and one that makes losses is the skill of the buying. I am a little concerned that there might be a tendency for officials without a great deal of knowledge, experience and expertise in purchasing suddenly to band together and purchase without the skill that both sides of the House would like to see. I hope that everything will be done to bring into local government a much greater skill in purchasing, with the recruitment of the correct management that will be needed if the powers in the Bill are to be properly used.
  The other factor which causes a degree of concern is the importance of seeing that for the activities enabled by the Bill the proper overheads are allocated for handling the goods. One of the difficulties is that money obtained at relatively low rates of interest due to the power of a major local authority may well be used with less skill than where a proper market rate of interest had to be paid. Likewise, I hope that the cost of warehousing, storing and distribution will be properly assessed by those carrying out the activities that are allowed. The cost of storage can be considerable.
  One part of the Bill which the Minister did not mention—I do not criticise him

  51
  for this—was the provision in Clause 1 that local authorities
  "…may purchase and store any goods or materials which in their opinion they may require for the purposes of paragraph (a) of this subsection."
  That gives a power to buy in for the future, and I hope that we shall not see too many local authorities engaging in a speculative assessment of the future trend in a market, and then perhaps finding that the market goes the other way and that it has purchased at too high a price. A careful watch will have to be kept on the situation here.
  The question of public bodies, naturally, causes a degree of suspicion on this side of the House. The Minister said that he will explain to us the powers he will have of deciding that a particular authority will be described as a public body for the purposes of the Act by means of a Statutory Instrument. We do not consider that that is good enough. For example, if the Minister decided that the Coal Board was a public body for a particular purpose, and listed it in a Statutory Instrument as an appropriate public body under the Bill, I think I am right in saying that the local authorities concerned could thereafter enter into agreements of any nature with the board, provided that they complied with the wording of the Bill.
  I quote the Coal Board because it has a chain of builders' merchants, and there could be a situation where the board is described as an appropriate public body for a purpose other than its builders' merchants side. For that purpose, both sides of the House would agree with what was happening. But the fact that it was described as a public body would enable it to join with local authorities in joint purchasing of building materials thereafter sold through its building materials subsidiaries to the public, and there would be an extension of unfair trade.
  Therefore, I would like to move in Committee that the Minister may have the power to approve of public bodies coming into such agreements under a Statutory Instrument, but for a specific type of agreement, so that we know the nature of trading which would thereafter take place with that public body. We
  52
  shall move an Amendment to that effect, because it is of considerable importance.
  Mr. A. P. Costain: Is my hon. Friend also aware that the Coal Board is among the biggest brick manufacturers in the country? Will not an Amendment to cover bricks be even more important?
  Mr. Walker: We must know the nature of the bodies getting together, not just list them, and thereafter having them do whatever they like. This will be a very important Amendment.
  Under the Transport Act, 1968, of which I have a reasonable knowledge, the passenger transport authorities have the power to run garages. We would be very unhappy if a passenger transport authority was described as a public body under the Bill and thereafter took advantage of bulk purchasing agreements of vehicles which it then retailed to the public through its garage outlets, if it possessed any. We would want considerably to tighten up Clause 1.
  We do not like the use of the word "extensions" in Clause 1(4). I concede that that was the wording of Conservative legislation, but there is always scope for improving legislation, even that passed by Conservative Governments. We shall, therefore, seek to define "extensions" in the Bill, so that the word could not result in a substantial building programme taking place. We would also like to see a formal direction on the nature of tendering to take place under the agreements. We would like the right of tendering to be incorporated in the processes.
  Our view on this side of the House is very simple. We are very much in favour of trying to improve the purchasing skill of local authorities. We recognise the absurdity of perhaps two or three local authorities in close geographical proximity separately purchasing items that could be bought at reduced prices if bought jointly by all three. We recognise the spirit in which the Parliamentary Secretary introduced the Bill, and I urge my hon. Friends to support it on Second Reading. But we consider the Amendments we shall move in Committee, putting a proper restriction on the wrong use of the Bill, are vital.

  53
  It will be in the light of the Government's attitude to our Amendments that we shall decide our attitude on Third Reading. If those Amendments can be accepted, the Bill may well assist the efficiency of local government.
  4.28 p.m.
  Mr. W. S. Hilton: I must express agreement—to my surprise—with almost everything that the hon. Member for Worcester (Mr. Peter Walker) has said about the Bill. Something he said has also lightened the darkness in which I have been for the past two years, since our debates in 1967 on my Bill. I could never understand some of the comments made then, but it now seems clear to me that some hon. Members opposite thought they were speaking on the blood sports Bill when they were making a contribution on local government goods and services. I was to same extent cheered by the fact that at that time there was all-party support, from the hon. Member for Honiton (Mr. Emery) and the hon. Member for Orpington (Mr. Lubbock), but I am still surprised, even now, by the opposition of some hon. Members opposite.
  I took the same view then of the Bill as my hon. Friend the Minister did today. What I tried to do with my Bill was to extend to all local authorities the excellent provisions in the London Government Act, 1963. Opposition was originally expressed to that Act in the House on other grounds, but I believe that in relation to these provisions and a number of others the most progressive local government thinking of that time was enshrined in that Conservative Act.
  It seemed to me that the whole debate in 1967 was fouled by the idea that we were trying to extend public enterprise at the expense of private enterprise—even if this was not always openly expressed. I could not see how extending the provisions of a Conservative Government Measure throughout the country could leave one open to the accusations of doing that, but at least some hon. Members opposite made those accusations. It was also highly significant that not one hon. Gentleman opposite who spoke in that interminable debate mentioned the London Government Act, 1963, or why they had changed their mind or even if they had changed their opinions of these Conservative provisions.
  54
  Another pertinent point—the Minister referred to this—is that nearly all the associations of local authorities supported the Measure. I wrote to them personally and, as the hon. Member for Worcester admits, they expressed the belief that it was desirable to introduce such a Bill. However, on the previous occasion the matter was considered this support was discounted because, it was said, local authorities had vested interests and would obviously follow them by support for the Bill.
  If hon. Gentlemen opposite had been able to tell me on that occasion, however, that the local authority associations opposed the Measure, that would have been a fair enough reason to them for rejecting the Bill. I therefore still feel rather bewildered by the debate which took place on that occasion, although I have been heartened by the words of the hon. Member for Worcester today.
  I begin with the proposition that if we can bring about economies from the use of co-ordinated purchasing and other services the result will be good for many sectors, including the private building industry, local authorities and the economy as a whole. At present, local authority purchasing is running at about £3,000 million a year. If we are able to achieve only a 5 per cent. saving on that total sum, the saving for local authorities would be £150 million. I am not saying that this is likely to emerge immediately, because this is, after all, permissive legislation. Local authorities can use it if they wish and my guess is that many of them may not have the initiative to make full use of it.
  It was originally estimated by me that a saving of £150 million might be achieved by a 5 per cent. saving through bulk purchasing. On the other hand, the hon. Member for Honiton said, in what was undoubtedly one of the finest speeches made when we discussed the earlier Bill—it was a superb speech because of his expertise and because, in any event, he supported the Bill—that from his knowledge of educational expenditure savings of between 15 and 30 per cent. could be achieved on certain items. The possible savings are, therefore, much greater than I have prognosticated.
  We should also remember that in almost every rate precept, by far the larger single item demanded from the

  55
  public in supporting the rates is education. If we can make the sort of savings mentioned by the hon. Member for Honi-ton—savings that have been achieved already by some local authorities—we will be doing a great deal for ratepayers and local authorities alike.
  The Minister suggested that many small local authorities are badly in need of expert purchasing advice and could benefit from the Bill. Many hon. Members have experience of local authorities and some of them extremely small authorities. They know that some of the smallest local authorities cannot even pay a full time town clerk or treasurer. It is highly unlikely, therefore, that such local authorities are able to afford specialist purchasing officers who have the techniques required for their task and the ability to put them into practice. But if the Bill is agreed in principle, as it seems to be, these small local authorities will have the benefit of the expertise that is available to the larger local authorities.
  I take a lesson in this context from another Conservative county council. The 1963 London Government Act was introduced by the Conservatives and set out the principles laid down in this Measure. However one local authority which has been practising them for a long time is Kent County Council, perhaps the finest example of its type in the country. This council has reached the objectives which we are setting for small local authorities. This is the objective of trying to help the smaller local authority with its purchasing methods. Mr. G. Carney, the county supplies officer for Kent, made the point in a speech on "Purchasing and Supply in a County Administration". He summed up the benefits of bulk purchasing by saying:
  "If proof is required of the financial benefit provided by such arrangements, it surely lies in the fact that the smallest Rural District Council in Kent has been supplied with its fuel oil at a price which was only marginally greater than that paid by the largest local government buying organisation in the country."
  Although he was referring to only one item, it proves the general opportunities that will be made available to small local authorities if the Bill becomes law.
  There are hon. Members on both sides who represent the building industry. In the newspapers today there appear what
  56
  I consider to be some rather panic-stricken announcements about what the Bill might do to the industry. The first point of reassurance to make—this was made when we were discussing the earlier Measure—is that no new building will be allowed. This point was emphasised when we discussed the matter earlier to reassure people that we were not attempting to attack the private building industry. Indeed, many organisations allied to the building industry have said that if we could achieve organisation of demand through public authorities we could reduce the price of building components. The economic development committees for both building and civil engineering have said that it would be possible only through public authorities to organise demand.
  A local authority has its pool of rate funds. It knows what it wants to do and it is possible for it to take decisions on specifications and organise demand. But the same cannot be done in the private field with individual owner-occupiers or other small purchasers. The E.D.C.s have pointed out, therefore, that there is almost no possibility of organising private demand. If we are to achieve the benefits of large-scale production, they would have to come about through the organisation of public demand. The E.D.C. committee for building joinery pointed out that if we could have large-scale production of, say, manufactured doors, a saving of 8 per cent. could be achieved. Large-scale manufacture of stairs could result in a saving of 13 per cent. The E.D.C. for the ceramic sanitary wear sector said that great savings could be made if standardised designs were adopted in the manufacture of certain items.
  It is worth remembering here that Britain exports a great deal of its building materials production, a point which was made when we discussed the earlier Bill. A great deal of our ceramic sanitary wear is exported. If we could achieve standardisation of design, that would lead to lower costs, so that not only the private building industry but our exports would benefit. The private industry would benefit because of lower home prices. I therefore cannot see why there should be any objection to this step on the part of tho se interested in the building industry.

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  Some building suppliers have expressed fears about the measure, partly I suspect because that they have not read the Bill carefully. But it would actually help them. The standardisation of designs would mean the suppliers not needing the storage facilities which they have now and their financial outlay on building materials would be lessened. They would benefit from greater runs of production that might arise from a co-ordination of demand in the public sector.
  What is the economic situation in which we are discussing the Bill. The general trend in industry and commerce today is in the creation of big corporations. Already, we have seen the emergence of some near giants in this country, and internationally there are industrial corporations whose total annual income is greater than the national exchequer incomes of many countries. We have to ask ourselves why these developments are taking place in private industry. This growth is not occurring on the same principle as Topsy grew. It occurs because these corporations feel that there is some benefit to be obtained. I believe that the co-ordination of service and purchasing activities is one of the major reasons for private business taking the initiative and making sure that they benefit from "bigness".
  We are told constantly from the benches opposite that we ought to take a leaf out of the book of private business, benefit from some of the lessons produced, and utilise them in public bodies, local authorities and in government. We are told that, if we elect more businessmen to the House and to the local authorities, that is all that we need to ensure that all the problems facing them will be solved. I do not completely disagree with that contention. I am on a number of public authorities such as the hospital boards, where I have seen people with business experience making a very effective contribution.
  I am prepared to accept that view, therefore. But what surprises me is that those in this House who advance the argument that there are lessons to be learned! from private business then have the effrontery to come here and deny our local authorities the right to profit from those lessons. That is what happened on the previous occasion when the other Bill was before the House.
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  In my opinion, there was a strong prejudice against local authorities having these advantages, yet those who wanted to express opposition to the Bill had only two alternatives open to them. The first was to admit that they were prejudiced and did not wish local authorities to have the advantages. The second was to deny that any advantages existed. Most Conservative hon. Members who opposed the Measure chose the Luddite view. Having extolled private business on other occasions, they occupied themselves mightily during the previous debate in saying that the advantages did not exist and that the private business world had produced no lessons to show that the co-ordination of supplies and services meant economies.
  As a result, we had what I regarded as the most entertaining spectacle of 1967—hon. Members opposite refuting their own economic arguments and denying that they had any validity. I hope that the more enlightened atmosphere engendered today by the speech of the hon. Member for Worcester will result in the House looking more favourably on a Measure which, in all sincerity, is designed to help local authorities to help themselves, the industries with which they are connected, and the economy of the country in general.
  4.45 p.m.
  Mr. Oscar Murton: It would be churlish if hon. Members on both sides did not at least compliment the hon. Member for Bethnal Green (Mr. Hilton) on the fact that his Bill of two years ago has now been lifted in its entirety by his own Treasury Bench. Whether he lifted it in the first place with the help of his Government, I do not know, but it is striking that it arrives unexpurgated and in its original form. That makes it easier to discuss it. On the last occasion, a number of hares were chased, but not all those hon. Members who contributed to that debate were concerned solely with hares. They were very much concerned also with the problems of local government.
  I think that the local authorities are most concerned about the first recommendation of the Joint Review Body on Local Authority Purchasing, set up in 1967. It states:
  "The Government should give priority to introducing legislation which would allow local

  59
  authorities to supply goods one to another and to contract, purchase and store for that purpose."
  I suggest that that recommendation is narrow in its effect and very different in its intention from the hon. Gentleman's original Bill which the Government have now brought before the House.
  Once again, I join issue with the Parliamentary Secretary. I asked previously whether these powers are not in practice already in existence and whether they have to be enshrined in a special Act of Parliament. I know that certain local authorities have promoted private Bills on the point, but I wonder to what extent in practice the rule of ultra vires has had an adverse effect on co-operation between neighbouring local authorities.
  The Parliamentary Secretary specifically mentioned computers. I crossed swords with him on the subject two years ago. I will not refer to individual local authorities, but I know of a number who very happily have co-operated in sharing computer time, and a number have been able to let out their services to public bodies which are related specifically to local government.
  Can the hon. Gentleman quote a single case where a local authority has been challenged? I suggest that he cannot. A district auditor can only challenge unlawful expenditure. If a local authority sells its computer time or any other service at a profit, there can be no challenge. The only remedy open to the district auditor is that of surcharge, and one cannot very well surcharge a profit.
  Mr. Skeffington: The difficulty is that it is a rule in practice and has been decided in innumerable cases that, if a local authority provides services other than for the inhabitants of the locality, it may be ultra vires. It seems desirable to remove the uncertainty. At the time of the annual audit, any elector can go to the district auditor and make the necessary challenge. It is not making for any basis of harmony if there is this uncertainty in the background.
  Mr. Murton: I am grateful for that explanation, but I wonder whether an objector would get anywhere. Provided that the service was not made available at a loss, I do not see that harm could be done.
  Mr. David Weitzman: It would be open to any layman to challenge a council if it performed an act which was ultra vires.
  Mr. Murton: As I understand the situation, it is normally the layman who does it. There are some who are very active in this respect.
  Why is the Bill being produced now? The original Bill anticipated the publication of the Reports of the Royal Commissions on Local Government for England and Scotland. Apparently, in promoting the present Bill, the Government have decided to ignore the recommendations contained in those reports. If, relating to England, the main provisions of the Redcliffe-Maud Report are accepted—we do not know whether they will or will not be, but the odds are that they will basically be accepted—why should a Bill be enacted at this stage aimed at widening the powers of local authorities to supply goods and services to other local government units when unitary authorities or similar bodies numbering about 60 will replace units numbering something in excess of 1,000? If we exercise patience, I think that this matter will resolve itself without the need for special legislation.
  If the Minister replies that the Bill should be taken now because of the delay implicit in the final implementation of the report on the reform of local government, then one could argue the other way and ask why the recommendations of the Commissioners on parliamentary boundaries should have been postponed? Surely this is an important point.
  Another matter that I must make quite clear is that I understand the Redcliffe-Maud Report, as such, to recommend that the ultra vires powers should be removed. If that is the case, how is it that we are faced with this Bill at this particular time? Could it be that the Government have not got any other Bill to fill an awkward lacuna, if that is the correct word?
  Another important point which concerns me is that the joint review body apparently comprised representatives from only local authority associations, the Greater London Council and a number of Government Departments. I should like to be assured that the views

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  and experience of both industry and wholesale merchants was considered at that time because the Bill could affect their future, despite the assurances that we have been given. No one desires to prevent local authorities improving their efficiency, because the more efficient a local government unit, so will there be less burden on the ratepayers. That is something for which we pray at all times. For that reason, I do not oppose the specific principle contained in the Bill.
  There has been much concern manifested by industry and by trade because the provisions of the Bill are much wider than comparable clauses in private legislation concerning certain local authorities. Under the Bill, the purpose for which goods might be supplied or services given is not confined to the functions and duties of any of the bodies concerned. There can be no indication how far Ministers may go in the prescription of a "public body" for the purposes of the Bill.
  In this connection, the words in the latter part of Clause 1,
  "appearing … to be exercising functions of a public nature…"
  are very wide indeed. Under the usual form of the corresponding provisions in local Acts the powers are usually confined to local authorities within the county or other authorities having a definite connection with the promoting body.
  Mr. Hilton: Following the Conservative Government's London Government Act, 1963, would the hon. Gentleman be prepared to accept that the authorities referred to there as suitable public authorities include hospital boards, national assistance centres, welfare organisations and even the British Postgraduate Medical School?
  Mr. Murton: I do not know that I would. What I think is meant by "public bodies" is what local authority associations had in mind in this respect, namely, local water undertakings and similar bodies having close connections with local government. To that extent I should not disagree. But I am alarmed that it might become wider.
  My trouble is that I do not trust a Labour Government. That is not a unique comment at present. After reading the provisions of the notorious Trans-
  62
  port Act and knowing what can be done by British Railways or the other transport undertakings—the wide diversification of trading activities which can take place—naturally I am concerned that a Minister may one day come to this House and produce a statutory instrument enabling local authorities to provide goods and services for a nationalised industry.
  Mr. J. T. Price Mr. J. T. Price (Westhoughton) rose—
  Mr. Murton: I will give way when I have finished this argument.
  I know that there has been alarm and despondency in the country and in the Press this morning about the possibility of a large buying monopoly being created. It may not go as far as that, but we could have local authorities who, under certain conditions are able to obtain a refund of selective employment tax, actually competing, for instance, with builders' merchants, contractors' plant hirers or meat traders who have to pay selective employment tax.
  Mr. J. T. Price: The hon. Gentleman has introduced a note into the debate which rather surprises me, particularly when he began to rake over past controversies, namely, the historical background of the railways. I draw his attention and that of the House to the fact that when the railways became nationalised they inherited a system which included railway workshops. Those workshops were set up, if the hon. Gentleman reads the history of the period, by the companies who owned the railways as a defence mechanism against exploitation by the people supplying goods to the railways in the first place. This may not be directly relevant to the Bill, but if we are to link this with 1967, we should bear in mind that these developments have taken place to protect the public interest against exploitation—
  Mr. Deputy Speaker (Mr. Sydney Irving): Order. The hon. Member is making a very long intervention.
  Mr. Murton: I thank the hon. Member for Westhoughton (Mr. J. T. Price) for his intervention. He suggested that it was not directly relevant. I agree with him. But I should point out that certain of the railway workshops in past years have been closed down.

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  I want to know whether the Minister can give some assurance to the National Chamber of Trade, which represents all those bodies in private enterprise, about the extensions which might be expected to the Bill, particularly regarding public bodies. I was for a time the secretary of a division of the National Coal Board and I have seen what can happen when such bodies indulge in a large measure of bulk-buying. I understand the policies.
  We must obviously do something to rationalise on certain occasions. In this case, there were 123 colliery companies in Northumberland, Durham and Cumberland buying, for instance, their lubricating and fuel oil from many different firms. On the other hand, when a bulk-buying organisation comes into being and many of those firms lose the business that they have had for many years, it can cause serious repercussions.
  I have mentioned my experience with the Coal Board. Suppose it is treated as a public body and a local authority cooperates with it in certain matters. To take a simple case, the Coal Board is keen on landscaping its pitheads, or spoil heaps, or bings, depending on what part of the country one is describing. There is a danger that it might upset the horticultural industry by obtaining the services of local authorities' parks departments for this purpose. I am sure that it is not the wish, even of this Government, to interfere in such matters.
  As my hon. Friend the Member for Folkestone and Hythe (Mr. Costain) said, brickmaking forms an enormous part of the subsidiary work of collieries, because the clay which comes out in the coal measures is eminently suitable in many cases for making bricks. There could be an extension of this in a nationalised industry where machinery is set up for buying. There could indeed be too close a co-operation with local authorities to the detriment of private enterprise.
  I think that the Bill is too widely drawn. My hon. Friend the Member for Worcester (Mr. Peter Walker) has asked for certain safeguards, and I think that these are vital. If one goes back a little in history, one sees the effect of indiscriminate use by local authorities of their powers in relation to bulk purchasing and the storing of materials and components. This provision might result in local
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  authorities stating in their contracts that they themselves should be the nominated suppliers for some or all of the materials and equipment used by firms when carrying out jobs for them.
  In a less happier time, the Manchester direct works department specified that that should be done. It specified that the components production factory which it owned in Bessemer Street should be used as a supplier. To my way of thinking that is wrong. I am glad that there has been a change of political control in Manchester, and that those works have been closed. One has to watch that sort of thing.
  I think that the House should also be reminded of what the Prices and Incomes Board has said. It has drawn the attention of local authorities to the need to examine, for instance, the relative costs of their architects departments vis-á-vis private architect firms, and even more, to examine the costing of maintenance work carried out by respectively private contractors and direct labour.
  It is on this question of maintenance by direct labour that I should like to say a few words. All the evidence proves that local authority direct labour carries out repairs and maintenance less economically than when it is done by contract labour. It is difficult to obtain an absolutely accurate comparison of output as a measure of productivity per man in direct labour and contract labour, but in 1968 the output per operative employed on contract repair and maintenance was about £2,810, while the output per operative employed by local authorities was about £1,710. I suggest that that proves irrefutably that contract labour is by far the most economical.
  Mr. J. T. Price: What is the hon. Gentleman's authority for those figures?
  Mr. Murton: That was the average throughout the country; not in a specific case.
  Mr. Price: Whose average was it? If we are to have this argument supported by figures, we want to know where the figures are drawn from, and on whose authority the hon. Gentleman is speaking.
  Mr. Murton: I am not speaking on anybody's authority but my own, I am

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  glad to say. I obtained these statistics, and I have no reason to doubt their validity.
  Mr. J. T. Price: Where from?
  Mr. Murton: If the hon. Gentleman would like to meet me afterwards, I shall be pleased to give him the information. I do not intend to give it now.
  One has to remember that in past years a number of tricky situations have arisen in connection with direct labour. Fortunately, they are all over and done with, but they ring like sad and sorry tales of far off battles, names like Liverpool, Shrewsbury, Bedlington, Merthyr, Salford, Coventry and Glasgow. I am glad that things are changing for the better on a change of local political control.
  I should like to issue another word o£warning. I understand that the Comptroller and Auditor General recently commented unfavourably on the failure of hospital authorities to test their direct labour costs in competition. Where this was done, one authority found that direct labour costs were 50 per cent. higher than the costs of outside contractors. That is the sort of thing that the House has to watch.
  I know that the hon. Member for Bethnal Green is interested in the Cooperative movement, and in many ways there is a direct analogy here. I know that the Co-operative movement has had a difficult time. It has had to close down Pelaw, one of its main manufacturing centres. I know, too, that a number of societies are in serious difficulty. I believe that that is so with nine of them. If that situation has arisen with such an able and efficient bulk buying movement, it strikes me that one has to move carefully in all these matters.
  Mr. Hilton: I think that the hon. Gentleman is expecting an interruption by going so widely. The Co-operative movement, which has increased its membership every year, now has 13 million members. It is co-ordinating its efforts, and its share of trade is increasing. Unlike private business firms, none of the societies will ever fail to pay out in full the share capital of its numbers. It will probably pay more.
  Mr. Murton: I believe that shareholders' investment has fallen to £218 million compared with £249 million in 1957, and that its sales of £510 million to 600 retail societies in 1968 produced a profit of only £2.8 million.
  I know that the Parliamentary Secretary will not like my final remarks, but I think that on this question of direct labour there should be an Amendment in Committee to include something on the lines of the old Circular 50/65 which a previous Minister of Housing and Local Government removed. If that Amendment were made, on this question of maintenance of land and buildings there would be some opportunity by means of tendering to weigh the costing between local authority services and those of private enterprise.
  I am not out of favour with the main principle of the Bill, but I am worried about the possible extension of it. I hope that when we table Amendments in Committee they will be debated, and even accepted. My hon. Friend the Member for Worcester threatened that if something had not been done to amend the Bill in certain respects by the time it came up for the Third Reading he reserved the right to vote against it. I do not wish to be out of step with my party in this matter. I have grave misgivings about the Bill, and it is only right that I should have voiced them.
  5.8 p.m.
  Mr. David Weitzman: The reception accorded to the Bill by hon. Gentlemen opposite is very different from that accorded to a similar Measure introduced two years ago, and contrasts sharply with the suspicious criticism in the editorial of today's Daily Telegraph, which I hope some hon. Gentlemen opposite have read. I appreciate that the hon. Member for Honiton (Mr. Emery) has probably converted his hon. Friends to his view, and I welcome that.
  My hon. Friend the Member for Bethnal Green (Mr. Hilton) introduced his Bill—now adopted by the Government in precisely the same form—in December, 1967. One of the objections which hon. Gentlemen opposite had to that Bill was that according to them its provisions should not be effected by a Private Member's Bill. That objection at any rate has gone. That Bill failed to

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  get through, not merely because of the opposition to it by hon. Gentlemen opposite but because, as it was dealt with on a Friday afternoon, the Opposition succeeded in ensuring that the Closure was not accepted.
  I was interested in the observations of the hon. Member for Poole (Mr. Murton). He talked about the ultra vires doctrine, and apparently could not understand it. I appreciate that if a layman were asked why the Bill was necessary and was told that local authorities could not do some of the things that the Bill provides for he would probably be astonished. Nevertheless, the ultra vires rule precludes cooperation in many instances not only between local authorities themselves, but between them and public bodies. Even if there is doubt in some cases it is essential that such doubt should be removed, because it reveals a basic legal defect which limits the relationship between public authorities.
  The hon. Member for Poole will appreciate that that defect has been removed, in the case of the Metropolis and some other cities, by Acts passed by Conservative Governments, and in my submission it is wrong that the advantages that have accrued to those cities as a result should be denied to other local authorities and public bodies.
  What are the advantages? My hon. Friend referred to the White Paper published in May, 1967, Public Purchasing and Industrial Efficiency. That White Paper set out the immense advantages to be obtained by central co-ordination of purchases. It referred to the construction work undertaken by the Ministry of Public Building and Works for the civil Departments and the defence services—the buying of many of the requirements of furniture and supplies—the Stationery Office meeting the requirements for stationery, printing and office machinery—the Ministry of Health meeting the requirements in drugs, dressings and certain medical and surgical equipment, for other Government Departments and the Defence services—the Ministry of Defence buying most of the motor vehicles for Government services and petrol, oil and lubricants for a number of Civil Service Departments.
  That White Paper—Cmnd. 2391—dealt with buying by the Central Government,
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  but it showed that the total value of purchases made by the rest of the public sector was substantially greater than the purchases of the central Government. It went on to propose that local authorities and the nationalised industries should be invited to co-operate with other public bodies to review the position. The importance of bulk purchasing has been stressed again and again in Labour election manifestoes. It is undoubtedly good business. In the debate on the Bill introduced by my hon. Friend I remember the speech made by the hon. Member for Honiton—the only Opposition Member who spoke in favour of the Bill. He obviously had great practical knowledge of the subject, and he gave examples of the way in which local authorities cut down expenditure considerably by central purchasing and stock control in educational stationery and material. Similar economies could be effected in the building of roads, the upkeep and management of hospitals, in universities, and in the affairs of many public bodies.
  The Bill would also permit, in Clause (1)(b), provision by an authority of any administrative, professional or technical services. That would lend itself to the greater use of trained staff and to a great degree of efficiency in trained staff. I read with interest the report of the Joint Review Body on Local Purchasing. That body—and hon. Members opposite should note this in view of their criticisms—included representatives of the Association of Municipal Corporations, the County Councils Association, the Rural District Councils Association and the Greater London Council, as well as representatives of Government Departments.
  No note of dissent was indicated in the Report. After studying all the aspects and the advantages to be obtained, it put forward the recommendations that the Ministries concerned and the local authority associations should confer together with a view to setting up at an early date national machinery to co-ordinate the purchasing activities of local authorities and to encourage prompt and more efficient purchasing by local authorities. In view of the remark made by the hon. Member for Poole, I want to refer particularly to the recommendations contained in this report. The one at the forefront was that which he quoted, calling upon the Government to give priority to

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  the introduction of legislation which would allow all local authorities to supply goods one to another and to contract, purchase and store for that purpose.
  The hon. Member said that that was a limited recommendation. Surely he does not want to deceive the House on that point. I shall read paragraph 32 in full, in view of what he said. That paragraph says:
  "We have already mentioned that there is no general statutory power to enable one local authority to purchase goods on behalf of another. Thus, except where local Acts give the necessary powers, the ultra vires rule precludes the sort of co-operation which we regard as fundamental to the more effective use of local authority purchasing as a whole. We therefore welcomed the introduction by Mr. W. S. Hilton, M.P., in the 1967–68 Session of Parliament, of his private member's Local Authorities (Goods and Services) Bill, which had government support and which"—
  I ask the hon. Member to note this—
  "if enacted, would not only have removed the basic legal defect that precludes one local authority from supplying goods to another, but would have authorised a local authority to buy also on behalf of certain other 'public bodies' (which term could have included, for example, police forces and universities). We regret that the Bill did not secure a second reading. We consider that early enactment of similar legislation is essential to local authority purchasing making any significant contribution to achieving the aims of the White Paper. And without such legislation our recommendation for the setting up of a national coordinating organisation will be meaningless."
  I am glad to see that that essential legislation is now to be enacted.
  Mr. Murton: I cannot help feeling that all this is straining at a gnat over the question of ultra vires. If I were convinced that local authorities have actually had trouble where they have lent out, for example, computer time, I might be more sympathetic, but I have not been given one concrete example in respect of which a local authority has been challenged. I should be very interested to hear from the hon. and learned Member that there have been such cases.
  Mr. Weitzman: If the hon. Member would care to consult the reports of the law cases he would find dozens of instances in which local authorities have been held to have acted ultra vires. It is not a new doctrine. His information is quite incorrect. Moreover, he should remember that even if there is doubt about one point it is essential that that doubt should be resolved.
  Mr. Skeffington: I am grateful to both the hon. Member and to my hon. and learned Friend. The very fact that certain authorities have sought powers for one purpose or another—bulk purchasing of goods and materials, or sharing equipment—and that the House has given them the powers, is convincing proof that the law is at least uncertain in this matter. Otherwise, the House would not have given the powers in question.
  Mr. Weitzman: I am obliged to my hon. Friend for what he has said. If anybody is straining at a gnat it is the hon. Member for Poole.
  My hon. Friend has said that the Bill is permissive. A local authority is not compelled to carry out its provisions. I read with interest an article by the hon. Member for Guildford (Mr. David Howell), in the Daily Telegraph last Friday, which was headed, "Where the Tories can save money," and sub-titled, "Ways of curbing excessive public spending." This is a practical step, I suggest. It was calculated in 1967 that local authorities spend £3,000 million a year on the purchase of materials and the provision of services and, by adopting the Bill, a saving of 5 per cent. a year, of £150 million, might be effected. What a pity that the Opposition did not adopt their present attitude when the Private Member's Bill was before the House.
  There is no doubt that the London boroughs save vast sums of money in education alone on the supplies which they receive from the Greater London Council. All hon. Members, I suppose, would like to see the ratepayers' bill reduced, and this is a way of doing so. I note, also, the statement of the Chief Secretary to the Treasury on 15th October about public sector spending. He spoke then of the establishment of a joint local group as an important step in ensuring that public purchasing made its contribution to greater all-around efficiency. The Bill is a strong move in that direction and one which I welcome and support.
  5.21 p.m.
  Mr. Norman Miscampbell: We do not intend to divide the House on this Bill, but that is no reason why we should not look at both its

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  purpose and its scope in a spirit of sceptical inquiry.
  First, its purpose. I should be interested in the Parliamentary Secretary's answer to the point raised by my hon. Friend the Member for Poole (Mr. Murton) about what will happen if, in the proposed changes which come with Maud, the ultra vires rules are either abandoned or modified. I agree with hon. Members opposite about ultra vires. It has been, in the past, a problem for local government. I suspect that the Parliamentary Secretary and I first learned about it at the same minute on the same day and in exactly the same class when we studied together some years ago. If Maud is to change the ultra vires rules, what is the purpose of the Bill? What will there be in the Bill that will not be possible in a few years in a completely transformed local government structure, with vastly greater authorities?
  Nor should we blind ourselves to the scope of what we are doing. We are giving considerable powers in bulk purchasing, the hire of plant and maintenance. Hon. Members have claimed that the Bill may lead to considerable economies. The hon. and learned Member for Stoke Newington and Hackney, North (Mr. Weitzman) mentioned £3,000 million, spoke blithely of a 5 per cent. saving, which meant £150 million, and said that this would be wonderful. Of course it would, but will we do it? Our experience over the last years of local government trading activities and services has not led to an optimistic conclusion about savings.
  But of course there will be some saving, and it will be possible to say that some purchasing is done better. What I fear is that, for such savings as there may be, there will be equal, if not greater, losses.
  Mr. Weitzman: Surely the hon. Gentleman recognises the value of the Report of the Joint Review Body on Local Authority Purchasing, which included the representatives of all these associations, which went into all these matters carefully and said that it is an essential condition that this legislation should be passed so as to obtain these economies.
  Mr. Miscampbell: I recognise, of course, the value of that report and do not underestimate it, but it should be remembered that it was drawn up entirely by local government interests and not by other, quite legitimate, interests.
  Mr. John Wells: I hate quarrelling with my hon. Friend, but, from the front page of the Burton Committee's Report, giving the composition of the Committee, he will see that he is not entirely right. A great many other people, representatives of central Government and nothing to do with local authorities, were on the Committee.
  Mr. Miscampbell: Yes, central Government as well. Government bodies were largely involved in this. My point is that commerce and industry, which might be displaced under the Bill, were not represented. I do not press the point further, because I recognise the value of the Committee's work. But we should be careful, when we extend the powers of trading and supply by local government, to recognise the resentment—justified perhaps in certain cases—which it undoubtedly engenders.
  But it is not on those grounds that I would ask the House to consider the Bill very carefully. It is because of the accountability and the efficiency, or the lack of checks for efficiency, which so often occurs in local government. Of course, if local government is going to provide certain services subject to this Bill, it is right that they should be offered to others, but this should be done on fully commercial terms, with which outside interests have an opportunity of competing. I suspect that many services which would be on offer from one local authority to another or from one public body to another will lead to strong pressure to use them without considering too closely the commercial advantages or disadvantages.
  Computers are a good example. If a local authority puts in a computer, it may not use it entirely. Time may be surplus to requirement and it would be right and proper that it should be used by another authority or public body. The situation may change and I expect that, in future, there will be complete competition for the services of computer time. But while it may be reasonable now to say "Use our computer because we have it," in five or ten or fifteen

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  years it may be a question of "Use this computer, but you should consider carefully whether you use the public circuit computer time"—which will no doubt then be available.
  I hope that, over the next few years, bearing in mind how much depends on it in other fields, we shall see a decision about the Maud Report. Whatever view one takes of that report, one thing which is clear is that the House will reach a conclusion about it and that larger authorities of some description will be necessary. It is a pity, in view of the inevitable changes, that we should give these extra powers now and not wait until we see the set-up of the new authorities.
  I tie that in with what I said at the beginning, that the Maud Report proposes that the ultra vires rules should be considered. It therefore seems eminently sensible that we should leave these powers to deal with changes which could come then. The scale of purchasing and other powers which will then exist will, of course, be infinitely greater than those which are likely at the moment, with the one obvious exception of London, where there as already vast purchasing.
  Mr. Weitzman: If large economies can be effected, why should not local authorities have the advantage of them?
  Mr. Miscampbell: That begs the Question. From our experience, I do not concede that large economies will necessarily follow. As I say, we are open-minded concerning the Bill at this stage. Subject to certain Amendments in due course, it will not be opposed.
  My hon. Friend the Member for Worcester (Mr. Peter Walker) has indicated what we on the side intend to press on the Government by way of Amendments. My first comment concerns the word "extensions" in Clause 1(4):
  "'maintenance' includes minor renewals, improvements and extensions".
  We an; told that that expression is taken directly from the London Government Act, 1963. My only comment about that is that I would not feel bound in this Bill by any definitions that we passed in 1963. The word "extension" opens up a very wide field. After careful discussion in Committee, it may be shown to be a wide field that is properly open.
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  At the moment, however, that word appears to open a wide field for competition by local authorities.
  The question of Clause 1(5) has already been mentioned and I will not weary the House with it again. If by Statutory Instrument, however, the Government are to be able to declare any body which is carrying out public functions to be a public body under the Bill, I foresee very wide extensions.
  I am sorry to say that I missed one of the comments made by the Minister, not because I was absent, but because I was not paying sufficient attention at that exact moment. I know that the Minister limited the position and said that directions would be given about how far an extension could be made. The hon. Gentleman will, however, be aware, as we all are, that what really matters is not what is said in debate or what directions are given, but the legislation that we in this House pass. As the Bill stands, it is clear that there will be wide powers for the Minister to extend the range of trading. I hope that this can be restricted in a perfectly proper way in Committee.
  My last point is one which inevitably comes from this side of the House rather than from hon. Members opposite. As trading increases and as local authorities become bigger, as one suspects they will, so the drive will grow not merely to say that it is cheaper for local authorities to get together and buy. I suspect that it will not be long before the proposal is made that there should be national as well as local government purchasing. That is a move that I would deprecate.
  5.33 p.m.
  Mr. George Willis: Having listened to the last two speeches from the other side of the House, I am bound to say that the criticism of the Bill does not seem to me to have been very severe. It has been rather of a carping nature than genuinely-based criticism.
  I was particularly interested in the speech of the hon. Member for Blackpool, North (Mr. Miscampbell). The hon. Member twice advanced the argument that we should not do anything now because we might be doing something in four or five years' time—not that we will be doing it then, but that we might possibly be doing something. It comes

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  very ill from hon. Members opposite, who are always talking about public expenditure and the wastefulness of local authorities and Government Departments, when we present a Bill to try to reduce that wastefulness or make things cheaper for the ratepayer, to ask why we should do this now and to suggest that we should wait for three or four years until the question of local government is tackled and, possibly, something might be done. That is hardly an argument against the Bill and it is one of which the hon. Member cannot be proud. To pursue that argument a little further, why should we be here at all discussing the Bill? We might as well be in our constituencies.
  The hon. Member said that we do not realise the resentment that is caused when the powers of local authorities are extended in this way or they are given powers of this nature. In my constituency, I have not even heard the Bill mentioned. Certainly, I find no great movement of protest surging along the streets of Edinburgh to mass up in Princes Street and demonstrate in front of St. Andrew's House to stop the Bill. I do not know what the hon. Member means by "resentment" to the Bill. I have no doubt that one or two business people will feel rather hurt, but I cannot imagine the miners from my constituency or the steelworkers from the constituencies of my hon. Friends demonstrating outside St. Andrew's House against the Bill. That was the hon. Member's second point about the Bill. Once again, there is not much public evidence of any considerable weight in that argument.
  The hon. Member's third and last point was that we should never introduce a Bill of this character because we never know how far it might be extended. There is always a great fear by hon. Members opposite of giving local authorities power to do something which might be extended a little. I have never been able to understand why it is wrong for a group of citizens within an area or a town to decide to do something for themselves. What is wrong about this? The basic argument is whether it is right for local authorities to undertake work of any kind.
  We have always accepted that if a certain type of work will not be undertaken by private individuals, the public can do
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  it. I have never been able to understand why we cannot extend that principle and why, if the public regards it as being in its own interests to do so, it should not be able to do the job for itself.
  Mr. Miscampbell: Would not the hon. Member agree that in that situation a public authority has special tax advantages, is not accountable because it does not pay S.E.T. and has easy borrowing or other advantages? Because it is not subject to the same scrutiny for efficiency, it would be very much to the detriment of a local authority and its members to indulge in such trading.
  Mr. Willis: I should need to check whether a local authority was or was not subject to this or that payment. The hon. Member is arguing that if there were an unfair advantage, it would be to the detriment of the people. I do not know why. I have never heard it suggested that a business firm which receives a subsidy is somehow disadvantaged by that fact. I always thought that a subsidy or preference was given to help firms and that it was an advantage rather than a disadvantage. Why, then, does it suddenly become a disadvantage when enjoyed by a local authority? I do not know.
  Mr. Patrick Wolrige-Gordon. The right hon. Gentleman is making a strong speech in favour of scale. The Bill empowers the local authority to make an agreement in appropriate terms with any public body. What is the right hon. Gentleman's objection to putting the Government in the position of the local authority and amending the Bill in that way?
  Mr. Willis: I think that this is a good little Bill. I should like to see legislation going much further and the local authorities given much wider powers. Indeed, I should like to see them have general enabling powers. What is wrong with that? It is right, apparently, for a person to be able to undertake almost any form of business—to form a company or a co-operative society—but wrong when he exercises his rights as an elector and citizen and suggests that he and his fellow citizens would like to undertake something. The whole thing then suddenly becomes wrong, and I do not understand why. I do not follow such

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  logic. However, we are not discussing that.
  This is a good little Bill. What it does is important and can achieve substantial financial savings. But I cannot understand the argument that the provisions might be extended to all sorts of things. I do not think that they will be, judging by the wording of the Measure. The Bill is long overdue and I hope that it will enable local authorities to act in a manner which will achieve savings for the ratepayers.
  5.42 p.m.
  Mr. John Wells: I hope that the right hon. Member for Edinburgh, East (Mr. Willis) will forgive me if I do not follow him into the Scottish intricacies he entered into. I notice, however, that there is not a Scottish Minister present, although the Bill applies to Scotland. It is negligent of the Scottish Office not to have a representative here.
  This Bill follows the Private Member's Bill introduced by the hon. Member for Bethnal Green (Mr. Hilton) three years ago. We all enjoyed his speech today. I am particularly glad that he reminded the House that the Kent County Council has had the sort of powers proposed by the Bill since 1929. I hope that the experience of the K.C.C. will help to dispel the fears of some of my hon. Friends about this Bill. The Explanatory Memorandum reminds the House:
  "The Bill will not result in any increase in the industrial or non-industrial staffs of Government Departments. It is not expected to produce any increase in local authority staffs and in the long run should produce a reduction…."
  This is one of the most important points, because many of my hon. Friends fear that the Bill would lead to an increase in local authority staffs. I do not believe that this would be the case. The K.C.C. purchasing department has between 360 and 370 employees. This means that the other local authorities it may service by virtue of these powers have fewer employees. Merely because there are more county council employees in Maidstone engaged in purchasing, in the whole of Kent there are fewer engaged in it, and I believe that the central purchasing is done extremely efficiently.
  Another of the fears expressed by my hon. Friends, both in debate and in
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  private, has been that the little trader will be penalised. I do not believe this to be the case either. If a small local authority tries to purchase as best it can, it does not know where to turn. It has no expertise or general direction and may, indeed, go to the local retailer only to find that he, far from being a local man, is part of a great chain, and that, far from buying either locally or cheaply, it is probably buying very expensively from a great national or even international concern. Therefore, I believe that, if these powers are given to all the local authorities, purchasing should be both cheaper, which will benefit us all as ratepayers, and without detriment to the little local trader.
  As the right hon. Member for Edinburgh, East said about 20 times, this is a good little Bill. It is, indeed, a little Bill. It is not extending local authority trading powers in any dangerous direction. I welcome it wholeheartedly from that point of view.
  In Kent, which was a pioneer in this kind of service, the Borough of Folkestone as recently as last year got out a little brochure in the way boroughs are apt to do saying what good boys they are. One of the most interesting parts was where it praised the benefits Folkestone has got from the central county purchasing department. So we need have no general fears about the Bill.
  But my hon. Friend the Member for Worcester (Mr. Peter Walker) was right to warn the House and the Government that we shall seek to make certain Amendments in Committee. He also drew our attention to the need to pay proper regard to the provision of proper facilities for costing. As he rightly pointed out, the skill of a successful industrial company depends on its purchasing department. But when comparing purchasing departments, one must pay close attention to overheads.
  The hon. Member for Bethnal Green laid great emphasis on the importance of sanitary ceramic ware and said that great advantage could come through standardisation, which in turn would help the British builder and therefore our export trade. I listened to his argument closely, but if various local authorities got together on their requirements about cistern size and standardised

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  their byelaws, we could get standardisation of this sanitary ware much quicker and more cheaply. It is not through the Bill that we shall get standardisation in the British ceramics industry, but through byelaw standardisation. That is where we could get great advantage.
  1 want to recall the debate of two years ago. My hon. and gallant Friend the Member for Eye (Sir H. Harrison) then rightly drew attention to one of the fears of the horticultural industry—that, we might get undercutting and false overheads by, for example, a contracts department and a hospital gardening department getting together, achieving no real saving but merely having an extra joint administrator over the two. This fear of more rather than less staff must be uppermost in the minds of some hon. Members, and we must take care that the Bill does not encourage local authorities or a purchasing authority and a secondary purchasing authority to get together and merely have an extra man over and above the staff existing now. I refer the Minister to that part of the speech my hon. and gallant Friend made two years ago on long-term reduction of staff.
  The Horticultural Trades Association and the National Farmers' Union have very real fears about the sale of surplus nursery stock. A very peculiar case is being considered at present. About a year ago the City of Liverpool offered a great deal of nursery stock which was surplus to its requirements, but instead of offering it for sale by tender or at public auction, to other local authorities, Liverpool, in November of last year, put an advertisement in the Gardeners Chronicle of which the last paragraph said:
  "Detailed lists with prices on application from the director."
  The Gardeners Chronicle is a good paper, but it is directed almost entirely at skilled private gardeners. It is not the sort of paper that is directed at municipalities or at Government Departments. It is most improper that such surplus stock should be offered at fixed prices. In this case, the fixed price was extremely low and was an example of undercutting. Disposal should be by tender, and the trade should have first option. In Committee, I shall seek to move an appro-
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  priate Amendment. I shall probably relate it specifically to horticultural produce, but others of my hon. Friends may wish to cover parallel cases.
  A case which is even more disturbing, though it took place rather longer ago, relates to the activities of the Scunthorpe Corporation. An advertisement appeared in the Scunthorpe Evening Telegraph on 15th November, 1967, saying that the Corporation intended to offer a landscape gardening service not only to council house dwellers, but to occupants of private houses. This is a further example of the inevitable yearning of local authority trading departments to do a little empire building. I hope that a close watch will be kept on that trend. Perhaps in Committee we could insert a new subsection (3) in Clause 1 so that local authorities could not undertake new landscaping work any more than they can do new building work. That would meet one of the substantial objections made by both the National Farmers' Union and the Horticultural Trades Association.
  A municipal activity of which I take a very serious view and which has worried a number of people was that engaged in by the Lindsey County Council some two years ago. The Lindsey County Council sent round the horticultural trade a schedule of goods to be tendered for in respect of a number of planting sites. The first planting site was for the county land agent—that was quite proper. So were the second and third sites. The next sites were for the county chief fire officer—again, perfectly proper. But the next was for a private gentleman whom I shall not name but who lives at Burton-on-Stather. It was a very massive scheme. The next was a modest scheme for a lady, living in Caenby. It all seems to be very peculiar.
  Then the county council called for tenders for a very large number of trees for the Cottam Power Station, which presumably belongs to the C.E.G.B. but certainly does not belong to the county council. Then there were plants for the Gainsborough Urban District Council, the Mablethorpe Council, the Nettleham Parish Council, and others. All these local authority items would be acceptable once this Bill was enacted, but I object to those cases that appear to involve private individuals. Another item was a

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  development at Sudbrooke Lane, Scothern, for a named developer.
  It all seems to be very peculiar. One realises that county planning officers frequently demand the planting of trees when they are giving planning permission, but county council tenders should not be put out for planting trees for private people. The Minister has been asked already to be a little more precise in listing the public bodies which could trade with municipalities or county departments under the Bill. I see, in connection with the same schedule that I dislike so much, that very sizable trees were to be planted in an extension to a burial ground. That would be extremely unsuitable, because the same local authority would have to provide bigger and better picks and shovels for the grave diggers. It seems to be an instance of foolish buying. In such cases there is need for expertise in purchasing.
  I give a broad general welcome to the Bill. My own county has pioneered the way. Specified safeguards are needed in relation to horticulture. Hon. Members on both sides will probably have received notes from the National Farmers' Union on the topic. I hope that in Committee the Minister will keep an open mind, and will accept some sensible Amendments, particularly in relation to landscaping and the sale of surplus stock.
  5.59 p.m.
  Mr. Cyril Bence: I share the concern expressed by the hon. Member for Maidstone (Mr. John Wells) about local authorities having power under the Bill to do landscaping for private housing estates. Many county authorities are insisting on what is called open planning, which is an idea that has probably come from this part of the world. Unless county authorities, which have traditionally purchased their shrubs, trees and bushes from nurserymen, continue to do so, I doubt very much whether these open planning schemes will be successful in the long run. Local authorities must have power under the Bill to renew their stocks by purchases from the large nurserymen. It is a mistake to think that because a local authority undertakes landscaping and planting on these housing estates it is taking work away from the private nurseryman. That is not so. More
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  often than not the local authorities get their original stocks from the nurseries. Many of our great nurseries depend largely on local authorities of all kinds for a good deal of their business. Under this Bill what has been suggested by the hon. Member would be a further advantage in the circulation, enjoyment and use of nursery stock of all kinds. I do not believe that it would be in competition with nurserymen but of assistance to them.
  Mr. John Wells: I do not dissent at all from what the hon. Member is saying. He has perhaps slightly misunderstood me. I welcome the Bill and I welcome the sale of more nursery stock, but I am a little alarmed about unfair trading as suggested in the specific cases I have quoted.
  Mr. Bence: We all are concerned about what is called unfair trading. As one who worked in an industry affected by 33 ⅓per cent. duties on its products, I appreciate what is unfair and what is fair trading. I cannot imagine a county authority indulging in unfair trading in competition with nurserymen or anyone else. From every contact I have and from all inquiries I have made I find that the major customers of nurserymen are local authorities. A county borough buys vast quantities of plants from nurserymen. I see no reason why, instead of gardeners standing about doing nothing, they should not be employed by such an authority to use some of the stock bought from the private nurseryman in landscape schemes which the authority has in its county.
  We all support this Bill but I hope that the practice which has existed over many decades when a good Bill such as this is brought forward will not be followed. Someone always finds a reason, however obscure and unfounded, to oppose such a Bill and to give warnings about its dangers. Every radical and progressive step we take is met by warnings that it is a dangerous thing. If this Bill will ruin the nurserymen of Great Britain, Sam McGredy of Northern Ireland or Wheatcroft, I do not know where we are. The more we enable local authorities to indulge in landscaping and to plant trees and shrubs in open plan schemes, the more it will benefit nurserymen.
  I suggest that before the Bill becomes law all the nurserymen will send out

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  circulars to all local authorities. They will read this debate and then "get cracking" producing brochures which they will send to every local authority urging that trees and shrubs should be planted. They will start recruiting gardeners to meet the need for these nurserymen. They have been ignored by the National Farmers' Union which is not interested in the producers of fruit and flowers. The Horticultural Trades Association has had a raw deal. I hope that local authorities will patronise them more as a result of this Bill, because English horticulture is as good as any in Europe.
  6.5 p.m.
  Mr. Walter Clegg: I apologise for not being present during the whole debate, but I had other duties to perform. I had the advantage of hearing the hon. Member for Bethnal Green (Mr. Hilton) when he brought his Bill before the House. I echo the fears which have been expressed by some hon. Members that there might be an increase in some local authority staffs. The Explanatory Memorandum to the Bill says that it is not expected that there will be any such increase, but I beg leave to doubt that. There could probably be an increase if any" empire building" takes place. This is something which local authorities should watch very carefully.
  The establishment of a purchasing power demands skill from those who are to operate it. They have to judge what the demand from other local authorities and public bodies will be. It would be very easy for over-buying to take place and the ratepayers of such a local authority would then be unhappy. The fact that skill will be needed to operate these services properly leads me to believe that there might be an increase in staff. New methods of operating stock yards are growing increasingly complex and there might be an increase in the number of invoice clerks and other people on the periphery.
  My main purpose in speaking is to ask certain questions about the legal relationships between local authorities which combine on certain projects. This is a complex question which should be considered in Committee. One of the complex areas of civil law concerns the com-
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  plication which arises over negligence when machines are hired out by one person to another. I understand that under the Bill a local authority could hire out a bulldozer to another authority. What would be the position if that bulldozer injured a third party? Who would the third party sue—the corporation supervising the job or the one which hired out the vehicle? I presume that the ordinary civil law would operate, but attention should be given to this point when we are in Committee.
  Another problem which is likely to arise concerns the question of contract. It appears that under the Bill a local authority could provide administrative, professional or technical services. It has been said that one local authority could do the job of planning a school or a sewerage system and another local authority could do the building. What would be the position if a local authority lent technical staff not only to advise but actually to devise a specific structure? Take the example of a public hall. Perhaps a rural authority with no design staff could go to a county council and ask if its staff could design the hall. The hall would be built in accordance with the design, but there may be a defect as a result of which part of the hall falls and people are injured. Who should those people sue—the local authority which built the hall or the local authority which designed it?
  Another aspect in which third parties are not involved is the legal relationship between the authority hiring out personnel and the authority using their services. Take the same public hall. Suppose that owing to a defect in design it was unsatisfactory and had to be remedied at a cost of several thousands of pounds. Would the local authority which used the service be able to sue the other local authority in damages because of bad design? It is as well to be quite clear about what these legal relationships will be.
  If local authorities hire out personnel and are not liable both in contract and perhaps tort to those using them, we could have a very complex situation. What I am most cencerned about is that the person who is injured or suffers as a result of one of these arrangements should know whom he has to sue. It is a very

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  expensive business for someone to sue the wrong person and then have another person joined in as a third party. This is a complex branch of the law and perhaps we could have some guidance from the Government Front Bench on these matters today or in Committee.
  6.12 p.m.
  Mr. Peter Emery: I would like to give a general welcome to the Bill, because I believe that it allows local government to obtain the same efficiency and major cost savings which are obtained by well-organised industry and private enterprise. This is surely what all hon. Members would wish local authorities to be able to do. Secondly, it recognises that people who spend vast sums of money—and the figure of three American billion or £3,000 million has been bandied around the House—should be properly trained and highly proficient. The remarks of my hon. Friend the Member for North Fylde (Mr. Clegg) are absolutely correct.
  Thirdly, the Bill underlines the fact that, with the exception of certain notable examples, the procurement and supplies function in local government is hoplessly inadequate and so out-moded as to cost the ratepayers many millions of £s a year. It would be right, although I have no pecuniary interest, to state that I am the Director of the Institute of Purchasing and Supply and the Secretary-General of the European Federation of Purchasing, which allows me to speak with some background knowledge of the general proposition that I am trying to put to the House.
  Certain items have been mentioned cost savings and worries have been expressed about the extra expenditure which might be necessary on the part of local authorities in obtaining the necessary staff, running overheads and dealing with the general operation of the supplies department. I would like to give some figures about this. First, the city of Leicester put forward certain information to the Joint Review Body about the total savings it believed it was able to make annually for 1955–56 to 1965–66. These started in the region of about £17,000 in the first year, rising to a figure of about £93,000 in the last of the 11 years. It believed that in toto it saved the ratepayers of Leicester something in the region of £565,000. If we take the mean of these 11 years, 1960–61, and take the total of
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  a penny rate in that year, the penny rate being £19,624, it will be seen that this saved the ratepayers of Leicester approximate 2½d. to 2¾d. on the rates every year. If that can be done in Leicester it ought to be done in many other areas.
  I turn now to the figures in respect of the G.L.C. What has been very much neglected in the debate is the fact that this Bill is only permissive. It does not force anyone to join a conglomeration or to go into any form of co-operation. It is only if the local authorities want to do it. Since the 1963 Act dealing with the G.L.C. we have produced some interesting figures. The first set relates to what the G.L.C. calls its "non-captive customers", in other words the boroughs outside which normally have their own powers to carry out purchasing but which have decided to opt in and have the G.L.C. Supplies Department do part of their purchasing. The amount that has been opted in by the 33 Outer London boroughs has risen from £3,953,753 in 1965–66 to £4,365,942 in the last year.
  These London boroughs are asking the G.L.C. to do this work because they are getting better service and prices, because it is carrying on an efficient and useful service. It is interesting to note, returning to the Leicester example, that the cost of running that supplies department was something under one-quarter of a penny rate in 1966–67. This puts the cost factors of the supplies department into a correct relationship with the type of savings it is possible to bring about. I will not go over what I said in December 1967, but it is important to make people understand that many of the modern techniques of proper industrial purchasing—vendor rating, quality control, reliability control, standardisation procedures and the necessary training—can only be carried out where there are properly oriented supplies departments.
  The real problem at the moment is that there are not anything like enough supplies departments in the majority of local authorities. I believe that there are only 15 places throughout the country where there is a proper supplies organisation functioning. Because an authority is setting up a central supplies department, or because a smaller authority is asking that the county or some other public body should carry out certain purchasing for it, this does not mean that it has to buy everything. Nor does it mean that

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  every consumable item is bulk purchased. Most supplies departments spend a considerable amount of time working out what ought to be bought in quantity and what ought not.
  Because of the concern which has been shown in the Press today about the building industry, I contacted the Liverpool City Council this morning. It is one of the few bodies which actually buys building materials. I was intrigued to learn that on the whole, other than bricks and cement and other large contract items, the majority of materials for building and maintenance is bought through building merchants. Therefore, it is important to realise that the existence of a central supplies department does not mean that everything will be bulk purchased or that one can do away with a considerable amount of the normal supplies functions of retailing and wholesaling throughout the country. That would not be the case.
  It is for this reason that I should like to comment on some of the arguments which are being circulated against the Bill. One argument is that the Bill contains proposals for an enormous increase in the purchasing powers of local authorities. That is not true. No extra powers are given to local authorities to buy things. All that the Bill does is to allow local authorities to get together and buy more efficiently that which they already have powers to purchase.
  Secondly, it is said that no detailed examination appears to have been made of the prospects of achieving the expected economies which some of us who are advocates of this Bill have put forward. That statement is not true. The facts of the cases which were presented to the Joint Review Body are available to anybody who wants to know what they are, and they are innumerable. It is not right to say that there has not been a proper examination of this matter.
  It is also said that although a group of local authorities providing large orders could, no doubt, obtain lower prices for supplies, they would have to assume responsibility for storage, breaking down bulk loads and redistribution. This statement again is untrue because much of the type of purchasing that a central supplies department will do will be arranging
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  call-up contracts—in other words, being able to arrange a contract at a better price because it would be for a much larger amount of the commodity, and then having the local authority which wishes to take up part of this contract indent from the manufacturer or wholesaler and have the commodity delivered directly to him.
  Indeed, if one looks at the way in which the Greater London Council has done this sort of thing, one finds that its items which are stocked and then distributed are in the region of a quarter of all the items that it purchases. In other words, about 75 per cent. is not kept in stock or in store.
  It is said also that the extra cost of those authorities' additional responsibilities would mount as more and more smaller authorities were involved. This again shows a complete lack of understanding of what a central supplies department does. It is just as easy to negotiate for 10,000 as for 5,000. There is no increase in the overheads. In fact, one would be cutting down the staff in the smaller authorities which are having to do the odd amount of purchasing and one would be handing over this work to the central authority.
  It has also been said that central supplies departments do not work towards British Standards Institution objectives. I do not believe that is true. I should like to quote from a book on central purchasing issued by the Institute of Municipal Treasurers and Accountants. It says on page 40:
  "We found that amongst local authorities which had made any attempt to introduce standardisation the most widely used standards were those issued by the British Standards Institution."
  Therefore, it is much more likely that local authorities which have supplies departments are working towards a variety reduction factor, which means greater standardisation. Indeed, the number of local authorities which have representatives on certain B.S.I. committees is growing each year.
  An important factor to bear in mind is that since the introduction of the Private Member's Bill we have had the support of the local authority associations. It is important to bear in mind that at the joint meeting of the County Councils Association, the Association of

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  Municipal Corporations, the Urban District Councils Association and Rural District Councils Association, it was unanimously recommended that the Ministry of Housing and Local Government be urged to introduce legislation, and the majority of the elected representatives at that meeting were Conservatives.
  The criticism has also been made that there was no real knowledge of industry on the Joint Review Body. I will not mention all the individuals on the body, but I have picked out at least five of the members serving on that body who are in command of, or have had a large experience in industry, retailing and finance generally.
  Having passed praise and given the reasons why I think there should be general support for the Bill, I believe it is only fair that we should ensure that the Bill is examined a little more closely than some hon. Members would like. I do not believe that it should be possible to use this Bill as an extension of a direct labour force. It would be entirely wrong and inappropriate if this Bill were to be the vehicle for such an extension. I am absolutely certain that the Opposition must attempt to insert Amendments so that that cannot happen.
  I should like to reiterate—having been allowed to comment on this point when I intervened in the Parliamentary Secretary's speech—that there might well be a financial limit applied to the building of extensions. I gather that the extension to one of the London teaching hospitals will cost in the region of £7 million, and obviously that is not what is intended under this Bill—or at least, I hope it is not.
  The other thing which the Bill is not intended to do is to increase inter-local government trading. That is not what is intended. On this point to some extent I cross swords with my hon. Friend the Member for North Fylde. I do not envisage the Bill giving power to one architect's department to produce architectural plans for some other local authority. I cannot read that into the Bill, and I hope that the Parliamentary Secretary will say whether that type of service—a specialist building service, or architectural service—would be transfer-
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  able from the county to, shall we say, Axminster Rural District.
  Mr. Arthur Jones: If my hon. Friend is to follow the logic of his argument that the great advantages lie in bulk purchasing and standardisation, it must follow that there should be co-operation between architects' departments in the matter of building materials. Surely, unless this is done, one cannot achieve the maximum standardisation.
  Mr. Emery: I follow the argument. What worries me is the possibility of standardising architects' departments just in the county. I do not think that would be advisable at this stage. My general view is that all of the architects' departments are overworked, and if that is so the idea of passing work to the centre so that the departments would be more overworked was not exactly what I had in mind. I should, therefore, like some definition of this matter from the Minister.
  Mr. Hilton: The hon. Gentleman is under a misapprehension about architects' characters. It is well known that one architect will never agree with another. One of the reasons why we have been held back in the use of industrialised systems developed by private industry and in the investment of money in the use of such systems is that architects in different local authorities will not agree with one another.
  Mr. Emery: I do not wish to be drawn into an argument which might well be out of order on this occasion.
  I welcome the Bill and support its Second Reading. I believe that there are reasons for fearing that in certain respects it may go too far, but, on the whole, I believe that those questions can be dealt with in Committee with sufficient definition to ensure that the Bill does not go beyond what the Minister has said is its intended purpose.
  Against those who argue, "Why not wait till local government is reorganised, and then the Bill will not be necessary", I reply that local government reorganisation will take much longer than the Government lead us to believe. There are large sums of money, many millions of pounds, to be saved for the ratepayer, and the sooner we can have those savings

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  brought into the coffers of local authorities the better for all of us who pay rates.
  6.31 p.m.
  Mr. Alex Eadie: First, I apologise to my hon. Friend the Parliamentary Secretary for not having been present at the outset of the debate. I had another meeting to attend, and I am sorry that I could not be here. I have listened to most of the debate, however, and I feel compelled to intervene because of the very qualified acceptance which the Bill has had. The hon. Gentleman the Member for Honiton (Mr. Emery) almost fell flat on his face when he stressed that the Bill was permissive and then said that he would ensure that Amendments were made to make certain things mandatory on local authorities. That seems illogical.
  Mr. Emery: The hon. Gentleman misunderstood me. The Bill is permissive. I suggested that Amendments should be made laying down that certain things could not be done. I was limiting its permissiveness, not suggesting that any requirements should be strengthened.
  Mr. Eadie: I need make no comment on that. The hon. Gentleman has conceded my point. He talks about permissiveness and then wants to make certain things mandatory. He has confirmed the point which I made.
  The hon. Member for Honiton took care to state his qualifications to speak in the debate. I cannot emulate his qualifications, but I am entitled to say what my qualifications are. I was for nine years the housing convener in a county authority, and for many years I was chairman of a county education authority. Therefore, I have had some experience of bulk purchasing and organisation within a large unit of local government administration.
  I cannot for the life of me understand the difficulties expressed by some hon. Gentlemen opposite when they read into the Bill that there could be legal difficulties between authorities if they went too far. I do not know the structure of local government in England, but I am sure that there must have been an interchange of services between local autho-
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  rities going on for a long time. For example, an education authority will seek the help of the county parks department. In my experience as a county education chairman, I have had to seek the advice and help of a county parks department in doing a particular job. Administratively, it was probably more efficient that we should seek the guidance and practical help of a county parks department in doing various works. I have never encountered legal problems in that way. If the job was not done properly, there would be not a legal problem but, so to speak, a physical problem, and the department would be asked to come back and do the work properly.
  In the same way, district councils in Scotland in the past, without any legal difficulties, have often sought the advice not only of the parks department but of the architect's department, too. If a district council wanted a hall or something constructed, it would ask the architect's department to design and construct it. There were never any legal difficulties involved. I am a little surprised, therefore, when qualified approval is given to the Bill and Aunt Sallies of that kind are brought into the discussion to justify it.
  To return for a moment to the point about permissiveness which the hon. Member for Honiton raised, I hope that he will concede that the House has at times had some sad problems created in that way, and many of us on both sides have said that, if only a certain piece of legislation had been mandatory rather than permissive, there would have been less trouble for the House and, sometimes, less trouble for the local authorities concerned. We should not, therefore, be too worried about whether the Bill itself is permissive, or even whether it is a good thing that such legislation should be permissive.
  The hon. Gentleman hoped that local authorities would not use the Bill as a vehicle for extending the work of direct labour departments. I find no such problem in the Bill. It would depend on the kind of services which a local authority wished to provide. At one time, I was concerned about the provision of enough schools and enough houses, and I was concerned about cost as well. What we did was a profitable exercise

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  for the local authority and for the ratepayers. We went to Scandinavia and picked out our own wood. We hired our own ships. We brought the wood from Scandinavia and processed it in Fife where I live. We were able to build a better standard of house and a better standard of school. It was profitable and of some advantage to the authority. If a local authority adopted that form of bulk buying, I do not think that it would seek to run roughshod over the Bill or that there would be anything wrong in it. As I say, it depends upon the circumstances of the authority in deciding to indulge in that sort of bulk buying.
  1 know that some hon. Gentlemen do not like that to happen, but in my experience—and I am entitled to quote my experience in these matters—it was profitable to the ratepayers and it accelerated our school building and house building programmes. I was proud that I was one of the pioneers in the building of our own schools and houses. For over 20 years before I came to the House, I was a member of a local authority—
  Mr. Arthur Jones: I completely follow the logic of the hon. Gentleman's argument. That is why I cannot understand the provision in the Bill which excludes work other than extension. There is no logic in preventing new building under the Bill as well, is there? What reason can there be for it?
  Mr. Eadie: I suggest that the hon. Gentleman discusses that with his hon. Friend It was his hon. Friend who brought the issue into the debate. If there is disunity on his side, let the hon. Gentleman solve the problem in discussion with his hon. Friends.
  In my constituency, we have a very progressive town council. It is progressive to the extent, for example, of being one of the very few authorities which changed the tenure of council house let-tings so that it now runs on a joint tenancy basis between the man and the woman. This is a very good thing, which gets over serious legal difficulties. This authority gives tenants a service which they greatly appreciate. For example, it decorates for them at cost. This is very efficient for the council and the ratepayers and there is nothing wrong in that. The Bill has been given qualified
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  approval, but we have been told that there will be many Amendments to it in Committee. I hope that none will ride roughshod over the points which I have made.
  I believe that the Bill is good, as is local authority administration, on the whole. Rather than trying to challenge the efficacy of local authority administration, we should give credit where it is due to local administration which takes into consideration the whole question of bulk purchases.
  6.42 p.m.
  Mr. Arthur Jones: I am glad to follow the hon. Member for Midlothian (Mr. Eadie). My intervention a moment ago was designed to help him. He criticised the fact that the Bill was restrictive, since it did not allow local authorities to do new building.
  I welcome the Bill so far as it tries to improve local government efficiency, which is a desirable and sensible objective. In the light of the report of the Royal Commission on Local Government and in view of the point about management techniques and L.A.M.S.A.C, organised by local authorities, and the growth of joint computer services, a lead has been given in this direction. As for co-operation in housing, it has been found that there were not great savings through multiple contracting and so forth in housing schemes, but some substantial savings were made in the unifying of design and the bulk ordering of components. Small authorities, linked with large ones in consortia, enjoyed economies of scale and standardisation.
  But we should consider some of the disadvantages of this proposal in the relationship between public and private enterprise. These proposals extend local government activity far beyond what we have been used to. The Parliamentary Secretary mentioned expensive earth-moving equipment as an example. That can be hired out to other authorities. Local authorities will, in fact, be dealers in these commodities and services. But as local authorities, they will not be able to run losses. The same profitable judgment as in private enterprise will not be necessary, since any losses can be subsidised by a precept on the rates—as has happened extensively over direct labour.

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  They need not look for the commercial margins that private business seeks. Local authorities will also have tax advantages—and exemption from S.E.T.
  There cannot be an exact comparison, but we should consider the disadvantages at which private business will operate vis-à-vis local authorities. There are contradictions in the Government's proposals. In Circular 57 of 1969, local authorities were required to put out to tender, in competition, the work of their direct labour departments. The Parliamentary Secretary made an unguarded reference to the worst forms of municipal enterprise when referring to those departments.
  This is what I was going to say to the hon. Member for Midlothian. Why should not local authorities, in the context of the advantages which it is alleged will flow to the economy in terms of higher efficiency, also do new building work? I see no logic in including additions but not new work. My hon. Friend mentioned a hospital extension costing £7 million. There is certainly a contradiction here.
  Current decisions limit local authority freedom in education and housing—over rent policies and the sale of council houses, for example. The Government are basing their case for the Bill on giving greater freedom of operation to local authorities, but they deny that freedom in other respects. This is a further contradiction.
  My hon. Friend said that this would not involve any more public money, but it must do, because local authorities will have to stockpile: they will not order all their materials on the basis of broken loads and so on when they have a bulk order.
  Mr. Emery: May I try to help my hon. Friend? When one is buying for many people, all of these individuals hold a minimum stock level. This is normal in industry when one holds a single central stock which is less than the amount of stock all around the periphery. So, on the whole, one should be able to make savings in the amount of capital tied up.
  Mr. Jones: Yes, that case could be made about dead stock, but I do not think that my hon. Friend's point would work out in practice with quite that simplicity. If the Bill is to achieve the in-
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  tended purpose, local authorities will involve themselves in the purchase of capital equipment which they will loan around. The plant hire business has been one of the growth industries. If this is going to be interfered with, are we sure that the equipment will be better used under this system? There will be added demands upon public resources at a time when they are being so substantially restricted. This is a further contradiction.
  Central Government is exercising very tight control, as they should, in this respect. I have believed for many years that we should not have an open-ended commitment by local government but that it should be brought within any extension of the gross national product and that there should be reserve powers, effectively influenced by central Government.
  When local authorities have wanted this power they have been able to obtain it easily. For example, reference has been made to the London Government Act, 1963, under which the G.L.C. built up a bulk purchasing department. Other authorities have done the same, and my hon. Friend the Member for Honiton (Mr. Emery) mentioned Liverpool. Local authorities have in the past been able to use the Private Bill procedure for this purpose. One is, therefore, bound to question the purpose of a substantial extension of this facility throughout local government.
  We have an indication that the Government wish to encourage further munici-palisation. I cannot see any other reason for the Bill, since the existing facilities have worked satisfactorily. There are, however, contradictions between present policy and what we are seeing in the Bill, for the Measure represents a substantial departure in principle from what has been practised in central and local government hitherto.
  The Minister mentioned the ultra vires rule, and I am aware of the feeling in local government that there should be greater power, but I cannot understand why this move should be addressed specifically to this sphere of local government administration. Without undue bias I have looked carefully into the matter, and what I find is the Government taking a further opportunity to make a logical extension of Socialist ideology

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  into municipilisation. I do not criticise them for that because it is within their political philosophy. Whenever there is an opportunity to do so, hon. Gentlemen opposite like to further their principles. However, it is in contradiction to the philosophy which I and my party hold and I therefore question the purpose of the Bill.
  I am not saying that the G.L.C. has not effected economies, but I sometimes doubt whether such departments are costed like private enterprise. For example, are the tax disadvantages which private enterprise must bear allowed for? There is substantial evidence to show that municipilisation in this form stands condemned in terms of efficiency and the effective use of resources.
  6.53 p.m.
  Mr. A. P. Costain: Although I heard the opening of the debate, I apologise for not being in my place for most of the following speeches. I was taking the chair at a meeting of a tourist resort committee which was of considerable interest to my constituency.
  Such of the debate that I heard leads me to conclude that this is a Measure which, like all Socialist Measures, is probably perfect in theory but extremely irrational and out-of-this-world in practice. I had the opportunity of speaking on the earlier Measure, when I expressed my views in detail, so I will not repeat the arguments that I adduced on that occasion.
  My hon. Friend the Member for North-ants, South (Mr. Arthur Jones) surprised me when he advocated that the Bill should include the development of new buildings as opposed to maintenance work and extensions.
  Mr. Arthur Jones: I did not advocate that. I said that there appeared to be no logic which stopped the Government's proposals from doing so, though I am thoroughly against it.
  Mr. Costain: I obviously got the wrong impression and I am pleased to hear that my hon. Friend is against including such work, which should not be included, because if a local authority cannot carry out direct work efficiently for itself it will have no hope of carrying it out efficiently for somebody else.
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  I should at the outset declare my interest in that I am a builder. I am, therefore, against direct labour. However, the fundamental point to remember in discussing the Measure is that we require certain services for the running of the nation and that some of these can be carried out by private enterprise or municipal organisations. Because a municipal organisation has large purchasing power—partly because it is spending the ratepayers' and taxpayers' money rather than its own—there is an opportunity for bulk purchase.
  My hon. Friend the Member for Honiton (Mr. Emery) gave a good example when he referred to Liverpool. We have crossed swords on this issue before and my hon. Friend knows my attitude to it. He pointed out that Liverpool Corporation's bulk purchasing department was bulk buying with the idea of the Corporation's smaller units not having to obtain materials from suppliers. That makes a good deal of sense and it is carried out by companies which have large groups. My firm operates in such a way.
  However, if one carries through this development to its logical conclusion one is bound, in the end, to cut out the builder's merchant who supplies bricks and cement. In the ordinary running of a business and in the normal operations of the building industry somebody must carry stocks of bricks and cement for the smaller operator. Thus, the more one restricts the amount of business that such a builder's merchant can do, the higher will be that merchant's overheads for the remainder of his business, which must still carry on.
  One may ask why a local authority should not buy in the most competitive market and supply all its units as well as adjoining local authorities. Under the Bill a local authority in one part of the country could supply any other authority anywhere else in the country. However, from practical experience, I have found, human nature being what it is, that when one authority deals with another there is a relationship similar to that existing between cousin and cousin. Hon. Members will know what I mean. When cousins deal together they tend to feel that they are right, and a certain amount of prejudice is bound to arise. I say this with feeling because I know how tendencies of this type occur in large groups.

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  No purchasing organisation, particularly in the building industry, can always order precisely the quantities that will be required. Somebody in the chain must hold stocks. I was responsible, under Nye Bevan, immediately after the war for organising the Airey House scheme under which 20,000 houses were built. We supplied all the local authorities and helped with the ordering. Everything went well for the normal operations of the scheme.
  But the same cannot be said for the smaller operations and maintenance work that followed. No stocks were carried and we were not able to draw spares and additional units of materials from a central point. I fear that the same will occur under this Measure. We were able to purchase efficiently and cheaply for the main bulk of materials, but as time passed the cost became more apparent.
  If it is possible to make savings by bulk buying, obviously it is sensible to do it. However, often it is not unlike the "price leaders" in many supermarkets. It is always possible to pick out one item which is extremely cheap. I am told that it is possible to buy whisky in a supermarket cheaper than the wholesale price. If one wishes to buy only whisky, obviously a supermarket is the place to go for it. However, the apparatus of this type of Bill goes wrong in arriving at the effectiveness of it from a national point of view. A good argument can be put forward for buying one product but, for the overall picture, it must be looked at from a national point of view.
  Mr. Emery: Will my hon. Friend comment on the history of the borough of Folkestone where, it is said, there has been ample proof of the advantages to be derived from the bulk purchasing activities of the county supplies department, and local ratepayers have been saved many thousands of £s? Why should not local authorities in Devon have the advantages which, because of the Kent County Council Act, local authorities like Folkestone enjoy?
  Mr. Costain: I know that my hon. Friend has been waiting for an opportunity to put forward that argument. There is no reason why local authorities in Devon should not have that facility.
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  I do not propose to vote against the Bill, because I am sure that we believe that our own local authorities are made up of sensible people and that they will apply the Bill in a sensible way. Unfortunately, however, all local authorities are not given the wisdom of my hon. Friend's local authorities and the borough of Folkestone. Many local authorities do not appreciate the problems confronting them and do not realise that if they buy goods from a bulk supply they will deprive themselves of the natural service which should follow. Often when one buys a product wholesale it is impossible to find anyone to service it. For the sake of authorities like that, while I support the Bill on Second Reading, I am glad that my hon. Friend the Member for Worcester (Mr. Peter Walker) has said that he will insist on suitable Amendments before it comes back to the House.
  7.4 p.m.
  Mr. Graham Page: In moving the Second Reading, the Parliamentary Secretary said that it was the intention of the Bill to save the ratepayer money. We on this side of the House welcome that. It is not always evident in the legislation of this Government. It is also obvious that the intention of the Bill is to give more freedom to local authorities. That again is not always evident in the legislation of this Government.
  In view of that, the hon. Gentleman must not be surprised if some of my hon. Friends approach the contents and details of the Bill with a certain amount of suspicion.
  We have seen it before, of course, and I congratulated the hon. Member for Bethnal Green (Mr. Hilton) on having his Bill accepted by the Government word for word. The Second Reading debate on the hon. Gentleman's Bill two years ago was adjourned with many hon. Members still wishing to speak. It has been adjourned for two years, and we are happy to come back to it.
  Two years ago, we had something like a debate on a White Paper on the subject. We were dealing with a Private Member's Bill for which the Government took no responsibility, and we considered it to be the right time at which to express our doubts. We expressed the doubt then that the Bill appeared

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  to authorise a substantial extension of municipal trading by rate subsidisation which might result in unfair competition with the ordinary trader and in a burden on the ratepayer.
  Fears were expressed that bulk purchasing with a view to inter-trading between authorities might lead to a need for excessive warehousing, a need for an elaborate organisation for the distribution and delivery of goods, a need for a lot of finance to support buying and holding stock, and might result in surpluses through lack of foresight for which the ratepayer would have to pay. It was feared that all this might be carried on without the necessary expertise. Some of those fears have been expressed again today.
  I remind hon. Members that the House was considering a Private Member's Bill for which the Government did not take direct responsibility, although undoubtedly there are taxation problems arising from it. Selective employment tax has been mentioned today. Furthermore, the debate took place at a time when the Redcliffe-Maud Commission was still sitting, as was the Joint Review Body on Local Authority Purchasing. We did not know either the form that future local government might take or the view of a very eminent body set up by the Ministry of Housing and Local Government to consider this matter.
  My hon. Friend the Member for Poole (Mr. Murton) and the hon. and learned Member for Stoke Newington and Hackney, North (Mr. Weitzman) have referred to the Joint Review Body on Local Authority Purchasing and its constitution. There were on that body not only officials of local authorities, but local authority members and a number of representatives of Government Departments to provide their knowledge of the subject. That body did not report until January of this year. We have now had an opportunity to read its report, and we know that the local authority associations and the Greater London Council, represented on that body, have passed a resolution inviting the Government to introduce this legislation. We must assume that the local authorities are in favour of legislation of this nature. That resolution was followed by a meeting with one
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  of the Joint Parliamentary Secretaries, who confirmed that it was the intention of the Government to sponsor this Bill.
  The Joint Review Body on Local Authority Purchasing sets out some very interesting and helpful arguments in its report. It does not set out any convincing evidence. Nevertheless, because that emminent body has come to certain conclusions, although the House should not feel itself bound by them, we ought to give them full weight and attention.
  Of special interest in connection with the Bill are the paragraphs discussing, first, the existing purchasing activities of large local authorities for themselves, and second, the existing purchasing activities of local authorities which have the power to purchase for and to distribute amongst other local authorities. Quite apart from Private Acts giving these special powers, a number of local authorities practise bulk purchasing on a large scale because they are large authorities. There can be no doubt that the practice results in price reductions.
  All the fears about financial commitment, warehousing, unwanted surpluses and rate subsidisation apply equally to the large local authority which is merely buying in bulk for itself. It is a difference in degree whether a large local authority is buying for itself or for an organisation of other authorities in addition, but it is a matter of degree only so far as bulk purchase is concerned. It is different in nature from that which is to be authorised under the Bill, because the Bill talks about not only bulk purchase, but trading between local authorities. I may be using a contentious word in saying "trading" between local authorities, but at least it is distribution of the goods and, I assume, payment for them amongst a number of local authorities. So there is that distinction between what is to be authorised under the Bill and the practice which goes on by any one large local authority at present.
  We should not overlook that the law already allows local authorities to combine for these purposes in connection with certain functions. Under the Public Health Act, 1936, which codifies the previous law, local authorities have power to combine and do what they are to be permitted to do under the Bill in connection with their public health functions.

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  That covers a wide sphere or local authority activities.
  In addition to that general power to local authorities under the Public Health Act, 1936, many of them have been given power by Parliament in Private Acts to combine their operations in the way indicated in the Bill. I estimate that three-eighths of the county councils in England already have the powers which we are offering in the Bill. Most of them cover a restricted area, namely, the county and not the whole country. They have not the power to enter into agreements with any local authority anywhere in the country. Most of them are restricted to their own county and some to the neighbouring county as well. However, nearly half the local authorities in this country have this power already. The result is that more than a third of England, and at least half the population, can be covered by the kind of agreement about which we are talking.
  When private legislation has gone so far, it is right for Parliament to consider whether this should be brought into public legislation and, if so, under what conditions and restrictions. When a private Bill is presented to the House the promoters have to prove special need of their district to justify it, but provision canoe made for that even in public legislation. I will refer to that point later.
  In the local authority Bills which have come before this House over the last 20 years, powers of the nature described in the Bill have nearly always been divided into two categories. First, the supply of goods—that is the power indicated in Clause l(l)(a)—and, secondly, the reciprocal services, which are set out in Clause 1(1)(b), (c) and (d). The restrictions on those powers, which have been given in private Bills, so far have differed, but the general pattern which has worked out is that for the period 1948 to 1954 they were restricted to the counties of the promoters. The West Riding, Nottinghamshire, Essex, Berkshire and Derbyshire got powers to carry on this kind of function within their own counties.
  There was then a change in the form of power granted. From 1954 to 1964, although Devon, London and Durham were fairly restricted in the areas in which they could operate, Monmouthshire,
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  Hertfordshire and Cumberland sneaked a Clause through, if I may put it that way, so that they could combine in trade with any local authority anywhere in the country. That was spotted when we got to the Manchester Corporation Bill in 1965, and the restriction has swung back again. The Manchester Corporation Bill had schedules in it clearly setting out the authorities which can agree together under these provisions. Generally speaking, since 1965, although there have been a couple of Bills giving the wide power to enter into agreements with any local authorities, they have been restricted to the local authorities of the county of the promoting authority of the Bill or the neighbouring counties.
  The same pattern has emerged regarding the definition of "public authorities?. It is proper for local authorities to cooperate with public authorities within their districts—the police authority, the university authority, the hospital authority, the river authority, water boards, and so on. But if the Bill is to go on to the Statute Book, it is essential that it should not authorise local authorities to set up a national purchasing body. There must be some restriction on the area within which these agreements can be made. Obviously this part of the Bill needs amending.
  Reading the Bill as it stands, I wonder how the Minister can dare to come to the House and ask for the power to give leave and licence to any local government body—even the Council of the Isles of Scilly—to set up a national purchasing body. How silly can we get? Surely, the Government do not intend this. If they do, then we should throw out the Bill at once. There should be this restriction on the area in which agreements can be made.
  If a national body was set up by a local authority or by any public body, that authority would escape selective employment tax. I think that we should have an assurance from the Joint Parliamentary Secretary, if he seeks the leave of the House to reply, that there will not be this unfairness in trading between local authorities and private enterprise over S.E.T. if the local authorities exercise their powers under the Bill. I want to stress that I should strongly object to a countrywide organisation being set up.

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  Clause 1 states:
  "A local authority and any public body within the meaning of this section may enter into an agreement for—
  (a) the supply by the authority to the body of any goods or materials …"
  The agreement can be made generally by the local authority with any public body which the Minister cares to define.
  My hon. Friend the Member for Worcester (Mr. Peter Walker) said that we would ask for a Statutory Instrument defining these powers. I will spell that out a little more. We shall seek in Committee, if the Bill receives Second Reading, to provide that the powers in Clause 1(1) are granted, not directly in the Bill, but by the Minister, by Statutory Instrument, to the local authority or group of local authorities asking for them, and that such local authority or group of local authorities must justify the request to the Minister in the same way as in the past it had to justfy it to Parliament—in a Private Bill.
  The Minister should be under an obligation to see that the request is for an appropriate district and appropriate authorities. In particular, local authorities should not be given carte blanche to supply public authorities which trade, or resell goods, or hire for reward, and so on. My hon. Friend the Member for Worcester mentioned two such authorities, the National Coal Board and the Passenger Transport Authorities. The chance of this sort of agreement being made, which might be translated into extensive trading by a countrywide authority, should be removed from the Bill.
  I propose, now, to consider some of the objections which have been made during the debate to see whether we can overcome them by proper amendments to the Bill. One of the most important is that arising out of some of the disasters which have come from direct labour undertakings during the last few years. My hon. Friend the Member for Poole (Mr. Marion) mentioned this particularly. Direct labour went seriously wrong when the Government ordered local authorities to abandon the need to obtain tenders, that: is to say, when Circular 50/65 was withdrawn.
  Mr. Eadie: Is the hon. Gentleman aware that I was responsible for a direct
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  labour department, and that the then Tory Secretary of State for Scotland agreed that I should advertise for tender 40 per cent. of the houses, and that the other 60 per cent. should go at a fixed price?
  Mr. Page: From his experience the hon. Gentleman made a valuable contribution to the debate, and he has now proved my point that these matters, or at least part of them, should be tested by tender. The right course was adopted in that case, where the hon. Gentleman was asked to advertise for tender 40 per cent. of the houses. We should introduce into the Bill, in some form, the need for local authorities to test this form of trading by sample tenders on some of their work. That would to some extent overcome the dangers which some of my hon. Friends see in the extension of direct labour undertakings.
  Mr. James Dempsey: Would the hon. Gentleman agree that in certain county areas it is not possible to get other building contractors interested, and that under those circumstances there is no alternative to asking direct labour to undertake such important work?
  Mr. Page: I am sure that that is so. I am not suggesting that one should use this provision foolishly. Where tenders are of no value, obviously it is no good asking for them, but there should be some provision for testing the work by periodic tenders outside the circle of local authorities concerned.
  The fear was also expressed that this type of agreement would show a loss to the ratepayer, that his money would be used to bolster combined operations of this sort. My hon. Friend the Member for Blackpool, North (Mr. Miscampbell) spoke of the need for accountability. I see no reason why there should not be an obligation to provide separate accounts of these activities so that the public can see that the proper overheads have been charged, and so that, as my hon. Friend the Member for Northants, South (Mr. Arthur Jones) said, the thing is properly costed and that it is all above board and open to criticism. Perhaps the Minister will give an undertaking that this will be done by circular. I do not think that it calls for an Amendment to the Bill, but, if it does, we shall

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  seek to make it during the other stages of the Bill.
  The fear was also expressed that local authorities would go outside their normal functions in these combined operations. That fear is worth expressing, because in all the Private Bills where the House has granted this power the Clause starts with such words as, "For the better performance of their functions". That phrase does not appear in the Bill. As an example of what I mean, the Nottingham County Council Act of 1951 says:
  "The Council may purchase, store, and supply to an authority any goods or materials required for the discharge of the functions of that authority…"
  and so on. Words such as those are included in every Private Bill in which this power has been granted, restricting the power as one purely and simply for the functions of the local authorities.
  That emphasises the need to define properly any other "public body". We do not want local authorities to buy to supply goods to some national public body; to a local one perhaps, for which the local council has some responsibility, but not a national public body.
  A real fear has been expressed that there will be a lack of skill in carrying out the purchasing operations, and a lack of the proper expertise. At the moment one cannot see that the trained men are available for this work. It is true that some local authorities have expert men to carry out this work, but that we must be careful to ensure that, as my hon. Friend the Member for North Fylde (Mr. Clegg) said, there is no empire building just for the sake of empire building. Before a local authority tries to exercise the powers set out in the Bill, the Minister should be assured that that authority really has the experience to carry out the work. If the Statutory Instrument procedure is adopted, that is one of the things about which the Minister should satisfy himself before agreeing to the Statutory Instrument being made. The hon. Member for Bethnal Green quoted the Joint Review Body's report and said that great savings could be made, but they can be made only if the job is carried out by people who really know how to do it. This is essential for the successful operation of the Bill.
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  Expertise is also needed in what the hon. Member for Bethnal Green called organising demand, which I understand is really standardisation. The hon. Gentleman referred with great delicacy to the standardisation of ceramic sanitary ware. I do not think it would be unparliamentary for him to have called it "the common loo". It is not always desirable from the aesthetic, or even from the physical point of view to have standardisation in that type of ware, but at least it is advantageous from the economic point of view. One needs the experience and the brains to know how to carry out this standardisation, instead of going wild on standardising things which are better not standardised.
  Mr. Hilton: The hon. Member has mentioned several of my arguments but I want to clear up a point that still bemuses me and has not been dealt with by him. Why did a Conservative Government give the largest local authority in the world precisely these powers without any of these dangers being mentioned, while judging it right not to give such powers to local authorities outside the Greater London area?
  Mr. Page: Everyone had those dangers in mind in giving powers to the greatest local authority in this country—the Greater London Council. It was for that council's predecessor to justify its claim when it brought a Private Bill before Parliament, because the Private Bill giving the powers came before the Public Bill. The London County Council had these powers before they were granted in the London Government Bill of 1963. It is a question of justifying them for any area and seeing whether the type of local authority concerned requires and is capable of carrying out the work.
  The Bill gives these powers wholesale. We are not discussing the question whether the local authority to which we are giving them is fit to use them, or whether it is covering the right area. That is why I say that they should not be given by the Bill but by Statutory Instrument under the Bill when we have considered the area covered. In London it was obviously right in terms of the area, and it was obvious that the authority was wealthy enough to put them into operation.

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  The last objection was that we should wait for Maud, on the supposition that if Parliament adopted the Report of the Royal Commission the ultra vires rule might be abolished—that local authorities would be entitled to do as they pleased and, therefore, to do what the Bill tells them they may do. Unlike my hon. Friend the Member for Blackpool, North, I hope that that day will never come. I would much prefer local authority powers to be properly defined rather than for local authorities to be told what they cannot do. That is a personal opinion.
  It will be a long time before Maud comes into the garden. We shall have to wait for some time before we know what will happen in terms of the structure of local government. In the meantime there may be some savings, and they can be made without damage—but only if the Bill contains the necessary safeguards. Much legislation will need to be amended when Maud is implemented. This Bill will be a mere drop in the ocean of amended legislation when we deal with the Report of the Royal Commission.
  I can summarise the Opposition's attitude towards the Bill—I acknowledge the shades of opinion expressed by my hon. Friends—by saying that we want to give local authorities the efficiencies and advantages of the big customer in commerce, industry and the professions. But we want to ensure that in seizing these advantages the local authorities first have the expertise to carry out purchasing and distribution as contemplated by the Bill; that they do not throw away the ratepayers' money to the injury of the ratepayers or the damage of the ordinary trader; that they do not set up national monopolies, but each will be restricted to local authority functions within the appropriate area for the exercise of those functions and, finally, that they concentrate on the benefits to their partners in this proposed group, and not upon empire building on the part of any one of them.
  7.34 p.m.
  Mr. Skeffington: With the permission of the House, I should like to reply to some of the points that have been made. I am pleased that, on the whole, the Bill has, been welcomed. The welcome
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  has been somewhat tepid in some quarters, but I do not object to that because proper points have been made by all those who have spoken, and they will have to be considered seriously in Committee and in later stages. Nevertheless, my duty to the House in asking it to give the Bill a Second Reading is not to disrupt harmony or store up debating points; it is to try to answer as well as I can the many interesting questions that have been asked.
  I am glad that a number of pleasing references have been made to my hon. Friend the Member for Bethnal Green (Mr. Hilton), because it must have been disheartening for him, having been successful in the ballot and having spent a great deal of time on the Bill when, having presented it, not only was a decision not able to be reached but although he came here Friday after Friday hoping that the Bill would get through on the nod there was always somebody here ready to shout "Object!" My hon. Friend will realise, as we all must, that the work that we do is not always wasted, and that blossom from the seed we sow may come some time later.
  The hon. Member for Worcester (Mr. Peter Walker) raised four points, which were repeated by other Members. As the Report of the Joint Review Body emphasised in paragraph 16 and elsewhere, it is not merely a matter of trying to secure the economies of bulk purchase automatically. There are great savings to be made there; that is probably beyond dispute. But bulk purchase will yield its dividends only if it is in the hands of an expert organisation, or expert personnel. This is as important as the economies that we hope to secure from the bulk purchases themselves.
  I hope that as a result of this Measure—if the House is good enough to give it a Second Reading—departments and experts will be able to provide their expertise over a wider field. It is not suggested here, or in the use of computers, that more and more central purchasing departments or large and expensive computers should be set up. There may be a case for more, but the heart of the matter is their better use. We must see that where personnel and equipment are still available, they are used as well as may be.

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  The hon. Member for Worcester mentioned the need for overheads to be properly charged in the price of a service. I agree. That is what happens now. When an authority provides a service it covers its costs, which include not only the cost of the materials but the cost of all the necessary administrative work connected therewith.
  The hon. Member talked about the cost of storage, and hoped that this would not mean that a local authority having these powers should stockpile vast accumulations of goods for long periods. As the hon. Member for Honiton pointed out, in total there may be even fewer stockpiles than there are now, but they will be more widely and regularly available, perhaps with a greater range.
  But the House must not forget that in all these matters there is the question of the general financial control exercised over local authorities by the district auditor. Undoubtedly, a heavy frozen stock would be the subject of an adverse report from the auditor, with all the necessary consequences, which might lead even to a serious position for those who had authorised the maintenance of the stocks.
  Some concern has been expressed about maintenance. I am willing to consider in Committee whether further qualification is necessary. In Clause 1(4), where maintenance is clearly defined, the word "minor" is used:
  "'maintenance' includes minor renewals, improvements and extensions;"
  That word carries out the principle of the Report and the requirement of the local authorities.
  Mr. Costain Mr. Costain rose—
  Mr. Skeffington: I may be able to save the hon. Member's intervention. I have said that I am prepared in Committee to see whether further definition is needed. I am not being doctrinaire. The Bill is only trying to do what the Report required us to do. If a further modification is needed, we shall consider it.
  Several hon. Members asked whether a public body could be a national body like the National Coal Board. Within the terms of definition here, I do not think that a corporation conducting its own vast powers in that way would be the subject of a Ministerial Order of the
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  kind which the Bill proposes. The fears here are probably illusory, but again I am prepared to consider this point in Committee. Certainly the Committee must assure itself that what we have proposed does not lead to an absurd extension which no one requires. I hope that we will not have great difficulty in agreeing on that point.
  The hon. Member for Crosby (Mr. Graham Page) asked how far we could usefully define the area over which one local authority could provide services to another and how far special accounting arrangements were necessary. These points should be investigated, but I hope that we will not forget that these powers will be administered by responsible local authorities. We are always saying that local government should be as free as possible of central control. We have already made a number of legislative alterations which free local authorities from central Government control, and have extended under the Town and Country Planning Acts those matters which no longer require Whitehall control.
  While it is proper for the hon. Gentleman to express his concern, I hope that he will not start thinking that the objective of the Bill is to treat local authorities as though they were not responsible bodies which have been doing this work for many years. This is a question of balance. Much will depend on the attitude which the Committee takes to the trust which we should be able to repose in local government.
  The hon. Members for Poole (Mr. Murton) and Crosby asked why these matters have come forward now. The question has been asked why, even if the Bill is desirable, it is desirable as soon as possible. When we discussed this matter two years ago, we were told that we should wait for Maud; now we are told that we should not do it before the local government reorganisation takes effect. When we have the local government reorganisation, I wonder what the pretext will be for not having this Measure. I am doubtful of the wisdom of putting off a Measure if it should be done.
  This is not anti-Maud, because hon. Members who study Maud as they do their Bibles will be aware that, in paragraph 560, it asks the existing authorities

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  without delay to rationalise their administration as far as they can, so that they will be preparing for the future and making the existing system work much better. However rapidly the Maud proposals or something like them are translated into actuality, this is bound to take two or three years at the very quickest. Why should local authorities and the ratepayers lose the advantages of this Measure in the meanwhile? Judging from their speeches today, many hon. Members probably regret that local authorities did not have these powers two years ago when my hon. Friend introduced his Bill.
  The hon. Member for Poole was obviously unconverted by my argument about ultra vires, in our discussions two years ago, although on that occasion the hon. Member for Crosby agreed with my view. If there was no purpose in having these powers, we would be wasting the time of the House. Any Private Bill of the character which many local authorities now have would not have got beyond the preliminary stages if it could not prove that the powers were necessary. The fact that we have had 31 or 32 such Measures in the last 30 years or so is some indication of that fact.
  The matter goes deeper than that. There is case after case, not necessarily referring directly to the purchase of materials, but to the ultra vires doctrine. It seems that local authorities are looking over their shoulders all the time if they engage in something of this kind for which they do not have explicit or implicit authority under statute.
  King v. Dolby, 1902 has dominated case law in this field. It was an example of the very point which the hon. Member made, that, if an authority is doing something which saves the ratepayers money, this must be reasonable, providing that it is its normal function. In this case, East Ham Urban District Council, as it then was, purchased, I believe, a second-hand omnibus to convey its members about the district instead of paying their tram fares. This was undoubtedly cheaper, but they were challenged and the matter went to the High Court. I believe that the Lord Chief Justice asked many questions about what horses were being used, which was not a major point at issue. They
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  apparently used the horses of the fire brigade.
  But the point was that the Council had no right to purchase or repair the bus over which this case arose. The individual overseers were surcharged £13 each, although they proved that what they were doing saved the ratepayers money. Ever since that case, authorities have been doubtful, if they have not had this explicit or implicit power to undertake services. I could quote to the hon. Member numerous cases in which the ultra vires doctrine has worked as I have described.
  I have made inquiries of the District Auditors' Inspectorate. We know that clerks, who are usually wise and learned in the law, frequently advise their councils not to undertake this or that service because they may not have the authority to do so. I know of cases when a clerk has advised his authority not to allow its computer to be used for another authority for that very reason. The Lancashire County Council made a kind and wise gesture to help district councils professionally with accountancy expertise, but the county council was advised by its clerk that this might well not be legal. That was why the county council sought the appropriate powers in its own Measure. It is worthwhile spending a moment to place this on record. If we want these services to be provided, it is right to give councils the protection of legal authority, otherwise they certainly will not be done.
  The hon. Member for Maidstone (Mr. John Wells), who apologised that he could not stay for the whole of the debate—as did the hon. Member for Worcester; I appreciate their courtesy—raised the point that a joint arrangement of this sort might add to staff. That would be a very odd result and one to be watched. It is the last thing that one wants to happen. The hon. Member for Maidstone made a number of points on horticulture, of which he is a doughty defender, and we look forward to his proposals in Committee. I am glad that he placed on record what the Kent County Council has done, because it has for some time done very well the things that we have been discussing.
  I listened with appreciation to the points made by the hon. Member for

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  Honiton (Mr. Emery). I was glad that he put his figures on record and I was glad also to have his support. We will certainly consider definitions to ensure that the fears expressed to the hon. Member can be shown to be groundless.
  The hon. Member for North Fylde (Mr. Clegg) asked a number of lawyers' questions, to which, I am certain, he knew the answers. The fact is that there is nothing in the Bill which alters the legal relationship between the parties in any of the matters dealt with by the Bill. One local authority will be able to sue another in the same way as it can sue a contractor. There is nothing to worry about there. Many authorities, if they have arrangements of this kind, may well work out insurance principles and cover themselves. That, however, is a normal matter and there is no difficulty there.
  In an interesting speech, the hon. Member for Northants, South (Mr. Arthur Jones) asked why new building was not covered. The hon. Member answered his philosophical points at the end of his speech when he expressed the view that this was a sophisticated or underhanded way of extending the Socialist principle of collectivisation.
  Building is not included because we did not want the Bill to extend further. We merely wanted to do in the Bill what the Report has advocated and what the local authorities want. That is why we have limited what we now seek to do by Statute but with the proviso that local authorities will be able to help other authorities and public bodies. It is precisely for that reason that the Bill is not being used for doctrinaire or philosophical considerations of that kind. To embark upon using direct labour departments for new building might be highly desirable, and a good case could be made, but not within the framework of this modest Bill. That is the answer to the hon. Member.
  The hon. Member for Northants, South also asked why there could not be provision for competitive tendering. This is a matter for local authorities. Of course, they can do so. In some cases it may be worthwhile. In many cases, the kind of maintenance that we are talking about is where a county council, for instance, has
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  a site on which a building needs repainting but its depot is 50 miles way. In those circumstances, it is sensible to use the district council to cover that kind of case. In view of what I have said, I hope that the hon. Member will realise that that is the position and that I have allayed a great many of the fears to which he and others have probably referred.
  Mr. Graham Page: If I may refer to the point about direct labour and tendering, would not the hon. Gentleman think it proper periodically to test all these powers against tenders from private enterprise by, for example, devising a scheme whereby the exercise of these powers could be tested for their economy as against outside tenders?
  Mr. Skeffington: There is probably a great deal to be said for an objective test of that kind. My only doubt is that to impose such an obligation in the Bill would be a limitation upon local authorities and would take away from them the kind of status which, I thought, the House now generally agreed should belong to modern authorities. This goes to the whole point of the ultra vires question.
  I am anxious that the Bill should not be so cluttered up with safeguards that local authorities do not think it worthwhile to use its provisions. I do not think that a local authority has anything to lose by checking from time to time that what it is doing is the most efficient, effective and economical way of doing it. If it found that it was wrong, it would have to revise its methods.
  Mr. Emery: Is it not the case that any proper supplies department normally has vendor rating which does precisely that, looking at all the possible bids and rating the vendors to ensure that it has the best buy? This is one of the reasons why one wants a larger department to be able to carry this through.
  Mr. Skeffington: I said in opening that the practice of local authorities in doing this work has proved again and again that they test the market and accept the scheme which, in the end, gives them the best economic return. Obviously, anything we can do to encourage that we ought to do, whether it is done by circular or by other measures.
  Again, however, I must ask the House to remember in the background all

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  the time that there are the overall financial controls under which local authorities operate and that there is the possibility of challenge by any elector in the area. These are powerful weapons already. I hope, therefore, that the House will not feel that we are taking a great leap into the unknown. That is not what we are doing.
  The hon. Member for Crosby asked whether the Bill might not be an extension of the powers of local authorities. I cannot see how this fear can be justified because all that the Bill does is to make legal shared services or actions which a local authority now has to perform for others. Of itself, the Bill adds no powers. It merely states that the activities can be more widely used. I am glad that the hon. Member made the point because there is misunderstanding about this outside the House. The Bill adds no new powers in that direction.
  I am grateful for the valuable and constructive points which have been made. I hope that I have answered them all and I look forward to seeing many of the hon. Members who have participated in the later constructive Committee stage.
  Question put and agreed to.
  Bill accordingly read a Second time.
  Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).

INDUSTRIAL DEVELOPMENT (SHIPS) BILL
Order for Second Reading read.
7.59 p.m.
The Paymaster-General (Mr. Harold Lever): I beg to move, That the Bill be now read a Second time.
The purpose of this short and, I hope, not violently exciting Bill is to ensure that investment grant is not given on ships where to do so would be detrimental to the United Kingdom balance of pay-merits. This purpose is achieved by giving the Treasury power to prevent a grant being given on a particular ship if, in the view of the Treasury, this would operate to the detriment of our balance of payments.
I should perhaps first remind the House of the purpose of investment grants. They were announced in the White Paper
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"Investment Incentives" on 17th January, 1966. Paragraph 14 explained that the overriding need was
"… to give priority to those sectors of industry which can make the greatest contribution to strengthening the balance of payments".
In this context, our merchant shipping fleet makes a valuable contribution to invisible exports, and for this reason ships were included among the assets eligible for investment grants. As paragraph 29 of the White Paper records, ships already attracted a larger investment allowance than other assets and enjoyed free depreciation as well. Free depreciation is still, of course, available for ships, and this is a further encouragement to owners to modernise their fleets.
To 30th September, 1969, a total of £83 million was paid in investment grants on new ships. A further £202 million will arise over the next few years on ships under construction or known to be on order at 30th September. This represents a considerable fillip to investment by the merchant shipping industry.
It can, I think, be said that this has contributed to the general benefit of the country's economy. In the period of investment grants, invisible income from shipping has doubled, although, of course, only a small part of this can be validly attributed to investment grants.
Mr. Simon Wingfield Digby: The income went down this year.
Mr. Lever: I hear the hon. Member for Dorset, West (Mr. Wingfield Digby) saying that investment income from shipping has gone down this year.
Mr. Digby: I received a Parliamentary Answer a short time ago saying that it was not quite so good this year as last year since, up to the end of September, it was £157 million.
Mr. Lever: At all events, this fluctuating income is considerably greater than before investment grants started, although it would be intellectually dishonest to attribute a great part of this increase to investment grants.
The gross tonnage of ships owned and registered in the United Kingdom grew from 17.8 million tons at the end of 1965 to 19.8 million tons in July this year. The world merchant fleet has been expanding at a faster rate than our own, with the

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result that our proportion of total tonnage fell from 12·3 per cent. in 1965 to 10·7 per cent. in 1969, so that, although we have increased our total, our percentage has dropped. However, the tonnage now on order for British owners is about 15 per cent. of the tonnage on order throughout the world, which means that the decline in our proportion of the total fleet should be arrested.
Clearly, the international character of shipping operations requires that more stringent tests should be applied before investment grants are made on ships than is the case for the grants on other types of assets. Thus, to get a grant on a ship an applicant must both be resident for tax purposes in Great Britain and either a citizen of the United Kingdom and Colonies or a company incorporated in Great Britain. In either event, the applicant must be carrying on business in Great Britain and must provide and operate the ship for the purposes of that business. The ship must be registered in the United Kingdom.
Furthermore, as my right hon. Friend said in 1966, when introducing the legislation:
"In the special case of ships, which are apt to move about"—
I think that statement can be confidently supported—
"grants will have to be repaid if a ship is sold or demise-chartered within five years to an ineligible person."—[OFFICIAL REPORT, 16th May, 1966; Vol. 728, c. 954.]
Additionally, the payment of grants on ships is invariably made subject to conditions which ensure that, if the ship is chartered out to other operators, we can check and approve the rates charged for any such charters, thus confining the benefit of the grant within the British merchant fleet.
I have already referred to the worldwide operation of ships and the House will readily see that, from the balance of payments point of view, the effect of investing in a ship is not the same as that of investment in some fixed plant—for instance, a chemical works. A manufacturing plant contributes substantially to the economy of the country in which it is situated by the provision of employment and in other ways. A ship does not necessarily do so. It may have been built abroad and be manned with a largely non-resident crew. In these circumstances,
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the benefit from the ship to the balance of payments of that country may be questionable.
It is also the case that a number of the shipping companies which are eligible for investment grants under the stringent provisions I have described are under the control of non-resident interests, to which, after payment of tax, the profits are remittable.
Many of these are old established members of the British merchant fleet who have long played an important part in our economy, including the tanker subsidiaries of the oil companies. But it is a fact that, where the operation of a ship is such as to bring a doubtful return to the balance of payments, that situation may be worsened if the company which owns it is under the control of persons or interests who are not resident here.
Of course, we must be careful to keep in perspective the operations in this country of the non-resident controlled shipping companies and the amount of investment grant paid to them on ships. For ease of comparison, I will quote the figures including both investment grants already paid on new ships and those outstanding on ships for which contracts have already been placed. The total figure at 30th September, 1969, was £285 million. Of this, the non-resident controlled companies stood to receive £91 million. But when the figure of £91 million is broken down, £30 million relates to ships built in the United Kingdom, leaving £61 million—just over one-fifth of the total figure—paid or to be paid to those companies on ships built elsewhere.
Out of this £61 million, £54 million relates to tankers built or under construction for the oil companies, to whose important position in our economy I have already referred. Again, £12 million out of the £61 million also relates to ships built in other E.F.T.A. countries and the Irish Republic. So it is quite wrong to claim, as has sometimes been done, that investment grants for ships are subject to wholesale abuse by foreign shipping operators whom the grants were not really intended to benefit.
However, we have kept the whole of this investment grant policy in relation to ships under constant and continuous review, and in the light of this review the Government have decided that it would

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now be right to recast the scrutiny we have been Maintaining via exchange control and other methods and extend it to most transactions involving the purchase or conversion of eligible ships.
Clause 1 of the Bill provides for such extended scrutiny to be applied by the Treasury. With a very important exception to which I shall return in a moment, it will apply to future purchases of eligible ships and to all eligible claimants. It is necessary to apply the new tests generally in this way so as to ensure complete coverage and to enable all cases to be handled on a consistent basis. The new scrutiny, subject to the exception, therefore applies to all transactions involving ships eligible for investment grant and replaces the previous limited scrutiny through exchange control which we have always maintained.
Under Clause 1(2)(b), the scrutiny will apply to any case in which application is made for investment grant on a ship where no capital payment in respect of the provision of that ship was defrayed before 8 th November, 1969. For normal purposes, this means that cases where a binding contract for the provision or conversion of a ship existed before 8th November will not be subject to the scrutiny, provided that a down payment has been made by the prospective owner on signature of a building contract. This down payment is, I understand, the usual practice in the shipping world on the signing of a contract.
The special exception to the new scrutiny is covered by Clause l(2)(a), which provides that the new arrangements will not be applied to ships wholly or mainly constructed or converted in E.F.T.A. countries, which, of course, includes the United Kingdom itself, and in the Irish Republic. This exemption also covers Finland, which is an associate member of E.F.T.A. through the Finland-E.F.T.A agreement. The reason for excluding ships constructed in E.F.T.A. and Irish shipyards from the scope of the Bill is that our obligations under the E.F.T.A. and Irish Free Trade Area Conventions require this.
The general purpose of Clause 1 is to give the Treasury power to veto an investment grant in cases where, in its opinion, to do so would be harmful to the balance of payments. The Clause does not specify the precise nature of the test which the
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Treasury will apply, and I do not propose at this stage to go in detail into the method by which the Treasury will reach its decisions in particular cases. No doubt my hon. and learned Friend the Financial Secretary to the Treasury, when he winds up the debate, will be ready to do so if the House so wishes; whether the House can resist this interesting revelation of the processes of the Treasury mind we will have to await the conclusion of the debate to know. Hon. Members will also find it useful to read the memorandum which the Treasury has prepared on the subject, copies of which are available in the Vote Office.
We recognise that shipowners will often wish to know well in advance of any decision to place a particular order whether the applications for grant will be successful under the test, and for this reason my Department and the Treasury will be ready to answer any advance inquiries on these points by shipowners, if they, for their part, will provide the necessary information about the location of the building of the ship, its financing, operation, and so on. We will do all we can to help in the most simplified way possible. The answer we give will be valid for the later action unless there is some significant change in circumstances or the estimates originally notified, in which case, of course, the intending shipbuilder can get in touch to see how his latest estimates fare under the test. Should there be a change after some of the grant has already been paid on the ship, further grant payment on that ship will cease unless the situation that then arises after the change complies with the test.
The House will note that Clause 2 empowers the Parliament of Northern Ireland—where the Ministry of Commerce has power to pay investment grants on ships similar to the Minister's power under Section 5 of the Industrial Development Act, 1966—to make laws for the purpose of applying a balance of payments test, and I understand that it is their intention to do so.
I have explained in some detail the arrangements which are being adopted with effect from 8th November, 1969, to supplement the existing provisions of the Industrial Development Act. This is in no sense a reversal of investment grants policy. It does not mean that the Government have suddenly woken up to an

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anomaly which had existed unnoticed for some time. The position is that now we have had a good deal of experience of operating investment grants this new provision is a logical development from the safeguards already provided in Section 5 of the Industrial Development Act, 1966 and extended by the special scrutiny which we have maintained for some time, with the assistance of exchange control measures.
The House will, I am sure, agree that this is a useful Measure which will ensure that in all cases vessels which are assisted by investment grants will bring a clear benefit to our balance of payments. I therefore hope that the House will regard it as a sensible Bill, and give it a Second Reading.
8.14 p.m.
Mr. Nicholas Ridley: I must first declare a tenuous interest in this subject, in that I am a director of a civil engineering contracting firm which is owned by a shipyard. Whether or not that qualifies as an interest I do not know, but I do not expect either to benefit or to lose from the Bill.
I must congratulate the right hon. Gentleman the Paymaster-General on a bland and disingenuous speech, but it must be my job now to try to pour a little troubled water under his oil. We are talking here of something that has become almost a scandal. The payment, or promise of payment, of £61 million to foreign-controlled companies to build ships in foreign shipyards, albeit over a period of five years, is something which cannot be lightly brushed aside as a matter of small importance.
Nor is this the first time that the matter has been raised. I myself, from a back bench, raised it on 2nd April, 1968, in an Adjournment debate. I received a curiously self-satisfied answer from the then Minister of State at the Board of Trade. He said that everything was now under control, that there was no need for me to worry and that, in any case, I had grossly exaggerated the whole thing. He assured the House that the abuse of money leaking out from the investment grant scheme to foreign owners building ships abroad had been
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effectively stopped by using exchange control mechanisms.
He said:
"We have taken steps to make sure the brass plate company does not operate, and the steps we have taken after consultation with the Treasury were announced by my right hon. Friend the President of the Board of Trade in January of this year."—[OFFICIAL REPORT, 2nd April, 1968; Vol. 762, c. 335.]
So he did nothing.
Therefore, the first question I must put to the Government is: why, suddenly, do we need the Bill if the steps taken in January, 1968, put right the abuse? What is the reason for bringing in a Bill a year and three-quarters later when we were told assuredly at that time that the menace had been ended? In fact, from the figures, it can be seen that the menace is still growing. Right up to April, 1968, when I had the Adjournment debate, we had been paying out at a rate of £50,000 a week on these bogus schemes. From then, to date, we have been paying out at a rate of £260,000 a week, which is five times as much.
If we look at the commitment, we find that at that time the commitment ahead was £34 million, a year later it was £37 million, and it is now standing at £40 million. So, again, I must ask the Financial Secretary to tell us what has gone wrong, and why the exchange control mechanisms which were brought into action in January a year ago are not working. Why are they not working, and why has it now been found suddenly necessary to legislate?
Section 5 of the Industrial Development Act states
"… the Board may make to any person carrying on a business in Great Britain a grant towards approved capital expenditure incurred by that person in providing a new ship …"
If it is permissive, if the Board may make grants, there is no reason why the Board should not exercise discretion at present, and there is no need for the Bill. If the Board has been exercising the powers it said it was exercising in January, 1968, there is no reason why it should not go on doing so. If it is necessary by this Bill to legalise the position, the Board has been acting illegally for the last 18 months. We therefore require to know why the Bill has suddenly to be brought in.

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I should like hon. Members opposite to imagine what their reaction would have been if, sitting on this side of the Chamber, they had discovered that under a Tory scheme £61 million had been committed to foreign ship owners to build in foreign yards. I do not believe that there is any other country which does things like this. On top of the £61 million, we have committed another £106 million to British owners to build in foreign yards. It is not my purpose to argue for or against that commitment tonight, but it brings to a total of £167 million the amount which this country is to spend over five or six years on subsidising ships built in foreign yards. I sometimes wonder whether we are absolutely crazy to allow an abuse like this to go on. Although of course we should like to help the British merchant marine, to help other people's merchant marine and other people's shipyards is absolutely mad.
How much will the Bill save? What is it intended to save—that is, how big has been the leak and how much has this been costing us? In his reply, the Financial Secretary could express these figures in terms of the amount of investment grants saved. Alternatively, he could present, as it were, a foreign exchange account. It would be interesting to hear what the Government hope to save.
We have a new argument and I should like to dwell for a little on the basis of the control the Government are seeking to bring in. They suggest that instead of simply using a straight test as to whether a company is foreign-registered or registered at home there should be the test of whether the contemplated transaction will benefit the British balance of payments or not. This is a completely new idea in relation to investment grants.
I entirely understand that it might pay the United Kingdom to subsidise a Greek to build a ship in Japan provided the profits of that operation came to this country and we got foreign exchange therefrom and provided taxation was paid back to the Exchequer to cover the cost of the grants which went out. That is a conceivable proposition and one on which the Government have hung their hat in relation to this Bill, but I find it an entirely new criterion for investment grants.
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The right hon. Member for Battersea, North (Mr. Jay), then President of the Board of Trade, introducing the Industrial Development Bill on Second Reading, said:
"we are also reshaping the whole system of Income Tax incentives by way of capital allowances designed to stimulate more rapid industrial investment and technological advance."—[OFFICIAL REPORT, 16th May, 1966; Vol. 728, c. 947.]
That was the purpose of investment grants, to stimulate more rapid investment and technological advance, but there was no mention of balance of payments. Later the right hon. Gentleman went on to give the four criteria which would be applied to each investment, and again there was no mention of balance of payments.
Suddenly there has been thrown into the whole investment grant syndrome the new suggestion that investment grants will be paid only where there is a balance of payments advantage. If that were applied right across the board, presumably importers of machinery or foreign cars, and even coastal shipping companies—which do not earn foreign exchange because they ply up and down the coast of Britain—would receive grants. They do not earn foreign exchange but may be the losers of foreign exchange. Is the Board of Trade now to disallow all companies which do not earn foreign exchange?
Mr. Harold Lever: The hon. Gentleman was evidently not paying attention when I explained that there is a difference between a ship which is allowed investment grant and a machine tool or other ancillary industrial asset, such as a coastal ship, which contributes to the British economy by its very presence. For a ship the only case that can be made for investment grant is that it contributes to balance of payments.
Mr. Ridley: We now have the extraordinary new suggestion that certain types of asset are to qualify for investment grant—
Mr. Lever: All assets in this country.
Mr. Ridley: Perhaps the right hon. Gentleman will allow me to finish the sentence—because they earn foreign exchange, whereas others are not to qualify because they are fixed investments which benefit the country. I can

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think of many worth while investments which earn foreign exchange and do not qualify for investment grant although perhaps they should. What about the export of whisky which probably brings in more foreign exchange than anything else? Why could investment grants not be given to distillers of whisky—
Hon. Members: They are.
Mr. Harold Lever: The short answer is that we do give investment grants to distillers of whisky.
Mr. Ridley: I thought these grants were related to industrial investment only. I am glad to find that the position is as the right hon. Gentleman has stated. What about Lloyds Insurance, aircraft and City activities concerning working capital? All these are matters of foreign exchange, yet they are excluded from the benefit of investment grants. The Government have got themselves into a curious position. For some investment grants the test is industrial investment, but for others it is whether they earn foreign exchange. I could think of further categories of case.
What about an oil refinery built in this country by foreign owners? That qualifies for investment grant, but it is perfectly possible for that refinery or chemical plant to be a net drain on the balance of payments. First, dividends would go out, and secondly, the imports which come in might be much greater than the exports it makes. Is it still to benefit under the industrial grants system or not? One could go on to a whole series of curious anomalies.
In the test detailed in the memorandum as to whether any particular application will get grant or not, we have the extremely complicated sum set out for the Treasury to discover whether or not a project will benefit balance of payments. First, the capital is to be discounted at a 10 per cent. cash flow, which is a curious figure. The 10 per cent. is the rate which relates to nationalised industry investment but the two kinds of investment are not similar. Ten per cent. approximates to the rate for private industry if allowances are made for investment grants and taxation being different between public and private industry. So we are adopting a public sector rate for a private sector investment which is nonsense.
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The House would be glad to join in the mirth of the phrase:
"allowance will be made for inflation at a rate not exceeding 3 per cent. per year."
That is a very good joke for the Treasury and I congratulate the Treasury upon it. Suppose the right hon. Gentleman gets all the firms to fill in forms, gets all the figures and then does all the sums, what result does he think is detrimental to the balance of payments and what result is not? Suppose, for instance, £1 million investment grant is paid for a ship which cost £5 million. If that ship on balance of payments will produce a net gain to the economy of £1 a year, is that beneficial or is it not? Perhaps it will be thousands of pounds a year, or millions. The right hon. Gentleman must be more specific. At what rate is it worth us making these investments to earn foreign exchange?
The Government are extremely "bullish" about the balance of payments. They tell us that they have this huge surplus building up. What on earth is the point of the British taxpayer paying investment grants to earn more foreign exchange which is now apparently in full supply? What is the measure that will be used to decide whether an investment is a good one? This whole question has so many difficulties that I do not believe it makes any sense at all.
The underlying basis of the Bill is therefore rubbish. It is out of conformity with the objects of investment grants, which were to increase investment and technological change. It is based on some mythical idea about what is or is not good for the balance of payments, without any explanation or true analysis of what is or is not good for the balance of payments. It is discriminatory. It applies only to companies which the Treasury, in its wisdom, decides to apply it to; there is no possible means of discovering whether one is to be let through the net—the answer comes out from the Treasury when the form has been put in and there is no way of assessing the likelihood of success or failure beforehand.
There is no appeal against being turned down. It opens up the door for the Treasury to use all sorts of arm-twisting techniques to ensure that a shipping company does something that may be in the national interest, to make sure that a

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shipping company builds a certain proportion of its ships in British yards or carries out certain trades. It gives unlimited power to the Government to manipulate the way in which shipping companies behave, in a way that we on this side of the House do not like at all. Further, it is a bureaucratic Bill, involving a series of form-filling exercises and it makes it worse for all shipowners because at present all United Kingdom registered shipowners are exempt from having to provide this information. Now they will have to do so.
It therefore extends to all shipowners what has hitherto been kept to a small number of foreign-controlled companies. Perhaps, the most unsatisfactory part of the Bill is the curious provision that it does not apply to building in E.F.T.A. countries. The right hon. Gentleman explained that this was because our commitments under the E.F.T.A. Treaty made it impossible for us to control orders there. By formalising the position in law, which this Bill seeks to do, in relation to Japan and Germany and the rest of the world, we make it quite clear that we have no intention of controlling building in E.F.T.A. yards.
It is wide open for all shipowners who wish to do so to go along and claim investment grants for ship orders placed in E.F.TA. countries. All that they will have to do is to switch orders which might have gone to Japan, Germany or Holland to Sweden or Norway and they will be able to claim the 20 per cent. under the same bogus conditions which apparently apply now.
If that is the case it will merely channel the leak out of other countries into ETTA. countries. From the point of view of the British taxpayer it will not do all that much to stop it. This is a curious way of paying back E.F.T.A. Think of all of the insults which this Government have hurled at E.F.T.A.—the import levy when they first came in, then investment grants, and then all the controversy we had with Norway over the aluminium smelters, and then the import deposits scheme, which we were discussing last week. All these "fouls" against the E.F.T.A. Treaty are, I presume, to be compensated by allowing this miserable little Clause to go through, permitting the continuation of a loophole.
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This is a sorry episode, and is a bad hole in the watertight quality of the investment grants scheme. We warned against investment grants when they were first introduced. The depressing thing is that, despite enormous expenditure, this year estimated to be £475 million, the rate of industrial investment is not growing as fast as it was. In the last five years industrial investment subject to investment grants has grown by 23·6 per cent. whereas in the previous five years it grew by 28·5 per cent. I do not make the point that it is getting very much better or worse but, despite doubling expenditure on subsidies to investment, there appears to have been very little response. At the same time, we have been pouring out money in this way on foreign shipowners building in foreign yards, and £61 million of taxpayers' money has gone down the drain.
The Bill is discriminatory and bureaucratic, and makes confusion worse confounded. It is high time the Government had another look at their whole policy in this field instead of patching, as they are doing in this Bill.
8.35 p.m.
Mr. Frederick Willey: The hon. Member for Cirencester and Tewkesbury (Mr. Ridley) has made a very confusing and disappointing speech. I was prepared to allow him to take the credit for having helped to promote this legislation; but, having done so, I gather that he is going to vote against it. It seems remarkable, but there is no alternative. He cannot allow the House to express its approval of what he has described as rubbish—and miserable rubbish at that.
My approach to this Bill is much more simple. I represent in my constituency the greatest single concentration of shipbuilding in Britain, and I support the Bill because it seems that it will be beneficial to the shipbuilding industry.
I want to make two propositions about shipbuilding which I think cannot be gainsaid. The first is that no Government have done more for the shipbuilding industry than the present Government. The second proposition is that the British shipbuilding industry faces a welcome period of full production and full employment over a period of years These propositions are not so dependent upon one another as one might imagine

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because there is a third fact, which is that the world shipbuilding industry is enjoying a boom and it is when we consider our own industry in that context of world shipbuilding that we are bound to be less complacent.
It is in the context of British shipbuilding and world shipbuilding that we cannot fail to be disturbed that we have now dropped to fourth place among the world's shipbuilders. We know that the Japanese are building rather more than half of the total world's shipping. We remember that one year after the war we reached rather more than half of the total world shipping. We have now dropped to a share which represents no more than 5 per cent. or 6 per cent. of world shipbuilding. If we look at the success we have gained in world orders we find that the position is no better. Taking the world order books, we again occupy the fourth place.
As the Paymaster-General has said, the same position obtains in shipping, a second major industry. Just as British shipbuilding year after year used always to occupy the first place, so did the British mercantile marine. But no longer is it top of the table. It has now dropped to third place. This fall is just as significant as the position of British shipbuilding. We have been overtaken by the Liberian fleet which has doubled its tonnage in the last five years, and, what is more significant, we have been overtaken by the Japanese.
The remarkable difference between ourselves and the Japanese is that the Japanese have built their enormous mercantile fleet in Japanese yards. In spite of the pressure of export orders on the Japanese yards, they have built in their own shipyards the fleet which has overtaken ours. This must cause us some anxiety.
If we look at the final figures for 1968, we find these two disturbing factors illustrated. The Lloyds figures for 1968 show that the tonnage for domestic account was the lowest peace-time figure since 1934, and that in the same time the tonnage imported—2 million tons—was the highest figure ever recorded. I remember, and the hon. Member for Dorset, West (Mr. Wingfield Digby) will remember, that years ago I first called
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attention in the House to the danger of importing shipping. Over 2 million tons of new shipping was imported last year. Fortunately, the position is improving this year, but not materially.
As my right hon. Friend the Paymaster-General said, the tonnage ordered by the British mercantile fleet over the next few years will at any rate arrest the decline of the British fleet. The shipbuilding output figures for this year will be better than last year's. But they will be far below the 2¼ million tons set as the target by the Geddes Committee. I welcome the Bill because I believe we still have to do far more for these two basic essential industries.
It is for that reason that I am very disappointed that the Government have not taken the occasion of the Bill to lift the ceiling on credits under Section 7 of the 1967 Act. We are reaching the ceiling, and it would have been a comfort to home owners, and encouraged them to place their orders in British yards, if the Government had said now, as they are bound to do sooner or later, that they would increase the ceiling from £400 million to encourage the home owners to place their orders in British yards.
The trouble with the investment grants has been that the shipping company benefits equally whether the ship is built abroad or at home. I hope that my hon. and learned Friend the Financial Secretary will remain silent. I would rather the provision of the Bill were not closely defined. I am much more hopeful that the words
"… operate to the detriment of the United Kingdom in the matter of its balance of payments, …"
will be interpreted more widely than perhaps the Government at present have in mind. I do not think that there was any evidence of wholesale abuse of the investment grant provisions, but there was evidence of their disadvantage to this country, and therefore I hope that the provisions of this legislation will be interpreted liberally.
The problem cannot be dealt with solely by legislation; the problem is the disturbing post-war history of these two essential, basic national industries. What we lack is a sense of national purpose, and that depends on far more than legislation. When we see what the Japanese

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and West Germans have done in building up their shipbuilding and shipping industries, we should be thoroughly ashamed of ourselves. We had all the advantages. We dominated the world market, both in shipbuilding and shipping. We have lost oar place in both because we have not been able to put national priorities first.
Therefore, whilst I welcome the Bill as at any rate calling attention to the importance of these industries to the balance of payments, and to the importance of home owners building ships in home yards, I believe that the country as a whole must recognise that it is in our national interests to see that we maintain and improve the position of these great industries in world markets. In consequence of adopting the Geddes recommendations, it is our national responsibility to see that sooner rather than later we attain the target of 2¼ million tons for British shipbuilding.
8.45 p.m.
Mr. David Howell: I listened with interest to the discourse of the right hon. Member for Sunderland, North (Mr. Willey) on shipping and shipbuilding. I wish, however, to concentrate on the Treasury aspect of the matter, because this is an issue which is of obvious concern to that Department.
Enough was said by the Paymaster-General and my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) to indicate that this is, by any standards, a peculiar Bill. The Paymaster-General called it "useful", but it deserves that adjective only in the sense that it attempts, in a bizarre way, to shore up an extremely inefficient system.
It is an inadequate cure for a dangerous disease and, with the best will in the world, I do not believe that the spurious precision which the Treasury has put into its paragraph headed under the medicinal tone of "The test", can hide what Clause 1 says, which is that the Bill hands to the Treasury substantial and rather vague new powers, in effect to say to those who apply for grants in this sector of industry, "I am sorry. You cannot have a grant. We do not like the look of your face". That is the level of precision embodied in the Treasury Memorandum.
However much it may be covered by various criteria, of which we have heard
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so much in other spheres and legislation in recent years, and however much it is labelled "The test", it will be arbitrary, it will hit unfairly at some people and it will create difficulties. There will be awkwardness ahead. We must be clear about this legislation, whether or not we like the general principle of the Bill.
It seems fair, since we have already discussed the shipping and shipbuilding implications of the Bill, to ask how we are tonight discussing a Measure of this peculiar nature, which gives to the Treasury, when it is of a certain opinion, the power to restrain the Minister of Technology in his enthusiasm to hand out grants in every direction.
My hon. Friend the Member for Cirencester and Tewkesbury said with some justification that the Bill was an inadequate response to a situation which had verged on a scandal. That was, in a sense, too kind of my hon. Friend. The scandal is not the situation solely in the area of shipping but the whole area of investment grants. That is where the scandal lies and I believe that it is a public scandal of enormous proportion, the size of it being measured in hundreds of millions of £s. My hon. Friend reminded us that the scandal and its size had been noted by the Treasury. There can be no doubt that the Treasury's interest is great.
This is a repercussion from a scandalous system, a system which we have criticised time and again in the House—a system into which the President of the Board of Trade promised he would conduct a survey in February of this year to test its effectiveness. We have heard nothing since, except a mumbled word from the Ministry of Technology, which has discovered that it is responsible for that survey. We have been told that it will try to do something and publish the results when they are ready. The Estimates Committee of this House, when studying the Winter Supplementary Estimates last year, called for a survey of the effectiveness of investment grants. There is still no sign of it.
The size of the moneys going in investment grants, quite apart from whether they are going to bona fide recipients or to those whose credentials are less worthy, is not merely climbing but climbing in a way over which the

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Treasury bench, let alone individual hon. Members, have no control.
In this situation, it is perfectly natural that hon. Members should ask that matters be surveyed in a disciplined and systematic way. Instead of a survey, we are given this Bill. Instead of the undertaking from the Minister to bring forward an effective study being implemented, out of the Ministry of Technology, with the connivance of the Treasury, there comes this strange creature.
I feel it difficult to be constrained by the wisdom of my own Front Bench into not voting against the Bill. It is a most peculiar piece of legislation. I do not think that any hon. Member who has spoken in favour of it will live to be very proud of this odd little creature on our Statute Book though, given the gigantic and inefficient system of investment grants, it does not surprise me that we should be confronted with such a Measure. I fear that we shall see more and more such Bills, all aimed at shoring up an unworkable system.
8.52 p.m.
Mr. William Small: The arguments of the hon. Member for Guildford (Mr. David Howell) rely on criteria which he would not apply in the general industrial sponsorship of investment grants in most of our industries. For years, our shipbuilding industry was deprived of access to investment grants in the form in which the aircraft industry got them. In view of that, I back this Bill 100 per cent., since it will help to protect the interests of Britain and the shipbuilding community.
Investment grants are about industrial sponsorship, and the fact that the decisions on making grants is to be switched to the Treasury is welcomed.
We have heard a lot about leakages into foreign countries, with owners getting access to borrowings at less than the commercial rate for products that they are building elsewhere.
I remember the oral hypnotism which my right hon. Friend applied to shipping on one occasion in the past. This is the second time in my experience that he has spoken on the subject, the first time being when we were in Opposition and when he entertained us at great length
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on the history of the coelacanth, and the relative salinities of the Sargasso Sea and the Red Sea. However, it is clear from what he said this evening that he is a Minister with an expansionist mind who is trying to employ a restrictionist argument.
He says that he intends to ensure that there are no leakages. However, the experience of the international oil combines in building ships is such that my right hon. Friend will require a postgraduate course in economics to see where our money is spent. So to that degree, we are subsidising our external competitors.
I welcome the regulatory accountability of the Bill.
I ask that, for the purposes of this scheme, the Government will use the rate of discount which is already in use in the nationalised industries, as explained in Command 3474.
Representing the Upper Clyde Shipbuilding group, it was a peculiar experience that when British Rail wanted to extend the sea route from Stranraer to Larne and applied for a grant, a Dutch company got the grant and built the "Antrim Princess", I hope that the nationalised industries, in terms of availability, can get investment grants on the same terms as private enterprise. This is an extension from land to sea and requires the building of a ship. I hope that on a strict even test on matters of this kind the Treasury will make up its mind to realign the matters on which application for grant is made.
The Bill make economic sense to me. What is meant by "non-resident interest"? Is this, to use a round phrase, an accommodation address which gives access in Britain to the Treasury and to the Minister of Technology for grant? "Non-resident interest" is a nice parliamentary phrase, but I believe that it could be used in these terms.
In support of the Bill, I quote from the Shipbuilding Repairers' National Association's reply to the Chamber of Shipping. I will not read the whole of the reply. The debate was about investment grant. It seemed to the Association a little strange, however, that some companies can obtain these grants at the expense of the British taxpayer for ships built abroad which carry out most of

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their trading abroad and only part of those earnings may be remitted to this country.
The benefit of the Bill, in balance of payments terms, is that every ship built here brings in goods and services and saves dollars and other outgoings.
1 support the Bill, because it is beneficial to British shipbuilding interests.
8.58 p.m.
Mr. Edward M. Taylor: My hon. Friend the Member for Ci rencester and Tewkesbury (Mr. Ridley), in his penetrating speech, has covered most of the points which could be raised, but I want to raise one or two additional points with which I hope the Minister will deal when he replies.
The hon. Member for Glasgow, Scotstoun (Mr. Small) was right in pointing out how important are the industries that we are discussing, namely, shipbuilding and shipping. We are all aware that shipping makes an enormous contribution to our invisible balance of payments. This is desperately important to this country. Apart from that, the shipbuilding industry is also important not just for the jobs it provides, but also because it provides jobs in areas where traditionally we have a high degree of unemployment.
It is largely because of the importance of these industries that not only has this country built up an absurd system of supporting shipbuilding and shipping full of anomalies and injustices, but this has been applied by most European and other countries concerned with the building of ships. Grants for building ships were primarily brought forward because the British shipbuilding industry, almost unique among our industries, was almost entirely unprotected from foreign competition.
Forei gn countries were giving large subsidies to support the building of prestige liners and ships, and the shipbuilding industry, unlike the textile, engineering and other industries was unprotected against foreign competition. It was because of these discriminatory subsidies that we started on the slippery slope towards providing massive subsidies of one kind and another. My Government started it with the shipbuilding credit scheme, which was a major contribution
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towards helping the shipbuilding industry at that time. Since then, however, there has been an escalation of subsidies, not only by Britain but by other countries, and many people in the Treasury and elsewhere must fear the day when all countries will be building ships for nothing for anyone in the world.
We are in the absurd position of allowing a lot of money to flow out of the country for the building of ships which bring us no benefit. I am not trying to condemn the Government for the present anomaly. It has arisen, not only because of the investment grant system but because all the countries concerned with the building and buying of ships have been competing in a mad subsidy race which is bringing benefit to the shipowners and to the shipbuilders, but not to the taxpayers of this or any other country.
We know that discussions have been going on in the O.E.C.D. to try to get rid of the extent of subsidisng in which all Governments are engaged, to try to find some way in which there can be proper and fair competition between shipbuilding and shipowning countries. Has any progress been made in the discussions? Can we look forward to the day when we can get rid of not only the anomalies, but all the forms of subsidy which we and other countries use to compete against one another?
The Bill is a limited one, but i am sure that even those who are opposed to it will appreciate the Preamble which says that the Bill is concerned with restricting the power of the Minister of Technology. Bearing in mind the new super-Ministry which has been set up, if the Bill has nothing else, it has that simple fact to commend it.
The Minister is establishing a division whereby some shipowners will get a grant, and others will not. Clearly there will be marginal cases in which people will feel deeply aggrieved. They will think that an injustice has been perpetrated, and that injustice may amount to a considerable sum. When we are talking about a substantial percentage grant, and bearing in mind that we are thinking of ships which cost £8 million, £9 million, or £10 million, the decision whether a grant is given is of great importance, and if the decision is to be taken on the basis of so-called profits, management, crew costs,

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and capital costs, obviously there will be marginal cases in which shipowners will feel that there has been some injustice.
Does the Minister intend to set up a proper and fair system of appeal? Unless the rules are sufficiently rigid and clear so that they are obvious to every shipowner and everyone knows whether or not they are eligible for a grant there must be a comprehensive and fair system of appeal by which a shipowner can feel that he is getting a fair deal.
I come, now, to the exemption of the E.F.T.A. countries and to the terrible anomalies, referred to by my hon. Friend the Member for Cirencester and Tewkesbury, which are costing the taxpayers of this country a great deal of money, and which are being stopped everywhere except in the E.F.T.A. countries. What is causing concern is whether this exemption will steer shipbuilding orders from this country to the E.F.T.A. countries the capable builders of ships, as the hon. Member for Dunbartonshire, East (Mr. Bence) with his shipbuilding interests, is well aware, and they will be in a position to mop up some of the hot money which is flowing out of the country in this way. Will this result in a substantial diversion of shipbuilding to the E.F.T.A. countries?
The reason for this exemption must lie in the E.F.T.A. Treaty itself. I wonder whether the Minister could tell us what the position will be, in terms of this Bill, in the unlikely event of our getting into the Common Market. Will the exemption automatically be applied to all the countries of the Common Market? When we talk of the E.F.T.A. exemption we are talking of substantial shipbuilders. Even the hon. Member for Dunbartonshire, East will not be very much concerned with Swiss shipbuilders, but we shall all be concerned with Norway and Sweden, which have substantial shipbuilding industries.
Will it be made crystal clear to ship owners, before the placing of an order, whether or not a grant will be given? That is of vital importance to any ship owner, and to our shipbuilding industry. If this cannot be done we shall have no confidence about getting orders. Ship owners will be less inclined to come to this country if they do not know, before the job is placed, the contract
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signed, or the work starts, whether or not a grant will be made. Nothing could more undermine the security of British shipyards than for ship owners not to be sure, before the order is finalised, whether an investment grant will be made. I hope that the Minister will be able to confirm that the rules and exemptions will be applied in such a way that the situation will be made crystal clear.
This involves certain problems. Apparently applications for grants in respect of new parts of ships will not be accepted under the new arrangement. Will a British-based company—a company with a British brass plate—be able to obtain a grant, irrespective of the circumstances, for the fitting out of a ship in Britain even though the hull was built in a Common Market country, or in Japan, or elsewhere? Will grants be payable in respect of the fitting out, completion, modernisation or conversion of ships in Britain although they have been built elsewhere?
The hon. Member for Central Ayrshire (Mr. Manuel) seems to be objecting to this. He may remember that only a few months ago a ship was constructed in the Greenock Port Glasgow yards but was finished in Norway, because at that moment that was the most efficient and cheapest way of doing the job. This course was also taken because of certain industrial troubles. Has the Minister entirely closed the floodgates, or will it still be legal, on the basis of the exemption mentioned in the Treasury Paper circulated with the Bill—Exemption 4(b)—for a ship to be built in Belgium or Sweden and still receive a grant because it is fitted out in a British yard?
Considering the Bill is almost like considering the old navigation laws. It worries me to hear the hon. Member for Scotstoun saying that this country ought to live by taking in its own washing. That would be bad for our country. We must not become too internally-minded, and think only of ourselves. We must accept the fact that the moment we move from investment allowances to investment grants major anomalies will arise, and we have all seen that in such circumstances there has been a major bonanza for certain foreigners, who have made a pile out of the British taxpayer. That was in some way inevitable on the introduction of investment grants. It was also partly inevitable because

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various shipbuilding countries have been competing against each other in providing subsidies. It is a good thing that this gap is being filled at long last.
It would be infinitely better for the British taxpayer and British shipowners and shipbuilders to take two further steps—first, to move to investment allowances, which are not nearly so open to abuse as are investment grants and, secondly—and more important—for the Ministry of Technology and comparable Ministries in other countries which build and operate ships to get together and agree to have fair competition—to have fair and equal subsidies or, better still, to do away with them. This scandal—it is a scandal, for which we cannot entirely blame the Government—has arisen largely because the French, the Italians and the Japanese have been trying to pinch shipbuilding orders by offering ridiculous credit terms and subsidies and we have joined in the battle. So long as this happens there will be scandals of this kind and ridiculous situations which result in smart-alecs creaming off millions from the British and other taxpayers. It is good that this has been stopped, but how much better if the shipbuilding countries could get together to find the real answer to the long-term problems.
9.11 p.m.
Mr. Albert Booth: This Bill is to be welcomed as a tentative step along the road which we shall travel a long way before this problem is solved. I should be failing in my duty to my constituents who live by building ships if I did not protest against the considerable amount of money paid out by the British Government in investment grants for the building of ships in foreign yards. Protests came to me from trade unionists in my constituency a considerable time ago and the answers which were given in this House to the fears which I and others expressed were far from satisfactory and showed too much complacency.
The Bill draws a clear distinction between E.F.T.A. and non-E.F.T.A. countries. Many of the arguments from my hon. Friend the Paymaster-General in favour of the Bill applied equally to these two categories. I should like to know why this distinction has been drawn. If the answer is that it is due to the terms
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of our E.F.T.A. contract, I would ask my right hon. Friends to seek from E.F.T.A. countries the provision for British shipowners of investment grants for ships built in other E.F.T.A. countries. If we have to distinguish between one country and another in the light of the position of the world shipbuilding industries, this seems to be a sensible arrangement. The Government seem to have become very pro-E.F.T.A. and anti-Common Market, but this does not line up with certain other current actions.
I question whether the real reason for not restricting the Minister's powers over all foreign shipyards as opposed to non-E.F.T.A. ones only is not a fear that by forcing British owners to buy ships from British yards they will be curtailing competition. I suspect that this is behind this part of the Bill and I suggest that it should be dealt with by a different machinery than by opening up investment grants to E.F.T.A. competition only.
After all, the Bill will limit competition on equal terms with E.F.T.A. countries and therefore exclude others, primarily, in this case, the Japanese yards. Why not deal with this problem of proper competition through the Monopolies Commission or the sort of investigation which I believe the Government will have to carry out consequent upon their decision to place the building of nuclear propelled submarines with Vickers in my constituency to ensure that they are charged a proper price? I welcome this decision, but that does not blind me to the fact that the Government must ensure that this decision does not result in their paying too high a price for these submarines. Similarly, the Government could investigate the price charged by British yards if they restrict investment grants for the building of ships to those built solely in British yards.
Mr. Arthur Blenkinsop: Would not my hon. Friend agree that even if a ship is built abroad for a British shipowner, it may in many cases earn valuable foreign exchange in its services across the world?
Mr. Booth: I fully appreciate that. I wish, however, to address myself briefly to the question of the test of detriment to our balance of payments which is set out in the Bill.

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It is true that a ship built for a British owner in a foreign yard may earn a considerable amount in invisible earnings and, therefore, be favourable to our balance of payments. If, however, the overall test is to be one of detriment to the balance of payments, should we not look at the tremendous expenditure of capital involved in the outflow of money from the importation of ships by British owners? Surely it would be a disgraceful situation to arrive at if for any considerable period this country became a net importer of ships. That of itself would be detrimental to our balance of payments, in the short run at least.
As a country which must expand its shipbuilding potential, we have to guard against this situation in applying the balance of payments test. Therefore, it is not a test which can be applied on a single vessel basis. It is a test, if it is a fair one, which has to be applied against the overall economics of being a shipbuilding and a ship owning country. In other words, we should not enhance ship owning companies at the cost of our shipyards by doing something which, in the long term, would be detrimental to our balance of payments position.
I believe that as a shipbuilding nation we cannot defend the situation in which £167 million of British taxpayers' money has been spent to have ships built in foreign yards. It would be wrong at any time but it is particularly wrong when there is unemployment in shipbuilding areas.
We have listened with interest to the speech of my right hon. Friend the Member for Sunderland, North (Mr. Willey), in whose constituency there was 10 per cent, male unemployment, and this in a debate in which we are discussing the money which is being paid out by the Treasury for the building of ships in foreign yards. This is highly significant.
If British investment grants are to result in work being done abroad, I would welcome this if the work were going to underdeveloped countries. In the case of shipbuilding, it is certainly not work that is going to underdeveloped countries. It is going to highly developed and developing countries. I hope that in Committee we will be able to amend the Bill to ensure that British taxpayers'
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money that is used for the building of ships brings about the building of ships in this country to such an extent that we see the British shipbuilding industry vastly expanded in the coming years.
9.18 p.m.
Mr. John Hay: My constituency is not very well known for shipbuilding, but at least I can lay claim to the fact that in certain parts of it we build some extremely good boats. As yet, the Government have not extended the provisions of the Industrial Development Act to the building of boats, and I would be wildly out of order if I sought even to introduce that matter further than I have done.
I do not pretend to be an expert in shipbuilding, but it is clearly the case that the Bill is presented for the purpose of protecting the shipbuilding industry rather than the shipping industry. I go along to some extent with the hon. Member for Barrow-in-Furness (Mr. Booth) in saying that we ought to have a little more information than we have had up to now concerning the relative advantages to the balance of payments of the shipbuilding and shipping industries. I apprehend that it is possible for a ship owner to produce a much better effect to the balance of payments through building ships in a foreign yard and putting them into worldwide trade than may accrue to the balance of payments from a small increase in the ships built in this country to be sold to foreign owners.
I did not rise to try to analyse the situation in detail but to draw attention to the context of the Bill. My hon. Friend the Member for Guildford (Mr. David Howell) said that this was a bizarre piece of legislation, and I agree. I cannot understand why the Government have chosen this form of drafting. Section 5 of the 1966 Act gives a permissive power to the Board of Trade to make a grant. Clause 1 of the Bill gives the Treasury power to give a statutory direction to the Minister of Technology, as successor in this case to the Board of Trade. This is the first time I have known one Minister taking power to give a direction to another. If an application is made to one Minister for a grant and the Treasury believes that some detriment to the balance of payments would arise, then the power is contained in Section 5 of the 1966 Act

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already and the Treasury in the normal consultations between the Ministers, could surely say, "We do not think if in the national interest, having regard to the balance of payments, that you should make this grant". I am puzzled as to what sort of spectacle we shall see inside the Government if and when an application is made to the Minister of Technology upon which the Treasury decides, in its wisdom, to make a direction.
Mr. Wingfieid Digby: The Treasury also has a Trojan horse in the Minstry in the shape of the Paymaster-General.
Mr. Hay: I was hoping to avoid discussion of the Paymaster-General's antecedents but I accept the point.
1. should like an explanation as to why it has been necessary to choose this form of drafting. This is not a Committee point because it would, I believe, have been simple for the Bill to have been drafted on the basis of amending Section 5 of the 1966 Act, simply saying that a new condition is to be imported into the various matters which the Minister of Technology, as successor to the Board of Trade in this respect, has to take into account before making a grant. An explanation tonight might save some time in Committee.
I come now to the reference in the Bill to a date. I know the problems which Government Departments face when it comes to fixing dates. Someone always falls on the wrong side of the line. But this; Bill was presented to the House on 10th November, which was a Monday, and it applied instantly to any applications made for a grant unless it was received before 8th November. How can business conduct its affairs if, without warning, Government Departments suddenly produce legislation, which we all know will go through, instituting a date from which some particular activity is to be illegal or in respect of which some particular treatment cannot be obtained?
Surely it would have been easy for some kind of statement to have been made, either in the House or outside, to industry generally, saying that a serious problem had emerged, that the Government had decided to legislation and that, from a certain date, such an application would no longer be considered if, in the opinion of the relevant Minister, the
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granting of that application would act to the detriment of the balance of payments.
Let us imagine that I am a shipowner and have been about to place an order, perhaps with a foreign yard, in anticipation that a grant of this kind would be available. I do so on, shall we say, 8th November. I did not know that the Bill would be presented three days later. I may have committed myself to a contract, and I may then find that the whole economics of the operation to which I have set my hand will be overturned by the fact that the grant is no longer to be available.
The Government owe industry and business something better than that in the way of treatment. There are far too many of these pieces of legislation coming forward, operating from a certain date and making illegal something which was perfectly legal up to that moment, with no notice whatever being given to enable people to prepare themselves for the change.
These are matters of detail, although of substantial detail. I do not want to traverse any of the main arguments for or against the Bill because, frankly, I do not feel qualified to do so, but I ask the Government to reconsider the form of the Bill, and to bear in mind that it will help business enormously if they give adequate notice of their intention.
9.26 p.m.
Mr. Cyril Bence: I have in my constituency some of the most important shipbuilding elements on the Clyde, such as John Brown Limited, which is now one of the major components of the Upper Clyde shipbuilding consortium.
I was rather amazed to hear the hon. Member for Henley (Mr. Hay) complaining of Government legislation being brought in in this way. For measures to be brought in as this one has been brought in is not a new phenomenon. As long as we accept, as every country in Western Europe and in America does, the proposition that Government must be a partner of industry, must play a part in industry and indulge in some intervention in it, Government being the legislative authority, there must always be a date from which something starts.

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The hon. Gentleman knows as well as I do that before Bills are printed and before such matters come before the House there has been discussion outside with appropriate bodies and authorities.
Mr. Hay: I would be glad to know whether that point is valid. Was this date disclosed in advance to the shipping industry? There was nothing about the Bill in the Queen's Speech that I could trace, and it seems to have come as a bolt from the blue to a large number of people.
Mr. Bence: I did not use the word "disclose". Whatever the Government, there are talks. If there is some form of partnership, some form of intervention-ism with all the industrial organisations concerned, there must be regular consultations. There is no question of disclosure—these discussions go on all the time.
This Bill has been brought in partly for the reason stated by the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) which is that there has been a leakage of these grants to shipbuilders and shipping companies all over the world. He said that he had been promised in January, 1968 that the Board of Trade would stop that leak, and he thought that the Bill was a rather belated effort in that direction.
I agree with a good deal of what the hon. Member for Glasgow, Cathcart (Mr. Edward M. Taylor) said. It is unfortunate that in modern industrial economies we seem to be chasing one another, bolstering one another up and using the taxpayers' money to finance all sorts of industries for all sorts of purposes, some of them in competition, others not. When we were in opposition I was always complaining about what I called the "begging bowl". These grants go on—
Mr. Hay: That is why they should be stopped.
Mr. Bence:—but we must realise that the shipping industry is the most international of all industries. For that reason I have to disagree with my hon. Friend the Member for Barrow-in-Furness (Mr. Booth). Foreign shipbuilders have ships built here: we have ships built in foreign countries. I see no objection to that. I want to see Britain making
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its fair contribution through our shipyards, our working force and our steel capacity, to the world pool of shipping. If Shell-Mex puts in orders for three ships in a British yard, one in a German yard and one in a Scandinavian yard, that is all right with me.
Mr. Booth: Would my hon. Friend agree that this country's contribution to world shipping in 1950 was 50 per cent. of world orders and today is less than 10 per cent?
Mr. Bence: That, of course, is worrying all of us, but those running the shipbuilding industry must bear major responsibility for competing in the world market. The hon. Member for Cathcart said that this "rat race" had started, but it was not started in this country. It was started in the United States, in Italy, in Germany and in France, and we do not know how to get out of it. I wish we could get out of it. Although there are shipbuilding interests in my constituency, in the modern technological age I should imagine that there are other things which should concern us—
Mr. Speaker: Order. With all his knowledge and skill, the hon. Member must come to this debate, which is about whether we should restrict shipbuilding grants for certain reasons.
Mr. Bence: I appreciate that, Mr. Speaker, but I was making a point following other points which, as you rightly say, have nothing to do with what is in this Bill. We are using taxpayers' money and we are to restrain that. We are to restrain what a Minister might do in using that money.
I am surprised that the hon. Member for Henley should complain about consulting the Treasury. One of my hobbyhorses has been that whatever money comes in it should be with the consent of the Treasury. That phrase appears in almost every Bill. I am sure that the hon. Member when he was in a Government introduced many Bills which had the phrase, with the consent of the Treasury?.
Mr. Hay: That was not what I was complaining about. It is common form when a Government has power to do something that it is with the consent of

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the Treasury. That is because the Treasury holds the money bags, but the Treasury might come to an opinion and then have power to give a statutory direction to another Minister. That seems strange.
Mr. Bence: The Treasury has to make a decision in giving a grant to some capital construction in the form of a ship at a given date. It has to make an assessment of whether that ship will make a contribution to our balance of payments. We all agree that shipping is a great international industry and is subject to international movements, but the life of a ship may be 20 years. What sort of projection will the Treasury make about the life of that ship? In the last 10 years of its life it may make a tremendous contribution, or it may make a great contribution in the first five years. How can one predict what contribution it will make? I do not like legislation which restricts any action concerning industry. I cannot see how it is possible to express an opinion as to whether a particular vessel, a 20,000 ton bulk carrier, a passenger liner or a tramp, is to be assessed with a life of 25 years and what contribution it will make.
How is it to be said that this ship will never be an asset to Britain, an earner of foreign exchange? I cannot see that. Shipbuilding is international, as is shipping, and I make no complaint if a ship is built in a foreign yard for a British owner. That ship can compete on the high seas, bringing in foreign exchange for Britain. If a foreigner decides that the type of ship he wants can best be built in Barrow or Clydebank and he builds it there and puts the ship into the world pool, I make no complaint about that. It would be a good thing if the shipping interests of the world would get together, as they do with freight agreements and employment of labour, and stop this rat race.
We are introducing a Bill now to stop private enterprise getting through the loopholes and exploiting the British taxpayer. All over the world taxpayers are being exploited to support their shipping industries for prestige reasons, often when their ships make no contribution to the economy. One big American liner is being laid up, although it has been subsidised to the tune of £12 million a year.
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This is a waste of effort and some control has to be exercised. Under the previous Administration and in the early part of ours, someone has been having a whale of a time. That is private enterprise. This Bill is not the result of a failure of the system of support—it is because of a failure of certain sections of British shipbuilding. It has failed to meet world wide competition. Other nations will subsidise us out of world shipping if we do not follow suit. We have not got an alternative answer.
9.37 p.m.
Mr. Simon Wingfield Digby: The right hon. Gentleman the Paymaster-General who opened the debate described this as a short and not violently exciting Bill. Whether or not it is violently exciting, we have had an interesting debate. Most of us are probably very sorry not to see the right hon. Member for Easington (Mr. Shinwell) present, as he usually is on these occasions. We hope that he will be recovered very soon. Although this may be a short and limited Bill it opens two very wide general issues. First, there is the question of investment grants, whether the replacement of the investment allowance by investment grants is working. We have heard of leaks today and one wonders what other leaks there are in other areas. Is this the tip of the iceberg? Will we get further Bills of this character dealing with other areas where investment grants are available?
I hope that the Financial Secretary will tell us the exact extent of the leak. We have not heard what the estimated size of the leak is. Secondly, this opens up questions of shipbuilding and shipping. As usual, we have found a conflict of interest between shipping and shipbuilding. The Geddes Report has largely been carried out. Many of us are wondering whether the Shipbuilding Industry Board will be allowed to lapse at the end of next year, as would happen under the Measure, unless it were specially prolonged for one year. We had a warning from the right hon. Member for Sunderland, North (Mr. Willey) that there is a world shipping boom and our own industry still has very many problems.
We have also heard from the hon. Member for Barrow-in-Furness (Mr. Booth) and from my hon. Friend the

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Member for Glasgow, Cathcart (Mr. Edward M. Taylor) about some of these worries in connection with shipbuilding. Equally with shipping there is intense international competition, and we are anxiously awaiting another Report, the Rochdale Report, which some of us had thought might have been issued by now. Until it does come there is bound to be some uncertainty, but already from that Committee there has been a certain fallout, if I might use the word, in the form of better figures relating to what our shipping is really doing. It has thrown up separate shipping figures for our invisible earnings, and I was glad that the Paymaster-General referred to this. In 1968 the gross earnings were £825 million and the net earnings £260 million. In 1969, shipping is not doing quite so well, but up to the end of September the net earnings to our balance of payments were £157 million.
It is all the more disturbing to note this evening that in other directions the investments grants are causing a leak in our very important balance of payments, and this is something to which we must direct our attention carefully. It is a little surprising that the method by which the Government are seeking to do this involves the use of such a sledgehammer that they have had to take such extremely wide powers.
I must make a complaint. I think it is a great pity that the latest annual report on investment grants is that for 1967–68. I am told that the report for 1968–69 will not be ready for another three weeks. With this debate in the offing, it seems a pity that the Government could not have hurried up a little and given us the figures.
One of the features of investment grants is that they are in the pipeline for a long time, and so the figures that we read in the available report are obviously completely out of date. Although to a certain extent the Paymaster-General has brought us up to date with the figures he gave this afternoon, it is a little difficult to digest them at first sight. They seem rather considerable. If I heard the right hon. Gentleman aright, £61 million, or one-fifth, is due to non-resident companies. This may account for part of the leak. But that is a very much larger
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figure than that accounted for in the annual report.
In the original Measure, Section 5 of which allowed for these investment allowances, the conditions were fairly stringently drawn, and it is surprising that the Government have experienced such difficulty in preventing leaks. In 1968 the Board of Trade announced several steps designed to stop this gap, by making British companies which were registered after 1963 subject to special provisions. But obviously this has not worked.
There have been repeated warnings on this subject. My hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) uttered a warning more than a year ago. There was a warning, of which we were reminded in the debate, by the Shipping and Shipbuilding Association recently, and before that Mr. Hogarth reminded us in a letter to the business section of The Times that the President of the N.U.S. last May drew attention to what was happening and said that some of these investment grants were going to those who did not really deserve them.
Now we have a third attempt to check this abuse, and my hon. Friend the Member for Guildford (Mr. David Howell) has described it as peculiar. My hon. Friend the Member for Henley (Mr. Hay) has commented on it, too. Constitutionally, it seems extraordinary that power should be taken to restrain a leading Minister from paying out money. I quite see that certain leading Ministers may on occasion need a certain restraint, but to put in a Statute that the Treasury is to restrain him seems peculiar. I am not sure that I should have started with the right hon. Gentleman the Minister of Technology; I think that we might well have started with one of his right hon. Friends. However, the mere fact that such a clumsy method has been necessary shows the extent of the difficulty.
Mr. Harold Lever: It is useful to restrain Ministers sometimes even from interrupting, but the position is this. Responsibility for giving the investment grants lies with the Minister of Technology. Responsibility for deciding whether the matter meets balance of payment requirements is, naturally, for the Treasury. It is not a question of restraining a Minister. The Treasury makes the

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balance of payments decision. Once that is the criterion, inevitably power has to be given to the Treasury.
Mr. Digby: That is an interesting emphasis on the power of the Treasury, and it is a precedent which we shall watch with great interest.
There is a serious leak going on, I am sure, or the Government would not have resorted to this rather extraordinary way of stopping it. I come now to four consequences that appear to me to flow from the leak which is going on. It musthave had some effect in swelling the total of the British merchant fleet by persuading people to build for the British flag. They have to fly it for five years. The right hon. Gentleman the Member for Sunderland, North mentioned something which has been a little disquieting for all of us, namely, that we now have only the third largest merchant fleet in the world, having been surpassed, first, by Liberia and now even by Japan. When we realise that the figure may have been swollen by the so-called leak, it is even more disquieting Second, there is the loss to taxpayers. Third, by paying out this money in the way it is being paid out in certain cases, we are giving a subsidy to our competitors in both shipbuilding and also in shipping. Fourth, we must be giving a sterling credit to non-resident interests which will not entirely play the game by our own balance of payments.
Now, the question why E.F.T.A. is included in these provisions. At first, I was extremely puzzled by this, but I understand that it is necessary under the provisions of the Treasury of Stockholm. One cannot help wondering whether this will lead to further abuse. I take the example of a Norwegian shipowner who wishes 1:0 build a ship in Norway. He can set up his brass plate in London. His difficulty, I suppose, is to show that he is Carrying on a business in Britain, but this seems to be just the provision which, under the pro forma, has failed up to now, and I shall be interested to know how it will be better enforced. If all these people had been genuinely carrying on business in Britain, surely, adequate funds would have been remitted back here and the difficulty would not have arisen.
I want to know whether this will be a case of built-in change, is it acquiring
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a certain flexibility which might be used by the Treasury in other and more difficult times? In the meantime, it creates a good deal of uncertainty, although I was glad to see in paragraph 11 of the Paper issued with the Bill that trial cases, theoretical cases, can be put out by interests intending to build a ship before they are actually committed so that the Treasury will tell them more or less what their position will be as regards a grant. I am still a little puzzled, however, about how so many have slipped through already. Where has the failure been? How will the new test of the effect on our balance of payments be applied? Will the judgment be made over a period of five years, three years, or even longer than five years? We are entitled to an explanation from the Financial Secretary.
I hope that he will also tell us the extent of the leak, which is impossible to determine from the figures put before us. Some of the newspapers have given a pretty large figure, but, judging from the figures the Paymaster-General gave, it is perhaps not so large as we had imagined.
The Opposition must support a Bill if it will have the effect of safeguarding the taxpayer, but we must hold the Government responsible for the leakage which has occurred in the application of investment grants. They have already tried to stop it and failed, and they are now trying again in this rather unusual way. I hope that it will be a case of third time lucky.
9.51 p.m.
The Financial Secretary to the Treasury (Mr. Dick Taverne): I hope the House will forgive me if I do not deal with all the points raised. Many will come up again in our Committee debates, and my right hon. Friend and I will deal with them there as they arise.
There has been no general disagreement with the purpose of the Bill, though exception has been taken to its form. First the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) and now the hon. Member for Dorset, West (Mr. Wingfield Digby) have blamed the Government for not taking action earlier to prevent this drain on the balance of payments. That is not an assessment that the House can accept. I leave aside the fact that formerly, under the 40 per

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cent. investment allowances and the free depreciation which was available, there could be a greater benefit to shipping companies than under the present system which might very adversely affect our balance of payments. We have kept a careful watch on the position, and we acted first in January, 1968, to prevent the so-called "brass plate companies" especially formed by non-resident interests from taking advantage of the investment grants. Now, in introducing the balance of payments tests, we are extending similar safeguards over a wide field. The objection to this is not entirely clear.
I understood the hon. Member for Cirencester and Tewkesbury to have two main objections. First, he felt that we should not pay investment grants at all. Second, he seemed to feel that we should not apply the balance of payments tests, though the drain on the balance of payments was the scandal about which he protested. I believe that he felt there should be a test of whether or not a company was foreign-owned.
There are two answers to his first objection. The system of investment grants has certainly made a contribution to an improvement in the net earnings of shipping which by all accounts, as is admitted, has been very considerable. Second, the investment grant system is particularly appropriate to shipping. So often shipping companies which make a considerable balance of payments contribution do not, because of depreciation and other factors, make profits which are subject to tax. Therefore, the investment grant is a form of assistance particularly suitable for enabling them to contribute to the balance of payments in the way that they have. I shall come later to the possible alternative test to the balance of payments test which has been suggested but would be in breach of our international obligations.
The hon. Gentleman asked why the discretionary system had been altered. It is true that the Minister of Technology, and previously the Board of Trade, had discretion as to whether or not to make a grant, exercised in accordance with the intention of the Acts under which it is within his competence to make decisions. However, the Treasury is responsible for policy on the balance of payments. There-
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fore, the Government felt it appropriate to legislate for the Treasury to have the discretion to apply the policy when it comes to investment grants. This is a policy which it is peculiarly apt that the Treasury should apply. They are used to applying balance of payments tests. For example, they apply tests for the balance of payments from the point of view of the effects of flows across the exchanges in overseas investments. Equally, in this type of situation there are similar tests, and I will come to them later. The Treasury is the right body to test whether or not the payment of a grant will redound to the benefit of the balance of payments. In any event, the question of the Minister of Technology's discretion is still under consideration by the courts.
I was then asked about the savings to the balance of payments. I am afraid that I cannot give the House a figure. The statistics depend on a number of factors which cannot at present be forecast. For example, they depend on the future rates of ordering by eligible ship owners and the question of whether ships are ordered in circumstances which would fail the test.
There may be other, less immediate, effects on the balance of payments—there are indirect consequences—which might mean, in certain cases, orders for the building of ships now being placed in the United Kingdom whereas otherwise they might be placed outside E.F.T.A. I do not foresee any reason why there should be a diversion of orders from the United Kingdom to E.F.T.A., remembering that the E.F.T.A. exemption applies to the United Kingdom as well.
The hon. Member for Dorset, West wondered if it would be possible for, say, a Norwegian ship owner seeking to build in Norway to set up a brass plate company in the United Kingdom. That is a fair question, but there are still, apart from the controls which are set out in the new balance of payments test in relation to non-E.F.T.A. ships further methods of control. For example, we still have the exchange control powers which have been used. It would be perfectly possible for the Treasury to use these exchange control powers—I referred to indirect powers—should any loophole lead to the sort of abuse with which we have previously dealt.

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Since the publication of the Bill, I have received a deputation from the Chamber of Shipping and certain points were made to me by, among others, the hon. Member for Henley (Mr. Hay), and I will deal with some of these later. First, however, it might be helpful if I dealt with the first question which the deputation raised; that of the date. It is quite normal for a change of policy to take effect from the date on which it was announced. My hon. Friend the Member for Dunbartonshire, East (Mr. Bence) pointed this out. The reason for choosing the date of 8th November was that it was on 7th November that notice of the introduction of the Bill was given to the authorities of the House.
The lest which was applied as from 8th November relates to relevant expenditure entered into before that date. This test was chosen because it was considered to be one which could be defined in a manner which would leave no doubt in the minds of ship owners whether or not they would qualify. It was also chosen to make it difficult to use dubious methods to back-date imprecise agreements which might be used to gain exemption in cases where exemptions should not be given.
I assure the House, as I assured the deputation to which I referred, that there is no intention whatever to make the Bill unfairly retrospective. We are looking at the question whether or not other firm contracts which are legally binding, but which have not yet involved the payment of a deposit, can also be exempted if entered into before 8th November.
One must face the need to avoid legal argument We want certainty. This is a matter which we can consider further in Committee, and, with the help of hon. Members generally, we can ensure that a satisfactory arrangement is arrived at which will not lead to any retroactive operation of the Bill.
Mr. Ridley: The hon. and learned Gentleman has told us what the Bill will save in terms of foreign exchange. What does he expect it to save in terms of investment grants?
Mr. Taverne: I cannot give that information, because the test which will be applied is a balance of payments test, and we shall have to look at the figures which come out to decide on each case
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whether the balance of payments test is passed. Until one applies that test, one does not know the number of cases in which investment grants will be refused.
It is perhaps appropriate—
It being Ten o'clock, the debate stood adjourned.
Ordered,
That the Proceedings on the Industrial Development (Ships) Bill may be entered upon and proceeded with at this day's Sitting at any hour, though opposed.
Question again proposed, That the Bill be now read a Second time.
Mr. Taverne: It is appropriate that I should now come to the test. It is necessary, in order to apply the test, first for an estimate to be made of all the extra payments and receipts involved across the exchanges arising from a transaction and of the timing of such payments and receipts. For that reason, shipowners will be asked to give estimates of profits, information relating to management and crew, which again clearly is relevant and also involves payments across the exchanges, and certainly we shall need figures and, where appropriate, estimates relating to the capital elements in the transaction.
One first looks to see what the payments across the exchanges will be. One then applies the discount rate. Future payments and receipts will be discounted to net present value on the basis which is familiar in investment appraisal and which is extensively used in many parts of industry.
There was a misconception in the minds of my hon. Friend the Member for Glasgow, Scotstoun (Mr. Small) and the hon. Member for Cirencester and Tewkesbury about the purpose of the discount rate. It is a test used to decide the value of payments going out now as compared with the value of payments coming in later. It does not matter what are the profits of the company. They may be higher or lower. The test is what is the value to the country. It is for that purpose that the 10 per cent. discount test is used.
Mr. Hay: Are the figures which the hon. and learned Gentleman is seeking and which he has just outlined to be obtained from the whole of the shipping

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industry or only from individual owners who may seek investment grants?
Mr. Taverne: It is from individual owners who may seek investment grants.
It has been suggested that this may be putting too much of an onus on the owners. I do not think that that would be the case. If we do not have such a test, the only alternative is to lay down flatly that specific categories of companies having ships built or converted in specific places will receive grants while others will not.
If we simply made the test that of United Kingdom ownership, we should be in breach of G.A.T.T. We do not aim in this Bill to say to a class of company that it will not receive grant or that grant will not be paid on ships built in a certain area. We are saying that companies will not receive grant where a transaction damages the balance of payments.
Obviously if a ship is owned by a nonresident company, it is certain that there will be costs to the balance of payments which would not arise in the case of a wholly resident-controlled company. It follows from that, that a non-resident controlled company is more likely to fail the test than another.
The test should not place undue difficulties on shipowners. In the case of an established British-controlled shipping company, it should be possible in general to establish that it is so established and that it is British-controlled. Secondly, the test which will be applied will be one of commercial judgment made in good faith, and one can look at a longer period ahead to see what the programme of ordering ships is and then apply this commercial test.
Mr. Edward M. Taylor: The Minister has suggested that this will not be difficult. How, in the case of a non-resident company building a ship in Britain, is it possible to give detailed information relating to management and crew? How is it possible to say how many of the crew will be United Kingdom residents so that these figures can be credited? How can a non-resident company say what kind of crew it will have when the ship has not even been built?
Mr. Taverne: It may be that in some cases certain parts of the information can-
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not be given as exactly as others, but an indication can be given whether it will be a mainly British crew, and this affects the flow of money across the exchanges. If it is to be a British crew, clearly the expenditure will have a different effect than if it is to be a wholly foreign crew.
I can tell the hon. Gentleman that in the discussions which not only I but Treasury officials have had with representatives from the Chamber of Shipping they have been satisfied that this will be a rapid process, that it will not place undue difficulties in the way of work, and that we will co-operate to every extent in streamlining the procedure so that the minimum difficulties will be caused to those who apply.
On the other important point about whether an indication can be given before the grant, the answer is, yes. The purpose of the information asked for by the Treasury is to give a firm indication whether the grant will be available. If there are later changes, in that information, as indicated in the circular, the indication might be invalidated. But if the information is as stated, the grant will be forthcoming once the indication has been given.
Mr. Ridley: Before leaving the test, will the Financial Secretary answer my question about the amount of foreign currency he would expect to come in annually in respect of an investment grant of £1 million, or any other figure he cares to take?
Mr. Taverne: This depends on the return across the exchanges. This is where the hon. Gentleman has clearly not grasped the fact that the test discount rate at 10 per cent. would determine whether £1 million worth of investment grant would produce a worth-while return to this country.
Mr. Ridley: What is worth while?
Mr. Taverne: What is worth while will be determined by the discount rate. If, allowing for the discount rate, the return across the exchanges exceeds the benefit to this country of not paying out £1 million, then the grant will be allowed. If it does not, the grant will be refused. This is clear, because it is a test which is widely used in industry with which the hon. Gentleman would be familiar if he was not making a particular point on the

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Bill. It is not something on which we can give a particular figure and say that we want a return of £400,000 within the first two years or anything like that. It is a feasible test to apply, and it will be applied, to protect the balance of payments. The Government have provided an eminently reasonable scheme to protect the balance of payments.
Mr. Willey: This is of constitutional importance. I have already said that, from the point of view of shipbuilding, I should Like it to be interpreted as liberally as possible. But is it good enough to legislate in this way the opinion of the Treasury? The Financial Secretary's case is that he has made the test absolutely clear. In that case, why cannot we have a schedule to the Bill setting this out?
Mr. Speaker: Order. The right hon. Gentleman has made one speech. He cannot make another.
Mr. Willey: I was only putting to my hon. Friend a matter of crucial importance that we must have cleared up before we consider the Bill in Committee.
Mr. Taverne: The way that this will be operated by the Treasury is similar to the way that the Treasury operates exchange control when it comes to foreign investment. Very much the same considerations apply. We have the same end in view, namely, whether money going out
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of this country will redound to the benefit of the balance of payments. The system being the same, and the object being the same, it is not unreasonable that this should be left to the discretion of the Treasury. We think that we should achieve the object in a manner which will be equitable between the interests involved.
As regards the retroactive point, I am sure that here again we can come to an arrangement which will be satisfactory to the parties involved.
I ask the House to give a Second Reading to an eminently reasonable Bill which is designed to do the very thing which the Opposition have asked us to do.
Mr. Hay: Will the Minister explain why it is necessary to give the Treasury a statutory power to give a direction to another Department of State? Why could it not be done by means of a simple Amendment to Section 5 of the original Act?
Mr. Taverne: If that discretionary power was not given the Ministry of Technology might have to pay the grant.
Question put and agreed to.
Bill accordingly read a Second time.
Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).

SCOTLAND (EMPLOYMENT)
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Dobson.]
10.11 p.m.
Mr. George Lawson: When I interrupted proceedings on Tuesday, 11th November, I suggested that it was perhaps necessary to discuss this matter on the Adjournment, because it seemed that at the least there was a great deal of confusion surrounding this issue. My impression was that the Leader of the Opposition thought that he had the Government on a hook, and judging what was said by hon. Gentlemen opposite—and I include among them the shadow Secretary of State for Scotland—they thought that something dreadful had been happening in Scotland, and that efforts should be made to bring that out.
On examining this question I concluded, before 11th November, that either the Opposition were honest, in which case they were misled, or they were dishonest, in which case they were trying to mislead the people of Scotland. If they have been misled, it is up to us to do what we can to put them right. If they are being dishonest, this should be a useful opportunity to tell the people of Scotland the truth about the situation, and that is one of my purposes tonight.
Another reason for this debate is that I thought then, and I still do, that some measure of blame rested on the Government for not bringing out much more clearly and comprehensively than they have done the true facts of the situation. The facts are there if one searches diligently for them. Searching for them, bringing them out, and forming a comprehensive picture that will show the whole truth are things which quite clearly neither the Shadow Secretary of State for Scotland nor the Leader of the Opposition has been able to do. I do not altogether blame them, because the facts are difficult to get at, but they are there, and my plea to my hon. Friend tonight is to ensure that there is a regular short summary, but nevertheless a clear description, of the comprehensive picture, rather than a singling out of separate items which few people, because
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of the little time at their disposal, are able to put together and form a clear picture.
Perhaps one can see from the kind of answers that Ministers give that they themselves do not make the situation clear. For example, the shadow Secretary of State for Scotland, the hon. Member for Moray and Nairn (Mr. Gordon Campbell), asked my right hon. Friend the Secretary of State for Employment and Productivity
" to what causes she ascribes the net loss of jobs in Scotland between December, 1965. and December,1968".
He was told in reply:
"The decrease … in the number of employees … is attributable in large measure to the contraction of some of Scotland's basic industries.—[OFFICIAL REPORT, 6th November. 1969; Vol. 790, c. 161.]
The reply went on to say that great efforts had been made to create new work but that the losses had been greater than the number of jobs created.
That is part of the truth, but an insufficient part. It does not remove what I consider to be a basic confusion in the minds of many people between unemployment and a reduction in the number of persons employed. The two things mean very much the same to many people, including, I believe, the Leader of the Opposition and the Shadow Secretary of State for Scotland. If we go into this question we appreciate the way in which it can lead to grave misunderstanding. Let us take the period brought out by questioning—from December, 1965, to December, 1968—and consider the breakdown in terms of the loss of jobs or the reduction in the numbers in employment. If we do that we find that in the period in question there was a reduction of about 51,000 in the number of persons available for work and an increase of about 15,000 in the numbers of unemployed. That gives a total of 66,000, which is near enough to the figure of 67,000, if we round off the figures.
What was this 15,000 additional to? The answer is to be found by looking at the date used as the basis for making the comparison—December, 1965. I wonder why the hon. Member for Moray and Nairn selected that date? Why did he not select December, 1964?
Mr. Gordon Campbell: I can answer the hon. Member. I have had a lot of correspondence with the Department of Employment and Productivity on this matter, as well as having answers to Questions, and in a letter I received it was explained that the system was changed in 1965, and that a comparison could be made only over the three years.
Mr. Lawson: That is fair enough. I thought of that. But the hon. Member must have found it very convenient to start from that date. He could have chosen December, 1964, which would have been a fair date to start from since that was the first December which was completely under the control of a Labour Government. If that year had been chosen the addition would have been only 8,000. If the hon. Member had chosen December, 1963—the last year of Conservative Government—there would have been 12,000 fewer unemployed.
But December, 1965, was the date when the new figures were made operative, and we can easily see that it was very convenient for the hon. Member. That was a time when unemployment was very low. I have worked out a little index which I shall read through quickly, giving the figures for the Decembers from 1963. If the December, 1963, figure is taken as 100, in 1964, it was 79, in 1965, 70·5, which is practically 30 per cent. less than December, 1963; in 1966, it was 83; in 1967, 94, and in 1968, 87·2.
There was an increase between 1965 and 1968 of about 15,000 wholly unemployed—
Mr. Ian MacArthur: Go back a bit.
Mr. Lawson: I am starting now on the basis of 1965–68. I have looked at the averages for all the years from 1958 and in only three was the average less than 70,000—in 1961, 1965 and 1966.
The situation is very complex when we deal with the reduction in the number of persons available for employment. In the first place, a reduction in the number of employees is not necessarily a bad thing. For instance, from 1965–1956 to 1968–1969, the number of persons employed by the two Scottish electricity boards fell by about 2,212 or
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10 per cent., yet output has gone up, so there is no question of that reduction being bad. There could indeed be an advantage in some reductions. For instance, over three years, the number of people employed in private domestic service fell by about 6,000, or 30 per cent. I do not want to deny a person a possibility of having a manservant or maidservant, but we could usually employ that manpower more usefully. Also, the number employed in wholesale and retail distribution from 1965 to 1968 fell by more than 27,000 and there can be no doubt that they were usefully employed, but we should be able to employ many of them even more usefully.
There have been steep reductions in the number of employees in certain basic industries and I wonder whether this is necessarily a bad thing. For example, from 1964 to 1968, the number employed in agriculture dropped by about 21,000, in mining by about 20,000 and in distribution by more than 30,000. Those three categories alone represent a loss of 70,000 jobs, but this is not necessarily a loss to Scotland. Much depends on the effective use of the released manpower.
Although the numbers of jobs gained are not so great, there are some useful additions. In engineering and electrical goods over the four years there were about 15,300 gains. In professional and scientific services there were about 32,000, mainly in educational, medical and dental work, but it is a considerable increase. What has been happening in Scotland is a shedding of the badly-paid jobs, those without prospects, and a growth of the better-paid jobs with better prospects. A short piece of evidence is that by April this year the Scottish wage earner had moved up to fourth place in the earnings league of the 10 different regions of Britain. By that time, 23 separate Scottish industries were above the average in the way of earnings.
The basic question which arises out of the White Paper relates to the numbers of people available for employment. The White Paper made a basic error of judgment concerning Scotland in not anticipating that there would be such a rapid rundown of the old basic industries. It forecast a rundown of the old industries

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during the period to 1970 of 74,000. By 1968, however, the rundown had already reached about 120,000. The White Paper is not really out of line to any degree in terms of the gains. It is, however, out to a considerable degree in terms of the rapidity of the losses. When one considers the nature of the many jobs which have been lost, what they were paying and the prospects they carried, we cannot altogether deplore the fact that there has been a rapid rundown in jobs.
The important point here, however, relates to the people themselves. There has been a disappearance from the labour force of considerable numbers of persons. I have given the figure of something like 51,000 during the period from December, 1965, to December, 1968. That was a rather unusually selective period because there was exceptionally high demand at that time.
The 51,000 can be broken down into 38,000 males and 13,000 females. Females—I use the term in no derogatory sense—can come on to the labour market and disappear from it very easily. When jobs seem readily available, they appear on the labour market; if there is a drying up of jobs, they disappear. To my mind, this would in large measure account for the reduction in the number of women employees between those two dates.
The position concerning males is a serious matter and has continued over many years. Hon. Members, on both sides, will recall that time after time we brought out the question of the constant diminution of the male labout force in Scotland. This situation is still with us but there are, I think, certain bright features.
First, to understand what has been happening over the past two or three years, we should understand that there was a quite severe dip in the birth rate in the early 1950s. In the five years from 1951 to 1955, there was an average reduction each year of 10,000 compared with the previous five years. That makes a substantial difference. That group, which is now coming on to the labour market, is aged 15 to 19 and is a relatively small group. It is down by about 26,000 as compared with its immediate predecessor, the 20 to 24 age group.
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Another factor—it is not one which we deplore, but we must keep it in mind—is that increasingly the young people are not coming on to the labour market in the way that they used to do. When I was a boy, they came on to the labour market at the age of 14 or earlier. Later, the age became 15. Increasingly, however, youngsters are staying on at school beyond that age. The figure which I have is that in 1968 there were 24,000 more boys and girls continuing at school than in 1964.
A substantially increased number of people are now engaged in pursuing further education. A substantially increased number of older people, thereby withdrawn from the labour market, are engaged in training as teachers. In 1968 compared with 1964, about 30,000 people in the younger age group have withdrawn from the general body of employees as a whole.
Not only is this the case in the sense that there is a reduction in the number of younger people coming on to the labour market, but there is a reduction in the number of older people in the market as well. Older men seem more ready to retire at 65 than they were formerly. I understand that in 1965 there were 15,000 more men aged 65 and over than there were in 1968, but that there were 5,000 fewer in employment.
These are the characteristics of what has been happening and there is no doubt that the scene is one of far greater prospects, with a growing variety of new jobs. In Lanarkshire, for example, the job scene is very different from the days when it depended largely on coal and steel. In Fifeshire, it is also very different. Scotland is now on a par with what is happening in other parts of the country. If the situation is understood in the sense that, increasingly, men and women are not making themselves available immediately for work but are acquiring skills or retiring earlier, then the problem of contraction in the number of employees becomes very different indeed.
10.32 p.m.
Mr. Gordon Campbell Mr. Gordon Campbell rose—
The Minister of State, Scottish Office (Dr. J. Dickson Mabon)The Minister of State, Scottish Office (Dr. J. Dickson Mabon) rose—
Mr. Deputy Speaker (Mr. Harry Gourlay): Dr. Mabon.
Dr. Mabon: In view of the short time I have and the fact that this debate was initiated by one of my hon. Friends, in a sense calling the bluff of hon. Members opposite—who have raised the subject many times at Question Time but have never had the guts to get a debate which could be properly answered by a Minister—I must now reply.
I am grateful to my hon. Friend the Member for Motherwell (Mr. Lawson) for keeping a balanced view of the economic situation in Scotland, since arguments about job losses and gains tend among hon. Members opposite to arrive at the conclusion that the Government's policy in Scotland is wrong. My hon. Friend is right in arguing that one has to look not at one index but at several to see what is happening and to judge whether the Government's policy is the right one. Hon. Members opposite keep contradicting themselves about what is happening and what they intend to do if they are returned to office. The hon. Member for Moray and Nairn (Mr. Gordon Campbell) is one of those who contradicts himself.
Mr. Gordon Campbell Mr. Gordon Campbell rose—
Dr. Mabon: The hon. Gentleman must make his own speech.
The hon. Member for South Angus (Mr. Bruce-Gardyne), for example, says that we are giving too much money for jobs and giving it in the wrong way. But we have never had an explanation from hon. Members opposite as to why our policies are wrong. My job is to answer my hon. Friend's claim that we are conducting the right policies. I have listened before to the arguments of hon. Members opposite who have focussed their attention on one simple index.
In the 1966 White Paper—beyond page 9 of which the hon. Member for Perth and East Perthshire (Mr. MacArthur) never seems to get—the Government set out a number of aims. Deductions were made of the likely rundown of the old traditional jobs which it was believed would take place. No hon. Member opposite predicted at the time that the estimate of the rundown was wrong. Not one of them can claim to have given a figure of the rundown of jobs showing that it would exceed the figure we claimed was possible in that time. But, even if the Government estimate Was wrong, are hon. Members oppo-
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site arguing that that rundown should never have taken place—are they arguing, for example, that the prosperity of agriculture should have been endangered by keeping too many men on the land? Are they arguing that coal mines should have been kept on even though they were beyond the economic viability stage? Are they arguing that the railways, with their manpower, should have been sustained as they were in 1964? We say that most of the difficulties of the time—
Mr. MacArthur Mr. MacArthur rose—
Dr. Mabon: No, I cannot give way.
Mr. Deputy Speaker: Order. If the Minister does not give way, the hon. Member must resume his seat.
Dr. Mabon: I have only got eight minutes left. It is becoming a bad habit of Scottish Members not to allow Scottish Ministers a reasonable run. We had it last week, and now we are having it this week.
What I am trying to say is that we have rejected absolutely the Canute doctrine of shoring up old institutions and sustaining dying methods. We have accepted that Scotland's future lies in applying her engineering and technological skills in the present age. As a measure of the magnitude of the job in front of Scotland we can look at the estimates made in the White Paper.
Let us take two of them—job gains and job losses, the subject of this debate. By any forecasting standards, outside those of scientific measurement, and the White Paper did not attempt that, our forecast for job gains was made with quite remarkable accuracy. We are well up to time in this vital sector of the creation of new jobs, and it would do credit to our critics if they would acknowledge this gracefully before going on to comment on job losses. Two years before the end of the period in question in the White Paper we have already marked up 118,000 of the 130,000 jobs set as the target for 1970.
Job losses have been substantially more than anyone, including ourselves, predicted, but the rate of modernisation of our coal mines, our railways, our agriculture, which, as was emphasised to me recently, is the envy of many parts of Europe, has been faster than the most

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optimistic hoped for. The hon. Gentleman should travel on our railways and see how much they have improved. There have been other economic factors contributing to this change. For example, there has been a lower labour intake into certain industries where, however, wages are high, something I hope to be able to come to later, and where productivity has improved.
Let there be no mistake: this rundown in jobs in our older industries had to come, and the fact that it has come more quickly and that we have been able to sustain it is, in the long run, a matter for optimism rather than the reverse. No one can suppose that any Government of a free country can order affairs so that the rundown of jobs and the creation of new jobs synchronise with complete precision. On occasions we have been able to moderate the rundown in order to ease the transition for the local economy affected. We recognise the unsettling effects of industrial change both on the individual and the local community. Change is not always welcome to people, and may even be resented where there is no choice facing the individual.
Change, however, is part of the integral pattern of economic life, and always has been. Our business is to make it as humane, as smooth, and ultimately as productive both to the country and for the individual as possible. The social measures we have introduced to this end, such as our generous redundancy payments provisions, I need not elaborate on now. Redeployment and retraining have also been important, not only economically but in their social implications in this process of change.
Let us look at some of these indices, apart from the index which we are now discussing. Unemployment in Scotland, under hon. Gentlemen opposite and before, was more than twice the United Kingdom average whether the United Kingdom average was high or low. Today, that ratio is down to 1½, and that is significant in itself.
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Migration has always been the bane of Scotland. It has been bad, and it was growing under the party opposite, but it has shown a considerable improvement in the years we have been in office. Net migration in the year ended July, 1969, was 25,000, the lowest figure since 1958–59, and a drop of 22,000 from the high point of 47,000 in 1965–66. Overseas migration shows a drop to 14,000 in 1968–69, which compares with a peak of 29,000 in 1966–67. This cannot be ignored.
Earnings, about which we have been reminded, is another index. It is not just a matter of one job or another but the quality of the job and the earnings must be considered. The wage gap between Scotland and the United Kingdom as a whole for adult male workers in manufacturing industry has fallen to 2.4 per cent., which is l1s. 7d., and is the lowest gap we have had for a long time.
My hon. Friend was kind enough to point out that today in Scotland we do not see people coming on to the labour market quite so early. The young are taking full advantage of higher education, and 24,000 more students over the age of 15 are in full-time education. We can also look at the demographic figures. In Scotland we have more older people, and we hope that they will benefit by the new and admirable pensions provisions which we are bringing in, and that older people will retire in the future without the fear that they have to carry on working to the statutory age, but will be able to enjoy life. We should see more of our younger people taking advantage of the extension of the school leaving age and see more full-time education—
The Question having been proposed after Ten o'clock and the debate having continued for half an hour, Mr. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
Adjourned at nineteen minutes to Eleven o'clock.