Commons Sitting of 27 April 1971

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
PRIVATE BUSINESS

  GREATER LONDON COUNCIL (MONEY) BILL
  Order for Second Reading read.
  Bill to be read a Second time tomorrow.

  NEW BROKEN HILL CONSOLIDATED LIMITED BILL [Lords]
  Bill read a Second time and committed.

  ISLE OF WIGHT COUNTY COUNCIL BILL (By Order)
  Order for consideration, as amended, read.
  Bill to be considered upon Thursday next.

ORAL ANSWERS TO QUESTIONS
  NATIONAL FINANCE

    Plant and Machinery (Investment)
    Mr. Sheldonasked the Chancellor of the Exchequer what estimate he has made of the level of investment in plant and machinery for the first quarter of 1971.
    The Chief Secretary to the Treasury (Mr. Maurice Macmillan): No estimates are yet available.
    Mr. Sheldon: As the Government have repeatedly stated that the change-over from investment grants to investment
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    allowances has no disadvantageous effect upon investment, and as the Financial Statement forecast shows that only ½ per cent. increase in investment is expected next year, which will be two years after the Government came into office, will not the Chief Secretary accept that there is great disquiet about the effect of this time lag extending over two years?
    Mr. Macmillan: One cannot extrapolate in the way that the hon. Gentleman has done. I merely said that the estimates are not available.
    Mr. Hordern: Is not the problem about industrial investment that the return on industrial assets fell over the last six years from 15 per cent. to 10 per cent. and that the cost of borrowing exceeds the return on industrial investment? Is it not rather a nerve on the part of a member of the Labour Party to table a Question such as this, because by raising corporation tax and by other measures the Labour Government were entirely responsible for this state of affairs?
    Mr. Macmillan: Yes, Sir; my hon Friend is quite right. Although we are doing everything we can to encourage investment through incentives, the main incentive is the expectation of profit and the liquidity to invest, both of which were severely damaged by the efforts of right hon. and hon. Members opposite when they were in Government.

    Marginal Earnings and Investment Income (Tax)
    Mr. John Hannamasked the Chancellor of the Exchequer what is now the highest rate of tax payable by a resident of the United Kingdom upon his marginal earnings and upon his marginal investment income.
    The Minister of State, Treasury (Mr. Terence Higgins): 75·4 per cent. and 88·75 per cent. respectively.
    Mr. Hannam: I welcome the reduction in the levels of tax on high incomes and the reduction in surtax, but may I ask the Government to consider an early reduction in the levels of taxation on the levels of income?
    Mr. Higgins: We fully understand the point which my hon. Friend is making. As my hon. Friend pointed out in his Budget, the changes which are being

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    made in personal taxation will be such as to relieve taxation on a particular slice of investment income. We believe that this will be very important in its effect on encouraging savings.
    Mr. Barnett: Does the hon. Gentleman agree that, although the Government may have done something at the higher level—although apparently still not sufficient to satisfy some hon. Members opposite—the Chancellor and the Government generally have over a wide field increased the disincentive to over 100 per cent. for very much greater numbers of people at the lower end of the scale? Are the Government suggesting that it is not a disincentive to lower-paid workers?
    Mr. Higgins: I do not accept what the hon. Gentleman says. He should study carefully the speeches made by my hon. Friend the Financial Secretary in the Budget debate.

    Welfare Services (Expenditure)
    Sir B. Rhys Williamsasked the Chancellor of the Exchequer what proportions of the expenditure of central Government on the welfare services in 1971–72, including health, education, family allowances and pensions, will be borne by contributions from employers, employees and from general taxation; and what were the corresponding figures in 1970–71.
    Mr. Maurice Macmillan: In both 1970–71 and 1971–72, contributions from employers and insured persons are each expected to cover rather more than 20 per cent. of the expenditure on those social services which are provided by the central Government. The remainder will be financed by general taxation.
    Sir B. Rhys Williams: Is there any logical basis for these figures? Ought not the cash relationship between the individual and the State to be governed by a comprehensible social contract?
    Mr. Macmillan: The whole House is aware of my hon. Friend's views, but that is the first time I have heard him use that phrase in connection with them. He has now asked a wider question. These percentages have been round about this level for some time.

    Money Supply
    Mr. Bruce-Gardyneasked the Chancellor of the Exchequer what is his latest forecast of the precentage increase in the money supply during the financial year 1970–71.
    The Chancellor of the Exchequer (Mr. Anthony Barber): In the first three quarters of the financial year 1970–71 the money supply increased at an average rate of 3 per cent. a quarter. Figures for the last quarter of the financial year are not yet available.
    Mr. Bruce-Gardyne: May we then look forward to the current financial year? If, on the gloomiest possible hypothesis, the rate of inflation was such that the achievement of the 3 per cent. growth objective which my right hon. Friend laid down in his Budget speech were no longer compatible with the limitation in the rate of increase of the money supply to 3 per cent. per quarter or less, would it be the growth objective or the monetary guidelines which would have the priority?
    Mr. Barber: The question refers specifically to the year 1970–71. There are a number of factors to be taken into account. The growth over the year is certainly one relevant factor, but another is bound to be the current rate of inflation, and another is the state of company liquidity and the Government's determination to reduce the current rate of inflation. All these factors have to be taken into account. This is why I said in the Budget speech that it was important that we should consider this matter flexibly.
    Mr. Merlyn Rees: Will the recent increases in personal loan schemes by the banks upset the Budget judgment on money supply?
    Mr. Barber: The banks are still operating within the guidelines which are laid down.
    Dr. Gilbertasked the Chancellor of the Exchequer what proposals he has for redefining the elements that enter his calculations of the size of the country's money supply.
    Mr. Higgins: None, Sir.
    Dr. Gilbert: I hope the hon. Gentleman will realise that that will come as

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    a considerable disappointment to the House. But, going beyond that question, has he anything to add to his right hon. Friend's answer to the hon. Member for South Angus (Mr. Bruce-Gardyne)? All the considerations involved having been enunciated, could we have some indication—there is confusion even in the responsible newspapers about the Government's intentions here—whether the Government intend to use the control of money supply to damp down cost inflation, regardless of its effects on the gross national product?
    Mr. Higgins: I see no reason why the hon. Gentleman should be disappointed at my original answer. The question of the definition of the money supply was reviewed in the summer last year, and the new definitions have proved useful. The second question is a different question, and it previously received a different answer.

    Unemployment
    Mr. Barnettasked the Chancellor of the Exchequer if he will make a statement on the likely effect of his Budget proposals on the level of unemployment in 1971.
    Mr. Barber: The Budget was designed, after a time, to slow down the rise in unemployment and then to halt it. Its success in achieving this will depend above all on the progress of de-escalation of pay settlements.
    Mr. Barnett: The Chancellor has conceded again today that he has the power to reduce the level of unemployment. Why will he not tell the House now that he is prepared to act further if it seems likely to reach 1 million? If he will not give that assurance, the House will be bound to conclude that he is prepared to reach that figure.
    Mr. Barber: I can only tell the hon. Gentleman absolutely frankly that if wage inflation continues at present rates I can hold out no hope of an early halt in the rise of unemployment, much less a reduction.
    Mr. Ashley: Will the right hon. Gentleman agree that there are significant differences between the two sides of the House on an acceptable level of unemployment? Will he name a figure
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    which he personally will find unacceptable?
    Mr. Barber: No, Sir; but I believe that there is common ground between both sides of the House that the present level of unemployment is too high.
    Mr. Heffer: Would the right hon. Gentleman not admit that he and his hon. Friends, on this claim that so-called wage or cost inflation is responsible for inflation, are rather in their propaganda like Dr. Goebbels, in that if one continues to say a lie long enough, the people in the country will believe it? Is it not time that the Government stopped this nonsense of suggesting that high wages are responsible for unemployment, and got down to a policy of properly reflating the economy and dealing with the problem of unemployment, for which they are basically responsible?
    Mr. Barber: No, Sir. The people in the country know that what I have been saying is true. It is right hon. and hon. Gentlemen opposite who are burying their heads in the sand.

    Building Industry (Bank Loans)
    Mr. Frank Allaunasked the Chancellor of the Exchequer if, in view of the numbers now unemployed, he will relax the credit squeeze, in particular by allowing bank loans to builders to be placed in the priority category.
    Mr. Maurice Macmillan: As my right hon. Friend indicated in his Budget Statement, we have already relaxed the credit squeeze to the extent of allowing some increase for the time being in the rate of growth of restricted lending. I do not think it would be advisable to make any change in the priority categories at the present time.
    Mr. Allaun: Yes, but, despite that, these building firms still cannot get loans. Is it not a fact that 1.300 building firms went bust in the last nine months, mainly for this reason? Would not this practical measure relieve both the colossal unemployment and also the tremendous housing need at the same time?
    Mr. Macmillan: It would be wrong to single out the building industry, even in present circumstances, for priority for relaxation of restrictions in the face of

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    claims which could be made by other industries for similar treatment.
    Sir R. Thompson: Would my hon. Friend agree that 1,300 building firms went bust largely for the reasons of S.E.T. and a 7 per cent. Bank Rate? As both these factors have been alleviated, would he pay no attention to this kind of cackle?
    Mr. Macmillan: Yes, of course it is true that, particularly among the smaller firms, it was pressure of selective employment tax and Bank Rate, both of which have been ameliorated by this Government, which caused a great deal of the trouble.
    Mr. Douglas: Would the hon. Gentleman not agree that, particularly in Scotland, the activity of the building and construction industry could be extended without any inflationary pressure, because a high proportion of those unemployed in Scotland are in this industry? Therefore, should not distinct administrative steps be taken immediately along these lines?
    Mr. Macmillan: That is a different question. I still do not think it would be right in the circumstances to make any change in the priority categories for bank loans.

    Estate Duty Revenue
    Mr. Meacherasked the Chancellor of the Exchequer what he estimates to be the annual loss to estate duty revenue through the use of discretionary trusts, gifts inter vivos and various life assurances.
    Mr. Higgins: I am not sure what the hon. Member has in mind.
    Mr. Meacher: Since the hon. Gentleman does not understand what I am at —that the use of these devices sheerly for the purposes of tax avoidance, flagrantly contrary to the clear word of Parliament, costs the Exchequer several hundred million pounds a year—will he not accept that it is the myopia of the politically one-eyed to set up a committee, as this Government have done, to investigate the abuse of the social service benefits without letting it also investigate the much greater and far more costly incidence of abuse through tax avoidance and tax evasion?
    Mr. Higgins: The hon. Gentleman is at times inclined to confuse evasion with avoidance, but I have carefully studied his recent writings on this subject and correspondence in some of the newspapers. I am bound to say that it is the hon. Gentleman who is seeking to make merely trivial party political points rather than serious contributions to analysis.

    Invisible Earnings
    Mr. Emeryasked the Chancellor of the Exchequer what he estimates will be the level of invisible earnings during the financial year 1971–72; and how this compares with 1965 and 1967.
    Mr. Barber: Net invisible earnings in 1970, excluding net Government expenditure on current account, were £1,108 million. After including Government receipts and payments overseas, the surplus amounted to £628 million. This compares with surpluses of £160 and £255 million in 1965 and 1967 respectively. As for the current year, I am looking forward to a continuing surplus on the invisible account of broadly the same magnitude as occurred in 1970.
    Mr. Emery: Will not the Chancellor therefore further encourage investment overseas, which was thoroughly discouraged by the last Government? Have not our objections to that discouragement been proved correct by the remarkable achievement of invisible earnings in assisting our balance of payments?
    Mr. Barber: I recognise the importance of overseas investment and the resulting earnings to the balance of payments. I agree that our invisible exporters have made splendid efforts over these years. This is one of the great success stories in recent years.
    Mr. Maclennan: What proportion of these earnings are from tourism?
    Mr. Barber: I cannot say offhand, but I should be glad to answer a Question on the subject if the hon. Gentleman will put one down.

    Unpaid Income Tax
    Mrs. Renée Shortasked the Chancellor of the Exchequer what was the total of unpaid income tax at the end

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    of each financial year from 1965 to the present year; and what proposals he has for encouraging payment on the due dates by those who do not come within Pay as You Earn regulations.
    Mr. Higgins: As the answer to the first part of the Question contains a number of figures, I will, with permission, circulate them in the OFFICIAL REPORT. Figures for 1971 are not yet available. As regards the second part, this matter is kept under close review. I have no proposals for change at present.
    Mrs. Short: Is this not a case of the hon. Gentleman closing a blind eye to those who can evade their income tax —businessmen, the self-employed, the buyers and sellers and the rest? In order to stop these abuses, would it not be a good idea to introduce a rebate for those who pay their tax on time and to charge those who do not the current rates of interest on the outstanding income tax payment which is due?
    Mr. Higgins: It most certainly is not the case that we are closing a blind eye or, indeed, an open eye. It is a matter which we keep under close review. Indeed, most of the sanctions—for example, the rate of interest—have been reviewed recently. We think that the present balance which we are striking is about right. If there is any change in the situation, we shall consider it.
    Following is the answer to the first part of the Question:
    The amounts of income tax unpaid but collectible at 31st March out of the charge raised in the year are as follows:

    £ million

    1965

    …

    …

    …

    …

    48

    1966

    …

    …

    …

    …

    90

    1967

    …

    …

    …

    …

    69

    1968

    …

    …

    …

    …

    89

    1969

    …

    …

    …

    …

    96

    1970

    …

    …

    …

    …

    118

    The figures do not include tax under P.A.Y.E. or Schedule 9 which are not normally assessed. Figures are not available of the collectible arrears at 31st March out of charges raised in earlier years.

    European Economic Community
    Mr. Moateasked the Chancellor of the Exchequer what are the latest estimates he has made of the cost to the balance of payments in the next five years if Great Britain should join the European Economic Community.
    Mr. Maurice Macmillan: There are many factors involved. The Community has not yet replied to our proposals on the United Kingdom contribution to the Community budget. So I have at present nothing to add to what my right hon. and learned Friend the Chancellor of the Duchy told the House on 16th December.
    Mr. Moate: Does my hon. Friend agree that the contribution to the Community budget is only one of a number of serious adverse effects if Britain signs the Treaty of Rome, totalling probably over £500 million a year? Does he also agree that if there were such a heavy balance of payments burden this country would be prevented from pursuing those policies of growth which would be necessary to obtain the so-called dynamic effects?
    Mr. Macmillan: It is not possible to quantify the possible charges across the exchanges to the extent my hon. Friend has done. Certainly my right hon. and learned Friend the Chancellor of the Duchy of Lancaster gave a figure for the adverse effect on trade balances of £200 million to £300 million, but he warned that this was a very tentative estimate. I have no further information which would enable me to give a more precise figure or to comment on my hon. Friend's figure. Many factors are involved, including the benefits which we should get and the greater dynamism and expansion in the economy which joining the Common Market would bring.
    Mr. Deakins: Will the United Kingdom have to pay an increased contribution to the Community budget in the event of Norway and Denmark not joining at the same time as Britain?
    Mr. Macmillan: The level of the contribution is one of the matters under negotiation. Since the Community has not yet replied to our proposals I cannot reply to that question.

    Computerised P.A.Y.E. Centres (Random Access)
    Mr. Leslie Huckfieldasked the Chancellor of the Exchequer what facilities for random access will exist at his proposed computerised Pay As You Earn centres.
    Mr. Higgins: There are no plans for taxpayers' records at any of the proposed Schedule E Centres to be held normally in a form which would allow random access.
    Mr. Huckfield: That is interesting. Will the Minister of State tell the House how various tax offices up and down the country are supposed to get at and find out individual details?
    Mr. Higgins: I understand that the records are held on a continuous tape and not in such a form that random access is readily available.
    Sir B. Rhys Williams: When Pay-AsYou-Earn is put on a weekly basis, will it be necessary to provide random access facilities at all?
    Mr. Higgins: I should like notice of that question.

    Companies (Cash Flow)
    Mr. Tom Boardmanasked the Chancellor of the Exchequer what is his estimate of the effect of the Budget on the cash flow of companies.
    Mr. Maurice Macmillan: The cuts in corporation tax and S.E.T. and the reduction in Bank Rate will help the cash flow of companies; and company liquidity will be helped both by these changes and by the less severe limit on private sector bank borrowing. It is difficult, however, to quantify these effects precisely.
    Mr. Boardman: Does my hon. Friend agree that this additional cash flow will help companies, which have been starved of cash for so long, to invest in a way which will provide both more employment and profit?
    Mr. Macmillan: This is certainly true, provided that this increase in cash flow is not used in meeting higher costs, including wage costs.
    Mr. Albu: Is there not a danger of this country coming to rely too much on overseas investment and invisible exports while its productive capacity at home declines? Was not that the view of the Conservative Party at the beginning of the century?
    Mr. Macmillan: My recollection does not extend as far back as the hon. Gentleman's. It is fair to say that a higher proportion of our total import bill is now being met, taking one year with another generally, by exports than at any previous time in our history. The effect of overseas investment and earnings producing foreign exchange was far greater in the last century than in the last decade.
    Mr. Barnett: Given this increase in companies' cash flow, is it not a fact that the forecast rate of industrial investment increase in still i per cent.? Are not the Government prepared to do anything to increase it?
    Mr. Macmillan: That question has already been dealt with several times this afternoon. The Government have taken some measures in the Budget and these will have their effect. For the rest, it is the expectation of profit, and this cannot be achieved if companies are expecting to have to pay out the extra cash flow in higher and increasing wage levels.

    Sterling Balances
    Mr. Deakinsasked the Chancellor of the Exchequer if it is the policy of the Government to phase out the sterling balances.
    Mr. Barber: Early changes in the reserve role of sterling are not practicable. At an appropriate time the Government would be willing to explore possibilities for change with all those concerned, including the official holders of sterling.
    Mr. Deakins: Have there been any discussions with the Common Market countries on this issue? Has the right hon. Gentleman or his right hon. and learned Friend the Chancellor of the Duchy of Lancaster given the Common Market countries any undertakings about the future of the sterling balances?
    Mr. Barber: I have certainly had no formal talks with the Six. Sterling and other international monetary matters are the subject of discussion whenever I meet my opposite numbers from the European countries. There are interchanges at official level, but these are, and must remain, confidential if they are to be of any value.
    Mr. Bruce-Gardyne: Is it true, as was reported recently, that a decision in principle was taken to renew the Basle Agreement without any consultation or discussion with the French Government? If so, was this not a little ham-fisted in view of the parallel negotiations which are continuing in Brussels?
    Mr. Barber: I said publicly quite a long time ago that I thought it was in the interests of this country and the sterling area generally that the Agreement should be renewed.
    Mr. Roy Jenkins: The right hon. Gentleman has not answered the question put to him by his hon. Friend the Member for South Angus (Mr. Bruce-Gardyne). Will he bear in mind that while it is reasonable that we should envisage a substantial change in the phasing out of the reserve role of sterling, it is necessary to put something in its place, and that it will not be desirable merely to put the whole weight on the dollar, which is itself staggering a little under the excessive reserve burdens which it is carrying?
    Mr. Barber: To phase out sterling's reserve réle implies, as the right hon. Gentleman suggested, replacement of the sterling balances by some alternative asset. This would require international co-operation. The point I was making was that the Government would be ready to consider such a move provided that means could be found which avoided an unacceptable burden on the United Kingdom, promoted the healthy development of the international monetary system, and protected the interests of the sterling holders.

    Personal Incomes (Budget Proposals)
    Mr. Hardyasked the Chancellor of the Exchequer what is the effect of his recent Budget on a married man with two children under the age of 11, if his income is either £1,000 per annum earned or £5,000 earned and £5,000 unearned.
    Mr. Higgins: On the assumption that the incomes given include family allowance, the increases in child allowances give a benefit of £31 in the first case and, coupled with the increased earned income relief, a benefit of £72 in the second case.
    Mr. Hardy: Does the Minister agree that most wage and salary earners now
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    receive remarkably little benefit from his right hon. Friend's Budget, unlike the well-placed who are now likely to create a large increase in the demand for luxury goods and services? Does he, therefore, agree that the Budget is not only socially divisive but is likely to greatly increase inflationary pressures?
    Mr. Higgins: I do not agree that the Budget is socially divisive, nor that it is likely to create inflationary pressures. If the hon. Member looks at the measures taken by the Government since last June and the measures which have been announced and are now in the pipeline, he will find that groups of the kind which he described gain very considerably.

    Income Tax (Clothing Allowance)
    Mr. Skinnerasked the Chancellor of the Exchequer how many income-taxpayers have had the fixed allowance, as it affects working expenses for clothing, &c. adjusted during the past five years.
    Mr. Higgins: I regret that this information is not available.
    Mr. Skinner: Is the hon. Gentleman aware that many thousands of weekly-paid manual workers, including many miners, have seen the fixed allowance depreciate by up to 50 per cent. over the past few years? Will he give instructions to the Inland Revenue to take a little time off from adjusting surtax rates downwards and move the workers' fixed allowance upwards?
    Mr. Higgins: I do not think that to look at it in that sort of way is helpful, but I will bear in mind what the hon. Gentleman says.

    Public Expenditure
    Mr. Kenneth Bakerasked the Chancellor of the Exchequer what estimate he has made of the amount by which public expenditure will be reduced in the current financial year as a result of decisions announced since 18th June, 1970.
    Mr. Maurice Macmillan: Policy decisions announced up to the time of the White Paper on Public Expenditure 1969–70 to 1974–75 (Cmnd. 4578) reduced the previous programmes by £315 million, but diverted £50 million of this to enlarge the Contingency Reserve. I cannot yet estimate the net effect of decisions

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    announced after this, which represents in the first place a charge on the Contingency Reserve.
    Mr. Baker: Whilst I congratulate my right hon. Friend the Chancellor and the Treasury Ministers upon making a start, may I press them to ensure that there is a constant Ministerial review of all public expenditure to ensure that the figures in the White Paper are kept to and that public expenditure in any event will not in 1971 exceed the growth in our productive potential?
    Mr. Macmillan: My hon. Friend has rather neatly stated practically the sole reason for my existence—to ensure as far as possible that this does happen.
    Mr. Barnett: Will the hon. Gentleman go if it does not?
    Mr. Freeson: Bearing in mind the grave need to increase the rate of slum clearance and new housing construction by local authorities throughout the country to solve our housing problems, does the Minister agree that there should be an increase in the allocation of public expenditure for local authority housing in the coming year?
    Mr. Macmillan: One of the main objects of rearranging public expenditure as we are doing is to ensure that the Government do not spend money on projects which can well be handled by the private sector, partly to ensure that a greater degree of care and attention can be devoted to those things, which only the Government can do.
    Mr. Roy Jenkins: Does the hon. Gentleman's answer to his hon. Friend's supplementary question mean that in the event of the increase in public expenditure exceeding the increase in the gross national product this year he will regard himself as having failed in his job, and feel it necessary to resign?
    Mr. Macmillan: The right hon. Gentleman should not allow his natural optimism and wishful thinking to lead him to read too much into my statements in that way.

    Self-Employed Craftsmen (Purchase Tax)
    Mr. Boscawenasked the Chancellor of the Exchequer (1) what
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    is the cost to the Revenue of the concession allowed to self-employed craftsmen to sell up to £500 worth of their goods without incurring purchase tax; and how many individuals are in receipt of this concession;
    (2) whether, in view of the fact that the £500 purchase tax concession to self-employed craftsmen was introduced 15 years ago, he will now adjust it in order to take account of the changed value of the £ sterling.
    Mr. Higgins: There is no purchase tax concession for self-employed craftsmen as such; but there is a general exemption limit of £500. This is designed to reduce collection costs. No information is available as to the cost to the Revenue of the exemption or the number of individuals who benefit from it. But, taking the two factors together, the Revenue probably gains from the arrangement. An increase in the exemption level would, however, lead to objections from those competing with small traders.
    Mr. Boscawen: Does not my hon. Friend agree that it would help the Revenue to gain a bit more if it increased that exemption, which has helped many hundreds of craftsmen to remain in self-employment after they have retired from other jobs? Will he consider doubling it, as the exemption limit in annuities for self-employed has been doubled?
    Mr. Higgins: I fully understand my hon. Friend's point. I have received representations from a number of hon. Members on the subject since last June. But if we were to raise the limit just for reasons of reducing administrative costs rather than helping small traders as such it would lead to very considerable problems with regard to competition with other normal commercial organisations.
    Mr. Nicholas Edwards: Does my hon. Friend realise that an increase in the limit would be of great assistance in the remoter areas and for the tourist industry?
    Mr. Higgins: I am not quite clear how it would affect the tourist industry. It certainly is the case that in a number of remote areas there are small traders of this kind. For the reasons I have mentioned—and I have looked into the matter very closely—I do not think a change would be justified.
    Mr. Emery: The level of £500 was set many years ago. If it was right at the prices then, surely it should be increased now?
    Mr. Higgins: It was indeed a considerable time ago. But I have tried to hit a balance, given the number of complaints that we have had from both sides as to the eflect on competition if we raised the limit.
    Mr. Maclennan: May I explain to the hon. Gentleman very briefly how the concession benefits the tourist industry in the remoter parts of the country? Many craftsmen operate in those areas, and their produce helps to boost the tourist contribution to the local economies.
    Mr. Higgins: I fully appreciate the indirect effect. I thought that my hon. Friend had something more direct in mind. I have received representations, and I have examined some of the products of the kind which the hon. Gentleman mentioned, which undoubtedly have a tourist attraction.

    Value-Added Tax
    Mr. Madelasked the Chancellor of the Exchequer whether, following the indication in the Green Paper on Value-Added Tax that newspapers will be exempt, this exemption is intended to apply to the revenue they receive from advertisers as well as the revenue they receive from sales.
    Mr. Maurice Macmillan: The form of relief for sales of newspapers has not yet been decided. Advertising revenue is a different matter, but final decisions on coverage will not be taken until nearer the introduction of the tax.
    Mr. Madel: Will the Government bear in mind when further considering the matter that certain sections of the Press depend far more heavily on advertising than on sales as a form of revenue, and that if V.A.T. were put on advertising revenue certain sections of the Press would be put in great difficulties?
    Mr. Macmillan: My hon. Friend's point is fully understood. If V.A.T. were charged on newspaper advertising the ultimate cost would be in the price of the goods advertised rather than the price of the paper concerned.
    Mr. Ashton: Is the Minister aware that if the tax is placed on advertising it will undoubtedly be passed on to the consumer and will be just one more incentive for trade unions to seek further wage increases? Is not this against his policy, or does he expect trade unions to bear the brunt of price increases inflicted by the Government?
    Mr. Macmillan: Value-added tax, like purchase tax, selective employment tax and other indirect taxation, is normally part of the cost of the goods concerned. What I was saying was that in this case a value-added tax on advertising would affect not the newspaper in which the advertisement was placed but the goods which were being advertised in that paper.
    Mr. Marten: While this may be what the Government want now, if we should go into the Common Market will not the tax be harmonised in Brussels, with a decision taken by the Common Market countries and not by us?
    Mr. Macmillan: No decision has yet been taken on the coverage or rates to which the Common Market countries are harmonising the value-added tax. The Green Paper is a purely United Kingdom proposal.
    Mr. Barnett: If the exemption system is used rather than the zero rate, does the hon. Gentleman concede that in the case of both newspapers and food it would in effect mean that tax would be payable in exactly the same way as by non-registered purchase tax payers?
    Mr. Macmillan: The question of coverage and the form of relief to newspapers has not yet been decided. Food is another matter, and another question.
    Mr. Barnett: Will the hon. Gentleman answer the question, just on this one occasion?
    Mr. Macmillan: I cannot say what form of relief will be granted to newspapers, which the Question is about. Food is another matter altogether, and not the subject of this Question.
    Mr. Roy Jenkins: The hon. Gentleman was not asked to say what form of relief was granted. He was asked to look at what followed from whether the exemption system or the zero rate was used.

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    Surely he can follow this argument and answer my hon. Friend.
    Mr. Macmillan: It is precisely because the Government have not made up their mind and are looking, and will continue to look, at these matters that we published the Green Paper. We are perfectly prepared to consider different methods of relief for the sales of newspapers, in conjunction with the trade. We are firmly committed to consulting the newspaper trade in general, as we are to consulting other people affected by V.A.T. That is precisely the point of publishing a Green Paper—to give time for reasonable consultations.
    Mr. Hugh Jenkinsasked the Chancellor of the Exchequer what proposals he has for applying the value-added tax to the entertainment industry and to artistic enterprises in general.
    Mr. Higgins: Value-added tax is essentially a comprehensive tax, but decisions on the details of its application to particular sectors will not be taken until nearer the time of introduction of the tax.
    Mr. Jenkins: If the value-added tax is put on the entertainments industry, will not this amount to reintroducing entertainments tax, as it were, by the back door? Will the hon. Gentleman give a positive assurance that the V.A.T. will not be exerted on the entertainments industry, or, if it is levied, that some form of exemption will be provided to relieve the industry of the main consequences of the burden?
    Mr. Higgins: The form of the tax would be very different from the entertainrnents tax. Exemptions and coverage and so forth are for discussion. That is why the Green Paper has been issued. If there are particular points which the hon. Gentleman wants to bring to our attention, then that is the purpose of the Green Paper.

    £ Sterling
    Mr. Kaufmanasked the Chancellor of the Exchequer what is the purchasing power of the £ sterling now, taking it as 100p on 18th June, 1970.
    Mr. Higgins: I would refer the hon. Member to the answer I gave to the
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    hon. Member for Newcastle-under-Lyme (Mr. Golding) on 23rd April.—[Vol. 815, c. 480.]
    Mr. Kaufman: Is the hon. Gentleman aware that the furtiveness of that reply conceals the fact that since the Government came to power and pursued the inflationary policies for which they are responsible a man on average earnings has lost £1·68 from his pay packet and that by the time the old-age pensioners finally get their long-delayed increase next September the value of that £1 increase will be only 23½p? Will he convey this to the Prime Minister so that the Prime Minister does not issue another peevish statement saying that no one ever told him?
    Mr. Higgins: I am surprised that the hon. Gentleman has the nerve to refer to the pound in the pocket, since the last Government undertook the inflationary policies which we are determined to control.

    Building Society Mortgages (Interest Rates)
    Mr. Walter Johnsonasked the Chancellor of the Exchequer what is the Government's policy towards the level of interest rates still being charged by the building societies for house mortgages despite two reductions in the Bank Rate.
    Mr. Goldingasked the Chancellor of the Exchequer what steps he intends to take to facilitate the reduction of the cost of house mortgages to owner occupiers.
    Mr. Higgins: The abolition of the stamp duty on mortgages from 1st August, announced in the Budget, will reduce the initial cost of house mortgages. Charges by building societies, including mortgage interest rates, are a matter for the societies concerned.
    Mr. Johnson: Is the hon. Gentleman aware that house purchasers feel cheated by the building societies? When Bank Rate goes up, interest rates also go up within a matter of weeks, but when Bank Rate comes down, all sorts of phoney excuses are put up by the building societies for not bringing their interest rates down. Will the Government not act in this matter?
    Mr. Higgins: The position is as I have described it. There is no direct connection between Bank Rate, which is essentially a short-term rate at which the Bank of England re-discounts bills, and mortgage rates. Mortgage rates are a matter for the building societies. We do not believe that there is a case for Government intervention.
    Mr. Golding: Does the hon. Gentleman appreciate that his answer will bring cold comfort to those who already have mortgages on which they have very high repayments indeed? Will he appreciate that they feel cheated by the Government because they were led to believe that interest rates would fall under this Administration?
    Mr. Higgins: One must take into account the fact that the rates which building societies charge necessarily reflect the rate at which they can borrow. This is an important matter because otherwise, of course, the supply of funds for mortgages would dry up. I do not believe that this is a matter in which the Government should intervene.
    Mr. Fletcher-Cooke: Since the law relating to monopolies and restrictive practices now includes services of this sort, would not my hon. Friend consider possibly referring this matter to the Monopolies Commission, if only to allay public anxiety?
    Mr. Higgins: This is a matter for my right hon. Friend the Secretary of State for Trade and Industry, who will no doubt take note of what my hon. and learned Friend has said.
    Mr. Freeson: The hon. Gentleman has said that these matters are solely for the building societies and not for the Government. Is he really telling us that the Treasury has had no consultations jointly with the Department of the Environment and representatives of the building societies about future policy towards house ownership? If he is, will he reconsider and undertake consultations with the Department of the Environment and the Building Societies Association?
    Mr. Higgins: That is a much broader question. The Question on the Order Paper related specifically to the interest rates which are charged.
    Mr. Geoffrey Finsberg: Will my hon. Friend accept that not all house owners feel in the same position as hon. Members opposite suggest, and that many of them felt much more cheated by the failure of Lord George-Brown to give them the 3 per cent. mortgages he promised?
    Mr. Higgins: That may well be so. The memories of hon. Members opposite are conveniently short in this respect.

    NATIONAL ECONOMIC DEVELOPMENT COUNCIL
    Dr. Gilbertasked the Prime Minister when he next intends to take the chair at a meeting of the National Economic Development Council.
    Mr. Sheldonasked the Prime Minister when he next intends to take the chair at a meeting of the National Economic Development Council.
    The Prime Minister (Mr. Edward Heath): I have nothing to add to the reply which I gave on 20th April to a similar Question from the hon. Member for Heywood and Royton (Mr. Barnett). —[Vol. 815, c. 943–4.]
    Dr. Gilbert: While at the next meeting of the N.E.D.C. the right hon. Gentleman will doubtless be discussing cost inflation, can he identify for the House any element at all of demand inflation in the present economic situation? If not, can he tell us how far unemployment should be safely reduced before he thinks any such element might appear?
    The Prime Minister: The next meeting of the N.E.D.C. will discuss inflation in other countries and various methods being used to combat it there. It is hoped that the members of the N.E.D.C. will have a greater understanding from that discussion of inflation and the methods of dealing with it. What is obviously important is that increased demand should not combine with cost inflation to produce a still greater inflationary situation. That, from the discussions at the last N.E.D.C. meeting, was apparent to all.
    Mr. Sheldon: Since the right hon. Gentleman has repeatedly stated that the escalation of wage demands is the main

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    cause of high unemployment, and since he has also specifically stated that escalation of wage demands has been brought to a halt, will he now explain why it is that unemployment is still rising?
    The Prime Minister: Because employers are still under pressure of trying to find the liquidity with which to deal with high wage increases already granted. This liquidity has been increased as a result of the Budget, and one is, therefore, hopeful that firms will now be able to use these resources for greater investment, which is a prime demand of the Opposition.
    Mr. Hordern: Does not my right hon. Friend agree that the sole contribution made by the Leader of the Opposition and the Labour Party to controlling inflation has been to support every wage claim so far advanced? Would not he also agree that the Leader of the Opposition would be much better employed in eating steak at the St. Ermin's Hotel for a 15-year transitional period?
    The Prime Minister: I am not sure that I would want to sentence even the Leader of the Opposition to that. My hon. Friend makes the point that the Opposition have abandoned a compulsory wages policy and a voluntary wages policy and are inciting workers to higher wage increases. It is perfectly true that they are bankrupt in all ideas.
    Mr. Thorpe: Without following the Prime Minister in his attack on the culinary standards of the St. Ermin's Hotel, may I ask him whether he does not think that the N.E.D.C. might usefully concentrate its efforts next time it meets on discussing unemployment? Is he aware that some of us find it difficult to comprehend how it was that, as Leader of the Opposition, the right hon. Gentleman, without benefit of Treasury statistics, had no difficulty in prophesying what the levels of unemployment were likely to be—albeit that he was usually wrong—whereas now that he has the benefit of all these statistics it is impossible for us to find out whether he expects the unemployment level to rise, whether he expects the Government to maintain it or whether it is Government policy to reduce it? Can we have a frank answer?
    The Prime Minister: It was the thought of putting the right hon. Gentleman the Leader of the Opposition through a 15-year transitional stage which I did not wish to threaten him with. The agenda of the N.E.D.C. meeting has been settled jointly between the employers, the trade unions and the Government, and two subjects are monetary control and inflation in other countries.
    Sir G. de Freitas: If the right hon. Gentleman does not attend the next meeting, will he at least draw the attention of the N.E.D.C. to the fact that the rise in unemployment in the East Midlands was greater last month than in any other region in Great Britain? This is a very serious new development.
    The Prime Minister: The N.E.D.C. is supplied at every monthly meeting with an index of statistics, giving economic indicators.

    DISABLEMENT INCOME GROUP
    Mr. Ashleyasked the Prime Minister what recent representations he has received from the Disablement Income Group; and what reply he has sent.
    The Prime Minister: I received last Friday a letter from the Director of the Disablement Income Group about the incomes of certain categories of severely disabled people. I shall be replying to it shortly.
    Mr. Ashley: Is the right hon. Gentleman aware that the Government's recent provision for disabled people, especially disabled fathers, is warmly welcomed as a first, but significant, step forward? Will he consult his colleagues about the provision for a group of people who work hard, who never complain, who do not go on strike and who never put in a wage claim, namely, disabled housewives?
    The Prime Minister: Yes, Sir. The letter I received on Friday from the Director expressed the Group's appreciation of the action which had been taken by the Government and the announcement made by my right hon. Friend the Secretary of State for Social Services. The letter went on to raise the particular case of severely disabled housewives, as

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    well as of the congenitally disabled and the disabled who are at work. After considering these three points, we will reply to the letter.

    SOCIAL AND ECONOMIC POLICIES (GOVERNMENT INTERVENTION)
    Mr. Carterasked the Prime Minister if he is satisfied that the present level of Government intervention is sufficient for the achievement of his social and economic policies; and if he will make a statement.
    The Prime Minister: Yes, Sir.
    Mr. Carter: Is the right hon. Gentleman aware that when the Government have intervened there has simply resulted a decrease in living standards for a great many people, notably because of their policy of deliberately increasing the cost of food, rents, prescription charges and school meals? Is it not time for the Government to intervene to reduce the staggering level of unemployment?
    The Prime Minister: The question of the level of unemployment was dealt with by my right hon. Friend the Chancellor of the Exchequer in the debate on the Budget. In any event, the House will have an opportunity to discuss this matter on an Opposition Supply Day. The hon. Gentleman is wrong in the first part of his supplementary question because poorer families, through the family income supplement—
    Mr. Carter: How many of them? Two hundred thousand.
    The Prime Minister: I do not regard 200,000 as a negligible number of families. They have benefited net from the measures which the Government have taken and which the Labour Administration completely neglected.

    TRADE UNION LEADERS (TALKS)
    Mr. Barnettasked the Prime Minister if he will make a statement on his official talks with Mr. Leonard Woodcock of the United States Automobile Workers, Mr. Jack Jones and Mr. Hugh Scanlon on 23rd March, 1971.
    The Prime Minister: I would refer the hon. Member to the reply I gave to a similar Question from the hon. Member for Midlothian (Mr. Eadie) on 20th April, 1971.—[Vol. 815, c. 380.]
    Mr. Barnett: Did not Mr. Woodcock explain to the right hon. Gentleman that high wages in the United States were not causing unemployment? Does the Prime Minister still insist that they are doing so in Britain?
    The Prime Minister: Mr. Leonard Woodcock explained to me and to the members of the T.U.C. who were present that they were able to get high wages because they had three-year contracts which they observed, with the result that there was very little industrial unrest. [Interruption.] If hon. Gentlemen opposite care to look at the figures for Ford in the United States, which I had available and about which Mr. Woodcock knew, they will find that this is the case, simply because the firm is able to get additional production. If, in this country, the trade unions were able to give three-year contracts with no industrial disturbance, they, too, would get higher wages and there would be higher production.
    Mr. Heffer: Is the right hon. Gentleman really unaware of the fact that, despite those three-year contracts, in many American industries the strikes are longer? Is he also unaware that Ford's strike record in America is far worse than the record in this country?
    The Prime Minister: I contest the hon. Gentleman's figures. The point which Mr. Woodcock made was that during these three-year agreements there was a minimum of industrial unrest, and this meant that the company was able to achieve higher production and ensure deliveries on time to its agents.
    Mr. Harold Wilson: Did Mr. Woodcock discuss with the right hon. Gentleman, as he did with me, the case of the G.E.C. strike in America in 1970, in which more man-days were lost in that 11-week strike than in the whole of Great Britain in the whole of 1969?
    The Prime Minister: We did not discuss G.E.C. because Mr. Woodcock was out to show me what had been achieved at Ford in Detroit.

    SCOTTISH TRADES UNION CONGRESS (MEETING)
    Mr. William Hamiltonasked the Prime Minister when he next intends to have an official meeting with representatives of the Scottish Trades Union Congress.
    The Prime Minister: My right hon. Friends the Secretaries of State for Trade and Industry and for Scotland and I met a delegation from the Scottish T.U.C. on 22nd February. I also met representatives of the Scottish T.U.C. when I lunched with the Scottish Economic Council on 26th March. The Government are always willing to consider representations from the Scottish T.U.C., but there are at present no plans for further meetings.
    Mr. Hamilton: Is the right hon. Gentleman aware that, since those meetings took place, and since the Scottish T.U.C. apparently expressed satisfaction with them, unemployment in Scotland has continued to rise, notwithstanding the Government's promise to improve the infrastructure as a contribution to reducing unemployment? Is he aware that the Glasgow Tory Corporation completed not one house in January of this year and only 72 in February? What pressures are the Government bringing to bear on the Tory-controlled Glasgow Corporation to ensure that it improves its house-building record? What do the Government intend to do about the shocking unemployment figures in Scotland?
    The Prime Minister: Since the first meeting with the S.T.U.C. we have made the additional arrangements for special development areas in Scotland. The answer to that part of the hon. Gentleman's supplementary question dealing with housing is that I myself announced in Glasgow that an additional 17,000 houses would be built.
    Mr. Bruce-Gardyne: When my right hon. Friend next meets the leaders of the S.T.U.C., will he discuss with them the way in which many capital goods producers in Scotland are being obliged to declare men redundant because their industrial customers in England have had to cut back on their investment programmes owing to the disappearance of profits through industrial unrest?
    The Prime Minister: The S.T.U.C. has already told me that it fully recognises this aspect of the problem.
    Mr. James Hamilton: Is the right hon. Gentleman aware that the S.T.U.C. has firmly declared itself against the Government's policy of restraint, which is causing heavy unemployment throughout the country? Is he further aware that the S.T.U.C. is on record as saying that the Government's policy will result in the highest post-war unemployment figure in Scotland, of 136,000 in 1963, being surpassed? What does the right hon. Gentleman intend to do about this, considering that if he continues with his present policy we shall be driven back to the hungry 'thirties?
    The Prime Minister: It is difficult to prove intellectually that a policy of wage restraint will create unemployment. I have never heard any commentator or economist try to do it. If the S.T.U.C. has laid that down in the way the hon. Gentleman describes, I would like to read it before commenting on it.

    RHODESIA
    Mr. Juddasked the Prime Minister, following the most recent contacts between the British Embassy in Pretoria and the illegal Smith regime, what arrangements he has now made to visit Salisbury, Rhodesia; and whether he will make a statement.
    The Prime Minister: I have made no arrangements to visit Salisbury.
    I have nothing to add to the answer I gave to a Question from the hon. Member for Manchester, Blackley (Mr. Rose) on 22nd April.—[Vol. 815, c. 1362.]
    Mr. Judd: Is there not a growing gap between the pernicious racism of the Smith régime and the five principles to which the right hon. Gentleman and his hon. Friends claim to be committed? If so, will he take an early opportunity to dispel completely the rumours of a cloak and dagger settlement with the régime in Rhodesia? Will he also recommend the Foreign Secretary to make it abundantly plain to the Portuguese Government when he next visits Portugal that we in Britain deprecate their deliberate thwarting of international intention in giving sustenance to an illegal régime

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    which is in treasonable revolt against the Crown?
    The Prime Minister: I do not propose to comment on any of the hon. Gentleman's remarks because we are carrying out preliminary exchanges and, as promised, when there is anything of substance to report, it will be reported to the House.

    CABINET PAPERS
    Mr. John Hallasked the Prime Minister whether he will now review the procedure for custody and publication of Cabinet Papers, and revise the classification of such papers.
    Mr. Biggs-Davisonasked the Prime Minister whether he will now review the procedure for custody and publication of Cabinet papers, and revise the classification of such papers.
    Sir F. Bennettasked the Prime Minister whether he will now review the procedure for custody and publication of Cabinet papers, and revise the classification of such papers.
    The Prime Minister: I am not aware of a need for such a review.
    Mr. Hall: Does my right hon. Friend agree that recent references in both memoirs and speeches would seem to indicate a lack of understanding of the present procedure or else that the present procedure does not work? In these circumstances, is not this procedure due for review?
    The Prime Minister: As far as my responsibilities go, the arrangements for the custody and publication of Cabinet papers and their classification are satisfactory. It is for the Prime Minister of the day to deal with classification during his period of office.
    Mr. Biggs-Davison—
    Mr. Wellbeloved: On a point of order. I am reluctant to intervene, but may I draw your attention, Mr. Speaker, to the fact that Questions Nos. Q8, Q9, 010 and 017 are identical and that Questions Nos. Q14, 015, 016 and 011 are identical? This is clearly a ploy originated in the Smoke Room and is a gross abuse
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    and complete waste of Question Time. Is it right that the Table Office should have accepted these identical Questions? If the rules provide for the Table Office to accept them, may I ask you, Sir, to consider this gross abuse of Parliamentary privilege and to give a Ruling tomorrow that it should not happen?
    Mr. Speaker: That point had already occurred to me in relation to Questions Nos. Q1 and Q2. However, it is a serious point and I will consider it.
    Mr. C. Pannell: Further to that point of order, Mr. Speaker. Will you, Sir, look up the precedent of Mr. Speaker Morrison concerning equal pay for women, when he took a very stern line against an attempted conspiracy which appeared on the Order Paper? As I was one of those affected, I speak with some feeling. What was good enough in that case is good enough today.
    Mr. Wellbeloved: Further to the point of order. The Questions to which I referred originated in the Smoke Room. The two Questions to which you, Mr. Speaker, referred, originated in the Tea Room.
    Mr. Speaker: I will consider all these important matters.
    Several Hon. Member—
    Mr. Speaker: Order. We have very important business to do today. I have promised to consider the matter.
    Dr. Gilbert: Further to the point of order. I hope that you are not suggesting, Mr. Speaker, that there has been any collusion in the setting down of Questions Nos. Q1 and Q2?
    Mr. Speaker: I have not suggested anything.
    Mr. Faulds—
    Hon. Members: Oh.
    Mr. Faulds: You bloody well listen.
    Mr. Speaker: I did not quite hear what the hon. Gentleman said, but technically he was addressing me and I am listening.
    Mr. Faulds: I am very relieved to know that you are slightly deaf, Mr. Speaker. May I raise a point of order with you? With great respect, there seemed to me some indecent haste to

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    get to Question No. Q8 and the block of Questions following it when there was not a supplementary question allowed on Question No. Q7, which deals with a rather important matter, apart from that put by the hon. Member who originated the Question.
    Mr. Speaker: I have received advice recently from the House about calling hon. Members to ask supplementary questions. My view of the Prime Minister's reply to Question No. Q7 was that no profitable supplementary question could be asked at this stage because he said that we would inform the House when there was anything to tell the House. I then went on to Questions Nos. Q8, Q9 and Q10, not attributing motives or realising where they originated.
    Mr. Faulds: Further to the point of order. How can you, Mr. Speaker, say whether a supplementary question will be profitable until you have heard it? I happened to have a profitable supplementary question to ask.
    Mr. Speaker: If that rule applied, everybody would ask innumerable supplementary questions. It is for the Chair to decide these matters.
    Mr. Biggs-Davison: May I ask my right hon. Friend the Prime Minister whether the right hon. Member for Leeds, East (Mr. Healey) will be given the same facilities as the right hon. Member for Coventry, East (Mr. Crossman) to consult Cabinet papers so that when he in his turn comes to write his memoirs he can explain his advocacy, with Lord George-Brown, of the sale of arms to South Africa?
    The Prime Minister: There is a longstanding convention that members of an Administration have access to certain documents. This is always arranged directly with the Secretary to the Cabinet.
    Sir F. Bennett: Can my right hon. Friend the Prime Minister say, as a matter of factual answer, whether tapes or other records of telephone conversations outside the Cabinet between Cabinet Ministers are subject to the same rules about confidence as apply to Cabinet procedures themselves?
    The Prime Minister: I have been discussing entirely the matter of Cabinet documents and Cabinet records. I have
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    no knowledge of tapes or of taped telephone recordings.
    Mr. Bidwell: Can the Prime Minister say whether any of the papers disclose the date when he will cease to blame the previous Government for the inflationary mess that he is in?
    The Prime Minister: I do not think that has any relationship to the Questions with which we are dealing.

VEHICLE AND GENERAL INSURANCE COMPANY
The Prime Minister (Mr. Edward Heath): With permission, I wish to make a statement about certain matters related to the Vehicle and General Insurance Company.
As the House will be aware, my right hon. and learned Friend the Attorney-General received this morning a final report from the Metropolitan Police of their investigation into the unauthorised disclosure of information from the Department of Trade and Industry in respect of the affairs of the company.
After consideration of all the evidence at present available and after consultation with the Deputy Director of Public Prosecutions and Treasury Prosecuting Counsel, the Attorney-General has decided not to institute any criminal proceedings under Section 2 of the Official Secrets Act, 1911.
This decision having been taken, the Government have concluded that it would be in the public interest that a tribunal should be established under the Tribunals of Inquiry (Evidence) Act, 1921, to inquire into wider issues in relation to the circumstances leading up to the cessation of trading by the V. & G. Insurance Company, namely—

(a) Whether and if so by whom the contents of certain documents or other information in the possession of the Department of Trade and Industry relating to the affairs of the company or any of its subsidiaries were improperly disclosed or obtained between 4th and 18th November, 1970, and whether, should this be shown to be the case, any use was made of such information for the purpose of private advantage.

(b) Whether there was negligence or misconduct by persons in the service

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of the Crown directly or indirectly responsible for the discharge, in relation to those companies, of functions under the Insurance Companies Acts, 1958–67.

(c) Whether there is any evidence that the interests of policy holders or shareholders of those companies were adversely affected as a result of any impropriety, negligence or misconduct found to have occurred.

The necessary Resolution for this purpose will be tabled today; and the House will be asked to approve it tomorrow.
Mr. Harold Wilson: The House will welcome the right hon. Gentleman's announcement of this, as far as we can tell, thorough-going inquiry.
Is the Prime Minister aware that the whole House will agree that it must be for the right hon. and learned Gentleman the Attorney-General to decide whether to institute criminal proceedings? The House will have been prepared for this announcement by the fact that his decision was foreshadowed in the Press this morning, the information being attributed to Ministers.
Is the right hon. Gentleman aware that, on the first study of what he has said, the terms of reference would appear to be adequately wide, as we have pressed? They will include, not merely the circumstances of the "leak" and the possible misuse of any "leak" for personal advantage, but also, if we interpret the right hon. Gentleman's reference to "persons in the service of the Crown" correctly, Ministers as well as civil servants, I am not talking about the "leak", which we all assume is not in question, but the manner in which the Government handled it and, as the right hon. Gentleman said in his projected terms of reference, the position, interests and rights of the policy holders. Will the Prime Minister confirm that Ministers as well as other servants of the Crown are intended to be covered by the terms of reference? Finally, since the tribunal has been set up under the 1921 Act, will the right hon. Gentleman confirm that the decision as to whether the tribunal should sit in public or private is a matter for the members of the tribunal to decide, but that convention in recent years and the recommendations five years ago of the Royal Com-
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mission on the 1921 Act indicate that in all possible circumstances the hearings should be in public except when there is an overriding reason for holding them in private? Will the right hon. Gentleman confirm that that is his view and that it will be for the tribunal so to decide?
The Prime Minister: Yes, the right hon. Gentleman is quite correct that the terms of reference which I have quoted this afternoon to include Ministers both in this Administration and previous Administrations. As to whether the tribunal will sit in public or in private, the position is exactly as the right hon. Gentleman has described it.
Sir D. Walker-Smith: In view of the doubts, confusion and difficulty which arose in respect of the tribunal of inquiry into the Abervan disaster, could my right hon. Friend say whether, in the context of this tribunal, there will be applied the recommendation of the Lord Justice Salmon Committee in regard to contempt in these proceedings, so as to make clear the question of legitimacy and propriety of comment on matters under inquiry by the tribunal?
The Prime Minister: As my right hon. and learned Friend knows, the recommendations of the Salmon Commission were very wide-ranging. I believe it is true that the Abervan tribunal took account of the great majority of them, and I think it is to be assumed that any tribunal in future will also do so. There was one particular recommendation that the Attorney-General should not take part. The then Attorney-General, I believe at the request of the president, did take part, and it is the intention of my right hon. and learned Friend the present Attorney-General that he should discuss with the president of the tribunal what his wishes are.
Mr. Richard: The Prime Minister said that the second of the terms of reference was to consider whether or not there had been any negligence or misconduct by any servant of the Crown or any Minister and whether the interests of the shareholders or policy holders were thereby affected. In the event of finding of evidence by the tribunal—I am not commenting or prejudging anything—but in the event of the finding by the tribunal that there was some kind of negligence or misconduct as a result

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of which the interests of policy holders or shareholders were affected, do the Government accept any obligation to reimburse those shareholders and policy holders?
The Prime Minister: I think it would be wrong for me to attempt to anticipate any findings by the tribunal, or at this point to make any policy statement about any decision the Government may reach as a result of them.
Mr. Thorpe: May I ask the Prime Minister whether he is aware that there will be a widespread welcome for the appointment of this tribunal as the only way of restoring public confidence in the confidentiality of Government information? May I ask three questions? Can he say what he has in mind about the president of the tribunal, or will that await the outcome of the debate tomorrow? Secondly, the statement says that there will be no criminal prosecution on the basis of evidence at present available. Do we take it from that that the Government are reserving their position on this matter, awaiting the outcome of possible further evidence? Thirdly, do we take it that the inquiry will be sufficiently wide to consider why it took two months for this matter to be referred to the D.D.P. and five months for this tribunal to be appointed?
The Prime Minister: As for the membership of the tribunal, it was one of the recommendations of the Salmon Commission that no names should be announced before the debate on the Resolution had been concluded. That procedure we propose to follow in this case. We shall ask the House to approve the Resolution, and when both Houses of Parliament have done that my right hon. Friend the Home Secretary will announce the names. As to the second point, that is a matter for the Attorney-General, who is completely independent in all such matters. As to the third point, that does fall within the terms of reference of the tribunal.
Mr. Kenneth Baker: Can my right hon. Friend say whether the tribunal will investigate the fact that the executives and directors of Vehicle and General over the years have been a prime source of leaks about the fortunes of that company, and in view of item (c), will the
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tribunal be able to establish whether the collapse of V. and G. was in any way due to leaks or, as financial commentators picked up in 1968 and 1969, to financial imprudence of the management?
The Prime Minister: What the tribunal investigates is a matter for the tribunal to decide within the terms of reference which I think are very clear.
Mr. C. Pannell: I draw the Prime Minister's attention to a statement made by the Secretary of State for Trade and Industry last Thursday when he said:
"… but I must say that from the departmental point of view it would not have seemed a matter which would have benefited greatly from revelation."—[OFFICIAL REPORT, 22nd April, 1971; Vol. 815, c. 1375.]
From the departmental point of view "it "—that is the situation of V. and G. "would not have seemed a matter which would have benefited greatly from revelation". From that opinion sprung the terrific procrastination and pressure and the desire for an inquiry. Will the pressures on Ministers be looked at, if not by the tribunal by the Prime Minister, and what sort of advice he accepted as to whether the departmental point of view was put before the public interest?
The Prime Minister: The timing of these matters can obviously be investigated by the tribunal and it is better today that this should now be left to the tribunal.
Mr. Darling: As I understand it, the inquiry is to deal with the possible wrongful disclosure of information. Would the Prime Minister agree that there is another aspect of this matter which requires investigation, and that is why no action was taken by the Department of Trade and Industry under Section 80 of the Companies Act, 1967, which gives the Department authority to intervene immediately in the affairs of a company where there is a possible risk of the company going bankrupt? Surely we require now an investigation into why action was not taken by the Department when it should have been taken, quite distinctly apart from this question of disclosure. Would the right hon. Gentleman not agree that the best way of conducting that inquiry is by a special Committee of this House?
The Prime Minister: The statement I have just made is a detailed one, and the proposed terms of reference of the tribunal have been drafted closely as well as clearly. If the right hon. Gentleman studies it I think he will find that his point is fully met, because one part of (b) says quite specifically
"whether there was negligence or misconduct by persons in the service of the Crown directly or indirectly responsible for the discharge, in relation to those companies, of functions under the Insurance Companies Acts, 1958 to 1967."
On the question of a Select Committee, if the hon. Gentleman will refer to the Salmon Commission he will see the very strong, in fact overwhelming, argument set out why a Select Committee should not be used.
Several Hon. Members Several Hon. Members rose—
Mr. Speaker: This is a matter which can be debated tomorrow.
Mr. Harold Wilson: Whether this is a point of order or not, I think the right hon. Gentleman at the end of his statement mentioned that this will come up for approval, that an Order will have to be tabled for tomorrow, and, of course, it is then subject to debate. I do not know whether, Mr. Speaker, you regard it as a point of order—
Hon. Members: It is not a point of order.
Mr. Wilson: Hon. Gentlemen, if they will listen, in a moment can form their own view, and so will Mr. Speaker. This point is concerned with helping the progress of business in the House tomorrow. If it is not a point of order—
Hon. Members: It is debate.
Mr. Wilson: If it is not a point of order, may I ask whether the right hon. Gentleman is aware—
An Hon. Member: Get on with it.
Mr. Wilson: I will get on with it—
Mr. Molloy: On a point of order.
Mr. Speaker: Order. I called the right hon. Gentleman the Leader of the Opposition. I ask hon. Members that he may be allowed to put his Question.
Mr. Wilson: Which, Mr. Speaker, is a matter of not being interrupted by a certain number of hon. Members opposite
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or by the St. Trinian's bench below the Gangway.
Is the Prime Minister aware that on past experience in relation to this it is profitable that the House as a whole should leave the job, once the announcement has been made by the Government Front Bench, to the tribunal and that it would be the hope at any rate of this Front Bench, and I am sure of the Government Front Bench, that instead of a debate tomorrow on a matter which has been referred for investigation we should proceed quickly to leave it to the tribunal to decide.
The Prime Minister: That is a point of view which I share and which I hope will be shared by the whole House.
Mr. Carter: On a point of order, Mr. Speaker. I rose immediately the Prime Minister had sat down—
Mr. Speaker: Order. If I may be allowed to get a word in, in view of what has just taken place I propose to allow one or two more supplementary questions.
Mr. Carter: Thank you, Mr. Speaker. I will be very brief. Most of the points I would have raised have already been covered.
I welcome the Prime Minister's statement. How long does he estimate the tribunal will take to reach a conclusion? That is a point which will bear very strongly on people's attitude towards the tribunal. How will the tribunal get on in terms of relationship with the inquiry at present being conducted by the Ombudsman and with the inquiry being conducted into the affairs of V. and G.?
The Prime Minister: It is not possible for me to say how long the tribunal will require to complete its labours. A point which was very strongly emphasised by the Salmon Commission and which was followed by the previous inquiry was that ample time should be allowed by the tribunal for those concerned to prepare the work of the tribunal. I presume that this will again be the case with this tribunal.
I understand that the inquiry by the Parliamentary Commissioner has already reached its preliminary stage. It is a matter for the Parliamentary Commissioner to decide whether he continues with his inquiry in present circumstances

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or whether he uses the power granted to him in legislation either to suspend it or to withdraw it. The inquiry under the Companies Act will proceed.
Mr. J. H. Osborn: As well as the tribunal inquiring into possible misconduct and negligence, will my right hon. Friend ensure that the tribunal reviews the extent to which legislation by Conservative as well as Labour Governments has imposed an impossible task on Government Departments and civil servants, particularly on the question of defining whether a company, be it an insurance company or another company, is viable? This aspect should be considered by the tribunal if consideration of possible negligence and misconduct is within its terms of reference.
The Prime Minister: It is for the tribunal to decide whether it wants to investigate such a matter, but I do not think that it would be excluded under paragraph (b) of the terms of reference which I have read to the House.
Mr. English: The right hon. Gentleman has just said that it is entirely for the Parliamentary Commissioner to decide for himself whether to suspend or to continue his present inquiry. Is it not the case that the Parliamentary Commissioner is ultimately responsible to a Select Committee and that, had he continued with this inquiry and made a special report, it would have come to the House by that means? Do we gather that the Prime Minister has no intention, in the Resolution setting up the tribunal, to give any indication to the Parliamentary Commissioner as to what he should do?
The Prime Minister: The hon. Gentleman is quite correct in his last statement. I was merely stating a matter of fact, namely, that the Act empowers the Commissioner to discontinue his investigation of a complaint undertaken by him.
Mr. Benn: Can the Prime Minister tell the House why the date 4th November appears in his statement? As far as I know, this is the first time that date has appeared. Is there any significance in leak possibilities having been confined to those dates? Would these dates preclude inquiries into what might have happened earlier?
The Prime Minister: The reason for the reference to 4th November is that this is the date on which the document was drawn up, and the 18th was the date of the meeting at which it became known that unauthorised persons had had access to the document. In its general terms I do not believe that it excludes the tribunal from any other investigations that it may wish to make.
Mr. Rost: Might not this be an appropriate time to consider an even wider and more important issue which has been raised by this matter, namely, the function of the Board of Trade as watchdog in company affairs? Is it not time that we asked the Secretary of State for Trade and Industry to look into the role of the Board of Trade and give it some teeth as a protector of the public interest in these matters?
The Prime Minister: Anybody who has been a Minister at the Board of Trade will have knowledge of the difficulties which legislation poses for those who have responsibility there. An inquiry of the kind envisaged by my hon. Friend is much wider and further ranging than this inquiry. A further recommendation of the Salmon Commission was that a tribunal of inquiry should be set up only to look into a specific matter and not into wide-ranging general ones.
Mr. Ashton: Is the Prime Minister aware that outside the dates he mentioned on 26th November the Daily Express published a story to the effect that 25,000 V. and G. shares had been sold in one block? Will the tribunal have powers to ascertain who sold those shares and where he got his information from?
The Prime Minister: The tribunal has very complete powers to make inquiries of all kinds.
Several Hon. Members Several Hon. Members rose—
Mr. Speaker: I think that we must now move on.
Mr. Clinton Davis: On a point of order, Mr. Speaker. Ought not the Prime Minister to have taken this opportunity to have offered the thanks of the country and of the House to my hon. Friend the Member for Birmingham,

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Northfield (Mr. Carter) for his perspicacity—
Mr. Speaker: That is not a point of order.

STEEL INDUSTRY
The Secretary of State for Trade and Industry and President of the Board of Trade (Mr. John Davies): With permission, Mr. Speaker, I will make a statement.
The House will wish to know of the stage reached in my review of the existing and future structure of the British Steel Corporation; this has been carried out in parallel with the review of nationalised industry activities more generally which is still continuing.
After a most careful examination with the Corporation, the private sector of the industry, and other interests, we have decided, in view of the economies of scale of modern integrated steel works, to maintain within the Corporation the present responsibilities for bulk iron and steel making activities.
The question of the future size of the industry is being considered within my current review of the Corporation's financial and development position. We shall continue to explore with the Corporation the scope for further progress towards greater efficiency and competitive discipline. This of course must be subject to the constraints of fair competition with the private sector and the need for a rapid improvement in the Corporation's financial position; it is also subject to the Government's overall policy for the economy.
The nationalisation of the industry created a number of anomalies on the boundary between the Corporation and the private sector and we intend to pursue with the Corporation the extent to which these can be remedied. The Corporation also has interests in a wide range of diversified and ancillary activities. Now that we have taken the main decision on bulk steel making we will have urgent consultations on the future status of these activities, and on the scope for introducing private capital. Furthermore, we would welcome any new private sector steelworks developments and in this connection—
Hon. Members: Oh!
Mr. Davies: Shall I repeat that—we would welcome any new private sector steelworks developments, and in this connection it would not normally be my intention to use my statutory powers of approval in any restrictive way.
The decision I have announced today will help to provide the industry with a greater sense of stability.
Hon. Members: Oh!
Mr. Davies: I shall of course report back to the House when the further consultations I have referred to have been completed.
Mr. Michael Foot: Does the right hon. Gentleman realise that after the ten months of uncertainty in which the steel industry has been plunged by the Government's attitude the equivocal nature of his statement is bound to lead to further uncertainty and difficulty for the steel industry?
Does the Secretary of State recognise that his exclusion from Government action, selling off or hiving off of the bulk iron and steel-making activities is a reprieve for a section of the industry which has never been proposed for selling off or hiving off by anybody except the most neolithic members of his Administration, and does he realise that if he is to remove the uncertainty he should give an undertaking to the House, the country and the steel industry today that he will exclude from the further consultations and proposals for hiving off the four other main divisions of the Corporation, namely, special steels, tubes, constructional engineering and chemicals, which include some of the most profitable parts of the industry? Will he give a clear undertaking that those sections of the industry are to be excluded from any proposal for hiving off?
Further, when he says that he will not treat any proposal for private capital in a restrictive way, will he say, also, that he will remove the restrictions which he is now imposing on the public sector of the industry and the Steel Corporation generally? Will he accept that he has an absolute obligation to the people working in the industry to remove these uncertainties and to enable the Corporation to get on with the job of carrying out its investment programme and

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development programme, upon which the employment of steel workers depends, and will he realise that the best way he could do that would be to say that any further consultations of this character are to be called off altogether?
Mr. Davies: As regards the general tenor of the hon. Gentleman's remarks, I recall that throughout the decade of the 1960s, the whole future of the steel industry was held utterly in suspense by the party opposite. During their period in power, the Labour Government declared their intention to nationalise this industry—that was in November, 1964—and they brought that to fruition nearly three years later, at the end of July 1967. So I do not readily accept any easy charges of delay and dilatoriness.
The hon. Gentleman's reference to the equivocal nature of the decision is equally irrelevant. In fact, this decision covers a very large proportion of the activities of the British Steel Corporation, and to call it equivocal is, to my mind, just incorrect.
The hon. Gentleman asked me to confirm that this major part of the Steel Corporation's activities was never considered for any treatment other than that which my statement now accords to it. The Conservative Party in Government would certainly not have wished to start with a Corporation of the kind which we now have before us. But we have to deal with what we have, and the decision which we have reached has certainly not been reached on the basis of no alternative proposals in contemplation.
Finally, as regards the argument which the hon. Gentleman puts up about my attitude towards the introduction of private steel works as against what he calls my restrictive policy in relation to public capital, I have simply said that I should welcome private proposals coming forward. My attitude to public capital is that, with a steel industry in the condition in which we have it, that is, in deficit and facing serious problems in relation to its investment programme, any reasonable person responsible for the monetary welfare of this great industry and for the public interest would have to look carefully into the future of its finance.
Mr. Foot: Will the right hon. Gentleman now answer the most specific question which I put to him, about the four sections of the steel industry—special steels, tubes, constructional engineering and chemicals? Is he saying that those aspects of the industry are still to be subject to consultation, or is he saying that they are to be removed from the consultation? If he says that they are to be removed from the consultation and that they are to remain part of the Steel Corporation, we should certainly welcome the decision, but does he realise that, if he now says that consultations are to continue about those sections of the industry, he cannot acquit himself of the charge of continuing the uncertainty in the steel industry?
Mr. Davies: I apologise for not replying on that aspect of the matter before. In so far as the four activities to which the hon. Gentleman refers do not fall within the framework of the decision which I have announced, they will still be subject to the consultation which I propose.
Mr. Emery: Does my right hon. Friend realise that his decision, which will bring about greater rationalisation and greater economies of scale, with larger units of production, represents the only way that the steel industry will make the profits which both sides of the House want, but will he tell the House how he envisages that Section 15 of the Iron and Steel Act, 1967—I think it is—will be used and the way in which he will wish to encourage more private capital and more private steel work operations to be introduced?
Mr. Davies: I fully realise the vast importance of scale of plant considerations; obviously, they are paramount in the matter. As regards the latter part of what my hon. Friend asked, I think that my announcement today should serve as sufficient notice, bearing in mind that I would not use these powers in any restrictive way. That in itself would, I hope, constitute an encouragement.
Mr. Eddie Griffiths: Will the right hon. Gentleman explain what he means by bulk steel making? I understand it to mean the production of ordinary grades of steel, including up to the strip mills. Is he saying that the special steels division, the chemicals division, the constructional engineering division, and also plants

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such as Ebbw Vale, which was to be reorganised to produce tin plate and galvanising plate, and plants such as Shotton, which was to specialise in Stelvetite, will be sold off to private buyers? Will the right hon. Gentleman say exactly where he draws the line between ordinary steel work activities and bulk steel making as he defines it?
Mr. Davies: The precise definition would take an exceedingly long statement. [HON. MEMBERS: "Try it."] I do not propose to do other than indicate the broad lines. Activities such as iron making and steel making, primary rolling, strip mills and like processes will fall within the definition of what I have said. But it would be dangerous, I think, to restrict it to that. Individual plants which, obviously, may comprise other parts of the industry may well fall within this definition; this is a matter which needs precise statement plant by plant, which is now being undertaken within my Department and will be discussed with the Corporation. As regards the two specific plants which the hon. Gentleman mentioned, Ebbw Vale and Shotton, both these would be regarded as falling within the framework of the bulk activity to which I have referred.
Mr. Lawson: Does not the right hon. Gentleman realise that one of the vital questions concerning us is the size which the Government have in mind for the steel industry? He has given no indication of that. Can the right hon. Gentleman tell us, for example, whether the Secretary of State for Scotland has been pressing upon him the vital importance of a much larger steel making and iron making industry than at present if the interests of Scotland are to be protected at all?
Mr. Davies: The hon. Gentleman can be very sure that the Secretary of State for Scotland presses these views strongly upon me. As regards the size of the steel industry, as has been said in the House on previous occasions, this is a subject of the deep review which is taking place into the whole development programme of the industry. The hon. Gentleman may well recall that I cited a figure for this development of about £4,000 million as being the kind of extent which we are discussing. It will be fully realised that a profound review will have to be under-
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taken before a development programme of that size can be agreed.
Several Hon. Members Several Hon. Members rose—
Mr. Speaker: Order. I hope the House will realise the difficulty I am in. In accordance with the wish of the House, I allowed questions on the last statement to go rather longer than usual. We have very important business ahead of us in which many hon. Members are concerned. Therefore, I can allow only a few more supplementary questions.
Mr. Lane: Is my right hon. Friend aware that there will be wide welcome for his statement today? Will he confirm that the rest of his review will be pursued with the utmost urgency, so that as soon as possible the steel industry will have a secure financial and organisational basis for its future progress and prosperity?
Mr. Davies: Yes, I absolutely take that point and will expect to see the review carried out with the utmost urgency. As my hon. Friend knows. I hope to have reports very soon on the first section of the review. The more widespread section of the review will take some additional time, and I do not expect to have the report of the review body on the major development programme covering many years until much later in the year.
Mr. Palmer: Will the right hon. Gentleman say whether the principles of this alarming statement are to be taken as a precedent for other nationalised industries, including electricity supply?
Mr. Davies: I find it difficult to reply to that question, because the statement seems to me to be not at all alarming.
Sir G. de Freitas: Will the Minister assure my constituents that no part of the steel industry in Corby will be hived off or handed over to private speculators?
Mr. Davies: This will, I think, in all reason fall within the bulk category to which I have referred, but this is a matter for further discussion with the Corporation.
Mr. O'Malley: Is the Minister aware that if this is the best he can do after ten months in office it is just another acknowledgement of his complete inadequacy? The first part of his statement amounts to an open acknowledgement of

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the justification for the nationalisation of the steel industry. Since there is need for tidying up the ragged edges in the private sector in Sheffield, now that the Industrial Reorganisation Corporation has been removed, would it not be sensible for the assets of Brown Bayley to be transferred to the British Steel Corporation? On the question of new steel works, will the right hon. Gentleman say, in view of the Press speculation and leaks, just what inquiries have been received by his Department for the takeover of British Steel Corporation assets that are to be closed immediately or in the future?
Mr. Davies: On the last point, proposals for taking over any assets of the Corporation are matters for the Corporation and not for the Department, and I am sure the hon. Gentleman realises that. He referred to the ragged edges of the industry, and the survey which we are undertaking with the British Steel Corporation looks naturally at both public and private sectors. I am surprised to hear him continue to emphasise the delay factor in view of what I have said. The penalties of delay which the industry has suffered are very much more the product of the Labour Party than of the Conservative Party.
Mr. Finsberg: My right hon. Friend spoke of Section 15 of the 1967 Act and said that he would not use his powers restrictively. Will he go slightly further and say whether he would encourage the injection of private enterprise in steel?
Mr. Davies: I have said that I would welcome proposals of this kind. The powers in question might be used restrictively, and I wish to indicate that I would not so use them.
Mr. Frederick Lee: Are we not now in the absurd position that, whilst the Government's deep-seated inquiry, as they call it, into the Corporation's finances and development policy is holding up development in the nationalised sector and bringing about the closure of steel firms such as Irlam, the right hon. Gentleman is now giving an invitation to private people who wish to invest in steel to do so? How under those conditions, can he possibly know what kind of steel industry we shall have in the future?
Mr. Davies: I refute absolutely the right hon. Gentleman's remarks on the subject of Irlam. The Chairman of the Corporation has made it abundantly clear that it has nothing whatever to do with the current review presently being undertaken.
Mr. J. H. Osborn: Is my right hon. Friend aware that his statement will be welcomed as a milestone in establishing a healthy steel industry, both public and private? When will he be in a position to publish an agreed plan—[Interruption]—I have a private interest in the private sector and I have also been associated with the steel industry, as I think the House is well aware. Will my right hon. Friend say when he hopes to publish an agreed plan outlining the scale of investment we can visualise towards meeting the £4,000 million programme to which he has referred? How much will be provided from Government sources and how much does he visalise will have to be found from rationalisation, hiving-off and other sources of finance? The European steel industry has the advantage of large-scale finance from sources outside Europe. Is there a chance of the British steel industry being financed from resources outside this country and the Treasury?
Mr. Davies: It is refreshing to hear someone who knows the industry and realises the significance of the statement I have made. As regards sources of finance—
Mr. Eddie Griffiths: On a point of order. It is invidious for the right hon. Gentleman to make such a statement before he has had an opportunity of knowing the background of hon. Members within the Chamber. I have spent 17 years on the shop floor.
Mr. Speaker: It is not a point of order for the Chair. I am not responsible for what the Minister says.
Mr. Davies: As regards the sources of finance, of course it will be—[HoN. MEMBERS: "Withdraw."]—Replying to the question—[HON. MEMBERS: "Withdraw."]—I am replying to the question on finance—[HON. MEMBERS: "Withdraw."]
Mr. Speaker: Order. I think some hon. Members on the Opposition side are under the impression that the right hon.

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Gentleman made a personal allegation against some of them. Is that the case?
Mr. Eddie Griffiths: On a point of order—
Mr. Speaker: I call the right hon. Gentleman first.
Mr. Davies: I did in fact just say a word of commendation about my hon. Friend. I made no observation whatever about any hon. Member opposite.
Mr. Eddie Griffiths: On a point of order—
Mr. Speaker: The right hon. Gentleman has made it quite clear that he made no reflection on any hon. Member.
Mr. Michael Foot: On a point of order. It is quite clearly in the recollection of every hon. Member on this side of the House that the right hon. Gentleman referred in the most derogatory and scandalous manner to all my hon. Friends who come from steel constituencies and all my hon. Friends who have worked in the steel industry, some for many years. The right hon. Gentleman is in no position to insult hon. Members as he has done. I therefore submit to you as a point of order, Mr. Speaker, that the comment of the right hon. Gentleman was not a proper withdrawal of his remarks, and that you should call upon him to withdraw them.
Mr. Speaker: Order. The House must remain calm about this matter. The right hon. Gentleman made a remark which was taken as a personal reference. I do not think it would have been out of order even if it had been a personal reference. I gave the right hon. Gentleman a chance to say that he did not mean what he said as a personal reflection against any right hon. or hon. Member, and I think it would be wise to leave the matter there.
Mr. Tinn: What the right hon. Gentleman said might well be taken as a reflection not only on this side of the House but upon the Chair. If some of us who have had direct practical experience of the steel industry have not been able to put a question, the responsibility is not ours but lies with the Chair.
Mr. Michael Foot: May I ask the right hon. Gentleman first to note that
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one of the difficulties in these question and answer sessions on steel matters is that practically all the representatives from steel constituencies come from this side of the House, and it is very difficult for all of them to have the opportunity in the time available to put their case. In view of the grave nature of the right hon. Gentleman's statement and what we consider to be grave uncertainties in the steel industry—uncertaintities which are bound to be intensified by his statement—will he arrange for the earliest possible debate in this House so that we may have a full discussion of the steel industry to try to repair the damage which the right hon. Gentleman has done to the industry today?
Mr. Davies: Any question of a debate is not a matter for me but for my right hon. Friend the Leader of the House. If I may reply to the question put by my hon. Friend the Member for Sheffield, Hallam (Mr. J. H. Osborn) on the subject of finance, the sources of finance are self-generating and those and other sources will come into consideration in the review which I am undertaking.
Mr. Speaker: If I may deal with this matter now, I am sure that the right hon. Gentleman did not intend any personal reflection. In fact according to my recollection it could only be suggested that the right hon. Gentleman was inferring that some hon. Members did not know what they were talking about. Many people have said such a thing on many occasions in this House and I do not think hon. Members should be too sensitive. The matter to which the hon. Member for Ebbw Vale (Mr. Michael Foot) has just referred is not a matter for the Chair. I have no doubt that it will be taken into consideration. I cannot allow the matter to be further debated now.
Mr. Eddie Griffiths: On a point of order, Mr. Speaker. I believe that the right hon. Gentleman's words, referring to his hon. Friend the Member for Sheffield, Hallam (Mr. J. H. Osborn), were that it was refreshing to have somebody with a knowledge of the industry. This can only be interpreted as casting a reflection on those hon. Members with experience of the steel industry who spoke before the hon. Gentleman. I ask the right hon. Gentleman to withdraw that remark.
Mr. Speaker: Order. I will now rule on this matter. I did give the right hon. Gentleman an opportunity of saying—
Mr. Faulds: Lame duck. Have the guts to get up and apologise.
Mr. Speaker: The right hon. Gentleman said, and I heard him say it, that he meant no personal reference to any hon. Member on the Opposition benches. In any case, I would not have ruled what he said as unparliamentary. I have heard much worse things from other right hon. and hon. Members.
Mr. John Mendelson: On a point of order, Mr. Speaker. The other day when one of my hon. Friends tried to move the Adjournment of the House under Standing Order No. 9 you referred in your Ruling to the fact that there could not be an immediate debate on the Government's policy on the steel industry, as announced in three different statements, because there were other opportunities for debate. You will recall that arising out of your reply it was then suggested by the right hon. Gentleman the Leader of the House that there would be a debate which he would announce the next day and which would satisfy that particular demand.
You are involved, Mr. Speaker—which is why I am putting this matter to you—because as a result of your reply the further steps which I and other hon. Members might have taken to move the Adjournment of the House were not taken. We now find that in the general debate on Thursday that particular pledge by the right hon. Gentleman is not being fulfilled. The right hon. Gentleman, who today has made another serious statement, refuses to give an undertaking on behalf of the Government that there will be an immediate debate. I put it to you, Mr. Speaker, that those of us who represent many people who earn their livelihood in the steel industry at various levels are now entitled to press for an
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assurance that there will be an immediate debate on the steel industry within the next three days.
Mr. Speaker: That is not a matter for me. I may have some sympathy with the idea that a debate on the steel industry should be arranged, but I am not quite clear about the extent of the debate on Thursday. The point is that the Chair does not arrange the agenda of the House. If the Standing Orders were to be altered so that it was the responsibility of the Chair to choose the subjects for debate, the Chair would do its best. However, it is a matter for the Leader of the House, and, since the usual channels are represented at present in the Chamber, no doubt the matter can be discussed.
Mr. Mendelson: On a point of order, Mr. Speaker. Since the Leader of the House is here, will he not now give an assurance in the light of the statement which we have heard today?
Mr. Speaker: As I have said, this is not a point of order.
Mr. O'Malley: Further to that point of order, Mr. Speaker.
Mr. Speaker: It is not a point of order. I must protect the business of the House. We must move on to the Motion in the name of the Prime Minister.

BUSINESS OF THE HOUSE
Ordered,
That this day the proceedings on the Motion relating to Mersey Docks and Harbour [Money] may be proceeded with at any hour, though opposed, and shall not be interrupted at Ten o'clock: Provided that any questions necessary to dispose of the proceedings on that Motion shall be put at a quarter to eleven o'clock or three quarters of an hour after the commencement of those proceedings, whichever is the later.—[Mr. Clegg.]

HOUSE OF LORDS REFORM
4.27 p.m.
Sir Brandon Rhys Williams: I beg to move,
That leave be given to bring in a Bill to make provision in regard to the voting rights in the House of Lords of heriditary peers by succession; and for related purposes.
I recognise that the House is anxious to proceed with its business, but I feel that it is not inappropriate after 10 months of this Parliament, for a back bencher to seek to take up 10 minutes of parliamentary time to discuss this important subject.
May I say at the outset that I am not seeking to initiate a campaign. Although the Bill I would like to introduce has been drawn up with the benefit of expert advice, I should point out that I am sponsoring it only myself.
The Bill contains, in effect, only one specific recommendation. I am not trying to attack the hereditary principle. It would be futile and unconvincing to try to maintain that the hereditary principle no longer plays a major part in national life and I consider that the hereditary principle should continue to be given due acknowledgement in our constitution.
If we study the present composition of the House of Lords, we find from the current Vacher that there are four peers of the blood royal, two archbishops, 25 dukes, 30 marquesses, 162 earls and countesses, 109 viscounts, 24 bishops, and 721 barons and baronesses including the law lords and also including the 184 life peers.
Many might not regard this as necessarily the ideal composition for the Upper House. Others might ask, "Why make a change if there is no urgent need? Why make the best the enemy of the good?" I recollect that that condition of liberty is eternal vigilance. It is not desirable that our constitution should contain a flaw. And the worst time to change our constitution would be a time of constitutional crisis.
The object of my Bill is to strengthen our two-chamber system and not to weaken it. I consider that the Second Chamber should be an organ for the clear expression of informed and responsible public opinion. In mediæval times no doubt the ownership of land on a
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large scale was a suitable, and in many cases almost the only, qualification for a man who wished to play an active part in public life. But now the nature of national life has changed. It is far wider and more varied than in mediæval times; and the composition of the Upper House should take account of that fact. In practice, the composition of the Upper House does indeed respect the change which has taken place since mediæval times. In 1968, when the White Paper assessed the position, out of 736 hereditary peers by succession only about 400 attended at all and only about 250 played any significant part in the proceedings in the Upper House.
The time has come to give statutory effect to this reasonable convention—namely, that only about one in three of the hereditary peers by succession take an active part—a convention, however, which has no legal force and might still be broken at a time of political or constitutional crisis.
In 1958, the Life Peerages Act, which was a one-Clause Bill, was opposed by hon. Members opposite. But in retrospect I believe that few would feel that it has worked out undesirably. Many hon. and right hon. Members who voted against it have subsequently found their way into the other place by virtue of its provisions.
If, however, one is to seek to give statutory effect to some method of restricting those hereditary peers by succession who are entitled to exercise voting powers in the House of Lords, how should the selection be made? The theory that hereditary peers might themselves decide, by some process of selection or election, those whom they wish to remain Lords of Parliament has been advanced by a number of students of the subject; but we have to reflect that, where Irish and Scottish peers were concerned, this practice has been abandoned—I believe with good reason. In my Bill, therefore, I intend to recommend that the choice of hereditary peers by succession who may continue to exercise voting rights in the other place should be made by nomination. I realise that this may be thought by some hon. and right hon. Members to be a controversial recommendation, although it is certainly not a

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new one and it is widely supported by highly competent authorities.
It is the strength of our unwritten constitution that it permits changes to be made when they are necessary and at the same time places emphasis on continuity and the observance of convention. We might liken our two-Chamber constitution to a bicycle, a bicycle of which at present one of the wheels has a flat tyre. If we may take the rider of this vehicle to be the Prime Minister we can say that he must not incline to extremes or the machine will throw him off. I trust the maturity and political wisdom of the British electorate and of British statesmen and politicians to insist upon due respect for the conventions. I believe that on reflection my Bill will be seen to be not as controversial as it may seem at first.
If the Bill came into effect, I would hope that in the first instance the nominations of hereditary peers by succession as life peers with full voting rights would include all the 250 or so hereditary peers by succession who now take an active part in the other place. In introducing the Bill, I am not seeking to promote divisions or to introduce any sudden change: the Bill is devised merely as a talking point. I hope therefore that I may have the leave of the House to lay it on the Table.
Question put and agreed to.
Bill ordered to be brought in by Sir Brandon Rhys Williams.

HOUSE OF LORDS REFORM
Bill to make provision in regard to the voting rights in the House of Lords of hereditary peers by succession; and for related purposes, presented accordingly and read the First time; to be read a Second time on Friday, 30th April, 1971, and to be printed. [Bill 159.]

FAMILY INCOME SUPPLEMENTS REGULATIONS
Resolved,
That the Family Income Supplements (Computation) Regulations 1971, a draft of which was laid before this House on 25th March, be approved.—[Sir K. Joseph.]

NATIONAL HEALTH SERVICE (CHARGES)
4.35 p.m.
Mrs. Shirley Williams: I beg to move,
That an humble Address be presented to Her Majesty, praying that the National Health Service (Charges) Regulations 1971 (S.I., 1971, No. 340), dated 3rd March, 1971, a copy of which was laid before this House on 10th March, be annulled.
In moving this Prayer against the Regulations which introduce increased charges for the National Health Service, I begin by saying that it has long been the view of the Labour Party, as the then Minister of Health, Mr. Kenneth Robinson, put it in the debate on the reintroduction of prescription charges on 30th May, 1968, that
"…ideally the National Health Service should be free to everyone at the time of need."
As we know, there are only three years in which that was the case, from 1948 to 1951, though between 1965 and 1968 prescription charges were abolished. In 1968 they were reintroduced at the rate of 2s. 6d. per item, in a situation in which broad cuts were being made in all fields of Government expenditure, and in which taxation was increased.
Mr. Speaker: Order. May I interrupt the hon. Lady. Is it convenient that this Prayer and the one dealing with the National Health Service (Scotland) should be taken together?
Mrs. Williams: Yes.
The Secretary of State for Social Services (Sir Keith Joseph)indicated assent.
Mrs. Williams: We on this side of the House must ask ourselves the question why we are praying against these Regulations. The first reason and the strongest reason is because we are extremely suspicious of the Government's intentions towards the National Health Service. The National Health Service is the outstanding social service that this country has yet created. We fear that it may suffer at the hands of the Government what one might call the death of a thousand cuts. Therefore, we wish with all our strength to resist this first round of cuts.

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The second reason why we resist these Regulations is that the Government have clearly an order of priorities in which charges on the social services are being made for their own sake. The Secretary of State recently sent a letter to the Secretary of the Association of Optical Practitioners in which he said:
"We feel that where the user can afford it he should bear more of the cost of social services and the taxpayer less."
The right hon. Gentleman will know that this is in direct contradiction to our view of the situation. We also feel that the Government are using the money raised from these charges primarily to relieve standard rate taxpayers and, even more markedly, those who are better of. If I may reverse one of the Government's slogans, there are times when it appears that the Government have given up dealing with prices at a stroke in the interests of dealing with strokes at a price.
Thirdly, in trying to justify these social charges, and the very great extension and increase in them, the Government are arguing that extending the system of means testing will avoid these charges falling upon those who are unable to pay. On this third ground, I must put before the Government the paradox which faces them. Either the means testing fails—and there is a great deal of reason to believe that many low income earners, whom I shall refer to shortly, many chronically sick, and many entitled to the season ticket, do not have the advantages of the exemptions, as hon. and right hon. Gentlemen know, or, alternatively, on the other horn of dilemma, that if people take advantage of these exemptions and the great extension of them through family income supplement, attendance allowances, school meals, welfare milk and so on, the net effect of this will be a rate of taxation amounting to more than 100 per cent. on increases in earnings over a very considerable band. The Government have not so far found any way out of the dilemma. It is a dilemma which is inescapable.
Fourthly, the Government have introduced a new and excessively dangerous principle. This is the principle of proportional charging. It is already applying to dental treatment and spectacles, and the Government intend, at present at least, to extend it to prescriptions as well,
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which is a direct obverse of the central ideal of the National Health Service, which is that the Service shall be free at time of need. The proportional charges mean quite directly that the greater one's need the more that one has to pay, and it interferes directly, too, with the freedom of the dentist, doctor or optician to treat his patient as he thinks best. As one senior member of the British Medical Association put it to me the other day, the doctor will now have to think not only of the patient's condition, but of his pocket book.
The basic charge on prescriptions is to increase from 12½p per item to 20p. No doubt the right hon. Gentleman will point out that 40 per cent. or more of the population are exempt if they claim exemption from the charges. I want briefly to deal with the grounds for exemption. The first is exemption on the ground of age. This works reasonably well, because it has no implication of means-testing and poverty about it. However, I want to ask the right hon. Gentleman whether, in the light of the increases that he is making he will not reconsider the limit on children which comes into effect at the age of 15, and not now extend it to all boys and girls in full-time education below the age of 18. We believe that those who are not earning should not be charged. Secondly, on the ground of exemption for age, I ask him to look again at the position of women between the ages of 60 and 65 who, on the National Insurance legislation, are entitled to retire on full pension at 60 but who do not get the benefit of exemption from prescription and other charges at present.
Next, there is exemption on income grounds. I understand that the Government intend to exempt those drawing family income supplement as well as those drawing supplementary benefit. Again there is a serious weakness, and it lies in the band of those at or those just above the supplementary benefit level. Those in this band are entitled, on the Government's Regulations, to exemption, but the most recent figures show that in 1970 only 1·7 per cent. of prescription charges were refunded to this income group, whereas 8 per cent. of the population were entitled to refunds. Therefore, not one in four people in this band get the entitlement which they

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should get at present. It is hardly surprising that four-fifths fail to get these refunds because, as a recent study by the Bristol branch of the Child Poverty Action Group showed, nearly two-thirds of dentists' receptionists did not know that people could get exemption if they were on low incomes. If dentists' receptionists do not know it, I wonder how many of the general public do not.
How sincere are the Government's proposals in raising the income limits? I am not sure whether my right hon. and hon. Friends realise it, but the increase in income limits for prescription charges is precisely 2½p, and that increase comes into effect this month.
Then there is exemption on the ground of chronic sickness. The right hon. Gentleman will know that we feel strongly that the definitions are very much too narrow. They exclude chronic bronchitis, asthma, heart disease, including those who have had artificial valves fitted and who need constant treatment. They exclude schizophrenia and almost all other psychiatric conditions. It is not surprising that the Psychiatric Rehabilitation Association has said:
"…chronic schizophrenia is one of the most difficult illnesses to manage and patients can, through patient medical and community care, be helped back to employment, but usually to low paid employment. Their reluctance to take medication is a known feature of their illness so that a lowering of the value of their small income will emphasise this effect with disastrous results."
Another letter from the Schizophrenia Association of Great Britain says that people
"…who have had severe breakdowns will require medication for the rest of their lives in our present state of knowledge. We believe that schizophrenia is every bit as chronic a disease as epilepsy, sufferers from which are exempt from paying for prescriptions."
Many people require expensive and semi-permanent drug therapy. I should like the Government to explore the possibility of having constant drug therapy, a medical term understood by doctors, as a basis for exemption. At present, the division between chronic sickness which is exempt and that which is not is indefensible. The right hon. Gentleman will say that we have the season ticket. But he knows that, in the half year to the end of 1970, only 59,000 people took out the so-called season ticket, whereas it is estimated that there are at least a million
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people on constant drug therapy suffering from psychiatric illness alone.
These higher charges will hit the many lowly paid people who are just above the exemption line, and many who do not know how to claim exemption. They may lead to delays in getting prescriptions, and many people will get only one or at the most two items on the prescription list. They may lead to reliance on multi-purpose drugs, the so-called blunderbuss treatments, by which I mean the drug which tries to involve two or three treatments in one and which doctors say is medically unsatisfactory. It leaves the doctor with less room to adapt his therapy to the patient.
All these arguments are infinitely strengthened if the Government are foolish enough to press ahead with their proportional charges idea for prescriptions. I suspect that the idea was fathered in the Treasury, and was left as an undesirable foundling on the doorstep of the Department of Health and Social Security. I hope that the outspoken opposition of the British Medical Association and its General Medical Services Council and of the Pharmaceutical Society will persuade the Government to withdraw what can only be described as a mad and bizarre scheme. It will lead to very much higher administrative costs, massive extra work for pharmacists and dispensing doctors and temptations to evasion. In addition, the professional view is that it will be medically disastrous.
I want to express one word of sympathy for anyone who is at any time Secretary of State for Health. We are all aware of the escalation in drug prices, an escalation which follows in part from the sophistication factor as more and better drugs are developed, especially drugs like L-dopa for Parkinson's Disease, which are extremely expensive. The time cannot be long before a discussion is held between the Government and the medical profession about prescribing practices, which seems a very much better alternative than the imposition of higher charges.
I want to say a word about dental charges, where proportional charging bites already. I will not repeat many of the arguments which have been advanced so powerfully by my hon. Friend the Member for Wolverhampton, North-East (Mrs. Renée Short). The

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present position is that the dental service has greatly increased its productivity, mainly by encouraging more people to accept treatment. A course of treatment in the dental service in 1949 cost an average of £6 and now costs £4. One of the reasons for this remarkable reversal of the normal course of pricing is that there has been a remarkable increase in the scale of treatment. However, I am afraid that it will not do for the right hon. Gentleman to argue that, by increasing charges, he is in effect encouraging regular treatment the most recent survey of adult dental health showed in 1970 that 64 per cent. of regular attenders need some kind of treatment, and the right hon. Gentleman knows that his scheme makes it very much cheaper to pull out teeth than to save them. I have a letter from a doctor in Liverpool, who says:
"Worst of all, an alarming number of occasional patients have said quite firmly that, despite previous conservation of their own teeth, after April or whenever it is to be, they will only come to the dentist when forced by pain to have a tooth extracted."
From another part of the country, Surrey, a dentist writes:
"In my practice (a high income area) I expect to lose 25 to 50 per cent. of my patients in the first year."
There are many other letters which I could read. It is evident that the right hon. Gentleman has not persuaded the dentists that his new proposals will not have an effect on the scale of treatment.
There is one serious point which has not been brought up. It is that, if the number of treatments declines, as we believe that it is bound to do, dentists will go to the Dental Estimates Board, in order to protect their incomes, asking for higher rates, which will eat into the savings that the Government propose to make.
I hope, too, that the Government will look closely at the proposal to lower the age of exemption from 21 to 18. The Government know that these are the years when patterns of regular attendance are built up or broken; they are years when teeth are vulnerable. It is not surprising that in New Zealand and Sweden, two countries with extensive health services, consideration is being given to raising the age of exemption and not, as alas we are doing here, to lowering it from 21 to 18.
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The proportional charges the Government are introducing for spectacles are established in such a way that we fear that the 40 per cent. of optical practice which at present takes place in the hybrid area—that is, which combines National Health Service lens with private frames—may well be driven out of the Health Service altogether. Is this what the right hon. Gentleman intends to do? We on this side fear that this is exactly what he intends. At present, the full cost of dispensing which is met by the patient means that for a very considerable range of lenses it will be cheaper for the optician and the patient to reach a deal outside the Health Service than to go through it. This could well mean the large-scale destruction of this service as a part of the National Health Service. If the right hon. Gentleman intends to save it, one thing that he can do immediately is to make lenses exempt for children who wish to have private frames.
We on this side believe that these Regulations demonstrate once again the most obvious hallmark of the Government—their belief in inequality modified only by a system of means-tested benefits. We believe that a grave responsibility will rest upon the Government if they destroy the most impressive social advance made in this or any other country since the war, namely, the National Health Service. The great poet John Milton said—
"Let not England forget her precedence of teaching nations how to live."
There are few examples better in that respect in the last 20 years than the National Health Service, which we on this side intend to do all that we can to protect.
4.52 p.m.
The Secretary of State for Social Services (Sir Keith Joseph): It is a pleasure to debate with the hon. Lady the Member for Hitchin (Mrs. Shirley Williams) because, however selective she is in her choice of arguments, she always manages to slip at least one sentence in which shows that she recognises the problems that Governments of any sort face.
I want to explain the set of problems, going far outside the Health Service, though I shall not take more than a moment to refer to them, that we found on returning to office. We found, as we

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realised before the Election that we would find, an excessive marginal rate of taxation afflicting the people. We found a hideous number of gaps in social provisions, all of which stretched back through previous Governments of both parties but which had remained hideous gaps during the previous six years of Labour Government. I refer to such gaps as the lack of any proper treatment for the chronic sick and the lack of any proper consideration in services for the disabled. We found family poverty. We found very badly neglected sectors in the National Health Service.
Faced with this series of needs, we deliberately set about fashioning a new system of priorities. We knew what we would find. We told the country that we identified these and other defects which we would try to cure, above all by a better series of priorities.
In the first speech that I made from this Box in the office I hold, I told the House that the Government, as I believe any Government, including the last Government, would be looking at the scope for raising charges where they would not hurt the citizen, so as to contribute towards putting right some of these defects.
At that time I spelled out the clear principle that in seeking scope for increased charges we should be guided above all by one overriding rule—that we should design no charge that would deter the patient from necessary treatment. I have added since that if the records show—time will need to be given before we can fairly judge—that any charge we apply has a deterrent effect on patients, we will look again at the charge.
Mr. Alec Jones: It will be too late then.
Mr. John Mendelson: They will be dead then.
Sir K. Joseph: We cannot guarantee that the charge of, in this case, 20p for a prescription, for instance, will not deter the occasional improvident householder any more than right hon. and hon. Members opposite could guarantee that their prescription charge of 12½p would not deter the occasional improvident householder. We are determined to ensure that the charges do not deter large numbers of people from necessary treatment.
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The search for scope for raising charges without deterrence meant that we had to look also at the system of exemptions that we found when we came to office. I shall come to this aspect.
I must tell the House, as the hon. Lady reminded us, that the process of looking at charges is not yet over. We have already announced that we intend to put before the House proposals to lower the exemption limit for dental treatment from 21 to 18. There will need to be legislation. The House knows, because my right hon. Friend the Chancellor of the Exchequer announced it last October, that we were to bring forward proposals to discuss with the professions for relating prescriptions to cost. Such proposals have been put to the professions and I am studying the comments of the doctors and the chemists.
I repeat the assurance that in looking at charges the determination to avoid deterrence of the patient remains the rule in the forefront of my mind.
Mrs. Shirley Williams: If it is the view of the professions, as it certainly is about proportional prescription charges, that there will be an effect on patients, on what will the Secretary of State base his judgment that there will be no effect on patients as regards putting them off treatment?
Sir K. Joseph: I shall obviously want to study the comments of the professions very carefully. There will then need to be a dialogue in which each side examines the other's point of view. In other words, my answer to the hon. Lady is that there will be a rational consideration of what is said, just as I hope that there will be a rational consideration by the professions of what I say.
I must take issue with the hon. Lady when she was so severe about the concept of a proportionate charge. She spoke in comprehensive terms of her dislike of such a formula. I remind the House that we have had a proportionate charge for some time in a part of the National Health Service that is not totally trivial. After all, the Labour Government themselves applied what was virtually a 50 per cent. rule to the cost of dentures. As far as I know, there has been no withdrawal by the present Opposition from the approximately 50 per cent. cost of dentures which was applied by the last

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Government. The charge for full dentures in 1968 was £5. In 1969 it was increased to £6 5s.—a 25 per cent. increase. What we are proposing will mean a cost of £7, which will be an increase not of 25 per cent. but 12½ per cent. I ask the hon. Lady to bear in mind the proportionate charge for dentures when she next speaks about the proportionate formula.
The hon. Lady spoke as though in bringing forward these Regulations the Government were motivated by only one thing, to do damage. But she knows that no Government would lightly bring forward increases without a carefully thought out and deliberately constructive purpose. We are seeking intensively for more resources for the National Health Service. We are seeking intensively for methods of reducing the marginal rate of taxation. We are seeking intensively for ways to reduce family poverty. We are seeking intensively for ways to fill the whole spectrum of gaps that we found in social provision.
These increased charges play their part in making it possible to increase hospital and local authority services in real terms by more than they have been increased for several years. They are part of the total plan which makes it possible for the House to have approved the Family Income Supplements (Computation) Regulations, which will make a substantial attack on family poverty at its worst. They play their part in making it possible for us to have proposed to the House in the Budget to offer the country comprehensive tax cuts.
Mr. John Mendelson: These charges have nothing to do with taxation.
Sir K. Joseph: I have carefully refrained from praying in aid the large package of benefits for the chronic sick which come not from taxation but from the National Insurance Fund, and I am grateful to the hon. Member for Penistone (Mr. John Mendelson) for giving me the chance to refer to that.
Without some freedom to move on charges, the Labour Party condemned itself more than it need have done to a straitjacket from the point of view of the National Health Service. Hon. Gentlemen opposite increased charges, and they
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reinstated charges after withdrawing them. I shall give the House an example of what their dogmatic refusal to look at reality meant for some of the people suffering worst from the shortages. My predecessor sincerely wanted to do something for the mentally handicapped. After the revelation of the conditions in one hospital he wanted, above all, to find more resources for this neglected group. Nobody could impugn the right hon. Gentleman's sincerity, but what did he find? He found an extra £1½ million, but he could not tell the House for how many years that would continue.
As a result of the total changes that we have brought about, my right hon. Friend the Chancellor of the Exchequer was able to announce last October an extra £110 million for England, Scotland and Wales for the National Health Service over the next four years specifically for the three most neglected cinderella sectors of the service, the elderly, the mentally ill and the physically and mentally handicapped, in hospital and in the community.
We know that that is not enough, but it is many times more than the previous Government were able to add, and that figure comes on top of the fairly regular annual increase, in real terms, for the resources of the National Health Service. The result is that for this year, 1971–72, there will be an increase in real terms for hospital and local authority services of 6·1 per cent., compared with 3·8 per cent. last year, and 4·3 per cent. for 1968–69, a fairly typical Labour year.
The National Health Service is getting—I hesitate to use the word when we know that the need is so much greater, but it is true—a record increase of resources in real terms this year and next year because, among other things, of the increased charges which form the basis of the proposal before the House this afternoon.
Mr. Will Griffiths: The right hon. Gentleman has been using statistics of expenditure in real terms. Will he say something about the history of expenditure on the National Health Service expressed as a percentage of the G.N.P.? Let us look at the record there.
Sir K. Joseph: The hon. Gentleman does not have—
Mr. Will Griffiths: Answer the question.
Sir K. Joseph: I shall answer it. The hon. Gentleman does not have to behave as though I am saying that the National Health Service has enough resources. I am not for a moment saying that. In terms of G.N.P., our figure is lower than that of many similar countries. I am not sure that proportions of G.N.P. are an objectively reliable method of measuring the delivery of health care, but that is another matter. I ask hon. Gentlemen opposite to bear in mind that we are trying to operate a new system of priorities to help the wealth creators, the leaders of industry, managers of industry, families at all levels of income, those suffering from family poverty—which we are doing by means of the family income supplement—the mentally handicapped, the elderly, the mentally ill and the chronic sick. We have given evidence that we are making a start on these objectives.
As the hon. Lady fairly said, the strategy on which we are embarked depends crucially upon effective exemptions, and I hope that even hon. Gentlemen, opposite will give us the credit for trying to increase the take-up of the exemptions available against National Health Service charges. We have embarked on a campaign which, I believe, is the largest ever in money terms and certainly is in effort, to bring to the notice of the men and women concerned their rights for exemption.
I ask the House to note the campaign, which is about to get into full stream, based upon the booklet "Family Benefits, your right to claim them". In addition 30 million copies of a simple explanatory leaflet have also been published. We have advertisements in the Press. We have 140 television showings of a 30-second film. We have an operation going on in all the social security regions of the country, by which people from my Department's social security offices are explaining to social workers, to voluntary workers, and to statutory workers all the facts which they need to help them guide the citizen. I have sent letters to 200,000 people in local authority and social services, in church voluntary bodies, and in many other groups, asking them to help identify and guide the exemption claims of the public.
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I know the House will be glad to hear that the results obtained during the first week before the campaign had got fully under way indicate that, partly by a combination of public awareness of the increased charges, and partly by way of the campaign, applications for free welfare food, free milk, exemptions from prescription, dental and optical charges, and school meals, are multiplying many-fold.
Mr. Christopher Mayhew: The right hon. Gentleman did not say that there had been an increase in the category to which my hon. Friend referred, that is to say, the psychiatrically ill, who rely on drugs. Has he any evidence that the applications from that category are improving?
Sir K. Joseph: I am coming now, systematically, to the various groups in which charges are going up, and I will deal with that matter in its proper place.
I would like to turn now to the three main groups of charges covered in these regulations. First, the prescriptions. The I House may know that about 23 million people are exempt or have the right to exemption—that is 42 per cent. of the people in Great Britain. Because they cover a large number of people with more than average needs for medicine, no less than 50 per cent. of prescriptions are free of charge.
But the House may not be aware what the non-exempt individuals have on average—I am departing from the average in a moment—to face. A person who is not exempt—and that excludes all children, all people over 65, all people in certain chronic sick groups, all nursing and expectant mothers, all war disabled for their war disability are exempt, as are the supplementary benefit households and the family income supplement households and the needy—faces on average five prescribed items a year, perhaps in five prescriptions, perhaps in fewer.
For the average person, five items at the extra cost imposed by these regulations of 7½p, adds up to just under 40p a year. For the average person, there is no need to worry; the worry is for the people who are not average.
Mr. John Mendelson: I know that the right hon. Gentleman likes to have information, and he is asking for it. I have

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an example of people who do not conform to that meaningless average. A miner's wife told me that her husband regularly needed two prescriptions every 10 days. He is not of retiring age, but he has not been able to work. Why does the right hon. Gentleman waste the time of the House with these meaningless average figures, when he says that he will get to the real situation later?
Sir K. Joseph: I do not think that they are meaningless averages. I will come to that case in a moment. I am very interested to hear what the hon. Gentleman says.
So we come to the people who are not average and who are not exempt, because that is what the debate is about—
Mr. John Mendelson: Hear, hear.
Sir K. Joseph: The hon. Gentleman was discourteous to say that I am wasting the time of the House in explaining the background. The hon. Lady said—I thought that it was slightly glib for someone of her debating quality—that she was dissatisfied with the chronic categories for exemption. I suppose we all are, but she knows quite well that her right hon. Friends negotiated very hard with the B.M.A. to try to persuade doctors that it would be possible for them to allow the Government to pay the prescriptions free for more chronic sick categories, including, perhaps—I do not know the details of the past Government—the category to which the right hon. Member for Woolwich, East (Mr. Mayhew) referred.
The trouble, as explained to us by the B.M.A., is that they did not want doctors to have to decide whether the use of a drug which can serve both a chronic illness and a non-chronic illness should be free for a particular patient or not. I have sufficient respect for the negotiating ability of my predecessor not to promise the House that I shall be more successful with the B.M.A., but I shall, at a suitable time, if it seems to make sense, reopen the subject with them. But I cannot hold out much comfort that I shall be successful. We recognise their problems and I shall see whether they recognise ours sufficiently to be able to move at all.
The hon. Lady then referred to two distinct categories—children still in full-time education over the age of 15 and women between 60 and 65. I am advised
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that these groups, although they both attract a large amount of emotional support, do not statistically have any higher demand for medicines than the normality of people between 15 and 65. If I could be convinced that they had a much higher demand, I should have to think again about this question. I will keep those two categories under review.
But I should like to remind the House of the protection which is available for those who are not exempt but for whom even the extra 7½p per item might be a deterrent, particularly if, for instance, a household had an infection and several adult members had to have several prescribed items for several weeks running. For anyone near the supplementary benefit income level, the supplementary benefit remission is available. I admit that the exemption limit has been raised only a trifle, but the prescription charge is not in itself a very heavy charge. I am told that the arrangement for taking into account the income of an earner disregards the first £2 of the earnings, disregards rent—including mortgage and owner-occupier outgoings equivalent to rent—and disregards the working expenses and any regular burdens on the household connected with the hire-purchase, diet or heating requirements of any member of the household.
We shall have to see whether, as the take-up campaign develops, we get any evidence that people whose income is low enough perhaps to deter them from having proper treatment are not getting proper treatment. We shall then have to see whether the formula is right. But the campaign will be pressed vigorously, and if it does not produce good enough results the first time, we shall have to mount another. Also—
Mr. John Mendelson: Money for everything except for prescriptions.
Sir K. Joseph: Hon. Members do not appreciate that we have allowed for a very successful take-up campaign in computing the net saving to public funds of the rise in charges. We have allowed for the cost of the take-up campaign and for the cost of succeeding in the campaign. All supplementary benefit households are exempt from prescription charges automatically, and there is an exemption form in their order book. The family income supplement order book,

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when it comes into payment in August, will also increase the specific exemption from prescription charges.
I come to the point raised by the hon. Member for Penistone, who made the same point last July. I then gave him advice which I thought was perfectly solid—that he should tell his constituents about the "season ticket". He was very scornful about that, but it provides as many prescriptions as the doctor may prescribe for any citizen for the cost of 1p a day or 7p a week. If the hon. Gentleman has not advised that household—I think that he quoted the same one in July—
Mr. John Mendelson: No.
Sir K. Joseph: —then he should not quote the same type of household. He should recommend them to buy a prepayment certificate. For £2 for six months or £3·50 for 12 months, which works out at 7p or 8p a week, the person concerned can rest secure that, no matter how many treatments he or she may need, that is the total cost that will have to be met. Because the season ticket had only 50,000 or 60,000 buyers last year, we have embarked on an advertising campaign.
Mr. Mendelson: Again!
Sir K. Joseph: This was provided for in our expenditure. I am glad to tell the House that we are already up to 100,000 buyers. Today, for the first time, advertisements started appearing in the national Press drawing specific attention to the prepayment certificate.
Mr. Stanley Orme: How much did it cost?
Sir K. Joseph: I think about £14,000.
Mr. Mendelson: When the previous Administration introduced prescription charges, the first estimate given was that there would be a saving of about £25 million per annum. Will the right hon. Gentleman tell the House, on the basis of the figures, how much was saved after all the exemptions had been catered for and all the administrative expenses had been applied? Was it anywhere near £25 million, or what will the figure be?
Sir K. Joseph: I cannot without notice. I can only look at the last Government's published announcements. If the hon. Gentleman cares to put down a Question
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I will look into the past and see how they managed. However, I can tell the House now that the N.H.S. savings from the charges are about £33 million, of which there will be net savings of £29 million. I think that £4 million will go in increased supplementary benefit payments for dental and optical services. That includes the cost of the take-up campaign.
Dr. Shirley Summerskill: Are the figures which the right hon. Gentleman has given based on the charges which have been increased plus the cost proportion scheme, or are they solely the increases which are now in operation?
Sir K. Joseph: The latter—the 1st April, 1971, charges. I am obviously not taking into account what might be the result of further changes in the form of the charge.
I turn from prescriptions to optical charges. As the House knows, we are moving towards charging the total cost except for sight testing, which remains free. We are raising the charge for the lenses to an average, banded, real cost. The full cost of the frame is already paid except for the National Health Service frame. I have been told by the profession that it would like to find a more acceptable frame for children, who are exempt. I am glad to confirm that we hope to move into the free category a frame which is widely popular in the adult category so that children, in more cases than now, will be able to have a free frame which they will be glad to use. We shall bring this about as soon as supplies make it possible.
There is here a more substantial addition to the supplementary benefits scale for exemptions. The House will have seen from the income guide in the advertisements and answers to Questions in HANSARD this morning that we are adding a tolerance of £1·50 to the supplementary benefits scale, adjusted for working expenses and so on, and a variable for rent, to help those who find optical treatment too expensive. Children's treatment remains exempt.
I turn to the dental increases. I am particularly glad to acknowledge that although the British Dental Association

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disagreed with what the Government proposed, once it was persuaded that the Government intended to go ahead the Association undertook to advise its members on an approach to dental patients to explain exactly the new system which was being brought in.
I have here the folder of advice which is going out today from the B.D.A. to its members. It has made a first-class job of it. It emphasises the new principle introduced by the Government of making dental charges half the cost of treatment up to a maximum of £10 while retaining all present exemptions and keeping the examination and report on teeth absolutely free. The B.D.A. explains that this system should be a great encouragement to people to attend their dentists regularly. Instead of a standard charge for all non-exempt patients of £1·50 or the cost, whichever was the lesser, as up till 1st April, there is now a clear economic advantage to the patient to have regular and relatively small treatment because he will pay only half the cost.
The result of retaining all the present exemptions and of setting a maximum of £10 for any treatment, which may be spread over a series of visits, will perhaps interest the House. If we apply the new system of charges to the 1969 dental experience we get the following results. About half of all courses of treatment—those for children, for young people between 16 and 20, other than for dentures, and for nursing and expectant mothers—remain exempt.
Mrs. Shirley Williams: They remain free at the present time.
Sir K. Joseph: They remain free at the present time. The only change proposed, which would involve new legislation, will remove the 18 to 20 age group from that free category.
Of the remaining half who are not exempt, half—that is, a quarter of the whole—will either be free, because they involve only examination and report, or will cost less than under Labour because the total cost, except for examination and report, will be less than £3. Therefore, the charge will be half the cost and that will be less than it would have been under Labour.
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To summarise the position, three-quarters of dental treatment, based on the 1969 experience, will either be exempt or free or cost less than in 1969
Of the remaining one-quarter, there are three separate twelfths. One-twelfth would have cost between £1.30 and £2.40 and one-twelfth would have cost between £2.40 and £10, but a large number of those would have been for dentures which were charged at half cost under Labour and averaged about £6 5s. in Labour's last years. Therefore, there is very little change for that one-twelfth. There will be a whole 1 per cent. who will be at the maximum charge of £10.
I apologise to the House. I have missed out one-twelfth. To begin again, the remaining quarter is one-twelfth under £2.40, one twelfth between £2.40 and £10, and one-twelfth for dentures where the charge will be very little different from what it was under Labour.
The dentists are very wise, in our view, to recommend the new principle in the trms put to them by the Government. "Recommend" is perhaps too strong a word. The B.D.A. is wise to explain to the dentists what the Government's new proposals mean, because three-quarters of their patients will continue to be exempt, to get their treatment free, or to get it at less cost than under Labour.
All the supplementary benefit families are exempt or get automatic remission of charges. All the family income supplement households will have their charges totally paid for. Those who are above supplementary benefit level, and are earning, will be entitled to a higher tolerance and to help with or total remission of charges, taking into account in the assessment their actual rent for housing expenses, their actual working expenses and any particular burdens on their household.
So I think that the charges will not do damage. There will be, as there always has been under both Conservative and Labour Governments, a small dip in the take-up immediately after the charges come into effect. It has generally been offset by a surge in the treatment before the higher charge comes into effect, and we must wait at least a year, and probably 18 months, before the

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normal pattern of take-up can be fairly judged. In all past experience there has been a surge before the increase of charge, a dip after the charge has gone up, and then over the next year or two a gradual resumption of the basic growth trend. That is what we expect to happen.
We shall be watching during the period from 12 to 24 months from now to see whether that expectation is fulfilled. We shall be watching the effectiveness of the take-up campaign, and listening to the experience reported to us by the professions. If we find on any of these fronts that our formula for exemption does not meet a need, we shall have to look at our arrangements again. But in the meanwhile I ask hon. Members, after they have made their legitimate points, to reassure their constituents, who come to them for advice, and to give them the leaflets which I shall gladly make available explaining the freedom of the services to those who really need free services, because we all on both sides at least share this, that we definitely want the services to be available to those who need them.
Mr. Deputy Speaker (Miss Harvie Anderson): Order. Before I call the next hon. Member to speak, may I draw the attention of the House to the fact that the debate is limited in time and that a considerable number of hon. Members wish to speak.
5.33 p.m.
Mr. Alec Jones: During yesterday's debate one of my hon. Friends referred to the Secretary of State as one of the more compassionate members of the Conservative Government. Having listened to the whole of yesterday's debate, including the right hon. Gentleman's speech, and to his speech today, I find little evidence of that compassionate part of his character. He said that as long as the prescription charges did not deter a large number of people they were acceptable to him—even if they deter a small number. This reminds me of a person giving advice to a newly-qualified doctor and saying, "It will be all right if you bury a few mistakes, but do not bury too many". When someone who holds the position of responsibility of the right hon. Gentleman implies that, I cannot see it as evidence of a compassionate nature.
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We in Wales have a special reason to be proud of the Welfare State and the two pillars that support it—our system of social security and our National Health Service. The system of social security introduced by our esteemed friend the right hon. Jim Griffiths was savagely attacked in the House yesterday. The National Health Service was introduced by another famous Welshman, the late Aneurin Bevan. To find that service under attack today is distasteful to the majority of hon. Members on this side.
That pride which Welsh people share in the Welfare State and its two pillars, which have brought so much help to our people, turns to anger when we see them being attacked by a Conservative Government who either know little of how they help our people or care very little about them. The attacks yesterday and today place the Health Service and our system of social security in jeopardy. That is why organisations in defence of the social services are springing up in South Wales. They are chiefly promoted by practising doctors, dentists and other welfare workers, and are organisations not prodded into existence by politicians but brought into being by people who care. I hope that they are also springing up elsewhere to defend the essential elements of our Health Service and social security.
We should make our personal position clear. In making my mine clear, I believe that I am also representing the views of those who sent me here. We believe that on social, economic and health grounds the National Health Service should be available to all at the time of need, without any question of payment. It is understandable if Conservative Members take this opportunity to rub into Labour Members that it was a Labour Government who reintroduced prescription charges. I have no objection, if their reminder of our past follies prevents us from making a similar mistake again. Such a reminder will be a small price to pay for the preservation of the Health Service.
It was in the Chancellor's White Paper, Cmnd. 4515, that we first heard the details of the introduction of the charges. The White Paper said that prescription charges should save £32 million, dental charges £14 million and ophthalmic charges £7 million, making a total of so-called savings of £53 million in 1974–75.

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But most of us do not need any more convincing that they are not real savings but are mere transfers of money from the majority who will have to pay more for the National Health Service to provide the resources needed to make tax concessions to those who are already better off.
My hon. Friend the Member for Willesden, West (Mr. Pavitt) is missing from today's debate, unfortunately. He has constantly pointed out from his own experience inside the Health Service that the so-called savings seldom turn out to be what they are expected to be. Speaking 13th July last year about the prescription charges then in force, he said that whereas they had been expected to yield £25 million, the true yield was between £7½ million and £10 million. One of the reasons is the extremely elaborate system of checking of exempttions and refunds which must follow the introduction of Health Service charges, or any increase. That it is an elaborate system was evident from the right hon. Gentleman's words today, when he lost one-twelfth of the dental charges.
If the Government are to increase charges, we want exemptions, so we support the Government in that respect. But exemptions must always create anomalies, and it is the anomalies that ordinary people outside find so basically unfair. The anomaly of age has already been mentioned. A number of local authorities in South Wales, headed by the Abertillery Urban District Council, are organising a campaign on behalf of women aged between 60 and 65—those wives over the age of 60 who are receiving an old-age pension. The local authorities in South Wales hold the view, which I hope that many hon. Members on both sides will hold, that such wives should automatically be exempted from prescription charges. Judging by the interest being taken in the debate by lady Members, I should think that every one of them will support the contention that free prescriptions should be available to these ladies once they have reached the age of 60.
Dame Joan Vickers: I have already raised this point with my right hon. Friend, who has told me that he would not do it because it would cost £3 million.
Mr. Jones: I accept the point. I have always appreciated that the hon. Lady has consistently pressed this matter. I realise the cost involved, but perhaps I can suggest that the money could have been found out of the very large sums which were readily made available as tax concessions for the better off.
I want to refer now to exemptions through categorisation of the chronically sick. I have had a letter from the managing director of a firm in my constituency telling me of his visit to a gentleman suffering 100 per cent. from pneumoconiosis, a disease found particularly in coalmining areas. This constituent has not worked for 14 years—and has not yet reached the age of 65. Because he can, when he feels well enough, get out without assistance, he therefore does not qualify for free prescriptions. I find it hard to believe that anyone who has lived with or had any experience of pneumoconiosis cases could say that a man with 100 per cent. certified pneumoconiosis is not chronically sick and is not morally entitled to free prescriptions.
There is, of course, an anomaly. For example, another constituent of mine suffers from mild epilepsy. I very much regret his suffering, but I must in fairness point out that, although he is able to go to work every day and earn a full wage, because his chronic sickness is in one of the official categories, he is entitled to free prescriptions, in contrast to the man who is suffering 100 per cent. certified pneumoconiosis. I use these two examples to show that, as long as we have the ridiculous system of prescription charges, such obvious anomalies are bound to arise.
Mr. Dan Jones: The people who suffer from pneumoconiosis and silicosis have been seriously injured in pursuit of the industrial needs of the nation.
Mr. Jones: My hon. Friend the Member for Burnley (Mr. Dan Jones) knows the problems and conditions of the work of miners in South Wales as well as, if not better than, most of us, and I am grateful to him for his intervention.
In dealing with the categorisation of chronic sickness, it was of some value to hear the Secretary of State indicate that he was prepared at least to consider some re-examination of the exemptions

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scheme. I believe that one simple method of dealing with this would be for free prescriptions to be available for all who are in need of drugs over a relatively long period. In other words, if a person needs medicines for a longish period of sickness, he should automatically qualify for free prescriptions.
The right hon. Gentleman referred to the low take-up rate in welfare services and rights. He spoke of the Department's Press and television campaign. Although, obviously, we on this side would prefer a better course, we hope that this campaign will succeed in persuading people to take up their rights. I ask the Under-Secretary of State to convey a few words of mine, which I believe are of a special importance, to the Secretary of State. I believe that the newspaper advertisement in its application to prescription charges is misleading. I believe that equally misleading is the official leaflet P.C. 11, issued by the Department.
I am not suggesting, of course, that they are deliberately misleading. I am not even suggesting that they may mislead either the Secretary of State or hon. Members. But they are certainly misleading people who need to know whether they are entitled to free prescriptions. Both leaflet and advertisement imply that a married couple may be entitled to free prescriptions if their weekly income in £16·45. Admittedly, the advertisement says that the table is a guide only and the leaflet contains the notice that the examples given are indeed only examples. But people who need and are making applications for free prescriptions are taking the advertisement and the leaflet at their face value.
Only last weekend in my constituency two married couples came to me about this matter. Their gross incomes were £12·15 and 12·22 respectively, but neither couple qualifies for free prescriptions. I ask the Secretary of State to re-examine the table in order to ensure that it is made perfectly clear that it is not all married couples with an income lower than £16·45 who are to get free prescriptions but that in many cases the income level needs to be lower than £12·15. Not only should the tables be re-examined, but the Department, when rejecting applications for free prescriptions or re-
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funds, should give the claimants a detailed explanation why, instead of the small note which is customarily issued now.
In conclusion, I want to say something chiefly to my own right hon. and hon. Friends. That may be rather unusual but there is not much point in saying it to right hon. and hon. Members opposite. There is some value in saying it aloud to my right hon. and hon. Friends. I say to them that there is a danger that, if we on this side of the House spend too much time and energy in dealing with exemptions, we might again grow to accept as inevitable the principle of prescription charges. Naturally, the level of charges, given that principle, is important—desperately important to those in the low-income groups, although possibly not to those in the lowest group of all, who are to be shielded to some extent. I had hoped to hear from the Secretary of State a clear indication that even the present Government have wisely changed their mind and abandoned their proposals to relate prescription charges to the cost. I remain convinced that all charges discourage and that high charges prevent many people from seeking the medical advice and treatment which they need at the early stages of an illness. Many diseases which can be controlled or cured, can in fact be controlled and cured only provided they are diagnosed at an early stage.
Mr. Timothy Raison: I am grateful to the hon. Gentleman for giving way, particularly as he said that he was having a private discussion with his own side of the House. As far as I know, all the advice to which the hon. Gentleman has referred is given free through the National Health Service.
Mr. Jones: I do not quite follow the hon. Gentleman's point. I am concerned not so much with advice as with prescriptions.
Mr. Raison: The hon. Gentleman specifically mentioned advice.
Mr. Jones: Whatever point the hon. Gentleman has in mind, I must leave him to deal with it in his own speech.
Mr. Raison: I am sorry to persist, but the hon. Gentleman specifically complained about charges. My point is that advice in the N.H.S. is given free. It is

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the treatment which leads to charges being made.
Mr. Jones: I think I know at what the hon. Gentleman is getting, but he will appreciate that there is little point in being given free advice if one is denied the opportunity to benefit from it by receiving the treatment that is necessary.
If these prescription charges or any future increases prevent early diagnosis, the Secretary of State will have failed in his duty to promote and care for the health and welfare of our people. When, as a boy, I lived in the Rhondda Valley, which I now have the honour to represent, it was a feature of Valley life that a person with bad eyesight went to Woolworths to buy a pair of spectacles. If the reintroduction of dental, optical and other charges results in our adopting that attitude towards health matters, there will be strong opposition from the people of Wales.
Mr. Deputy Speaker (Miss Harvie Anderson): I appeal to hon. Members to restrict their remarks to, at the most, 10 minutes. If they do not do so, many hon. Members who wish to take part in the debate will be precluded from doing so. Dr. Stuttaford.
5.52 p.m.
Dr. Tom Stuttaford: I promise to be brief, Mr. Deputy Speaker.
I wish, at the outset, to have it clearly understood that, like any doctors among my colleagues on this side of the House, I am faced with a conflict. It is a conflict between that which is clinically ideal and that which is financially expedient. The hon. Lady the Member for Halifax (Dr. Summerskill) is fortunate today in that she is not faced with this conflict.
There can be few doctors who in any way welcome prescription charges, and I am certainly not among that minority. I have never believed that prescription charges do anything for the doctor-patient relationship. An appreciable percentage of doctors do their own prescribing. The relationship between them and their patients cannot be enhanced when many people remain convinced that they are paying for their pills or medicines.
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When prescribing doctors are having to collect these taxes, as it were, their patients will believe that they are meeting the cost of what is being prescribed, when, in fact, no charge that we could possibly introduce could represent the full cost of prescriptions. This point greatly affects the country doctor, though it must also harm the relationship between the chemist and the patient.
I echo everything that the hon. Lady the Member for Hitchin (Mrs. Shirley Williams) said about the anomalies of the exemptions. One need only look at the list with a clinical eye to see that the exemptions might have been chosen with a pin; by chance, from a list of diseases. There seems to be no rhyme or reason to this proposal and I am ashamed that it was my profession which dictated what should go on the list. I therefore welcomed my right hon. Friend's assurance that he will be in touch with the B.M.A. to have it revised.
Also early in my remarks I wish to sound a word of caution about the problem of schizophrenia. In this category many patients do not know from what they are suffering. I agree wholeheartedly with what has been said about the need to get these people to take their treatment. They are even less likely to take it if they see themselves classified as "chronic schizophrenics". It is a disease about which there is a strong social stigma and what is proposed will not be of help.
The prescribing of combination drugs is not necessarily a form of blunderbuss treatment. Combination drugs can be useful, particularly for the elderly, though I accept that they would be exempted. However, they are also useful for the improvident and difficult minority in that they need take only one pill three times a day instead of four or five pills a number of times a day. I accept, however, that the prescribing of combination drugs can be a mistake if they are prescribed to save the patient's purse. It is bad medicine when it is dictated by a charge of this kind.
We must not overlook the grasping or impecunious patient and the fact that it is easy for the doctor to acquiesce by prescribing a large number of pills instead of a few or a large bottle of medicine rather than a small one so that the treatment will last the patient longer. This

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sort of prescribing increases the problem of bathroom cabinets filled with half-empty bottles, the danger of drugs finding their way on to the black market and the increased danger of suicide—all perhaps indicative of a weakness on the part of the medical profession, but one which is difficult to avoid when charges of this type are imposed.
Although I can support this increase in charges today—[Interruption.]—because they relate to increased costs in the N.H.S., no political capital should be made out of what is being done. Indeed, I can support it only on that basis. After all, hon. Gentlemen opposite re-introduced prescription charges and introduced dental charges. Their record is every bit as bad as ours. They, too, have had this conflict, and when they are in office they come down on the side of the Treasury, and when they are in Opposition they are on the side of the doctors.
Be that as it may, it is clear that we have made much better use of the money that we have collected by this means. In my part of the world there is a geriatric hospital which has been promised closure for the last eight years but on each occasion when the matter has come up we have been told, "Put in an application next year for a new hospital to replace this one, when it is closed". At last the application has been accepted and now we hope for progress with this hospital.
Likewise, we have been trying for some years to get a home in Norwich for the young chronic sick. An order has now gone out to the local regional hospital board to build such a hospital. Thus, when we speak of the evils of prescription charges, let us not forget what can be achieved with the money so collected.
One problem with exemptions is the relating of cost to disease. Although I can just see my way to supporting the increase this time—primarily because of Labour's record in this matter and the increase in the cost of living, coupled with the redistribution of money in the N.H.S.—I could not support a proportional increase in prescription charges by which disease, and not the income of the patient, would be the determining factor. By that means, the disease and the quirks of the doctor prescribing would determine the charge. In other words,
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if one were lucky and had rheumatoid arthritis, so that the treatment was aspirin, the charge would be small. If, on the other hand, one were suffering from a complaint necessitating expensive prescribing, the treatment would be equally expensive.
Sir K. Joseph: I am bearing up stoically to everything my hon. Friend is saying. He is a doctor of high repute and I would hate it to go out from this House that he has accurately described what the Government have proposed to the professions. We certainly do not intend that anybody should be deterred by the cost of medicines, whatever the disease. I must put in this disclaimer.
Dr. Stuttaford: I accept that completely, but I feel, nevertheless, that the cost of some of these treatments will be very high, with the result that it will probably be a matter of a chosen item.
Sir K. Joseph: And a maximum.
Dr. Stuttaford: Yes, and a maximum.
The last drug which we must consider for exemption is the pill. It has never been included in drugs which must be constantly taken. In fact, it is constantly taken more than any other drug. It should be prescribable on the National Health Service and should be in the exempt list. We have got into the way of thinking of the pill as being something which can be prescribed with safety by the family planning clinics. This is not so.
It is a drug, perhaps the most useful in our armoury, which affects the whole body and not just any one part of it. It has an effect on the brain, blood pressure, heart and lungs. Any of these may show the first signs of damage caused by the treatment. Yet, if we give more aid to family planning clinics, encouraging patients to go there, family doctors will not know what is wrong with their patients when they go to them with the first signs of trouble. We must do everything we can to encourage general practitioners to provide this service for patients, and it should be free, because in that way it will save money.
6.2 p.m.
Mr. Will Griffiths: I well understand your appeal, Mr. Deputy Speaker, for brevity

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and I shall do my best to keep within the few minutes which you have recommended for speeches.
I raise the strongest possible objection to the way in which this debate has been arranged. It is absolutely monstrous that the Secretary of State and the Opposition Front Bench spokesmen should, in a twoand-a-half hour debate, take 57 minutes between them and that two other Front Bench spokesmen, presumably, should speak before the end of the debate at seven o'clock. This is not treating the House of Commons seriously on a matter of this importance. I am especially cross about it because the one thing which unites the two Front Benches is the fact that neither of them on any occasion within my recollection has voted against National Health Service charges. It is, therefore, about time that some people who have a different point of view had a little more time to address the House.
I propose to say nothing about the prescripition charges or charges for surgical appliances, and so on. They are important, but time does not permit me to say anything about them.
The Secretary of State's speech was breathtaking. It was inaccurate in some respects, as I shall seek to show. The right hon. Gentleman quoted selective statistics and then, when challenged, went off them. He misrepresented people. For example, it is wrong to say that the British Dental Association has recommended the scheme to its members. It has done nothing of the kind.
Sir K. Joseph: I think that I corrected myself and said that the association had explained the Government's point of view in its communication to its members. I withdrew the word "recommended". If I did not, I meant to do so.
Mr. Griffiths: I apologise to the right hon. Gentleman.
The British Dental Association and the Association of Optical Practitioners are very strongly opposed to these charges. However, I wish to apply myself to charges in two fields where I submit there has been a qualitative change. For the first time, there are cost-related charges for the ophthalmic and dental services. Incidentally, the hon. Member for Norwich, South (Dr. Stuttaford) was right in saying that both Labour and Con-
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servative Governments had imposed charges at different times. But, in all the time that I have been a Member of the House, I have never voted for any of them. I have always voted against them, and so have some of my hon. Friends.
We have always had flat-rate charges in the ophthalmic service, ever since the Labour Government of 1951 took the first step on the slippery slope. We now have a new factor. We have, not a flat-rate charge, but a cost-related charge. In other words, the worse a person's sight, the greater will be his financial burden. In future, the charges will be calculated in this way. The patient will pay the whole cost of the lenses, a charge agreed between the Department for Social Services and the manufacturers, and a dispensing fee which—and I hope that my professional colleagues will not be offended when I say this—is a euphemism for profit. The patient will pay £2·40 per pair for spectacles with the lowest-powered, simplest lenses. The cost will rise to £6·40 a pair for spectacles with the highest-powered lenses—that is, for spectacles for people with the worst sight. Until 1st April, everybody, except those who were exempted, paid £1·60 per pair.
If right hon. and hon. Members opposite are pleased about that, and if they think that the Budget concessions will console people who are partially sighted or who need very high-powered lenses and regular attendances, they are even worse than I suspected they were in my most unhappy days. For bifocal lenses, the patient will now pay between £4·90 a pair and £7 a pair. Until 1st April, the maximum charge, again taking no account of exemptions, was £2·50. These are swingeing increases, not increases of 5s. or 10p.
I come to the point about which I think the Secretary of State deceived the House; I hope that he will be able to contradict me. He said that examination under the ophthalmic and dental services was free. Paragraph 24 on page 9 of the White Paper entitled "New Policies for Public Spending" states:
"Charges for dental services will be related to approximately half of the cost of the services actually provided, apart from dental examinations which will continue to be free of charge."
The right hon. Gentleman repeated that today. I am advised by the British Dental

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Association that in examination the dentist looks in the patient's mouth, and I am also advised that, in a very large proportion of cases, the dentist considers it expedient to take at least one X-ray. If he does so, the recoverable fee for an X-ray is 9s. The patient pays 4s. 6d.—half the charge. Therefore, a very high proportion of dental patients will not get a free examination.
Let me give an example from the ophthalmic service. Since 1st April, in many cases more cash is collected from the patient than is recoverable from the executive council. I repeat that: the charges which the patient has to pay exceed the recoverable moneys from the executive council. So we have the position at the end of this month that the optician will have to pay back to the executive council the excess sum of money which he has collected from the patient. I hope I have made myself clear on that. He will in fact be acting as a tax collector.
If I am challenged on this I have all the details here and of other lenses in the range. I estimate that in some cases it is 10p and it can rise to 30p which the optician takes in excess in recoverable charges which would be paid to the executive council at the end. The executive council will say, "Ah, you will not necessarily return this money; we will deduct it from your examination fees which you have paid for what the Minister says is free." If the patient is paying anything from 10p to 30p over the recoverable price it is clear, surely, to everybody that he is paying between 10p and 30p for the allegedly free examination.
Sir K. Joseph: I am grateful to the hon. Gentleman for giving way and I shall be very quick. There has been no change whatsoever in the payment for X-rays, which were included in the chargeable costs before in assessing the cost of £1·50 which the previous Government maintained and as we maintain. Tooth inspection which may lead to X-ray is free and remains free. On the second point, as I explained, there is a banding, an averaging, of lens charges in order to avoid proliferation of different lens charges, and this leads to patients sometimes paying 10p more, sometimes 10p less, for the precise charge for a particular lens. I do not think it goes further than that.
Mr. Griffiths: I challenge the right hon. Gentleman. I challenge him when I say that the majority of the ophthalmic services patients will have to pay a sum over the recoverable price, and, if the price exceeds that, it must be a payment towards the allegedly free examination. That is what I am saying. As the weeks go by and we get a little more experience of this, I will allow the right hon. Gentleman to answer Questions in the House so that we can ascertain where the truth of this matter lies.
I must finish, and I have gone on for rather longer than I intended. I have just two other things to say. The first is—and I say this to the Secretary of State—that because of what I have said about this cost-related service the estimates of the savings on the ophthalmic services and the dental services must be inaccurate. The right hon. Gentleman cannot possibly know what the savings are. How can he know in all the range of dental services from simple treatment upwards? Similarly with the ophthalmic service between the minimum and maximum I have quoted. Therefore I say that the White Paper on Public Expenditure which the Government have put before the House is an ill-conceived policy, certainly, but also a badly thought out, a not properly worked out, paper in financial terms, and to the extent that the House has to determine its attitude on the basis of the White Paper, the House, in this respect at least, has been deceived.
I finish by saying to my colleagues on this side of the House, and particularly to those who were formerly members of the Government and who are on the National Executive of the Labour Party, that nothing will suffice for us at the end of all these arguments about giving exemptions and having selectivity but a return to a genuinely free service. The selectivity and exemptions which the Minister has been talking about this afternoon are a recipe for depriving the poor and the badly educated people. Hon. and right hon. Members opposite do not have any difficulty in reading the small print. They get others to do it for them, and they pay them to do it. I say lo my party that the sooner we get back to the straight concept of the National Health Service as it was in 1948, the better. I apologise for having gone on for so long.
6.15 p.m.
Mrs. Jill Knight: I warmly support what my right hon. Friend is trying to do. I believe that we can have either a first-class health service or a free health service, but we cannot have both, and we have to make up our minds which we want. The hon. Member for Rhondda, West (Mr. Alec Jones) has left the Chamber, I am sorry to see, but he said something to the effect that my right hon. Friend did not seem to care very much about people. I want to say here and now that there is no more compassionate Member in the whole of the House than my right hon. Friend, and no one is more conscious of the needs of the poorer people.
I take up a point made partly by the hon. Member for Manchester, Exchange (Mr. Will Griffiths), the question of patients' charges according to the kind of optical lens which is prescribed. The nature and the power of the lens in future, apparently, is to be the criterion of how much the patient pays. I am myself very concerned about the question of this being a penalty on those people with bad eyes. I appreciate that the maximum charge is being laid down at £3.50 but I do not think that this covers the point, and I want to underline that this is the first time since the National Health Service began that charges have been imposed on the basis of how bad a person's eyes are. There have, of course, been variations in cost, according to the style of lens, whether single or bifocal, and that seems fair, because with a bifocal pair of spectacles there are two pairs in one and, therefore, there is a very good reason why bifocals should be more expensive. But I do not think that ever before has difference of power of the lenses been the criterion of cost.
If we were to follow this into the charging of prescriptions and were to say that those people with the worst illnesses must pay more for their prescriptions, the House would not accept that for one moment; but in fact that is what we are saying about spectacles. I think that it will be very difficult to get the patients to understand that. Ophthalmic opticians will have a hard job trying to explain to patients that because their eyes are bad they will have to pay more. I very much hope that my right hon. Friend
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will think about this very carefully. One appreciates that for very poor people there is help available and that nobody is to be deterred because of the cost from having the spectacles he needs. Nevertheless, this is a most important point.
I will take issue briefly with the hon. Member for Manchester, Exchange on one statement which he made. I may have misunderstood him and I am very ready to give way to him if I have, but he said something to the effect that the prescribing charge was profit. It seems to me perfectly fair to make a charge for the technical and professional business of deciding what is wrong with a patient's eyes and what lens he needs for the wrong to be put right.
Mr. Will Griffiths: I agree with that, because I draw such fees myself, but what I was saying when I was talking about the charges to which the hon. Lady is referring was that they included the price of the lens and the dispensing fee, as the hon. Lady very well knows, and I said that the dispensing fee might be said to be a euphemism for profit.
Mrs. Knight: Very well, I accept that point.
One other point which I wish quickly to raise is the question of contact lenses. I think it ought to be made very clear to patients and to the public that the cost laid down for contact lenses refers only to contact lenses prescribed in hospitals. That is not sufficiently clear in the papers which we have at this time, and I hope that something will be done to make that rather clearer.
Otherwise I support what my right hon. Friend is trying to do and I think that the country shows signs that it, too, will support him.
6.20 p.m.
Mr. Neil Carmichael: It is unfortunate that this important debate, which so well illustrates the difference in philosophy between the two sides of the House, has had such a short time allotted to it and that other business of the House, important though it was, ate into that time.
There are Regulations relating to Scotland which are exactly the same as

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the Regulations which we are discussing. I am well aware that the Labour Government introduced certain charges when they were in power. Although at the time I thought it was wrong and felt sad about it, as a member of the Government I supported those charges because of the prevailing economic situation, but I regarded it as one of the first matters to be dealt with when the economic situation improved. Had we been returned to power on 18th June it was one of my personal priorities to try to persuade my party to get back to a free National Health Service. I realise that there is no such thing as a "free" health service; it has to be paid for.
I am anxious that a person requiring treatment should not be troubled with having to find money to pay for that treatment at a time when he also has to find the energy and the courage to deal with his illness or disability. The concept that the treatment that a patient receives should be decided by his capacity to pay is corrupt. It is a denial of dignity to the sick person. Sick people are frightened, helpless and worried about coping with things that they cannot quite understand and to introduce an additional worry of finding the money for treatment is completely wrong. It brings the alien element of cash into the personal relationship between doctor and patient. It is wrong also for the doctor, who has not merely to make a medical diagnosis but to decide on the treatment partly on the basis of how much the patient can afford to pay for it.
I was told recently by a doctor in my constituency that he had a patient, whose husband had recently died, who needed a permanent course of a certain drug. The doctor decided that in addition to the drug she needed a tranquiliser to calm her down. On closer examination he decided that she also needed an iron tonic. This meant three items on the prescription. Knowing the patient very well, the doctor decided that this would be more than she could afford. To the widow 4s. meant a great deal, and the doctor decided that it was better to allow her run-down condition to await treatment until she had recovered from the effects of her bereavement, so he omitted the iron tonic from her prescription. It
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is wrong to ask the doctor to make these decisions.
Dr. Stuttaford: Is the hon. Gentleman aware that if the prescription costs less than 4s. the chemist should tell the customer that this is so? An immense bottle of iron tablets can be bought for a few pence. Patients sometimes pay too much when they pay the prescription charge rather than the actual cost of the prescription.
Mr. Carmichael: I am assuming that my informant knew this. He is highly thought of and is a very conscientious doctor. I am sure that he would know, and if he had thought that a tonic could be obtained at less than 4s. he would have told his patient so.
I am sorry that the Secretary of State did not go further on the question of whether 50 per cent. of the cost of the prescription will be reached. I wonder if the Department has in mind what was said by The Sunday Times and the Economist—that the bureaucratic structure needed to collect the charges would cost more than the charges would bring in, and the game would not be worth the candle?
Are the Government thinking of taking the next logical step of increasing rather than decreasing the number of amenity beds? Will there be a demand to introduce more private health insurance? There are very powerful financial lobbies at work on this, and we know that the Government can be susceptible to powerful financial lobbies.
Our National Health Service has a great many flaws. Although it has not developed in the last 20 years in the way some of us hoped it would, it is still a wonderful system in comparison with systems in other parts of the world. Following upon these Regulations, shall we see cash being brought more and more into the doctor-patient relationship? I have been told that in hospitals in Europe—never mind America—it is impossible to get proper service from nurses unless they are given a daily gratuity, and this is becoming an international scandal. It is said that this could not happen here, and I certainly hope it will not, but given the Government's attitude on people's ability to pay, I should not be surprised at whatever they introduce.

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A comprehensive health service is very expensive and there are always areas of abuse. We have perhaps spent too much time in the past talking about abuses instead of talking about the importance of the health service as part of the social wage. The next time a Labour Government is in power we must take steps to increase the independence of the health service from direct payment by patients. Instead of succumbing to the notion of the over-burdened taxpayer we must in our propaganda show the taxpayer what taxes are paid for, and that the taxes paid in respect of the health service represent part of the standard of living of our people. I hope the House will give a resounding vote against the proposals of the Government in these Regulations.
6.30 p.m.
Dr. Shirley Summerskill: The Prayer on these Regulations has given the House the opportunity, in a regrettably short debate, to analyse and question both the economic and medical justifications for charging the patient when he is sick. I personally was not convinced with the explanation given by the Minister as to the economic justification for these further increases in health charges. Charges make up only 5 per cent. of the finance of the Health Service. The estimated gross saving in public expenditure arising from these new charges on prescriptions is £13 million a year, on dental charges £12 million a year and on ophthalmic charges £5 million a year. I say "estimated" because the previous Government realised that it could be only an approximate figure.
There are three imponderables in calculating these figures—and they exclude the infamous cost-related scheme with which I shall deal in a moment. First, how many people will be deterred from seeking treatment by the new charges? We were assured by the Minister that the charges will not deter, but how can one possibly tell who is deterred and who is staying at home and not going to the surgery because of the cost? Secondly, how many people who up to now have not sought exemption, either because they have not bothered or because they have been unaware that they were entitled to exemption, will now
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do so because of increased charges? That is another matter we do not know.
Thirdly, the administrative costs are bound to rise under the new scheme. Here again, as the Labour Government found, one cannot predict the administrative costs. These costs were well brought out by my hon. Friends the Members for Rhondda, West (Mr. Alec Jones) and Manchester, Exchange (Mr. Will Griffiths). Therefore, we have only an estimate of the economic justification for these charges. When the Minister told the House how many people would be exempt, how many people would get free prescriptions, and said that for some it would cost less, we wondered why these charges were being imposed at all.
Whatever sums the charges save, they will be a drop in the ocean in regard to the total Health Service. The money so gained will not go far towards paying for new hospitals, staffing the service, providing expensive equipment, caring for the mentally ill and handicapped, and preparing for the increasing demands to be made on the Health Service. These charges, as any economist would agree, are merely tinkering with the basic grave financial problems facing the Health Service.
The service needs at least another £400 million a year even to prevent a break-down in standards, on top of the £2,000 million now spent. It needs even more if it is to improve its present standards. Therefore, the new charges are of limited and dubious economic value. The fairest way to pay for the Health Service is where 85 per cent. of the money already comes from, namely, through taxation. Each person then contributes according to his ability to pay and pays when he is well rather than when he is ill.
What is the Government's long-term policy for the payment of the National Health Service? The hon. Member for Farnham (Mr. Maurice Macmillan) said in a debate in this House before he became a Treasury Minister:
"Any foreseeable expansion of the economy, even under a Tory Government, could not, in my view, be expected to produce the full amount which the Health Service requires in addition to what we are now spending."—[OFFICIAL REPORT, 1st July, 1969; Vol. 786, c. 243.]

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So under a Tory Government we cannot rely on economic growth to pay for the Health Service. Therefore, apart from contributions, that leaves taxation and charges to pay for it.
What steps have the Government taken recently? They have taxed the sick with one hand and reduced the standard rate of income tax with the other. They have penalised the sick who need extra assistance, and have helped the better off with a tax cut. For the sick to subsidise the healthy is neither just nor is it economic sense.
During the General Election hon. Members opposite made a simple and effective appeal which won them the election, namely: tax cuts for the men and price cuts for the women. Yet the tax cut, such as it was, has been subsidised by increased school meal charges, by 6,291 price rises since the election, and by more for prescriptions, dental treatment and spectacles. We heard nothing about these at the election.
Mrs. Knight: Is the hon. Lady suggesting that sick people do not pay taxes? A great many sick people pay taxes and will be helped by the tax cuts.
Dr. Summerskill: Everyone agrees that the tax cuts help primarily the better off section of the community, and the very fact that the sick pay taxes makes it even more unfair that, when they get sick, they should have to pay a second time. The Labour Government imposed charges out of necessity at a time of serious economic difficulties. Now that our balance of payments is strong—and the Government have cut taxation to prove it—this can no longer be an explanation.
The Labour Party in the country and in this House has a history of concern over this issue. We are not ashamed of this. We feel strongly about the principle of charging the sick. At least we imposed charges with reluctance, with distaste and with apology. This Government a few months after coming to power have increased them as part of a package, brazenly, with indecent haste. The difference between us is that this Government regard taxing the sick, with all the hardship caused, merely as a limited money raiser, not worth making a fuss about.
Dr. Stuttaford: Does the hon. Lady not recall that the Attlee Government of 1950 were intending to impose, just before they lost the election, a charge of 85s. for false teeth, since they regarded that figure as being half a working man's weekly wage? This was to be introduced very soon after the start of the National Health Service. It was to be introduced partly for its deterrent effect and it was a very large sum indeed.
Dr. Summerskill: I am trying to illustrate that we imposed charges with reluctance—which is not the spirit we detect in hon. Members opposite. As well as being economically unjustifiable, charges have a deterrent effect both on doctor and patient. The President of the Pharmaceutical Society, Mr. W. M. Darling, has predicted:
"Many patients will be seeking their cures from the shelves of supermarkets, from old medicines stored away in medicine chests, until the money can be found for the doctor's prescription."
Self-diagnosis and self-medication will increase and clearly the clock will be put back to the days when the poor would buy a totally inappropriate cheap medicine from the chemist, or worse still, go without treatment. If a woman with a family that is already trying to make ends meet, falls ill herself, she could postpone or even fail to visit her doctor if she fears that she will be given a prescription containing two or three items over a period of two or three weeks.
So much for early diagnosis and early treatment which is the essence of preventive medicine. Not only will the sick be divided from the healthy by charges, but the poor sick will be divided from the rich sick by these higher charges. The doctor's freedom to prescribe will be affected by the increased charges. And certainly, as the hon. Member for Norwich, South (Dr. Stuttaford) pointed out from his personal experience, prescription charges can seriously influence a doctor's surgery treatment. Patients ask, "Do I have to have all these items? Could you leave one off?" The hon. Member for Glasgow, Woodside (Mr. Carmichael) illustrated this in his speech. A patient may not take his prescription to the chemist until he has more money. With the advent of the new charges, this sort of attitude will become more frequent. Doctors, therefore, will undergo

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a conflict of professional judgment which is totally unacceptable. They will be forced to carry out their own means tests. They will find themselves deliberately prescribing cheap drugs for the poor and more expensive ones for the others. Dentists, too, will face this dilemma of either giving the patient the treatment that he needs or the treatment that he can afford. These charges are, therefore, a direct attack on medical and dental professional standards, and we have evidence from these professional bodies which agrees with that.
I welcome the Minister's announcement that he will consult again with the B.M.A. about the chronic sick, a subject which has been brought out again and again in the debate. As for the new proposed scheme, the Government are really introducing—apart from dentures, as the Minister pointed out—a totally new principle here.
Sir K. Joseph: Not in these Orders.
Dr. Summerskill: No—as for the proposed new scheme. We hope that it is only a proposed new scheme, because this scheme, we hope, was merely a kite flown by the Chancellor. We hope that the Minister will note that it is opposed by the British Medical Association, the Medical Practitioners' Union, the pharmacists, the patients and even by the hon. Lady the Member for Birmingham, Edgbaston (Mrs. Knight).
The fact that payment of a proportion of the cost of each drug prescribed, up to a maximum of 50p per item, will be expected, is totally unacceptable. We hope that the Minister will pocket his pride and abandon the scheme. I assure him that this side of the House will think far more of him if he does so. Perhaps he would even take the opportunity of this debate to abandon the scheme, because it would impose a totally cruel and callous discrimination against patients who need more expensive drugs through no fault of theirs. Nearly half the drugs prescribed would cost the full 50p, including the modern life-caving drugs and almost all antibiotics. If an hon. Member went to his doctor with a chest infection and needed three kinds of tablets, he could pay £1·50 for treatment. This is discriminating against those who need especially expensive drugs for
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blood pressure or rheumatism. Instead of encouraging preventive medicine the scheme would be promoting deterrent medicine. The Pharmaceutical Society estimates that to collect the new charges would cost £16 million, which is the same amount that it is estimated that the scheme would raise.
In conclusion, we come back to the same question. What is the long-term principle to be followed by the Government in paying for the National Health Service? Is it that the sick should pay more while taxation is reduced? Are there plans to charge for general practitioners' home visits, for hospital meals and for long-stay hospital patients? Are the new charges only the hors d'oeuvre before the main meal? If so, people have a right to know.
We on this side of the House are proud of the Health Service. These charges are economically irrelevant, administratively cumbersome, medically harmful and socially unjust. They will produce a society which is less healthy, less fair and less civilised. At the Conservative Party conference last year, the right hon. Gentleman declared with great passion
"We must and will encourage the habit of self-reliance and thrift."
The Government tell its that we should stand on our own feet and make our own way in the world. But the sick are not able to stand on their own feet and make their way in the world. Clearly, under a Conservative Government, it can be said that the price of the National Health Service is eternal vigilance. I ask the House to pray against the Regulations.
6.45 p.m.
The Under-Secretary of State for Health and Education, Scottish Office (Mr. Edward Taylor): We have had a most interesting and thoughtful debate. Some of the remarks made by the hon. Lady the Member for Halifax (Dr. Summerskill) were, perhaps, unnecessarily emotive and were unfair to those on this side of the House. She said that the Opposition were proud of the Health Service and wanted to develop it. I assure her that all of the policies of the Secretary of State and the Government are directed to improving the health and welfare services. The Regulations are part of these proposals.

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The hon. Lady asked me about the basis of the Regulations and the justification for them. Essentially, this is a question of priorities. We all want to see the health and welfare services developed. But there are the competing claims of other services. The resources available have to be used to best advantage. Our view is that in the case of certain social services, where the user can afford it he should pay a greater share of the cost, but that more help should be given to those in the greatest need and more resources should be made available for those parts of the health and welfare services which are in greatest need, such as the care of the elderly and the mentally handicapped.
It is all very well to complain about charges which, under these Regulations, will bring in about £33 million, but very little has been said of the extra resources which my right hon. Friend and the Government have made available to the health and social work services, amounting to about £110 million. This is being spent to make sure that we make up as many of the gaps in our services as we possibly can. There are enormous demands on the services. The services are expanding and it is essential that the very best use should be made of the available resources.
Mr. Alex Eadie: The hon. Gentleman has informed the House that the charges will bring in about £33 million. Has he calculated the administration charges or is this a net figure?
Mr. Taylor: £33 million is the net figure of N.H.S. saving to the Government. It will be £33 million in a full year. The sum of £4 million to which my right hon. Friend referred is for the increased payments for supplementary benefit to take account of the increased charges. The resultant figure of £29 million represents extra resources available to the Government as part of a contribution to expanding the services.
I shall attempt to answer as many of the points raised as possible. We had a knowledgeable contribution from the hon. Member for Manchester, Exchange (Mr. Will Griffiths), who asked about optical charges and sight testing. He said that we have a situation when we
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have limited averaging under which some will pay a little more of the actual costs and some a little less. He asked if it would be the case that under this system there would be a payment for sight tests. I assure him that, obviously, under an element of averaging in the new charges, some will pay a little more and some a little less than the cost. But it is not the case, overall, that payments by patients will exceed the cost of provision of glasses to the N.H.S. The charge will be made for the provision of glasses but not for sight tests. This is laid down as part of our policy and is being implemented.
Mr. Will Griffiths: I apologise for interrupting the hon. Gentleman. First, how on earth does he know how many people in the next 12 months will have to pay more to the optician than the recoverable charge and how many will have to pay less? We cannot know until the scheme has been in operation for some months. Second, would the hon. Gentleman agree that, to the extent that people pay something over the recoverable charge, they are contributing to something other than the price of the appliance? Surely that is clear.
Mr. Taylor: Under a system of limited averaging, as opposed to some other policy, a situation must arise in which some people pay a little more and others a little less. We have made the best estimates possible, and there is no question of a general sum being used for this purpose. Overall, there is no question of the income making a contribution towards the cost of sight testing.
The hon. Gentleman also referred to dental charges and said that in many cases people are getting free attention by way of examinations and that it follows that in many or most cases an X-ray may be required. In 1969, there were about 18 million inspections by dentists free of charge, and only 3 million X-rays. In other words, X-rays were taken in only about a sixth of the examinations. Under the previous arrangements brought in by the last Government, an X-ray would have cost 9s. on the basis of charging the full sum. Under the new arrangements, the charge will be only 4s. 6d., which is half the total. Even in the case quoted by the hon. Gentleman where there is just an

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inspection and an X-ray, instead of paying more, the patient will actually pay about half the sum.
Many questions were raised about other matters. The hon. Member for Rhondda West (Mr. Alec Jones) asked why women aged between 60 and 64 were not being exempted from prescription charges. This matter has been raised on many occasions. However, people are exempted at the age of 65 not because men become eligible for the retirement pension at that age but because, at that age, people are likely to need an increasing number of prescriptions. Clearly it would be an anomaly to allow a different exemption age for women or to exempt all people receiving retirement pensions. There are cases where a single or widowed woman pensioner could not afford to pay prescription charges, but the arrangements enable help to be given where it is needed.
The hon. Gentleman also referred to the categories of the sick who qualify for exemption. Whenever a formula is laid down, anomalies may extend from it. But it has proved difficult to establish the right categories. The co-operation of the medical profession is essential, and its representatives consider that doctors should not have to decide arbitrarily which patients should be exempted. This could lead to arguments between doctor and patient, with consequent harm to the doctor-patient relationship. We are willing to look at almost any proposal, but it would be misleading to suggest that any change would be easy.
In view of what has been said about hardship, perhaps I might refer to the importance of exemptions. The wide range of exemptions is retained, covering about 23 million people or roughly 42 per cent. of the population. In addition, anyone with an income below a certain level is entitled to exemption or refund. One half of all prescriptions are exempt from charge.
It has been argued, quite rightly, that there may be cases where people are eligible for exemption and do not apply for it. We are aware that there are cases like this. We have had and will continue to have an extensive campaign to try to make everyone aware of his entitlements and rights. My right hon. Friend referred to a number of leaflets
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on the subject, and we have the little red book, "Family Benefits: Your Right to Claim Then", which sets out the position simply and clearly. In the first few weeks of this new campaign, we have seen some dramatic results. Taking prescription charge claims alone, these have increased from an average of 346 a week before 1st April to 1,800 after that date. We hope that that will continue.
Then we have the cases in the margin. We have been urged to forget about exemptions and to concentrate on people in the margin who need a lot of prescriptions. We have the system of season tickets. For a cost of £3·50, people can obtain total exemption from charges for 12 months, in the sense that they can get any number of prescriptions for that cost. It has been suggested that £3·50 a year or £2 for six months is a lot. It represents a penny a day—for that sum anyone can be eligible for total exemption from charges.
We have had many discussions on these matters. I suggest that we are still in doubt about where the Opposition stand. In a debate of this importance, I believe that we are entitled to have some indication. We have had only one so far, and that came from the hon. Member for Halifax, who said that the difference was that the Labour Party imposed charges reluctantly. That reminded me of the old headmistress who told a child whom she was about to punish, "This will hurt me more than it will you." But, on a matter of this importance, that is not sufficient to enable people to know about the differences between the parties.
The crunch occurred when several propositions came from the hon. Member for Glasgow, Woodside (Mr. Carmichael), the hon. Member for Hitchin (Mrs. Shirley Williams), the hon. Member for Rhondda, West and the hon. Member for Halifax, who said that it was anomalous to introduce new charges, albeit with exemptions, and at the same time to cut taxation. She suggested that this was wrong. She wanted to know why we made concessions in one direction and imposed new charges in another. But surely, in the long term, the policy of right hon. and hon. Members opposite would have the same stultifying effect on the country's future as previous Socialist policies, which drove the nation to crisis after crisis and to economic stagnation.

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As the junior Minister responsible in Scotland for health and education, I have become increasingly aware of the desperate needs in our health and walfare services. We need to do more for the elderly and infirm. In the long term, the need will be met only by increasing the size of the national cake so that all the slices are larger and, in that way, providing more for the wage earner and the essential public services. That is what we did in our previous 13 years of office. We made substantial cuts in taxation, while achieving a massive increase in spending on the social services.
The opposition to these Regulations has been short sighted and irresponsible. The Opposition have had their chance. They condemned Health Service charges and then reintroduced them. We still do not know where they are. They created an economic climate in which real growth was virtually impossible and in which we could not have a major expansion in the social services without massive increases in taxation.
Under these Regulations, we are imposing additional charges. At the same time, we are making sure that the money obtained from them will come from those who can afford it, and we are also ensuring that much more will be made available for the health and social work services.
The Opposition had their chance. They wavered, bungled and failed. Our proposals are fair, just and reasonable. They give help where it is needed and contribute to a great leap forward in our expenditure on hospitals and social work services. I have no doubt that the House will approve these Regulations and reject the Motion.
Question put,
That an humble Address be presented to Her Majesty, praying that the National Health Service (Charges) Regulations 1971 (S.I., 1971, No. 340), dated 3rd March, 1971, a copy of which was laid before this House on 10th March, be annulled:—
The House divided: Ayes 251, Noes 280.

Division No. 350.]

AYES

[7.0 p.m.

Abse, Leo

Darling, Rt. Hn. George

Griffiths, Will (Exchange)

Albu, Austen

Davidson, Arthur

Gunter, Rt. Hn. R. J.

Allaun, Frank (Salford, E.)

Davies, Denzil (Llanelly)

Hamilton, William (Fife, W.)

Allen, Scholefield

Davies, G. Elfed (Rhondda, E.)

Hamling, William

Archer, Peter (Rowley Regis)

Davies, Ifor (Cower)

Hannan, William (G'gow, Maryhill)

Ashley, Jack

Davies, S. O. (Merthyr Tydvil)

Hardy, Peter

Ashton, Joe

Davis, Clinton (Hackney, C.)

Harper, Joseph

Atkinson, Norman

Deakins, Eric

Harrison, Walter (Wakefield)

Bagier, Gordon A. T.

de Freitas, Rt. Hn. Sir Geoffrey

Hart, Rt. Hn. Judith

Barnett, Joel

Delargy H. J.

Hattersley, Roy

Beaney, Alan

Dell, Rt. Hn. Edmund

Healey, Rt. Hn. Denis

Benn, Rt. Hn. Anthony Wedgwood)

Dempsey, James

Heffer, Eric S.

Bennett, James(Glasgow, Bridgeton)

Doig, Peter

Hooson, Emlyn

Bidwell, Sydney

Dormand, J. D.

Horam, John

Bishop, E. S.

Douglas, Dick (Stirlingshire, E.)

Houghton, Rt. Hn. Douglas

Blenkinsop, Arthur

Driberg, Tom

Howell, Denis (Small Heath)

Booth, Albert

Duff, A. E. P.

Huckfield, Leslie

Boyden, James (Bishop Auckland)

Dunnett, Jack

Hughes, Rt. Hn. Cledwyn (Anglesey)

Bradley, Tom

Eadle, Alex

Hughes, Mark (Durham)

Brown, Bob (N 'c' tle-upon-Tyne, W.)

Edelman, Maurice

Hughes, Robert (Aberdeen, N.)

Brown, Hugh D. (G'gow, Provan)

Edwards, Robert (Bilston)

Hughes, Roy (Newport)

Brown, Ronald (Shoreditch&F'bury)

Edwards, William (Merioneth)

Hunter, Adam

Buchan, Norman

English, Michael

Irvine,Rt.Hn.SirArthur(EdgeHill)

Callaghan, Rt. Hn. James

Evans, Fred

Janner, Greville

Campbell, I. (Dunbartonshire, W.)

Faulds, Andrew

Jay, Rt. Hn. Douglas

Cant, R. B.

Fisher,Mrs. Doris(B'ham,Lady wood

Jeger, Mrs.Lena(H'b'n&St.P'cras.S.)

Carmichael, Neil

Fitch, Alan (Wigan)

Jenkins, Hugh (Putney)

Carter, Ray(Birmingh'm, Northfield)

Fletcher, Raymond (Ilkeston)

Jenkins, Rt. Hn.Roy (Stechford)

Carter-Jones, Lewis (Eccles)

Fletcher, Ted (Darlington)

John, Brynmor

Clark, David (Colne Valley)

Foley, Maurice

Johnson, Carol (Lewisham, S.)

Cocks, Michael (Bristol, S.)

Foot, Michael

Johnson, Walter (Derby, S.)

Forrester, John

Jones, Barry (Flint, E.)

Cohen, Stanley

Freeson, Reginald

Jones, Dan (Burnley)

Coleman, Donald

Galpem, Sir Myer

Jones,Rt.Hn.Sir Elwyn(W.Ham,S.)

Concannon, J. D.

Garrett, W. E.

Jones, Gwynoro (Carmarthen)

Conlan, Bernard

Gilbert, Dr. John

Jones, T. Alec (Rhondda, W.)

Corbet, Mrs. Freda

Ginsburg, David

Judd, Frank

Cox, Thomas (Wandsworth, C.)

Golding, John

Kaufman, Gerald

Crawshaw, Richard

Cordon Walker, Rt. Hn. P. C.

Kelley, Richard

Crosland, Rt. Hn. Anthony

Gourlay, Harry

Kerr, Russell

Crossman, Rt. Hn. Richard

Grant, George (Morpeth)

Kinnock, Neil

Cunningham, G. (Islington, S.W.)

Grant, John D. (Islington, E.)

Lambie, David

Dalyell, Tam

Griffiths, Eddie (Brightside)

Lamond, James

Latham, Arthur

Mulley, Rt. Hn. Frederick

Small, William

Lawson, George

Murray, Ronald King

Smith, John (Lanarkshire, N.)

Leadbitter, Ted

Ogden, Eric

Spearing, Nigel

Lee, Rt. Hn. Frederick

O'Halloran, Michael

Spriggs, Leslie

Leonard, Dick

O'Malley, Brian

Stallard, A. W.

Lestor, Miss Joan

Oram, Bert

Stewart, Rt. Hn. Michael (Fulham)

Lever, Rt. Hn. Harold

Orbach, Maurice

Stoddart, David (Swindon)

Lewis, Ron (Carlisle)

Orme, Stanley

Stonehouse, Rt. Hn. John

Lipton, Marcus

Oswald, Thomas

Strang, Gavin

Lomas, Kenneth

Owen, Dr. David (Plymouth, Sutton)

Strauss, Rt. Hn. G. R.

Lyon, Alexander W. (York)

Palmer, Arthur

Summerskill, Hn. Dr. Shirley

Lyons, Edward (Bradford, E.)

Pannell, Rt. Hn. Charles

Taverne, Dick

Mabon, Dr. J. Dickson

Parker, John (Dagenham)

Thomas,Rt.Hn.George (Cardiff,W.)

McBride, Neil

Parry, Robert (Liverpool, Exchange)

Thomas, Jeffrey (Abertillery)

McCartney, Hugh

Pendry, Tom

Thomson, Rt. Hn. G. (Dundee, E.)

McElhone, Frank

Pentland, Norman

Thorpe, Rt. Hn, Jeremy

McGuire, Michael

Perry, Ernest G.

Tinn, James

Mackenzie, Gregor

Prentice, Rt. Hn. Reg.

Tomney, Frank

Mackie, John

Prescott, John

Tuck, Raphael

Mackintosh, John P.

Price, William (Rugby)

Urwin, T W.

Maclennan, Robert

Probert, Arthur

Varley, Eric G.

McMillan, Tom (Glasgow, C.)

Rankin, John

Wainwright, Edwin

McNamara, J. Kevin

Reed, D. (Sedgefield)

Walden, Brian (B'm'ham, All Saints)

MacPherson, Malcolm

Rees, Merlyn (Leeds, S.)

Walker, Harold (Doncaster)

Mahon, Simon (Bootle)

Rhodes, Geoffrey

Wallace, George

Mallalieu, E. L. (Brigg)

Richard, Ivor

Watkins, David

Weitzman, David

Mallalieu, J. P. W. (Huddersfield, E.)

Roberts, Albert (Normanton)

Wellbeloved, James

Marks, Kenneth

Roberts, Rt.Hn.Goronwy(Caernarvon)

Wells, William (Walsall, N.)

Marsden, F.

Robertson, John (Paisley)

Whitehead, Phillip

Marsh, Rt. Hn. Richard

Roderick, Caerwyn E.(Br'c'n&R'dnor)

Whitlock, William

Mayhew, Christopher

Roper, John

Willey, Rt. Hn. Frederick

Meacher, Michael

Rose, Paul B.

Williams, Alan (Swansea, W.)

Mellish, Rt. Hn. Robert

Ross, Rt. Hn, William (Kilmarnock)

Williams, Mrs. Shirley (Hitchin)

Mendelson, John

Sheldon, Robert (Ashton-under-Lyne)

Williams, W. T. (Warrington)

Mikardo, Ian

Shore, Rt. Hn. Peter (Stepney)

Wilson, Alexander (Hamilton)

Millan, Bruce

Short, Rt.Hn.Edward(N'c'tle-u-Tyne)

Wilson, Rt. Hn. Harold (Huyton)

Molloy, William

Short, Mrs. Renée (W'hampton,N.E.)

Wilson, William (Coventry, S.)

Morgan, Elystan (Cardiganshire)

Silkin, Rt. Hn. John (Deptford)

Woof, Robert

Morris, Alfred (Wythenshawe)

Silkin, Hn. S. C. (Dulwich)

Morris, Charles R. (Openshaw)

Sillars, James

TELLERS FOR THE AYES:

Morris, Rt. Hn. John (Aberavon)

Silverman, Julius

Mr. Ernest Armstrong and

Moyle, Roland

Skinner, Dennis

Mr. James Hamilton.

NOES

Adley, Robert

Chapman, Sydney

Fookes, Miss Janet

Alison, Michael (Barkston Ash)

Chataway, Rt. Hn. Christopher

Fortescue, Tim

Allason, James (Hemel Hempstead)

Chichester-Clark, R.

Foster, Sir John

Amery, Rt. Hn. Julian

Churchill, W. S.

Fowler, Norman

Archer, Jeffrey (Louth)

Clark, William (Surrey, E.)

Fraser, Rt. Hn. Hugh(St'fford & Stone)

Astor, Hn. John

Clarke, Kenneth (Rushcliffe)

Fry, Peter

Atkins, Humphrey

Clegg, Walter

Galbraith, Hn. T. G.

Awdry, Daniel

Cockeram, Eric

Gardner, Edward

Baker, Kenneth (St. Marylebone)

Cooke, Robert

Gibson-Watt, David

Balniel, Lord

Coombs, Derek

Gilmour, Ian (Norfolk, C.)

Barber, Rt. Hn. Anthony

Cooper, A. E.

Gilmour, Sir John (Fife, E.)

Batsford, Brian

Corfield, Rt. Hn. Frederick

Glyn, Dr. Alan

Bell, Ronald

Cormack, Patrick

Godber, Rt. Hn. J. B.

Bennett, Sir Frederic (Torquay)

Costain, A. P.

Goodhart, Philip

Bennett, Dr. Reginald (Gosport)

Critchley, Julian

Goodhew, Victor

Benyon, W.

Crouch, David

Gower, Raymond

Biffen, John

Crowder, F. P.

Grant, Anthony (Harrow, C.)

Biggs-Davison, John

Curran, Charles

Gray, Hamish

Davies, Rt. Hn. John (Knutsford)

Green, Alan

Blaker, Peter

d'Avigdor-Goldsmid, Sir Henry

Griffiths, Eldon (Bury St. Edmunds)

Boardman, Tom (Leicester, S.W.)

d'Avigdor-Goldsmid,Maj.-Gen.James

Body, Richard

Dean, Paul

Grylls, Michael

Boscawen, Hn. Robert

Dixon, Piers

Gurden, Harold

Bossom, Sir Clive

Dodds-Parker, Douglas

Halt, Miss Joan (Keighley)

Bowden, Andrew

Drayson, G B.

Hall, John (Wycombe)

Boyd-Carpenter, Rt. Hn. John

du Cann, Rt. Hn. Edward

Hamilton, Michael (Salisbury)

Bray, Ronald

Dykes, Hugh

Hannam, John (Exeter)

Brewis, John

Eden, Sir John

Harrison, Col. Sir Harwood (Eye)

Brinton, Sir Tatton

Elliot, Capt. Walter (Carshalton)

Haselhurst, Alan

Brown, Sir Edward (Bath)

Elliott, R. W. (N'c'tle-upon-Tyne,N.)

Hastings, Stephen

Bruce-Gardyne, J.

Emery, Peter

Havers, Michael Hay, John

Bryan, Paul

Eyre, Reginald

Hayhoe, Barney

Buck, Antony

Farr, John

Heseltine, Michael

Bullus, Sir Eric

Fell, Anthony

Hicks, Robert

Burden, F. A.

Fenner, Mrs. Peggy

Higgins, Terence L.

Butler, Hn. Adam (Bosworth)

Fidler, Michael

Hiley, Joseph

Campbell, Rt.Hn.G.(Moray&Nairn)

Finsberg, Geoffrey (Hampstead)

Hill, John E. B. (Norfolk, S.)

Carlisle, Mark

Fisher, Nigel (Surbiton)

Hill, James (Southampton, Test)

Channon, Paul

Fletcher-Cooke, Charles

Holland, Philip

312

313

Holt, Miss Mary

Meyer, Sir Anthony

Shaw, Michael (Sc'b'gh & Whitby)

Hordern, Peter

Mills, Peter (Torrington)

Shelton, William (Clapham)

Hornby, Richard

Mills, Stratton (Belfast, N.)

Simeons, Charles

Hornsby-Smith,Rt.Hn.Dame Patricia

Mitchell, David (Basingstoke)

Sinclair, Sir George

Howe, Hn. Sir Geoffrey (Reigate)

Moate, Roger

Skeet, T. H. H.

Howell, David (Guildford)

Molyneaux, James

Smith, Dudley (W'wick & L'mington)

Howell, Ralph (Norfolk, N.)

Money, Ernie

Soref, Harold

Hutchison, Michael Clark

Monks, Mrs. Connie

Spence, John

Iremonger, T, L.

Monro, Hector

Sproat, Iain

James David

Montgomery, Fergus

Stainton, Keith

Jenkin, Patrick (Woodford)

More, Jasper

Stanbrook, Ivor

Jennings, J. C. (Burton)

Morgan, Geraint (Denbigh)

Stewart-Smith, D. G. (Belper)

Jessel, Toby

Morgan-Giles, Rear-Adm.

Stodart, Anthony (Edinburgh, W.)

Johnson Smith, G. (E. Grinstead)

Morrison, Charles (Devizes)

Stoddart-Scott, Col. Sir M.

Jones, Arthur (Northants, S.)

Mudd, David

Stokes, John

Jopling, Michael

Murton, Oscar

Stuttaford, Dr. Tom

Joseph, Rt. Hn. Sir Keith

Neave, Airey

Sutcliffe, John

Kaberry, Sir Donald

Nicholls, Sir Harmar

Tapsell, Peter

Kellett, Mrs. Elaine

Normanton, Tom

Taylor, Sir Charles (Eastbourne)

Kershaw, Anthony

Onslow, Cranley

Taylor,Edward M.(G'gow,Cathcart)

King, Evelyn (Dorset, S.)

Oppenheim, Mrs. Sally

Taylor, Frank (Moss Side)

King, Tom (Bridgwater)

Orr, Capt. L. P. S.

Taylor, Robert (Croydon, N.W.)

Kinsey, J. R.

Osborn, John

Tebbit, Norman

Kirk, Peter

Page, Graham (Crosby)

Temple, John M.

Kitson, Timothy

Page, John (Harrow, W.)

Thatcher, Rt. Hn. Mrs Margaret

Knight, Mrs. Jill

Parkinson, Cecil (Enfield, W.)

Thomas, John Stradling (Monmouth)

Knox, David

Percival, Ian

Thomas, Rt. Hn. Peter (Hendon, S.)

Lambton, Antony

Peyton, Rt. Hn. John

Thompson, Sir Richard (Croydon, S.)

Lane, David

Pink, R. Bonner

Tilney, John

Langford-Holt, Sir John

Pounder, Rafton

Trafford, Dr. Anthony

Trew, Peter

Legge-Bourke, Sir Harry

Powell, Rt. Hn. J. Enoch

Tugendhat, Christopher

Le Marchant, Spencer

Price, David (Eastleigh)

Turton, Rt. Hn. R. H.

Lewis, Kenneth (Rutland)

Prior, Rt. Hn. J. M. L.

van Straubenzee, W. R.

Llovd,Rt.Hn. Geoffrey(Sut'nC'dfield)

Proudfoot, Wilfred

Vaughan, Dr. Gerard

Lloyd, Ian (P'tsm'th, Langstone)

Pym, Rt. Hn. Francis

Waddington, David

Longden, Gilbert

Quennell, Miss J. M.

Walker, Rt. Hn. Peter (Worcester)

Loveridge, John

Raison, Timothy

Walker-Smith, Rt. Hn. Sir Derek

Luce, R. N.

Ramsden, Rt. Hn. James

Walters, Dennis

McAdden, Sir Stephen

Rawlinson, Rt. Hn. Sir Peter

Ward, Dame Irene

MacArthur, Ian

Redmond, Robert

Warren, Kenneth

McCrindle, R. A.

Reed, Laurance (Bolton, E.)

Weatherill, Bernard

McLaren, Martin

Rees, Peter (Dover)

Wells, John (Maidstone)

Maclean, Sir Fitzroy

Denton, Rt. Hn. Sir David

Whitelaw, Rt. Hn. William

MoMaster, Stanley

Rhys Williams, Sir Brandon

Wiggin, Jerry

Macmillan, Maurice (Farnham)

Ridley, Hn. Nicholas

Wilkinson, John

McNair-Wilson, Michael

Ridsdale, Julian

Wolrige-Gordon, Patrick

McNair-Wilson, Patrick (NewForset)

Roberts, Michael (Cardiff, N.)

Wood, Rt. Hn. Richard

Maddan, Martin

Roberts, Wyn (Conway)

Woodhouse, Hn. Christopher

Madel, David

Rossi, Hugh (Hornsey)

Woodnutt, Mark

Maginnis, John E.

Rost, Peter

Worsley, Marcus

Marten, Nell

Russell, Sir Ronald

Wylie, Rt. Hn. N. R.

Mather, Carol

St. John-Stevas, Norman

Maude, Angus

Sandys, Rt. Hn. D.

TELLERS FOR THE NOES:

Maudling, Rt. Hn. Reginald

Scott, Nicholas

Mr. Paul Hawkins and

Mawby, Ray

Sharpies, Richard

Mr. Keith Speed.

Maxwell-Hyslop, R. J.

MERSEY DOCKS AND HARBOUR BILL (By Order)
Order for Second Reading read.
Mr. Speaker: Before calling on an hon. Member to open the debate, I have two things to say. First, I think that it would be for the convenience of the House if the Instruction in the name of the hon. and learned Member for Southport (Mr. Percival)
That it be an Instruction to the Committee on the Bill that they so amend the Bill as to provide that not less than one half of the amount due upon the redemption of each unit of the new securities shall be paid to the holder of the said unit on the date on which it falls due for redemption or forthwith if the said date has already passed.
314
and the Instruction in the name of the hon. Member for Liverpool, Wavertree (Mr. Tilney)
That it be an Instruction to the Committee on the Bill that they amend Schedule 5 to the Bill so that it no longer repeals the duty imposed by the Mersey Docks Acts Consolidation Act. 1858 s. LXIX and the Mersey Docks and Harbour Board Act, 1950 s. 21 to maintain landing stages.
were discussed on the Motion for the Second Reading of the Bill.
Second, I have selected the Amendment in the names of the right hon. Member for Birkenhead (Mr. Dell) and other hon. Members, and in due course I will call the right hon. Gentleman to move that Amendment. When the right hon. Gentleman has moved the Amendment, I will not restrict the debate to the

315
exact terms of the Amendment but will allow reasonable latitude.
7.12 p.m.
Mr. John M. Temple: I beg to move, That the Bill be now read a Second time.
Before I explain the principles of the Bill, I think that it will be appropriate for me to give a brief history of the port of Liverpool. For 100 years up to 1811, the port was managed by Liverpool Corporation. Then for a period of 50 years until 1858 the port was jointly managed by the Corporation and by what is now termed the Mersey Docks and Harbour Board.
A significant year was 1858. In that year the Corporation dropped out of its responsibilities and the whole responsibility then rested on the Mersey Docks and Harbour Board. The Board was established as a public trust with 24 directors appointed by the port users and four directors Lppointed by the Government. That has been the situation up to this day.
Right hon. and hon. Members may think it strange that I have been asked by the promoters of the Bill to move its Second Reading. I think it was thought that I had a sufficient knowledge of the port of Liverpool and a sufficient connection with Merseyside and was sufficiently detached from the immediate difficulties which surround the port.
I may say in explanation of my being chosen that my family for three generations on both sides has been closely associated with Liverpool and was established on Merseyside before the Mersey Docks and Harbour Board took over responsibilities for the port. As a young man I can remember starting in business in Liverpool. As a boy I can remember looking out from my father's offices on the dock road in Liverpool and watching the great Clydesdale horses drawing the drays which were loaded with bales of cotton which had come from the United States of America and which were destined for the mills of Lancashire. I can therefore claim to have had a long connection with Liverpool and with Merseyside and to have a deep love and affection for everything that goes with the city and port of Liverpool.
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The reason for the Bill is the Board's present financial situation. The Bill is needed urgently. Hon. Members may have read in today's papers that in the last financial year up to December, 1970 the Board, on a slightly different accounting basis, incurred a loss of £3 million, which was considerably greater than the loss which was incurred in 1969. This indicates the magnitude of the financial problems facing the Board.
After the 1970 General Election, consultations started between the Government and the Board. In December of the same year a receiver of rates was appointed by the Government. The first default on bonds occurred in January of this year. I will not give much detail of this part of the story, because it has been the subject of previous debates and a number of Questions, and hon. Members on both sides who are interested will have studied the debates carefully.
The most important point before the House tonight concerns what I call the guiding principles of the present Board in respect of what it wants to try to achieve for the port. I will set out those guiding principles very succinctly, and I hope clearly, as, first, to continue to expand and to modernise the port to benefit both port users and all employees and, second, to convert a public trust into a statutory company, treating all bond holders as equals. I hope that this statement of guiding principles will give a certain amount of encouragement to the right hon. Member for Birkenhead (Mr. Dell), who has tabled a somewhat critical Amendment.
I will now give a general explanation of the Bill, and towards the end of my speech I will explain the promoters' views of the two Instructions.
The promoters are the new board of the Mersey Docks and Harbour Board under the chairmanship of Mr. J. G. Cuckney. The present management of the Board is under a small executive committee. I have met the committee, and I have met the Chairman of the Board in Liverpool and in London, and I have met people who have been interested in the Board's affairs. They have expressed confidence, not only in the chairman but also in his executive committee.

317
The executive committee has faced a distressing financial situation and is deeply conscious of its responsibility. Clearly there is no easy way out of the Board's difficulties, but a ray of light appears when the situation is considered in connection with the great Seaforth container terminal. I use the term "container terminal" in a general sense, because the Seaforth project will be more than a container terminal. It will have general cargo facilities and bulk handling facilities for grain and meat. Without doubt, there is great urgency for the Bill. Unless the Bill succeeds today, it is doubtful whether Government support on the present scale will be forthcoming. I hope that my right hon. Friend the Minister, who hopes to catch your eye later, Mr. Speaker, will make the Government's position clear. I think I can at least anticipate that my right hon. Friend will express approval in principle of the Bill, and I hope very much that he will be able to help in other directions.
The new company is to be called the Mersey Docks and Harbour Company. It will be a statutory company, with most of the provisions of the 1958 Companies Act applicable thereto. Hon. Members will know that there was a previous Bill, which was withdrawn, the effect of which would have been an arbitrary writing down of the capital by about 30 per cent. That was considered in all quarters to be too inflexible, and the present proposal is that there should be a moratorium of repayments of the capital debt, and that at the same time interest payments should be written down by a maximum of 30 per cent. In other words, 70 per cent., at least, of interest would be paid during the moratorium period. The Bill has been brought forward after extensive consultations with all the various bodies who could possibly be concerned, and I hope very much, therefore, that it will prove more acceptable than the Bill which was withdrawn.
Mr. Edmund Dell: The hon. Gentleman will be aware that in a document issued to the holders of the capital debt of the Mersey Docks and Harbour Board on 29th January of this year, reference is made in paragraph 7 to an informal Security Holders' Committee. Has that committee approved the terms of the Bill?
Mr. Temple: The committee was a party to the consultations to which I have referred. I do not think I can claim that it necessarily approved the Bill, but the committee was a party to the consultations, and I gather that it has not actively disapproved. I believe that to be the position.
I think it is worth looking at the precedents for statutory companies in connection with docks and harbours. There are two now, those at Manchester and Felixstowe. Both are operating satisfactorily and are paying dividends on their ordinary share capital, so that in itself is a relatively hopeful sign.
It is proposed that the Board of the new company will have a majority of directors representing the capital debt holders, and that Her Majesty's Government will continue to have representatives on the Board.
In connection with the reorganisation scheme, the Board has rationalisation plans on hand, the object of which is to maximise the present capital assets and encourage modernisation schemes. I give an undertaking that the Board will press on urgently with its review of the whole viability of the port of Liverpool, because on the result of the study hangs the reorganisation programme for the capital structure, and the Board is anxious to bring in this reorganisation as soon as possible.
I shall now give a short explanation of what I regard as the key Clauses, and also make a reference to the position of pensioners. One of the more important Clauses is Clause 5, which is concerned with the Liverpool Pilotage Order. I am thankful to say that negotiations have been taking place with the appropriate bodies. An Amendment will be tabled in Committee, and it will, I think, be agreed. I believe that Clause 5, as amended, will be satisfactory. At the request of the local authorities, Clause 8(3) is to be omitted.
Clause 12 is important. It deals with priority borrowings. Priority borrowings, in effect, are those borrowings which the board has made from the Government subsequent to 27th December, I understand that this Clause may be the subject of an Amendment in Committee, which will permit the Government to renounce their priority rights at any time,

319
rather than just when the scheme was promulgated. It will be a permissive change in the Clause, which I hope will prove acceptable.
I now draw attention to a feature of the Bill which I found it very hard to go along with, but I have reconciled myself to this feature now. I am refering to Clause 38(1)(f), which is concerned with the conversion of capital. The House will know that there are certain actions pending before the courts which have been brought by certain bond holders whose bonds should have been redeemed in January of this year. In the normal course of events I should not have agreed to support a provision of this nature but, having beer' associated with these affairs for some time, I think I can say that very few things in connection with the board are strictly normal. In these circumstances, I have reconciled myself to agree with this provision, and my reason for doing so is that if it were not in the Bill there would not be the equity as between all bond holders which I believe to be essential for the reorganisation scheme. That is my reason for agreeing to this provision, and I hope that it will be accepted as being adequate.
Clauses 47 and 48 are concerned with the ultimate reorganisation of the Board's capital, which must be reorganised not later than the end of 1974. The proposals, briefly, are that an approved scheme should be prepared by the Board, that on the Board there should be a majority of the representatives of the capital debt holders, and that the scheme should be adopted by an ordinary resolution. If there is a difficulty about the adoption of the scheme, the Bill says that there should be an adjudication by an independent expert. The promoters have had second thoughts about the individual expert, and they are prepared to accept, shall I say, three wise men whose qualifications have, I believe, been discussed in certain circles. Possibly the wisdom of three is greater than that of one, and I hope that this provision will give a certain amount of satisfaction.
The other Clause which calls for comment is Clause 53(1), which provides that under the Bill a receiver of rates appointed by the court should be discharged. I admit that we had to go
320
back a long way to get a precedent for the discharge of a receiver of rates in a Parliamentary Bill. All the precedents are in 1867 and 1869. Such situations are, fortunately, extremely rare. I do not think that a receiver of rates gives confidence amongst port users, and I believe that this is a sensible provision, having regard to all the extreme difficulties which surround the Board.
I now turn for a moment, though I do not mean in any way to relegate the importance of my next paragraph, to the position of pensioners. A good deal has been said about their position, and the Board is deeply conscious of its responsibility towards its pensioners. The Board recently called in pension consultants in order to find out the capitalised liability of the pensions which it has to pay. Although the report has not been finalised, it appears that the capitalised liability facing the Board will be about £7 million, and that if the pensioners were paid on an annual basis, which they have been hitherto, the annual charge would be about £800,000 to £1 million. I can give an undertaking that the unions and staff associations will be consulted when the consultants' full report is available, and I think we can say that the position of the pensioners is therefore secure.
I turn now to the two Instructions which have been received, and first to that in the names of my hon. and learned Friend the Member for Southport (Mr. Percival) and my hon. Friend the Member for Surrey, East (Mr. William Clark). Their proposals are that the Board should repay 50 per cent, of the bonds as they fall due, and should, of course, repay the 50 per cent. of the bonds which fell due in January and March of this year. Everyone must have considerable sympathy for my hon. Friend's proposals and objectives. Their objectives are to secure a quotation for the bonds on the Stock Exchange, and also to put a floor in the bond market—two very laudable objectives.
On the question of the quotation, the board is particularly keen to bring forward its scheme as soon as possible. One reason is that, as soon as the scheme becomes definitive, a quotation can be obtained on a recognised stock exchange. I hope that that ray of hope will be accepted by my hon. Friends.

321
Putting a floor in the bond market is a very difficult matter. The promoters feel that to pay out some bondholders 50 per cent. as they go would prejudice the chances of other holders, not forgetting that there is a number of irredeemable securities in the form of annuities, for which of course there is no terminal date. I shall have to explain to my hon. Friends that the financial position of the board is at present so serious that it would be irresponsible of it to accept these proposals. I shall have to advise the House that they would be unacceptable to the promoters.
I turn now to the Instruction in the name of my hon. Friend the Member for Liverpool, Wavertree (Mr. Tilney). He is rightly concerned, on behalf not only of his constituents but of the Merseyside users of the ferry services, that the landing stage at present maintained by the Board at Liverpool should continue to operate for the ferry services. I can understand this point of view, and the promoters accept its strength.
I am happy to be able to inform my hon. Friend and the House that a series of conferences have taken place over a number of years, but particularly over the last few days. As a result of a meeting only yesterday between, on the one hand, the Merseyside Passenger Transport Executive and the Birkenhead and Wallasey Corporations and, on the other, the Mersey Docks and Harbour Board, an agreement in principle on a joint responsibility has been reached. I hope that my hon. Friend will feel that that is sufficient to meet the situation and that the details can be worked out in Committee.
In all these difficult circumstances in which the Board finds itself, I believe that the present proposals are as equitable as possible, having regard to the many conflicting and deserving interests. The object of the Board is to revitalise the Port of Liverpool and thereby to provide a satisfactory way of life for all those engaged in the port and indeed all those interested in Merseyside.
The port of Liverpool, which it is a thrill to visit, has, tied up against its great docks the ships of all the maritime nations. Not only is it the second largest port in the country, but it is of ever-increasing importance as an entry port for
322
oil and oil products for the refineries on the South Bank of the Mersey.
Having met the new executive of the port, I can assure the House that I every confidence that they have the capacity to carry out these plans. I know that their problems are considerable. I can give one final undertaking on behalf of the promoters. Where there are small, or large, difficulties, the Board is willing to enter into discussions at the Committee stage. I hope that, with those assurances, the House will feel able to give the Bill a Second Reading.
7.35 p.m.
Mr. Edmund Dell: I beg to move, to leave out from "That" to the end of the Question and to add instead thereof:
This House declines to give a Second Reading to a Bill, which, first provides no guarantee at all for the future of the Port of Liverpool in that, the action of the Government in refusing adequate financial support having ruined the credit worthiness of the Mersey Docks and Harbour Board for many years ahead, it makes no provision at all for the future development of that Port; secondly, is likely, as a result of the failure to provide for the future development of the Port, to lead to a running down of the Port and to redundancies; thirdly, constitutes a Statutory Company based on the conscripted capital of the loan stockholders without any guarantee of the extent of the write-down that will be proposed; fourthly, will lead to a scale of fees for Port services related not to the needs of the area for economic development, but to the equity capital compulsorily invested in it; and believes that the Bill fails to provide a proper basis for the Port's future which would in fact he provided only by public ownership as proposed by the previous Government.
This is in form a Private Bill, although whether it is so in fact is a matter on which I will cast some doubt later, so we on this side have not put on any Whip. It is perhaps a measure of the nature of the Bill that it has not been found possible to find any Merseyside Member to sponsor it. The hon. Member for the City of Chester (Mr. Temple) has a beautiful constituency on the banks of the Dee, but he is not a Merseyside Member. We will in future call him as a learned authority in favour of retrospective legislation.
The Mersey Docks and Harbour Board has at any rate this cause for congratulation—this is one Bill which it has not been forced to withdraw. Of course, the reason is that it is in fact a Government Bill, not a Private Bill. No public

323
trust or other authority would bring forward a Bill like this without the support and authorisation of the Government.
The previous Bill was withdrawn according to a great principle—that if people's property is to be confiscated they should at least be consulted first.
Therefore, this Bill contains the forms of consultation, although I do not imagine that those who are going to be consulted will be particularly happy with the results or even with the fact of consultation. The hon. Member for the City of Chester said that there would be three arbiters rather than one, on the grounds that three confiscators are better than one. We prefer no confiscators at all.
It has been said that the reason that the original Bill was withdrawn and replaced by this one was to provide the fact of consultation. But this is not the real reason. The real reason is that the previous Bill provided for a writedown of 30 per cent. in the capital of the holders of the capital debt. But now the Board cannot say whether 30 per cent. is enough. It has introduced the Bill not so much to provide for consultation as to provide itself with the possibility, if it proves necessary, of a larger write-down than 30 per cent.
The Bill is presented and justified on the basis that this is the way to secure the future of the Port and the only way of avoiding further uncertainty. But the uncertainty was created by the Government, by their decision last November not to give the necessary support to the Board in the situation with which it was faced.
As a Merseyside M.P. I emphasise that the Board had no consultation with Labour Members on Merseyside before introducing the Bill. We were told that it was a Bill which had to be introduced. I do not wish to complain in any way of the information which the Board has provided to Labour Members. We have had frequent discussions with the Board and it has answered, so far as it has been able, all the questions which we have put to it. But there was no consultation. We were just presented with the Bill as the answer to the predicament of the Port of Liverpool. We were offered a dagger pointed at our back. We were told, "Either you support the Bill or
324
there can be no guarantee for the future of the Port of Liverpool". We have been given no information to show that this is a way of securing the port's future. Indeed, judging by the answers which the Board has honourably and honestly given to questions which we have asked, I do not know how it can claim that the Bill provides any security for the future of the Port of Liverpool.
We have asked many questions. For example, we have asked: What is the financial position of the port? The answer has been, "We do not know, and we shall not know for up to three years" —the period provided in the Bill for the preparation of the draft scheme.
We have asked: What write-down will be necessary to provide the capital base of the Mersey Docks and Harbour Co.? Will it be 30 per cent., more than 30 per cent. or perhaps very much more than 30 per cent.? Again the answer is that the Board does not know, and it does not know until in due course—a maximum of three years—the draft scheme is presented to the new debenture holders.
We have asked whether in its judgment the port can be made viable without Government subsidy—without, for example, using the amended provision, to which the hon. Gentleman referred, by which the Government could renounce their priority on subsequent lendings. But again it does not know.
Finally, as a further example, we have asked whether it can feel sure, or feel reasonably sure, that adequate finance will be made available by the Government for the development not just of Seaforth, but for the development of the general requirements of the port. After all, after this default, money will not be available from any other source. Again it does not know.
The Bill is not a recipe for removing uncertainty. It is a recipe for three years continuing uncertainty. Nevertheless, we are told that the Bill is vital to remove uncertainty and that, unless this uncertainty is removed, firms will move away from the Port of Liverpool But the Bill perpetuates uncertainty, it does not remove it.
There is a clear and simple way to remove uncertainty. The Government should make a simple statement: "We

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will provide for the future of the port and for Rs development and for the necessary level of investment in the port." After all, the Government are in full control. It is not merely a matter that they will have a percentage of the new debenture stock; they, in effect, in reality, whatever the form, appointed the chairman and deputy chairman, and they are the only conceivable source of finance for this new company if it is formed by this legislation.
In previous debates I called this the cheapest takeover in history. The Government are in control without having had to pay for control. Unless the Government are prepared to say tonight that they will provide adequately for the future, the Bill does not help. If they say that, then the Bill is not necessary. A Bill might be needed to change the management. The old form of the Board certainly needed changing. Therefore, a Bill to that end might be necessary. But the Bill before us would not be necessary if the Government were prepared to make that statement. As it is, the continuing uncertainty can well lead to the running-down of the port and to redundancies.
The statutory company is to be established on the basis of a conflict of interests. The bond-holders, the holders of the capital debt, will naturally want the minimum write-down in their capital. The port, if it is to provide the services necessary in the national interest and for the North-West, needs a competitive level of fees. There will be pressure, especially from the large holders of loan stock, for the highest possible level of fees. In other words, the interests of the port may be sacrificed to the interests of the conscripted loan stock holders. It is entirely wrong that the future of the port should have to be determined by reference to an uneconomic load of debt.
The hon. Member for the City of Chester expressed his regret for the small investors who are being press-ganged into this statutory company. I should like to quote one gentleman, who was a Conservative candidate at the last election, Nigel Lawson, writing in the Evening Standard of 17th March, 1971. He, referring to what is being done, said:
"It is a cheap and nasty exercise which will cause considerable hardship in individual cases … the small savers who are being so heavily
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penalised—people this Government oestensibly seeks to cherish—have neither responsibility for the Docks debacle nor any awareness that they were at risk."
Everyone in this House knows that this is true.
It may be said: "Why should we worry about small investors losing £200 or £300 of their hard-earned savings at a time of massive growing unemployment when a lot of people are losing a great deal more? The fact of the matter is that there is a quality of deliberate, calculated, pettiness and dishonesty about this matter which is this Government's particular trade mark. With this Government one needs to read the small print.
Mr. Dan Jones: I should like to ask my right hon. Friend a direct question as a result of his recent utterances as a number of my constituents are involved in the precise category outlined by him. Is it my right hon. Friend's opinion that under the Bill these small investors will go to the wall in totality?
Mr. Dell: I hope that they will not go to the wall in totality. The extent to which their interests will be sacrificed is dependent on the draft scheme which will be produced. No assurances have been given about the extent of any write-down of capital which will take place.
I should like to make two comments only about the small investors, because this matter has been discussed in the House before. The Mersey Docks and Harbour Board takes this Act of confiscation too lightly. I know that it is fond of using this further weapon as a way of criticising its employees, but it gave the assurances regarding security. The Board placed assurances on its official documents regarding the "double your money if you are not paid on the due date" guarantee. If it now says that its assurances were worthless—it seems that they have proved to be worthless—I should have expected stronger representations to be made where they would really help—to the Government.
I now turn to the attitude of the City in this matter. How quiet it has become since the new Bill was introduced. It is allowing the Government to get away with this act of confiscation. II has abandoned its function as the protector of the small investor rather than embarrass

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a Conservative Government—its Conservative Government. I can imagine what the reaction would have been if this had been done by a Labour Government. We shall know how to evaluate its protestations in the future.
Mr. Temple: In my speech I mentioned that there were cases before the courts brought by the big investors, which were sub judice at present.
Mr. Dell: I know that there are specific cases, but if the hon. Gentleman compares such outcries as there have been about the previous Bill with the outcry that there would have been if this Bill had been introduced under a Labour Government, he will see the point I am getting at. Nothing has been done effectively to persuade the Government to change a major mistake in policy which the City should have pressed them to change. I wait to hear what will be the attitude of Conservative hon. Members to this act of confiscation.
The right way to handle the situation was and is public ownership, with proper compensation. The Government through this Bill—it is their Bill—have perpetuated uncertainty, damaged the future of the port and increased the likelihood of redundancy. They are refusing to accept their proper responsibility to the national interest and the future of the North-West.
I wish that it could have been said with some security of the Government that this would turn out at any rate to be their meanest action, but I have not even that security.
7.52 p.m.
Mr. William Clark: As the unhappy story of the Mersey Docks and Harbour Board unfolds it is more and more obvious that under the old management there was a complete disregard for cash values. The previous Government were entirely responsible for that. The present Government took over a mess, and all of us have sympathy not only with the Government and the Minister responsible but also with the management of the new Board.
The Board has three types of investor, bond holder, stockholder, debenture holder and so on. First, there is the Government, with nearly £20 million invested. Next there are the institutions,
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the pension funds and so on. The right hon. Member for Birkenhead (Mr. Dell) is being unfair when he says that the City has not made representations. The institutions running the pension funds represent millions of small people whose pension depends on the investments of those bodies. They have about £20 million invested, and the general public have £53 million, making a total of about £93 million invested in the Board. The Board has four Government nominees. There are no nominees from the institutions, and no direct nominees for the general public.
It might be asked why people should invest in such an undertaking and why they should not read the small print. The first good reason for investing is that the Government have a large investment in the undertaking. Second, they have nominees on the Board. The third good reason is that it is a trustee security. Is it still considered to be a trustee security? I see that my right hon. Friend the Minister shakes his head. I should like to have on the record whether it is still a trustee security.
I accept that the Government nominee directors have no responsibility to any other bond holder. That is the normal practice. But they had a responsibility to the Government; they were the nominees of the previous Government. What advice did they give them? To whom did they report? They must have reported to the Minister on how the Board was doing. When the Government of the day were injecting more and more money into the Mersey Docks, did they give the cash projections, the profitability and the rest? Who is responsible for this mess? It seems to me that the Government of the day, of which the right hon. Member for Birkenhead was a member, did not use their nominees as normal companies use their nominees, in that the nominees should have reported to them. Did they report back to the Ministry? To whom did they report? Why was no action taken? It was obvious even in 1969 that the undertaking was not profitable.
Mr. Dell: I do not know what, if anything, the Government nominees said to the Minister of the day, but it is clear what the policy of the Government of the day was—to bring that port and others into public ownership, with proper compensation.
Mr. Clark: I am delighted that the right hon. Gentleman has said that. His right hon. Friend the Member for Sheffield, Park (Mr. Mulley) was the Minister of the day. I am delighted that the right hon. Gentleman has said that they were going to nationalise. Absolutely splendid! So what is now said is, "Because the Government of the day are to nationalise tomorrow, let's not worry about profitability." That is the stupidity of the matter, and that it where we got the lethargy within the last Government which resulted in no action being taken on the Mersey Docks. If a Government are going to take over an undertaking, it is incumbent upon them that there should be no lethargy. They should take over a profitable organisation for the benefit of the taxpayer.
The right hon. Gentleman made great play of his Amendment. The sting is in the tail. He says that we must take the Board into public ownership. I do not know whether he has read the 1969 Annual Report of the Board, with its four Government nominees on it. It was categorically against nationalisation. The four Government nominees were saying "We do not want nationalisation", while their "employers" were saying, "We shall nationalise." The right hon. Gentleman has let the cat out of the bag—that there was no necessity for any cash evaluation, profitability and cash projections, discounted cash flows and so on, because the Government of the day were to nationalise the undertaking, and the taxpayer would have been saddled with a loss-making undertaking. That is monstrous. It is wrong for any Government to pump money willy-nilly into any undertaking, quasi-statutory authority or whatever, and not give the taxpayer benefit.
The previous Bill was eventually withdrawn as a result of a short, narrow debate, led very ably and in moderate terms by the right hon. Member for Birkenhead. The debate lasted about an hour, and each Front Bench took about 20 minutes. Three of us on this side also took part.
I have no vested interest in the Bill. I am not a Member for any of the Liverpool seats. But it is a basic principle that no one should be able to introduce a Private Bill which arbitrarily wipes off
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30 per cent. of the capital, just like that, and no Government should connive.
The right hon. Member for Birkenhead seemed to be saying that we should not worry about the big investors, because it was in the national interest to maintain the port, but that we must do something about the small investors. That is wrong from the investment point of view. One cannot separate investors into sheep and goats. If we are to maintain the confidence of investors, we have to treat them all alike. It is monstrous that there should be an arbitrary write-off of 30 per cent., because I think that this will affect other loans of a similar nature in other ports. We have many other ports and local authority loans. That is my one interest in this Bill. I am determined that we should never connive at something which may lose the confidence of the investors.
Mr. Hugh Jenkins: I support the proposition that the Government have a duty fully to reimburse investors and to see that no one loses any money. If that is the hon. Gentleman's argument, it has our support. But it would be wrong to say, in the special circumstances of this case, that the Government must not decide to be selective in favour of the smaller investors.
Mr. Clark: I am coming to that point.
I congratulate my hon. Friend the Member for City of Chester (Mr. Temple) on his speech. But I am rather worried about the question of consultation. If consultation has taken place with all the interested parties, why are there still petitioners against the Bill? Many people in the City have petitioned against the Bill, particularly the banks.
One aspect which I very much regret, as I am sure my right hon. Friend and the present management regret it, is that we are again discussing this matter without all the figures before us. We have not the 1970 accounts. We have the 1969 accounts, which were ready before this time last year. I accept the strictures of my hon. Friend the Member for City of Chester that this is an important and urgent Bill, but if that is so, the management should have seen that we got the accounts for 1970.
It is true that yesterday's Press release stated that the 1970 accounts would be

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available within the week. It also said that the accounts for 1970 showed a loss of £3,028,000. But in discussing a Bill of this magnitude it would have been better to have had the accounts before us. All we know is that in 1969 the Board had a loss of £1·8 million and for 1970 a loss of £3 million. No doubt my right hon. Friend has some reason why the 1970 accounts are not available.
The Bill has answered many points raised during the debate on 18th December. But because of the brevity of that debate, it was impossible to raise many other points which we wished to raise. The Bill is to facilitate capital reconstruction, and the Board, the stockholders and the bond holders can agree or disagree. I should like my right hon. Friend to spell out what the Board has in mind on the position of the stockholders, whether debenture holders or bond holders.
In relation to redemption, it is extremely unfair that many stockholders who should have had their money on 1st January have not had it because of the previous Bill, the appointment of the receiver and the standstill arrangement. What, for example, in the capital reconstruction, whenever it comes, is to be the position of the £100 holder of stock? He should have got his £100 back on 1st January. If he had done so, he could have reinvested it in local loans at the going rate of about 9½ per cent. At the moment, however, he is probably still getting only 3½ per cent. He has been deprived of the difference between the 3½ per cent, that he has at present—I am including the moratorium—and 9½ per cent. He is, consequently, going to lose the enjoyment of his £100 for possibly two more years, thereby suffering an additional loss of income of about 6 per cent. per year. That same investor, of course, is also going to lose, for the two years before we get the definitive scheme, 30 per cent. of interest. Thus, over the two years, he will lose a further £4 in interest as well as his £12 from the difference between his present 3½ per cent. and the 9½ per cent. which he could get.
When capital reconstruction comes about, the original £100 holder will have lost two years of an extra 6 per cent. on his money, a total of £12, plus the loss
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of 30 per cent. interest which he has to suffer. The capital reconstruction in order to give equity, should be about £100 plus redemption loss plus moratorium. The capital reconstruction will not be on the present £93 million capital plus redemption and interest, however—that is, £1 for £1—since it is understood that the £9 million which has gone in since November last year will come back as priority borrowing. It will perhaps be on only £84 million plus redemption and interest, making a total of £94 million.
Before the final scheme is formulated, the Board has many problems. One of these is the length of the docks, many of which are not being used. There should be land available to be sold off. But we do not know how much that is worth or by how much it will reduce the capital. We do not know whether the grain terminal is making a profit. The 1969 accounts gave no indication. We do not know how much stevedoring is making or losing. We do not know which are the less economic parts of the docks complex. Until we know how much we can get for the land or how much we can cut the loss by getting rid of the loss-making elements, the capital reconstruction cannot be formulated.
One may compute, as the previous Bill did by inference, presumably based on the 1969 accounts, that there should be a 30 per cent. write-off. When capital reconstruction comes and the Board knows the price fetched by the sale of land and which are the loss-making parts of the complex, it may be determined, for example, that the £100 stock is worth only £90 or £80 or £70. Whatever the figure may turn out to be, in these circumstances there is no justification for the Government money which has gone in since November last year ranking in priority over these stockholders. It should rank pari passu.
Let us assume that capital reconstruction comes and that 30 per cent. must be written off. A person with £100 in stock would, therefore, then have an asset worth only £70. I should have thought that the other £30 could be written up in a piece of paper issued to the holder stating "£30 equity in the Mersey Docks". I accept that at present it would be only a piece of paper, but, who knows, in 15 or 20 years' time it could become a profitable venture. It

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would at least mean that the ordinary stockholder would have a piece of paper showing that of his £100 he has £70 in loan stock and the rest as a £30 worthless equity, but it would be worthless only at present and it might become valuable in future.
I suggest that this would be a good idea to introduce for statutory authorities. After all, any commercial undertaking gets its capital gearing right, with so much as fixed capital and so much as equity capital. This means that in building up the business one does not have to pay interest on all the money one borrows. One must, of course, pay the fixed interest on the first sum, but the equity capital is long-term. I have always maintained that fixed capital tends to make management lethargic, and I suggest that in this case the issue of equity for the written-down amount would be to the point.
The right hon. Member for Birkenhead claims that there are facilities in the Bill for this sort of thing to be done, but we want it spelt out so that both small and large investors know where they stand and what lies ahead. The right hon. Gentleman made a strong plea for the small investor. I suggest that it would be a dangerous precedent to pick out different-sized investors in the way he suggested.
If one suggests that the large investors, the institutions, which have £20 million in this undertaking, are so large as to be able to afford to be hammered by the small man, one is in fact only hitting the small man, because the institutions' investors are the small men, and it is on their investments and the yield on them that the pensions of the small investors are guaranteed.
Mr. Simon Mahon: As one who does not have a penny piece invested in this undertaking, but as one who comes from the area, I wish to inform the hon. Gentleman that, having listened to him with patience, there are some on this side of the House who hope that he will extend to us the courtesy of appreciating that the Port of Liverpool represents all that we have done and worked for on behalf of the nation. In other words, lest anybody forgets—and this should be clearly on the record in a debate such as this—this port is the gateway to the
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Western Approaches and has on more than one occasion saved the country.
Mr. Clark: I do not dissent from that, but if we upset the person who might invest in Mersey, we may at the same time be upsetting the person who might invest in the Clyde and elsewhere. I appreciate the historical background to Mersey and I agree that it has been, and is, important to the nation. It has done a tremendous amount for our national wealth. I am arguing about the loss of confidence of investors.
Once the Government descend the slippery slope of precedent by dealing with different investors in different ways, they will be in trouble. After all, the Government have no money. If they want money, they must get it from the tax payer, and if they create a precedent of this kind it will be the tax payer who will eventually foot the bill. My hon. Friends are anxious to get taxation reduced, and already the Government have taken steps towards this end.
I agree that the Government should not subsidise any undertaking that merely wants money. However, my right hon. Friend should seriously look at this in the wider sphere. Let us consider the three types of investor with whom we are concerned tonight. First, we have the Government. They do not want their money back because they can afford to wait for it. Second, we have the institutions. They do not want their money back because they, too, can afford to wait; and their money is based on pensions and the actuarial value of the funds. They are more interested in yield than in capital.
Third, we have the small investor. He wants his money back. While I accept the philosophy that if one takes a decision one must stand by it, in this case the Government are telling the small investor, "You have invested £100. You will lose some of it. We do not know how much you will lose and we cannot tell you for two or three years. In the interim, 30 per cent. of your interest will be cut."
This shows the disadvantage of the Bill. The small investor is being told that he will definitely lose money, that the amount that he will lose cannot be stated but that between now and the appointed day he cannot sell his security.

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For this reason the Instruction which stands in the name of my hon. and learned Friend the Member for Southport (Mr. Percival) and myself seeks to have a floor below which the price of the security will not go.
We have deliberately inserted the figure of 50 per cent. We are asking the Board to say, "Of your £100 invested, we will give you at least £50", and the interesting point about it is that one would immediately be able to obtain a quotation on the Stock Exchange. At present one cannot get a quotation for any Mersey Docks stock simply because, from 27th November, quotations were suspended, and they cannot be reintroduced until a definitive stock scheme is announced and agreed.
The small investor with, say, £100, has, from 27th November, not been able to sell his stock because he has not been able to get a quotation. Small investors in this position will probably not get a quotation this year or even next year. They only know that before 30th June, 1974 they will be able to get a quotation. This is a provision in the Bill which has not been properly thought out.
Consider the position of the Board The Government are continuing to finance the Seaforth scheme, and it was unkind of the right hon. Member for Birkenhead to say that the Government were not helping in this matter. They are, in fact, pumping a great deal of money into this scheme.
Mr. Dell: How much?
Mr. Clark: Sufficient to keep the Sea-forth scheme going. It was unfair of the right hon. Gentleman to comment in the way he did on that point.
It is obvious that the Board does not have any money to redeem those debentures or bonds which will fall due in January or July of next year, and it will have to get money from somewhere. It has been rightly said that nobody but the Government will invest money in this instance. We are merely asking in our Instruction that the Government should advance the money and stand in the shoes of the person who must sell at £50. We have used the sum of £50 simply because that is the lowest to which these stocks ever fell before the loss of
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quotation. One might make a political point by saying that at 18th June of last year they reached the position of £50 or 50 per cent.
There would be no loss to the Government from taking this step. It would merely be a deferment of repayment and I suggest that the Government can afford to defer repayment, the institutions can afford to defer repayment, but the small man, in many cases, cannot.
The Government's philosophy is growth in the economy. That depends on three things—labour, management and capital. The Government with the policies which they have evolved over the last three or four months, have strengthened two of them—labour and management. It would be a tragedy if my right hon. Friend were not to ensure that capital was strengthened as well. I beg him to remember that we shall have to live with this loss of confidence in investment. It is essential that we keep investment in this country going. We can do that only if we maintain the confidence of the investor.
8.20 p.m.
Mr. Eric S. Heffer: The hon. Member for Surrey, East (Mr. William Clark) has, rightly and fairly, made a special plea for small and large investors. I shall not quarrel with his argument because I think there is a great deal to be said for it. But, like my hon. Friend the Member for Bootle (Mr. Simon Mahon) and others who come from the Port of Liverpool, I am deeply concerned about the future of the port and of the workers and families dependent upon it. Many of us have had personal experience of working on the port and getting our living from it. In fact, Liverpool and Merseyside would be nothing without their great port.
Therefore, when the Bill came before the House, remembering the situation prior to it, I wanted to be as sympathetic as I could because my constituents are dependent upon the port, and, to a large extent, their future is now being discussed. I wanted desperately to be able to say that, while I did not accept the general tenets of the Government's policy, the Bill was perhaps an interim Measure which I could support.
Whether we like it or not, we must recognise that the Port of Liverpool and the Mersey Docks and Harbour Board

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are in their present state because the Government abdicated their responsibility. The hon. Member for Surrey, East made the point, which we thought the whole world knew, that the previous Government intended publicly to own the ports, because they recognised that the only answer to the situation, not only in the Port of Liverpool, but in practically every port in the country was to make a planned approach to the development of the ports, and that could be done only on the basis of Government investment and public ownership.
We recognised that there were problems. When I worked in the Port of Liverpool the management was most inefficient. I have discussed these matters with the Minister and explained that we in the trade union movement have on many occasions put forward proposals which could have increased the productivity of the workers. Many years ago, I argued in the Liverpool City Council that the port had to be reorganised and that the existing Board structure was not right. I called for public ownership. But, because of the Conservative Government, I felt that perhaps the local authorities should have taken over the ports. We have known for years that something was wrong. We knew that there had to be a reorganisation. Our answer for that reorganisation was public ownership.
I find it difficult to support the Bill because the solution offered will not solve the problem. Two years ago the Under-Secretary of State at the Department of Trade and Industry went to the Port of Liverpool and was asked by one of his hon. Friends who now holds a responsible position in the Government to make a report on the situation there. He rightly recognised that the Port of Liverpool was backward, that it needed better facilities and modernisation, and that the Labour relations were antequated. His solution was that there should be a private company. He said in his report:
"Ideally this solution would go quickest to the heart of the trouble…complete return to private hands…would help the Board to do what is needed to compete with the other ports of Europe. This is the free enterprise solution.…To sum up, the best solution for the next Tory Government is to reorganise the capital, and to return the Docks Board to private enterprise."
That is basically what the Government intend to do. But we cannot compete
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with the foreign ports on the basis of a private enterprise system. The report made to the National Ports Council by Touche Ross, issued in January, 1970, which analysed the situation to see whether the ports of Antwerp, Dunkirk, Rotterdam and Hamburg had any special advantages over Liverpool, London and Southampton, said:
"From our investigation we have reached the conclusion that the four continental ports we studied have a major advantage over the three U.K. ports."
They go on to say:
"In addition to financial aid all the continental ports receive benefits from central or local government in the form of services provided free which U.K. ports have to pay for."
Examples include dredging rivers. To those hon. Gentlemen who talk about ports not being money making I would say that at Liverpool dredging of the river does not make a halfpenny, because that is one of the most difficult rivers in the country to deal with and it costs a great deal of money to keep that channel clear. This document says that such services are provided free, as are the police, and so on.
This is the real answer. This is what capitalist Governments, free enterprise Governments on the Continent of Europe do. They know that if the ports are to compete the only way they can do so is by Government giving forms of subsidisation in one way or another—to help the ports compete with their rivals. I do not know why this Government do not accept that as a solution, but that is not their answer. They are not prepared to give a subsidy. They are caught, we in Liverpool are caught, my people in Liverpool are caught, on this nonsensical, doctrinal, dogmatic and dangerous theory that we should not help so-called lame ducks. Full responsibility for this situation rests entirely with the Government and with no one else.
We who are Members of Parliament for Liverpool are forced into this situation that, as my right hon. Friend said, if we do not support the Bill there could be a collapse of the Port of Liverpool, that the users will move away—as they may—and that if we do not support the Bill we shall be basically responsible. That is the sword of Damocles hanging above our heads, as though we were

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responsible. The people who are responsible for this situation are the present Government and the Minister for Transport Industries. They are responsible for this by failing to meet their responsibilities in relation to this situation. Hon. Gentlemen opposite have to face this, that if anything unfortunate happens to the Port of Liverpool because of the failure of the Government they must accept the full consequences for that.
I have not heard, and I hope we are not going to hear, any speeches about everything being the responsibility of the wicked workers on Merseyside, the wicked workers who are always going on strike, and so on. I have no doubt that some hon. Members will drag that argument out. That is their only answer to every problem. Let me quote from the Liverpool Daily Post of today. There is a very interesting little piece in it which says:
"One of Merseyside's largest cargo handling companies, the Port of Liverpool Stevedoring Company, have increased throughput by 25 per cent. at their North 2 King's Dock berth during the first three months of the year. Mr. Lionel Storrs, Port of Liverpool's managing director, said yesterday that more than 38,000 tons of cargo—mostly fruit and vegetables—had been handled at the berth, a rate which compared favourably with that at any other port in the world. 'This surely confirms that given a proper environment and reasonable conditions of work, the Liverpool docker and those who work in the cargo handling industry here, are among the foremost in Europe in giving an efficient, speedy and reliable service,' he said."
Then comes this most telling point:
"'We took the men into our confidence and told them exactly what the position was,' Mr. Storrs explained. 'We had lost the Jaffa trade because of our unreliable service—and we were determined to win it back again.'"
They took the workers into their confidence. The facts are there.
There were problems last year. There was the problem—we all know about it—of dirty money, a problem which has largely been solved; there has been a reduction in disputes as a result. The other problem was of the extra workers who were needed in the port; an agreement was reached with the unions and those extra workers are now on in the port. That is the position. Progress is being made the whole time. In an area of high unemployment it is understandable that workers are frightened at the prospect of extra men being taken on
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in case that should lead to redundancy. But the problems have been overcome.
I have studied the Bill carefully. The gentlemen concerned in the new Board are doing about the best job they can within their terms of reference. But their terms of reference are wrong, and the members of the Board are not responsible for that. The responsibility lies with the Government. The alternative for the future of the Port of Liverpool, the future employment of our people and the development of the port is set out in the Amendment.
Reference has been made to the Sea-forth extension. In 1959 when the Liverpool Trades Council and the Labour Council issued a report on unemployment, one of the proposals in that report which I wrote was for an extension and development of the Port of Liverpool in the Seaforth area. We have argued this for years. This is basically what is required, and we believe that the answer is to extend public ownership. If the Government are not prepared to extend public ownership, they must be prepared to guarantee financial aid to Liverpool to ensure the future development of the port. That is why I hope that the House will support the Amendment.
8.36 p.m.
Mr. John Tilney: The hon. Member for Liverpool, Walton (Mr. Heffer) will not expect me fully to agree with his philosophy, although I am in agreement with his strictures of past management. He talks about public ownership, but in the minds of most people that means nationalisation and national control. Had he spoken about municipalisation as at Bristol, or backing up a free enterprise company, as at Manchester, I would have been more likely to support his views. It is no good handing over a partial bankruptcy to the city of Liverpool which has up to now had no say in the running of the Docks Board.
It is with great reluctance that I shall vote for the Second Reading of the Bill although I believe it to be necessary. I listened with care to what the right hon. Member for Birkenhead (Mr. Dell) said about this being a Government Bill. I only wish it were. We are dealing with the second largest port in the country. Private Bill procedure is very expensive,

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and many people do not understand it. One sees in the Private Bill Office a stack of letters from people who are suffering under the Bill and want to petition against it, but, because of the extreme expense, they cannot do so. The Government have a major obligation to many of the people who have written to me and to the Private Bill Office.
I am not blaming this Government, but past Governments have interfered. They have said that they have no responsibility, yet they have controlled in the background much of what the Mersey Docks and Harbour Board has done. It was first made a public trust. The securities were not strict trustee investments under the old Trustee Acts, although they are in a priority section under the new one.
My hon. Friend the Member for Surrey, East (Mr. William Clark) referred to the Government's appointed members. What were they doing when the profits began to turn down under the Labour Government? It was the Labour Government who reorganised the Mersey Docks and Harbour Board on the wrong principles and those who made up the Board had divided loyalties. It was the Labour Government who introduced the price freeze, which prevented the Dock Board putting up its dues. It had no proper reserves to fall back on or from which the George's landing stage could have been repaired had it been looked after properly. The Bank of England said that the Dock Board should not borrow long because their masters no doubt said that nationalisation was around the corner. The Labour Government concentrated on dogmatic ideas of nationalisation rather than on improving the communications so necessary to the port of Merseyside.
Mr. Dell: Could the hon. Gentleman say whether in his view a trust board in the financial situation of the Mersey Docks and Harbour Board should have been permitted to borrow long?
Mr. Tilney: At least the Government of the day should have been aware of what was happening. They should have known that losses were being incurred. Surely they would not want to take over a loss-making business any more than a municipality would want to do so. But what did the then Government do? They urged the Dock Board to spend
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more. Its plans were always submitted to the Ministry of Transport before it could invest £100,000, or even less.
Although some people may say that strikes and the slow turn-round have frightened shipowners away and made them think that Liverpool is an expensive port—and it is certainly an expensive port to dredge—those owners can choose wherever they wish to go. There is no necessity for them automatically to come to the port of Merseyside. I accept that past management is much to blame as well, but I believe that the Government should accept a measure of the consequences of their past actions.
I received a letter from somebody in the south of England which describes the situation in the following terms:
"The stock fell within Part II of the First Schedule to the Trustees Investment Act, 1961. All local authority obligations fall in this Part II.…Issues under Part II do not have to comply with the commercial requirements of the Companies Acts…as they do under Part III as respects the quality of information which must be given to the public.…But classified under Part II, they are not deemed a commercial risk, any more than a local authority issue or nationalised industry issue is so deemed.…There has been confusion as to the standing of these stocks and advice on investment in Part II investments would be confined probably to the relative returns as respects capital and income and not to the security of the investment as such."
The Dock Board brochure states:
"Under the present constitution of the M.D.13.H. copies of its annual report and accounts are only available to security holders on application."
If this is so, how can the Government argue that the small people who invested in the Board knew what was happening and were aware that the profits had turned down. The brochure also says:
"Because of the terms of the statutes under which the Board operates this receivership cannot lead to a winding-up of the undertaking. The ownership of the assets and the duties of managing the assets and operating the Port remain with the Board."
In fact, this has put bond holders in a worse position than many shareholders in a major risk-taking enterprise. I suggest that the Government as large shareholders should be more generous than they are being at present. There are 36,000 bond holders, with £23 million invested in units of £5,000 or less; 11,000 in units of less than £1,000. If the Government were to offer to take more of the equity from the small shareholders up

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to £3,000, it may be that in a few years' time the Government would do quite well since the Manchester Ship Canal equity now stands higher than any fixed interest stock of the Manchester Ship Canal. But it would show a consideration for the small shareholders and would bring about a certain amount of confidence.
The Bill will end up as a temporary Act. The proper solution is that the port should be municipalised, but we have no power to do that in any of the corporations around Merseyside, which at present is Balkanised. However, under the local government reform, I hope that we shall have a Merseyside County Council and that that will be given the power to run its port. This is in keeping with the Tory philosophy expressed repeatedly during the Committee stage on the Ports Bill. I hope that we shall be able to stand on our own feet, but at present we are denied the power to do so. Whether the port is nationalised or under private enterprise, it must be profitable.
I am grateful to my hon. Friend for what he has said about the Georges landing stage, which I again looked at yesterday morning. It is in a shocking state. I do not know why it has not been maintained in the past to a greater extent.
I regret that it is only in the last day or so that the letters have been exchanged. I regret that parts of Schedule 5 were put in the Bill. I wish that there had been greater talk between the city of Liverpool and the Dock Board, but it was not so. I shall, however, reluctantly vote for the Second Reading of the Bill.
8.47 p.m.
Mr. Eric Ogden: The hon. Member for Liverpool, Wavertree (Mr. Tilney) has the respect and, in many ways, the admiration of his colleagues from Merseyside. He has shown great interest in the affairs of the port. We hope that his interest and the work which he has been doing over the last few months in this regard have not seriously incapacitated him and that he will be feeling quite well at the end of the debate.
The hon. Gentleman made the point—and I may tease him a little—that he was
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in favour of municipalisation. I have always thought of the hon. Gentleman as a good, true-blooded Tory. I begin to worry a little when he is moving some way towards nationalisation and beginning to accept municipalisation.
Quality of management is vital whether it be under nationalization, municipalisation or anything else. At least the hon. Gentleman accepted that the Government have a major obligation in this matter and asked that the Minister be more generous.
The hon. Member for Surrey, East (Mr. William Clark) claimed that while this matter primarily interests Merseyside and the North-West, it had much wider implications regarding investment. Investment is certainly vital, both for present and future employment, in any part of the country.
The hon. Gentleman claimed that his Government had strengthened management, and he went on to claim that they had also strengthened labour. I challenge both claims. He also said that Government aid for the port of Merseyside was continuing. That is so, but it is only continuing on the basis of legal obligations entered into before 28th November. In the note which the then Board of Management sent to its bond holders, stock holders and interested persons, it included a letter from the Minister for Transport Industries in which this matter of future capital investment was spelt out very clearly. The Minister's letter to Mr. Taylor of the Docks Board said:
"As regards capital works and in particular the Seaforth Dock project the Ministry will continue to make loans in accordance with their existing legal obligations."
That is very different from the general claim that the Government are helping and will continue to help the docks scheme. In that letter, the Government spelt out a limited promise of aid—
The Minister for Transport Industries (Mr. John Peyton): Perhaps I can help the hon. Gentleman. In that letter, I was saying merely that the Government would have a limited commitment on those obligations to which we were already hound by law. We have gone a great deal further since then, of course.
Mr. Ogden: I accept that a great deal has happened since then. But there is a contrast between what was rightly said

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by the Minister about this limited loan and what might happen in the future.
This has not been a happy debate for anyone, least of all the Minister. As we on this side of the House see it, the Government are completely responsible for the Bill. It is a Government Bill in all but name. The fact that it is introduced as a Private Bill promoted by the Mersey Docks and Harbour Board means merely that it is the best proposal for support that the present Board can obtain from the Government. It is a bad Bill, but it is the best bargain that the board has been able to make with the Minister.
When we last debated the affairs of the Mersey Docks and Harbour Board, I tried to be fair. I said that I thought that the Minister understood the problems and had tried to find a better solution, but that his suggested solution had not been accepted by his Government. The right hon. Gentleman may have wanted to find a more generous, more fair and more equitable solution than the one contained in this Bill. He has shown a real interest in the affairs of the Board. Indeed, he was on Merseyside only last Friday. Sometimes, the right hon. Gentleman has expressed greater concern about the results of failure of industrial relations in the port than about the reasons for such failures. However, he appreciates the importance of the Board, not only for Merseyside but for the whole North-West and for the country's economy. He has done his best to find a solution. Tragically and shortsightedly, the Cabinet turned down his proposals. However, I do not ask him to resign because of that. He had done his best for the port, yet his proposals have been rejected by the Cabinet.
The Mersey Docks and Harbour Board was to be the first example of tough, determined Government policy concerned with the disengagement of Government from industry. It may not be just a coincidence that the Board is a statutory authority in an area which showed the greatest support for the last Labour Government. I do not say that that is a factor which influenced this Government against helping Merseyside, but certainly it did not encourage the Government to provide any extra help.
The Second Reading was moved lucidly, logically and tactfully by the hon. Member for City of Chester (Mr.
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Temple). He said that the two guiding principles which he had in mind were the continuation of the port as a viable unit and the employment for the port. That may be the intention, but good intentions do not necessarily result in good principles. He said that he was convinced that if the Bill did not get a Second Reading, Her Majesty's Government would be very reluctant to make future investment in the Port of Liverpool. I believe that those were his words.
The contents of the Bill may be necessary, but I do not believe that it has any friends, certainly not wholehearted supporters, either in the House or outside. Hon. Members on both sides who are interested directly in Merseyside, or in the wider implications, take the view that the Bill is the best we can get from the present Government. I do not know whether, if the Bill failed to get a Second Reading, more Government aid would be forthcoming, or whether the port would be worse placed.
We have made it clear that this Bill is not our solution, that it is a deal of which we have no part. As Labour Members of Parliament and certainly as Merseyside Members, we are not able to support the Bill, and the most that the Government can ask of us is that we should not formally oppose it. But we have offered an alternative, and it is for the House to make a judgment on a Private Member's Bill.
Merseyside Members have always shown a deep interest in the affairs of the board. At times we have been brought in by the trade unions, or the operators, or even the management. But my right hon. Friend the Member for Birkenhead spelled out what consultation over the Bill has meant—from time to time we have been told of decisions reached by the Board and the Government. That is all the consultation we have known. However, over the past months it has been closer than at any other time. There is a good case for close consultation with hon. Members, regardless of party, from Merseyside. If we had been able to take a closer interest in the internal affairs of the Board over the years, the present situation might not be quite as bad as it is.
There may well be a case for appointing a Merseyside Member of Parliament

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to serve on the Board full time or part time. I am not volunteering for the job. There are others in the House who have a much closer knowledge, much more experience, than I. It would have to be an almost full-time occupation, for an hon. Member would need a great many "pairs" to do that job. At times we are told slightly different things by the users, the workers and the management. We are asked to act as honest brokers, but we are not given any right to intervene. That is something which the Minister might consider.
The new management and the Bill are concerned mainly with the financial structure of the Board, yet that is only part of the total problem and challenge facing Merseyside. My impression of the new chairman and his deputy—they have said nothing about this to me, but it is the impression I have gained—is that they will do their three-year stint to get the Board on its feet and solve the problems, and then they will move on to other things. After three years in that job, they will need a rest and a break, for the challenges and difficulties will be many.
There are continuing problems for users and management, above all trying to ensure that those who manage and use and work in the port—putting that in any order of priority—work in partnership, work for "our" port of Merseyside, for "our" total benefit, have responsibilities for each other. The financial reorganisation must be part of the basic changes in the port. I do not think that the present executive council would claim to be port's managers, and the different financial structure following reorganisation will only allow the port to be operated by those doing the day-to-day work.
There has been some attempt to get consultation among users, operators, workers and management, but it is still at the stage where decisions are taken and then disclosed. Mainly because the Board is not yet master in its own house. That will be achieved only after the Bill has gone through. Those in the new organisation will then be able to answer some of the questions the workers are asking. It is not the job of Members of Parliament to become involved in day-
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to-day management, but there is great pressure that we should.
The bond holders have been referred to. Perhaps I should declare an interest, as I am a sponsored member of the National Union of Mineworkers and my union has 10,000 shares.
The question of investment by local government has been mentioned, but on any view that must be three years ahead. Local government cannot invest until the new organisation is on its feet.
I ask the Minister to comment on the future availabilility of port modernisation grants. Doubt is being expressed about the Government's intentions in this regard, apart from the basic scheme at Seaforth.
The hon. Member for Surrey, East spoke of land sales. I do not wish to do the hon. Gentleman an injustice, but if he was suggesting that the land assets should be automatically disposed of over a short period to increase the capital—
Mr. William Clark Mr. William Clark indicated dissent.
Mr. Ogden: I am glad to see that the hon. Gentleman did not mean that. It would be bad policy to sell off land assets, because land is investment; land is wealth, and we are concerned about future port development.
My hon. Friends and I are involved in this emotionally. It is not just a financial exercise with us. We are concerned about jobs and about all that the port has meant in the past and all that it might mean in the future. I have a dream of a port on Merseyside being the finest port in Europe, being linked with the Channel ports. In a container age that would not solve all our problems, because there would still be the question whether ships unloaded on Merseyside or on the continent. However, if we could get the Board on its feet again we would have a chance of making Liverpool that finest port.
I say now less bitterly than I did when we last debated the matter that the Government decided that they would go for a policy of disengagement. They destroyed the I.R.C., an organisation which could have helped. I contrast the help which was forthcoming to Cammell Laird with the lack of help here. I contrast the campaign put up by the shareholders

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in the Manchester Ship Canal, when the Labour Government proposal was to compensate at full market value, with the treatment of bond holders and investors here.
Our reasoned Amendment offers an alternative solution. It means in the short term Government aid and intervention—not out of charity, but out of necessity as an investment and as something which should come from the Government. We do not accept that anything that happens tonight is our responsibility. This Bill in everything but name is a Government solution to a problem to which they are imposing their own temporary solution. The long term future of the port must be decided at the next General Election.
9.3 p.m.
The Minister for Transport Industries (Mr. John Peyton): It may he for the convenience of the House if I intervene now and attempt to explain the Government's attitude to this very difficult problem and make one or two comments on the debate.
I congratulate my hon. Friend the Member for City of Chester (Mr. Temple) on his remarkable, skilful and persuasive speech. The Board must be grateful to my hon. Friend for his skilled advocacy of its case.
One of the two particular points which my hon. Friend raised was on the question of pensions for the Board's staff. One of the less satisfactory features of this sorry business was that a large amount of the Board's pensions were unfunded. At an earlier stage in this saga I said that I believe that the receiver would have power to pay unfunded pensions out of the rates. He has done so. I gladly add to that assurance and say that, if any difficulties should arise during the receivership with the continued payment of pensions, it is the Government's intention to ensure that the interests of pensioners are adequately and properly protected.
Mr. Dell: On the matter of pensions, the right hon. Gentleman said that the Government's assurance was given in respect of the period during the receivership. Is there an equal assurance relating to the period after the termination of the receivership?
Mr. Peyton: I think that thereafter the Board itself will be in a position to pay pensions, but I think that I have said enough to make clear the Government's concern for this matter.
Mr. Ian Percival: What my right hon. Friend is saying is that so long as the pensions can be paid out of moneys which otherwise might go to pay the interest due to bond holders, and to repay the bonds, that is all right, and when that runs out the Government will step in. Can that be right? I am as interested as anyone in these pensioners, but why should they be given priority over bond holders?
Mr. Peyton: I must leave my hon. and learned Friend to make his speech later. I think that I have gone as far as I should at the moment.
I know that my hon. Friend the Member for the City of Chester, and my hon. Friend the Member for Liverpool, Waver-tree (Mr. Tilney) are interested in the landing stage. I was in Liverpool the other day, and I was informed by the Chairman of the Passenger Transport Authority that he was in touch with the Board. I am now informed that they have reached a basis for agreement, and that there are only one or two points of detail to be settled. I understand that when the agreement has been finalised it is the Board's intention to seek leave to remove the repeal provision and replace it with an obligation to provide a landing stage, to dimensions agreed with the Passenger Transport Executive. I know the interest which my hon. Friend the Member for Wavertree has in this matter, and I hope that what I have said will go some way towards satisfying him.
The right hon. Member for Birkenhead (Mr. Dell) made a certain essay into melodrama, into which I do not wish to follow him. I appreciate that we can throw these epithets from one side of the House to the other. We can talk about calculated pettiness and about dishonesty being the trade mark of the Government. I do not believe that that sort of thing helps in what is—[Interruption.]—The right hon. Gentleman made his speech. He was listened to without being interrupted, and I am merely saying that that kind of utterance does not help to solve the problem.
Mr. Ted Leadbitter: I am merely saying that that is nonsense.
Mr. Peyton: The hon. Gentleman is free to express his opinions, and they will be listened to with the respect they deserve.
There is one point which I particularly wish to take up with the right hon. Gentleman. He said that no protests had been made from the City. As the recipient of many of the protests, I am in a position to offer the right hon. Gentleman a firm denial of what he said, and to add that there have been times when I have wished that what he has said was correct.
My hon. Friend the Member for Surrey, East (Mr. William Clark) has been a persistent advocate of the cause which he eloquently put forward tonight. He asked me whether the bonds are still trustee securities. The answer is that they are not. Because they are no longer being quoted on the Stock Erchange, they are not eligible.
I was grateful to my hon. Friend when he said that it would be wrong for any Government to pump money into an undertaking without regard to the taxpayer, because that is what I have found we are relentlessly being asked to do by the Labour Party in dealing with every problem that we face, and heaven knows there is a quantity of them. Although the hon. Member for Liverpool, West Derby (Mr. Ogden) may wash his hands quite calmly and say, "It is nothing to do with us," the last Government left us a fairly substantial legacy.
My hon. Friend for Surrey East asked whether some equity shares would be issued after reconstruction. While I believe that that question will probably have to await the reconstruction itself, I have no reason whatever to believe that the Board has set its face against it. My hon. Friend appeared in the later stages of his speech to contradict himself. Having remarked, with some truth, that there were no grounds for distinguishing between different types of investors, he went on to observe that the Government could wait for their money. If they did so, it would mean that the Government would be forced to go to other taxpayers in order to supply the need.
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The hon. Member for Liverpool, Walton (Mr. Heffer) gave the House, as though he had discovered some new pearl of wisdom, the suggestion that the answer was public ownership and subsidies. We have tried these specifics for many years now and they have solved no problems and created many. He went on to make the accusation—a joyous one, coming from him—that the Government were being merely dogmatic and doctrinal. These adjectives have been happily tossed to and fro in the House before now, and I shall not worry to throw them back at him tonight.
My hon. Friend the Member for Wavertree mentioned the possibility of municipal ownership. I certainly have no closed mind on this subject. What would be no solution to the problems of our ports is excessive centralisation. But that is not to say that some degree of municipal ownership or control could not in certain cases be very helpful.
The hon. Member for West Derby passed me a poisoned chalice in the tribute which he so kindly paid me. I deny his allegation that the Bill has no friends, as I also firmly deny that this is a Government Bill. It is a Bill of the present Mersey Docks and Harbour Board, which is fully responsible.
He also asked me about the continuation of port grants. This is a very important and not particularly simple matter. I hope to make an announcement on it in the fairly near future.
Mr. Ogden: Would the right hon. Gentleman at least agree that this Bill was prepared by the Board after the closest detailed consultation with the Government?
Mr. Peyton: The Board has been in pretty close consultation with the Government ever since it produced the rather nasty piece of news at the end of July last year that it was in deep trouble and needed many millions of public money. Of course there has been anxious consultation—not unnaturally—but this Bill, I repeat, is a Bill of the Mersey Docks and Harbour Board.
It might help if I reminded the House of some of the salient facts of the matter, without delving too far back into history. The port has a capital debt of between £90 million and £100 million. Of that debt, 27 per cent. is in bonds. Last year

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it became clear that the port could not earn a surplus, was facing mounting losses, and was unable to pay the interest on its due debt or renew its short-term borrowing when it fell due.
The Board is an odd animal, as hon. Gentlemen opposite have pointed out. It is a statutory trust and as such not accountable to anyone. It has a duty to run the port, saddled with a constitution ordained by nineteenth century Acts of Parliament, though slightly amended by the last Administration, a constitution which can be altered only by Parliament.
With 16 part-time members—not an ideal recipe for management—comprised of six shipowners' representatives, six other users and four Ministerial nominees—I hasten to add, none of them mine—how could it have remained in the mind of the Labour Party, when in Government, that this was a tolerable state of affairs? Yet they allowed it to continue. It was, comparatively speaking, only at the last minute that they rushed back to the old specific of nationalisation. This was chucked at us, only to have—
Mr. Simon Mahon: The right hon. Gentleman said that none of the members of the present Board is his nominee. Is it not a fact that one of the present nominees was a member of the previous Board?
Mr. Peyton: I was referring to the 16 part-time members of the Board prior to the time when I had any part in this exercise. None of them was my nominee. Since then there has been some slight change. If the hon. Gentleman will contain himself in patience I will come to that point.
It became clear in the summer of last year that it was urgently necessary for the Board to raise its charges at least to a point at which they would cover costs, eliminate loss-making activities and get rid of surplus assets—in short, to stop the calamitous outflow of cash.
In great haste the Board produced a Bill last November, which I understand was never intended as a final Measure. The Bill met with a considerable volume of protest. The Board, I believe wisely, bowed before the storm, but subsequently was able to obtain leave from the House to introduce the present Measure.
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Throughout the whole of this unhappy story the Government have been faced with two main questions. First, whether to lend money to the Board to enable it to redeem bonds as they became due, or to take what seemed to many people the much harsher and uncompromising line of saying that they would make no funds available for such a purpose. This was with the full knowledge that many small investors, and others, who had come to regard the bonds as having Government backing, would lose at least some of their money.
With great reluctance the Government took the latter course, believing that the adoption of yet another pain-killing solution would put an unjustifiable burden upon the taxpayer and would, moreover, encourage people to believe that the port's future was reasonably assured in all circumstances without having to worry too much whether it could give an efficient service at reasonable prices to its customers. Do not let any of us conceal from ourselves that that is the criterion which will decide the future of the port of Liverpool.
The second question which has deeply concerned the Government throughout is whether to continue grants and loans for the half-completed Seaforth project. The Government recognised, of course, the great importance of the port to our trade and its bearing upon the whole of Merseyside, and concluded, I am sure rightly, that it was a project upon which the whole future of the port depended, and that it should therefore continue.
The Government accept that the moneys advanced by them for Seaforth before 27th November should be treated in the same way as other capital debts owed by the Board at that time. I can also tell the House now that it is accepted that after a satisfactory capital reconstruction has been carried out loans made by the Government after 27th November shall rank pari passu with the reconstructed debt. I do not believe that the Government would have been justified in continuing to finance the project without some assurance as to the port's future viability.
Mr. Dell: The right hon. Gentleman has just said that once the reconstruction has taken place the Government loans made after 27th November will rank

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pari passu with the reconstructed capital debt. I take it that that does not mean that such loans made after 27th November are being written down. He will have heard the proposed Amendment mentioned by his hon. Friend the Member for City of Chester (Mr. Temple) about the possibility of writing down Government loans made after 27th November. Would such an Amendment be acceptable to the Government?
Mr. Peyton: I have said what I meant to say, and I have nothing to add to it. Throughout the affair the right hon. Gentleman has completely shut his eyes to the significance of the Government contribution to the Seaforth project. It is admitted that Seaforth is crucial to the whole of the future of the port. The money the Government had lent before 27th November will suffer the same fate as all other capital debt owed by the authority at that time. I think that the right hon. Gentleman understands that. The Government were under no obligation to go on making the loans available. What I am saying is that the money being put in since 27th November will, after reconstruction, rank pari passu with the reconstructed debt. I think that the right hon. Gentleman perfectly understood that.
Mr. Dell Mr. Dell rose—
Mr. Peyton: It is time I came to the end of my speech. I have given way to the right hon. Gentleman a number of times.
I was saying when I was interrupted that I do not think that the Government would have been justified in continuing to finance the Seaforth project without some assurance of the port's continued viability. The Bill gives that assurance, or at least it holds out a hope. In my view it is an essential Measure.
To those who challenge me with refusing all help, I can only ask why they have so persistently disregarded the aid to Seaforth which I have just mentioned, without which it is common ground the port would have no future.
To those who advocate public ownership, that dreary old specific so dear to the hearts of the Labour Party, I would only say that it has never solved anything yet.
Mr. Stanley Orme: Like Rolls-Royce.
Mr. Peyton: To those who say that the Government are careless of the port's finance, I say that they should look back at their own recent past, that they should not be quite so ready in so slippery a manner to shed their responsibilities.
Mr. Dell: Melodrama.
Mr. Peyton: This is not melodrama. It is very sober fact. During the period of the last Government—and it is time that this was said, and said clearly—the port's earnings were kept at a meagre level. The Board was obliged to borrow at short-term rates, which meant that, if ever there were a moment of truth, there would be trouble. The threat of public ownership produced that curious aura of stagnation which I shall always associate with Socialist financial and industrial policies.
In the view of the Government, this is an essential Bill. It is a necessary step in the path which the port of Liverpool must take in order to get back to the prosperity which I am sure it can regain, given the co-operation and good will of all concerned. I am profoundly sorry that the right hon. Gentleman showed so little sign of it.
Mr. Dell: I am grateful to the right hon. Gentleman for giving way. [HON. MEMBERS: "He has sat down."] I took it that he had given way. I asked him a simple question, to which he evidently does not know the answer—whether an Amendment on the lines proposed by the hon. Member for the City of Chester would be acceptable to the Government. Why has he not answered that question?
Mr. Peyton: I had sat down. I have made the position clear. I have spelt out the situation and I have nothing to add.
Several Hon. Member Several Hon. Member rose—
Mr. Speaker: Order. I still hope to call several hon. Members to speak in the debate and I ask those I do call to be brief.
9.27 p.m.
Mr. Simon Mahon: I shall try to obey your injunction, Mr. Speaker.

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The right hon. Gentleman chided me for my lack of patience. I remind the House that he was not greatly renowned for his patience when he was a backbencher. As one who started work on Liverpool dockside at the age of 14, I have learnt that patience is a genuine virtue. If anyone learns patience, it is generally in that sort of industrial experience.
This nation is divided socially, commercially and industrially. Merseyside contains the greatest docks in the world, right alongside the new Seaforth project. On behalf of the people of Merseyside whom I have the honour to represent, I say to the House that there are places in this country which are more favoured. As you, Mr. Speaker, know, from your intimate knowledge of Merseyside, we have grave social and industrial difficulties and we seem to be having to bear them for longer than the rest of the country. In my constituency, there are 40 vacancies in two major labour exchanges, and the unemployment level is 5·6 per cent. So anything that concerns Liverpool dockside at the moment and the possibility of redundancy is of the greatest importance to me.
When I was a boy, still at school, Chesterton said that the hearts of the people of Liverpool were in their boots. With one passage excepted, after the speech of the Minister we on Merseyside can rightly feel that our hearts are in our boots. I appreciate what has been said about Seaforth. Without it, Merseyside would go under. But there are vast maritime undertakings on Merseyside in addition to Seaforth. The present Government have washed their hands of major responsibility towards Merseyside—and if my own Government had done that I would have told them the same thing.
In the council chamber of Bootle, where I served on the local council for many years, there is the flag of Walker, R.N., and it was through the port of Bootle that he and those whom he served kept the gateway to the Western Approaches wide open. I would be saying the same to a Labour Government. Considering the way in which the people of Merseyside have suffered over the years, they are worth £27 million of any Government's money. I therefore appeal to the Minister to re-think this whole matter.
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I remind the right hon. Gentleman that above all he has a major interest in the industrial peace of the nation. Though some of us have been chided, even ridiculed, by him for our views on this issue, I assure him that in a modest and responsible way we have been, and still are, trying to improve the situation on Merseyside. We want to get away from the standby system and turmoil we inherited. We want to have better housing and education so that ultimately the ports provide a better standard of living for the workers in them.
There will be grave disappointment on Merseyside at the right hon. Gentleman's speech. We have been wondering where we went wrong. After all, we were never part of the Mersey Docks and Harbour Board. Men like me were kept well and truly outside the Board's doors, and I was telling the Board this only last week. We were never represented on it and we will not be so represented now. The people who made Merseyside and this nation great and who kept Britain alive in very dark days are not, even now, to be brought into the magic which we are told will put the Port of Liverpool on its feet.
With respect to the bankers, they do not even know whether the tide is running, let alone how to put the Port of Liverpool on its feet. Without the full co-operation of the Merseyside workers, nothing will be achieved, and apart from the remarks of my hon. Friend the Member for Liverpool, Walton (Mr. Heffer), nothing has been said about the need for co-operation in this respect. Mr. Lionel Storrs is one of the best authorities on the port industry. He has said that the Liverpool docker is among the finest in the world, and that is the truth.
This is not simply a financial problem. It is a problem involving human beings who have invested their whole lives in this industry. What the right hon. Gentleman has said will be treated with some distain by them, particularly considering the background of unemployment in this area. When I speak about these matters I sometimes see a look of puzzlement on the faces of hon. Gentlemen opposite. Perhaps I should not blame them. After all, I live in a totally different world from them.

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I am grateful for this opportunity to express, albeit it in inarticulate language, the feelings that exist in Liverpool about a Government who are prepared to count as nought everything that the people of this part of the country have done for the nation; of a Government who are prepared to reduce to digits on a balance sheet or economic signs and symbols the human beings who make up the port industry.
Often in the past the people of this area have listened to me. Sometimes I have spoken on particularly difficult wickets and, with my hon. Friend the Member for Walton, I have tried to maintain peace in the port, which is a particularly important factor. My advice to the people of Merseyside is to take the first opportunity to do what they did at the last election, and get rid of the remaining Tories in the area who support the Government. We did a good job on 18th June. It is obvious that we shall have to pull ourselves up by our own boot straps, for we can expect no help from this Government.
9.35 p.m.
Mr. Eric Cockeram: It will come as no surprise when I say that I join hon. Members on both sides of the House in deriving no pleasure from the fact that the Bill is before us, any more than I derive pleasure from the fact that the Mersey Docks and Harbour Board finds itself in its present situation. But we must face facts. The losses started in 1966 and they have been steadily mounting ever since. Clearly we have reached the stage at which something must be done.
Reference was made by the hon. Member for Liverpool, West Derby (Mr. Ogden) to the fact that we were conducting this debate in a partial vacuum because we have not had the acounts for the year ending 31st December last. That is true. But there is a perfectly reasonable reason for it. The new management of the Board is particularly anxious to ensure that the accounts for that date are drawn up in a proper, workmanlike manner, with a proper valuation of all the assets stated in them. It has commissioned independent accountants to report to it on many matters, including the amount of depreciation which should be provided for many of the assets.
360
Secondly, it has had to commission professional valuers to value many of the fixed assets. Thirdly, it has had to commission actuaries to report to it on the precise position of its pension funds—both the funded and unfunded pension funds. It is entirely appropriate that those figures should be absolutely correct before the accounts are produced.
But the Board found itself on the horns of a dilemma. Ideally it and we would have preferred to have accounts before this debate. But such is the position of the port, with a liquidator sitting in the Board's offices, that it was presented with the problem of removing the liquidator and turning over a new leaf for the port. Tonight we are taking the first step in doing just that. We are being asked to give it a new constitution.
I believe that within the three-year period set out in the Bill we shall find in the port of Liverpool, not only a modern, progressive undertaking with modern progressive management, but a revitalised approach to the docks system. We shall by then, I hope, have the virtual completion of the Seaforth system. We shall have one of the most modern dock systems in the Western world. Both of our tunnels will have been completed, giving easy access from one side of the river to the other.
Those who have confidence in the future of Merseyside and of our port, as I have, support the Bill because it is the first step in this rejuvenation. I am sure that Amendments will be necessary in Committee, but I share the view of the Bill summed up in the editorial in the Liverpool Daily Post a couple of days ago which concluded with this sentence:
"Amendments in Committee there may well have to be, but it must be hoped that the basic framework of this Bill is left intact."
I support that view.
9.39 p.m.
Mr. Hugh Jenkins: I think that the Bill is so bad that it does not lend itself to amendment in Committee. It seems to me that the right course to follow is that advocated by my right hon. Friend the Member for Birkenhead (Mr. Dell), who suggested, in moving the Amendment, that the Bill should not be given a Second Reading in its present form.

361
The Minister's speech clarified the issue. Before he spoke, some of his hon. Friends said that they would support the Bill with reluctance. I hope that, having heard him, they will decide not to support it. One fact which clearly emerged from the right hon. Gentleman's speech was that the Government accept full responsibility for the present situation. It is their responsibility and the Government make it clear that it is their responsibility.
I have a constituent who put money into this business, as other people have done, believing it to be a trustee security. A constituent of mine expected to receive £500 this year. The money has not arrived, and my constituent, not unnaturally, is concerned, because £500 happens to be the only money he has. This is why I put down an Amendment to the Money Resolution. In that Amendment I suggest that some preferential treatment should be given to small investors—people with small holdings. That seems to be a perfectly reasonable thing to do.
As for responsibility in this matter, the Board has made it quite clear that it places the responsibility on the Government. It says in the circular which it issued that the Government announced that special financial assistance would not be made available to the Board. Everything stems from that point. From that point of the Government's decision not to make special financial assistance available the whole trouble has arisen.
It is no use hon. Members opposite putting the blame, or trying to put the blame, on some mythical actions in the past. They have a thoroughly bad case and, though they try to escape responsibility, they cannot escape the printed word which has been circulated to every Member of Parliament and in which the Board itself has little comfort to offer for the investors' future. With commendable honesty, if nothing else, the Chairman has circulated this statement:
"I should also like to make it clear that while the Board's proposals involve deferment of a definitive scheme of capital reorganisation until some future date, the Board have no reason to believe that the definitive scheme for debenture holders will be any less drastic than that outline to security holders on 27th November, 1970."
The Board itself is saying in effect, "We may be putting off the evil day, but it is likely to happen all over again".
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How can hon. Members opposite pretend that this is a Bill for which they can accept responsibility, even with reluctance? I should like to think that, even were I on that side of the House, I could not bring myself to vote for this Measure. No hon. Member opposite has shown enthusiasm for the Bill. The only Member who has brought himself to support the Bill 'with any degree of enthusiasm is the Minister. He is the only Member of the House who has suggested that the Bill is of a sort which one can support happily.
Before the two parties changed sides in this House, we often used to hear hon. Members opposite—the Opposition as they were then—talk about the widows and orphans, and we on this side sometimes thought that the only shareholders in the country were widows and orphans—that all the shares in the country were held by widows and orphans. "These widows and orphans", they said, "are living on fixed interest and the Labour Government are not concerned with those people on fixed incomes. Why do not the Government pay more consideration to the plight of those people?" We used to hear pitiful tales about them. What happens when the two parties change their positions in the House? The Conservative Government are quite content to reduce the capital of these people on fixed incomes by 30 per cent. When it comes to practice, as distinct from talk, these people, many of whom are supporters of the Government, are treated most cruelly. They are not compensated at a full rate of compensation. So far from compensating them properly, the Government are reducing their capital. Responsibility for this, hon. Members opposite know, lies fairly and squarely upon their own Front Bench. There can be no doubt about it.
I want to read a letter from a widow, not a mythical widow but a real widow. This is what she writes:
"I am a widow, aged 68, and invested my late husband's and my own life savings of £2,200, which we had worked hard for all our lives and been thrifty enough to save. This money was invested with the Mersey Docks and Harbour Board in November, 1969, on the assumption that it was a very safe security, in fact, as safe as any Government security. I asked the Board to send me a balance sheet for the previous year but was told that they had not issued one. On handing over the money which was a

363
warrant from matured development bonds…"
She refers to a member of the Board, but I will not take advantage of the privilege of the House to name him—
"…who happened to be in the dock office at the time assured me that everything would be all right and shook hands with me. What a Judas handshake. They took this money under very false pretences as they must have known at that time they were in financial difficulties. I only lent this money until 27th March, 1972, and it should then be repaid to me."
I believe that it should be repaid to her, and that small investors should receive preferential treatment. The responsibility for her not getting all her money back rests fairly and squarely on the Government. There comes a time when a Government begin to lose their credibility with their supporters. The Government will look back to this day and rue it, and decide that this was when they began to lose credibility. This is the beginning of the end, and they will richly deserve it.
9.46 p.m.
Mr. Ian Percival: I disagree heartily with most of what we have just heard. I disagree with public ownership, and I am not one who says that the Government have not helped, because they have. The concession which my right hon. Friend has just made about the priority of the borrowings may be of great help, but my mathematics are not good enough to allow me to work it out. It may be of sufficient help to enable the Board to comply with the Instruction, which I hope the House will carry. Even so, with respect, I disagree with his conclusions. Unless this Instruction is carried, the balance will be wrong. The Instruction would mean that people would not have to wait so long for what little they will get.
In moving the Second Reading, my hon. Friend the Member for City of Chester (Mr. Temple) said that the object of the Bill was to reorganise the port for the benefit of port users and employees, and the hon. Member for Bootle (Mr. Simon Mahon) stressed this. Of course that is important, but at whose expense? Under the Bill, too much expense will fall on the bondholder.
My right hon. Friend said how glad he was that the receiver could pay the pen-
364
sioners, and that if he ever could not, the Government would do something. It is right that the pensioners should be paid. I am delighted that the pensioners in my constituency will have their pensions paid, but I also have in my constituency people of humble means who will not get their dividends because the money will be used to pay the pensioners. We can all agree on what should be done, but the question is who should pay for it and how should the cost be spread.
My hon. Friend the Member for City of Chester said that the idea was to revitalise the port. Of course it is, but who should pay? He also said, as did the hon. Member for Bootle, that we must consider the national interest. Of course we must. What I cannot stomach about it all is the apparent readiness of the Board, the Government and some of my colleagues on this side of the House to make the bondholders pay so largely for those things.
It has not been sufficiently stressed that what we are talking about is the obligation of the Board to repay money to lenders. That money can be called loan capital or debt capital, and if the Bill goes through debenture stock will be issued instead of bonds, but at present people who have lent money to the Board have a clear right in law to have that money back. The question is whether they should be put in an entirely different situation and given debenture stock as a preliminary to having an unspecified amount written off.
It is necessary to see how the Board has got into this situation. It appears that the directors, four of whom have been nominated by the Government for a considerable number of years past, failed to make provision for repaying the money which was clearly due to be repaid. It may be that there was no way in which they could have avoided that, though I do not know that that is the case. We have heard a good deal about bad management.
My second criticism is that the Board gave no warning of the situation until as recently as last July. A good many of my constituents have lent money since the time when the Board should have known how bad the situation was. I refer to the bond holders who when the sums of money were due were asked to leave that money in at a new rate of

365
interest. Somebody should look at the propriety of the actions of the Board which should have known how bad the situation was when inviting somebody to leave money with the Board. I merely draw attention to this fact as something which the House should have in mind.
It is clear that the previous Government also had some responsibility for not discovering the situation or, if they did discover it, for not making public some information about it. Certainly the one group of people on whom no blame can possibly be laid at all are those who had lent money which enabled the Board to keep going as long as it did. These are the people who will suffer under the Bill.
I appreciate that if my Instruction were carried the Board could not comply with it without some assistance from the Government.
Mr. Ogden: Subsidies?
Mr. Percival: No, I am not referring to subsidies. I am saying that it could not comply without some assistance. The assistance which would be needed would be for the Government to put up the money for a short period of time instead of my constituents having to wait to get what is due to them. I think that it is the taxpayer who should do this waiting. At the moment the Government will get money in preference to many of my constituents—at least they would benefit to the extent of 50 per cent. of the nominal value of the bonds.
I recognise that if my Instruction were agreed to it would put an obligation on the Government. I would justify this for four reasons. First, I believe the Government have some responsibility in this matter. Secondly, the national interest is involved, and that interest lies in keeping the Port of Liverpool alive and healthy. Those are two reasons why the Government should be generous rather than the contrary.
Thirdly, I do not believe that the Government's "lame duck" principle, with which I agree, has anything to do with this case. In fact, Parliament are stepping in here to help the lame duck; the lame duck in this case is the public trust. That trust cannot survive and will be in a sad state unless it is given some money to enable it to repay its debts, or unless Parliament enables it to write off those
366
debts. Parliament set up this public trust and Parliament and Government have failed—I am not seeking to make any political point—have failed to ensure that it remained in a sufficient strong position to meet its obligations to the persons from whom it had borrowed money.
The question now is whether Parliament should permit that undertaking, which has got into that situation, to write off a substantial and undefined proportion of its debts to make its position viable. If ever there was a case of helping a lame duck, this Bill is it. It is helping the lame duck at the expense of bond holders rather than the taxpayer. We have to ask whether that is something which Parliament should properly do. The Government have to ask themselves whether Parliament should be permitted to do this and whether they ought not at least to advise Parliament that it should accept this Instruction so as to ensure that the bond holders are at least treated that much less shabbily.
Mr. Ogden: Would the hon. and learned Gentleman give way?
Mr. Percival: No, the time is too short. I am saying nothing contrary to any principle for which the Government stand or upon which they have taken a stand. They have accepted that they are involved in this case. They have accepted an obligation to provide some financial assistance. The only question is the degree of financial assistance. Under this Bill we have a new situation, a situation that without a floor to the reduction these stocks are unquotable. So our poor constituents, who will lose money anyway, will, if they wish to sell in the next year or two—some of my constituents will have to sell because they rely on these stocks to supplement their income—have to take whatever any buyer will give them. That is a new situation which affects the balance as it was when the Government made their previous decisions as to help. It is a situation which calls for a redressing of the balance by this little bit of assistance which would be necessary if this Instruction were carried. I stress that this is not asking the taxpayer to pay out any more money to make good the losses. It is merely letting the taxpayer bear the waiting time and letting the taxpayer come in and, at his expense, carry that

367
waiting time, giving bond holders at least 50 per cent. at the time it is due.
Even at this late hour, I hope that the House will wake up to what it is doing and, if it gives a Second Reading to the Bill, will follow it by carrying the Instruction which I shall hope to move.
9.58 p.m.
Mr. Richard Crawshaw: This is a very important Bill primarily because it establishes an unfortunate precedent. I wonder whether hon. Gentlemen on the Government benches realise to what extent the Bill is likely to discredit our economic system. If people take the trouble to read some of the new unopposed Bills going through the House at present they will see that they are asking for permission to borrow money overseas. When questioned, the reason in this case is that, because the Mersey Docks and Harbour Board is
defaulting on its obligations, it has destroyed the trust of many British people.
Parliament should not pass a Bill which removes the rights of people who have invested in funds which they genuinely believed were trustee funds. We have heard where the rights and wrongs lie in this particular case. I made a request of the Minister on the last occasion that this matter was before Parliament—
Mr. Temple: rose in his place, and claimed to move, That the Question be now put.
Question, That the Question be now put, put and agreed to.
Question put accordingly, That the Amendment be made:—
The House divided: Ayes 118, Noes 155.

Division No. 351.]

AYES

[10.0 p.m.

Albu, Austen

Huckfield, Leslie

Palmer, Arthur

Allaun, Frank (Salford, E.)

Hughes, Mark (Durham)

Parker, John (Dagenham)

Armstrong, Ernest

Hughes, Robert (Aberdeen, N.)

Parry, Robert (Liverpool, Exchange)

Atkinson, Norman

Hughes, Roy (Newport)

Pentland, Norman

Barrett, Joel

Hunter, Adam

Perry, Ernest G.

Benn, Rt. Hn. Anthony Wedgwood

Irvine,Rt.Hn.SirArthur(Edge Hill)

Prescott, John

Bishop, E. S.

Jenkins, Hugh (Putney)

Rankin, John

Blenkinsop, Arthur

Jenkins, Rt. Hn. Roy (Stechford)

Rhodes, Geoffrey

Buchan, Norman

John, Brynmor

Roderick, Caerwyn E.(Br'c'n&R'dnor)

Campbell, I. (Dunbartonshire, W.)

Jones, Barry (Flint, E.)

Roper, John

Carmichael, Neil

Jones, Dan (Burnley)

Rose, Paul B.

Clark, David (Colne Valley)

Jones, Gwynoro (Carmarthen)

Ross, Rt. Hn. William (Kilmarnock)

Cocks, Michael (Bristol, S.)

Judd, Frank

Sheldon, Robert (Ashton-under-Lyne)

Cohen, Stanley

Kerr, Russell

Shore, Rt. Hn. Peter (Stepney)

Concannon, J. D.

Kinnock, Neil

Short,Rt.Hn.Edward(N'c'tle-u-Tyne)

Confan, Bernard

Latham, Arthur

Short, Mrs. Renée (W'hampton.N.E.)

Cunningham, G. (Islington, S.W.)

Lawson, George

Silkin, Hn. S. C. (Dulwich)

Dalyell, Tam

Leadbitter, Ted

Silverman, Julius

Davies, Denzil (Llanelly)

Lee, Rt. Hn. Frederick

Skinner, Dennis

Davies, Ifor (Gower)

Lewis, Ron (Carlisle)

Small, William

Davies, S. O. (Merthyr Tydvil)

Lomas, Kenneth

Smith, John (Lanarkshire, N.)

Dell, Rt. Hn. Edmund

Lyons, Edward (Bradford, E.)

Spearing, Nigel

Dempsey, James

McBride, Neil

Spriggs, Leslie

Doig, Peter

McCartney, Hugh

Stallard, A. W.

Dormand, J. D.

McElhorte, Frank

Stoddart, David (Swindon)

Douglas, Dick (Stirlingshire, E.)

McGuire, Michael

Stonehouse, Rt. Hn. John

Duffy, A. E. P.

McMillan, Tom (Glasgow, C.)

Strang, Gavin

Evans, Fred

McNamara, J. Kevin

Thomas, Jeffrey (Abertillery)

Fletcher, Raymond (Ilkeston)

Mahon, Simon (Bootle)

Thorpe, Rt. Hn. Jeremy

Fletcher, Ted (Darlington)

Marks, Kenneth

Tinn, James

Freeson, Reginald

Marsden, F.

Urwin, T. W.

Golding, John

Mellish, Rt. Hn. Robert

Wainwright, Edwin

Gourlay, Harry

Mendelson, John

Walker, Harold (Doncaster)

Griffiths, Eddie (Brightside)

Milne, Edward (Blyth)

Wellbeloved, James

Hamilton, James (Bothwell)

Morgan, Elystan (Cardiganshire)

Whitlock, William

Hamilton, William (Fife, W.)

Morris, Alfred (Wythenshawe)

Wilson, Rt. Hn. Harold (Huyton)

Hannan, William (G'gow, Maryhill)

Morris, Charles R. (Openshaw)

Hardy, Peter

Mulley, Rt. Hn. Frederick

TELLERS FOR THE AYES:

Harper, Joseph

O'Halloran, Michael

Mr. Richard Crawshaw and

Harrison, Walter (Wakefield)

Orme, Stanley

Mr. Eric Ogden.

Heffer, Eric S.

Oswald, Thomas

NOES

Alison, Michael (Barkston Ash)

Gurden, Harold

Page, John (Harrow, W.)

Amery, Rt. Hn. Julian

Hall, Miss Joan (Keighiey)

Peyton, Rt. Hn. John

Astor, John

Hall, John (Wycombe)

Price, David (Eastleigh)

Atkins, Humphrey

Half-Davis, A. G. F.

Prior, Rt. Hn. J. M. L.

Baker, Kenneth (St. Marylcbone)

Harrison, Col. Sir Harwood (Eye)

Proudfoot, Wilfred

Barber, Rt. Hn. Anthony

Hastings, Stephen

Pym, Rt. Hn. Francis

Bennett, Sir Frederic (Torquay)

Havers, Michael

Quennell, Miss J. M.

Benyon, W.

Hawkins, Paul

Redmond, Robert

Biffen, John

Heseltine, Michael

Rees, Peter (Dover)

Biggs-Davison, John

Hicks, Robert

Renton, Rt. Hn. sir David

Blaker, Peter

Higgira, Terence L.

Rhys Williams, Sir Brandon

Boardman, Tom (Leicester, s.W.)

Hiley, Joseph

Ridley, Hn. Nicholas

Boscawen, Robert

Hill, James (Southampton, Test)

Roberts, Michael (Cardiff, N.)

Bowden, Andrew

Holt, Miss Mary

Rossi, Hugh (Homsey)

Bray, Ronald

Hornby, Richard

Russell, Sir Ronald

Bryan, Paul

Howe, Hn. Sir Geoffrey (Reigate)

Sharpies, Richard

Campbell, Rt. Hn.G.(Moray&Naim)

Howell, David (Guildford)

Shaw, Michael (S'b'gh & Whitby)

Carlisle, Mark

Howell, Ralph (Norfolk, N.)

Smith, Dudley (W'wick & L'mington)

Carr, Rt. Hn. Robert

Irvine, Bryant Godman (Rye)

Speed, Keith

Channon, Paul

James, David

Spence, John

Chapman, Sydney

Jenkin, Patrick (Woodford)

Sproat, Iain

Chataway, Rt. Hn. Christopher

Jeesel, Toby

Sr.anbrook, Ivor

Clark, William (Surrey, E.)

Jopling, Michael

Stodart, Anthony (Edinburgh, W.)

Clarke, Kenneth (Rushcliffe)

Joseph, Rt. Hn. Sir Keith

Stoddart-Scott, Col. Sir M.

Clegg, Walter

Kaberry, Sir Donald

Sluttaford, Dr. Tom

Cooke, Robert

King, Evelyn (Dorset, S.)

Sutorlffe, John

Corfield, Rt. Hn. Frederick

Kirk, Peter

Taylor,Edward M.(G'gow,Cathcart)

Cormack, Patrick

Kitson, Timothy

Taylor, Frank (Moss Side)

Curran, Charles

Knight, Mrs. Jill

Tetobit, Norman

Davies, Rt. Hn. John (Knutsford)

Knox, David

Temple, John M.

Dean, Paul

Legge-Bourke, Sir Harry

Thatcher, Rt. Hn. Mrs. Margaret

Dodds-Parker, Douglas

Le Marchant, Spencer

Thomas, John Stradling (Monmouth)

Dykes, Hugh

Lloyd, Ian (P'tsm'th, Langstone)

Thomas, Rt. Hn. Peter (Hendon, S.)

Eden, Sir John

Longden, Gilbert

Thompson, Sir Richard (Croydon, S.)

Elliott, R. W. (N'c'tle-upon-Tyne,N.)

Loveridge, John

Tilney, John

Eyre, Reginald

McLaren, Martin

van Straubenzee, W, R,

Fenner, Mrs. Peggy

McNair-Wilson, Patrick (NewForest)

Vaughan, Dr. Gerard

Finsberg, Geoffrey (Hampstead)

Marples, Rt. Hn. Ernest

Waddington, David

Fisher, Nigel (Surbiton)

Mather, Carol

Walker, Rt. Hn. Peter (Worcester)

Fletcher-Cooke, Charles

Maudling, Rt. Hn. Reginald

Ward, Dame Irern

Fookes, Miss Janet

Meyer, Sir Anthony

Warren, Kenneth

Fortescue, Tim

Mills, Peter (Torrington)

Wcathcrill, Bernard

Fowler, Norman

Mitchcll,Lt.-Col.C. (Aberdeenshire, W)

Whitelaw, Rt. Hn. William

Fox, Marcus

Mitchell, David (Basingstoke)

Wiggin, Jerry

Gibson-Watt, David

Moate, Roger

Wilkinson, John

Cilmour, Ian (Norfolk, C.)

Monks, Mrs. Connie

Wood, Rt. Hn. Richard

Godber, Rt. Hn. J. B.

Monro, Hector

Worslcy, Marcus

Goodhew, Victor

More, Jasper

Wylie, Rt. Hn. N. R.

Gorst, John

Murton, Oscar

Gower, Raymond

Noble, Rt. Hn. Michael

TELLERS FOR THE NOES:

Gray, Hamish

Normanton, Tom

Green, Alan

Oshom, John

Mr. Eric Cockeram and

Griffiths, Eldon (Bury St. Edmunds)

Page, Graham (Crosby)

Mr. Harold Soref.

Grylls, Michael

Main Question put forthwith and agreed to.
Bill accordingly read a Second time and committed.
Mr. Speaker: Mr. Percival to move his Instruction.
Hon. Members: Object.
Mr. Temple: Thursday next.
Mr. Speaker: Mr. Tilney to move his Instruction.
Mr. Tilney: I do not wish to move it.

MERSEY DOCKS AND HARBOUR [MONEY]
Queen's Recommendation having been signified—
Motion made, and Question proposed,
That for the purposes of any Act of the present Session providing for the reconstitution of the Mersey Docks and Harbour Board as a Company and the reorganisation of the capital of the Board it is expedient to authorise any loss to public funds arising from the making of provision by that Act for:—

(1)

(a) the conversion of the existing mortgage securities for loans made to the Board before 27 November 1970 under section 11 of the Harbour Act 1964 or otherwise into new debenture stock secured by a floating charge upon the whole undertaking of the Company, so that the said conversion be effected in manner similar to the conversion into new debenture stock of other securities issued in respect of moneys raised by the Board;

(b) the postponement of the dates of redemption of, and the reduction of the rates of interest payable on, the new debenture stock during a moratorium period applicable in a similar manner to all such new debenture stock;

(c) the alteration (by a scheme made under the Act so as to be binding on the Company and each of the holders of such new debenture stock to secure, so far as practicable, the financial viability of the Company) of the rights and privileges attaching to the new debenture stock in a manner equitable to all such holders of new debenture stock, including the writing-down of the nominal value thereof, the postponement of the dates of redemption thereof and the reduction of the rates of interest payable thereon; and

(d) the allotment (in accordance with the said scheme) of share capital to the holders of such new debenture stock in a manner equitable to all such holders of new debenture stock;

(2) providing security for loans so made to the Board on or after 27 November 1970 as priority borrowings secured by a floating charge upon the whole undertaking of the Company, similar to the floating charge provided as security for the new debenture stock, but taking effect for the purposes of section 322 of the Companies Act 1948 as if created at the time of, and in consideration for, each such loan, being borrowings ranking as to interest and capital pari passu one with another and in priority to all other borrowings of the Company, whether made before or after any such priority borrowings, subject to such alteration of the rights and privileges attaching to such priority borrowings as may be agreed by the Secretary of State with the approval of the Treasury;

372

(3) the discharge of the appointment by the High Court of a Receiver of rates of the Board on behalf of the Crown.—[Mr. Patrick Jenkin.]

10.10 p.m.
Mr. Edmund Dell: The Minister will have heard the hon. Member for City of Chester (Mr. Temple) say that an Amendment would be proposed to the Bill in accordance with which the Government could subsequently renounce their priority. The right hon. Gentleman was unable to say earlier whether such an Amendment would be acceptable to the Government; he evidently did not know the answer. Perhaps he knows the answer now. Is such an Amendment in order within the Money Resolution, or would the Money Resolution itself require amendment to permit of the proposed Amendment?
Mr. Hugh Jenkins: On a point of order, Mr. Deputy Speaker. My right hon. Friend the Member for Birkenhead (Mr. Dell) has asked a question about the Money Resolution. I have tabled an Amendment to the Money Resolution:
At end add—
(4) Notwithstanding anything in paragraph (1) of this resolution, all existing bondholders or stockholders holding £1,000 or less in value and who have reached the age of 60 years shall be repaid in full at such times and in such manner as stated in the certificate issued with the original bonds or stock.
Should my right hon. Friend's question be answered before I move my Amendment, or should my Amendment take priority?
Mr. Deputy Speaker (Sir Robert Grant-Ferris): I think that I can clear up the hon. Gentleman's difficulties. I should have told the hon. Gentleman earlier, or Mr. Speaker before he left the Chair should have told the hon. Member, that it was not Mr. Speaker's intention to call the Amendment.
Mr. Jenkins: Further to that point of order, Mr. Deputy Speaker. I had some suspicion that you might say that. I take it that it will be in order for me to speak on the Resolution, even though my Amendment is not selected.
Mr. Deputy Speaker: Undoubtedly, so long as the hon. Gentleman catches my eye, which is not all that difficult.
10.12 p.m.
The Minister for Transport Industries (Mr. John Peyton): Perhaps I can help the House by answering the questions asked by the right hon. Member for Birkenhead (Mr. Dell). I am unwilling to give authoritative rulings about what is in order when I have not seen the Amendment in writing, but so far as I know it will be in order. I cannot see that it would be objectionable from the Government's point of view.
10.13 p.m.
Mr. Hugh Jenkins: The Amendment which stood in my name before it disappeared from the Order Paper sought to recommend that the Government should take preferential action in the Money Resolution so as to enable them to favour small bondholders and stockholders. I was not wedded to the strict terms of the Amendment. What I sought to achieve was that those who had less than £1,000 invested in the Board's undertaking should receive preferential treatment in the repayment of their money in full.
It was suggested in the earlier debate that it was wrong to select certain shareholders for special treatment. I therefore suggest that the proposal for which my Amendment would have paved the way should be amended so that the first £1,000 of any investment should receive preferential treatment, which would mean that all shareholders should receive for the first £1,000 of their investment the ability to receive payment in full.
It will be immediately apparent to hon. Members why I make this suggestion, although it is unusual for hon. Members on this side to be over-concerned about investors. But this was a trustee security, in which large numbers of small people invested. Since it has been known that I took an interest in this matter on behalf of a constituent I have received letters from all over the country. The largest holding of anyone who wrote to me was £2,300—the entire life savings of a man invested by his widow in the Board in November 1969, when it must have known that it was running into difficulties. The smallest was £200.
Mr. James Wellbeloved: My hon. Friend said that we are not interested in investors; I am sure that he will want to qualify that. We
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are interested not only in the Mersey Docks and Harbour Board investors but also in the Pinnock Finance Company investors and above all in the investors in Vehicle and General, which has foundered because of the incompetence and perhaps even worse of the Government.
Mr. Jenkins: I said that it was perhaps unusual for us to take a primary interest in investors. I agree with my hon. Friend the Member for Liverpool, Walton (Mr. Heffer) that the primary interest must be the future of those whose lives are spent in the docks. But it is not wrong for us to be concerned with people who have saved some money. I am therefore worried about those who thought that they had a Government-secured investment and who, as a result of the Government's failure to back this trustee security on the basis of some doctrinaire proposition, will lose their money.
The right solution to this problem is public ownership. We are not dedicated to any particular form of public ownership and we have no objection to municipalisation, provided that it is genuine. If the Government changed their minds and decided to rewrite the Bill in Committee to provide municipalisation, I am sure that the House would give the necessary instruction. The Government's credit would emerge better after that procedure.
They are saying that the proposal to meet the first £1,000 cannot be agreed to, but meeting these small claims would not abrogate their ideas about organisations standing on their own feet. It would be doing something which they know they should do. In the Budget, they gave away about £35 million to surtax payers who do not need it. I know one surtax payer in particular—
Mr. Deputy Speaker (Sir Robert Grant-Ferris): Order. The hon. Gentleman is straying rather wide of the Money Resolution.
Mr. Jenkins: I accept your guidance, Mr. Deputy Speaker. I was offering the Government ways and means whereby they could find money to meet the requirements of the Money Resolution. One suggestion was that they might modify, by a penny or two, the surtax proposals which they have made in order

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to leave them with a few million pounds for this necessary purpose.
I hope that my hon. Friends, and perhaps some hon. Gentlemen opposite, will feel that there is merit in this proposal and that they would like to do something for the people they represent. Many of these people who have put these small amounts into this trustee security are supporters of the Government. Here are some of the widows and orphans about whom we used to hear. It used to be suggested that the only shareholders were widows and orphans. In this case there are genuine widows and orphans involved, and the Government are depriving them of 30 per cent. of their investments, according to the Board's estimate. Some of these people expected to have their money back in January, but it is not there.
This is a serious matter for people of small means. If the Government are serious about their concern for people living on small fixed incomes, they will not reduce their capital by 30 per cent. Surely they want to help these lame ducks. Some of these ducks are lame. Some of the widows need the money. Are these the kind of lame ducks which the Government want to throw away?
If the Government do not change their mind, they will not merely lose credibility with this side of the House—they need not worry about that, because they have never had any credibility with this side of the House—but they will lose credibility with their own supporters. This may be a serious matter for the Government. It may turn out that tonight this small Measure will identify the point at which the Government began to lose the confidence of the country and in themselves. If a Government fail to be true to the people they should be representing, they cease to be worthy to continue to govern.
I hope that the Government will think again about what I was proposing in my Amendment, which you, Mr. Deputy Speaker, did not select. I hope that my hon. Friends will vote against the Money Resolution if the Government do not give me an assurance tonight on the lines which I have been suggesting.
I hope that I shall receive a reply to what I have been saying. I hope that
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the right hon. Gentleman will say that he will think seriously about these people for whom they are supposed to be concerned and not dismiss the matter. I ask the Minister to think carefully about what I have suggested. If he does, we shall not press the matter. However, if he decides to take no notice of these people, if he does not care about them, why should we vote for the Money Resolution?
10.24 p.m.
Mr. Ted Leadbitter: One of the disturbing features about the proceedings tonight is that there is no full financial statement of the Mersey Docks and Harbour Board before the House. Indeed, the full accounts to December of last year are not available to hon. Members. Yet we are aware that specific letters of instructions and advices have been sent to the stockholders.
I have come to the conclusion, in dealing with the Money Resolution, that if there is no information about the true financial state of the Board, then the House may be misled into thinking that the situation is either less serious or more serious than it is but that in any case there is doubt about the true position. The matter must disturb any hon. Member seeking to put before the House propositions such as that which my hon. Friend the Member for Putney (Mr. Hugh Jenkins) has put and which I want to describe now.
I have a constituent who has worked a full life. Part of his superannuation money was provided to him in a lump sum and was lent to the Mersey Docks and Harbour Board. He is a retired man with no other means than his pension. He is justified in making the point that when he loaned that small sum of money —about £3,000—the Board was well aware of its financial state. If stockholders have been given advice about the future postponement of the payment of their loan and reduction in the rate of interest, it is wrong that a Member should be deprived of the financial armoury with which to argue on their behalf the case concerning their disturbing position. The Minister for Transport Industries can use the lack of knowledge, saying that the Government must await a full report before they can commit themselves precisely, even if they were inclined to be generous in this respect, and they are not.

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The Bill was put forward as a Private Bill. The Minister said that it was not a Government Bill. But it did not escape our notice that in the voting a few minutes ago there were the Chancellor of the Exchequer, the Solicitor-General, the Minister of Agriculture, the Secretary of State for Trade and Industry—practically the full Cabinet, except the Prime Minister; and I suppose that this is the second occasion on which he has not been told what is happening. This means that Conservative hon. Members cannot get away with a pronouncement that it is a Private Bill, when there is a strict Government interest, with the representation of Ministers from every Department.
Mr. Deputy Speaker (Sir Robert Grant-Ferris): Order. We have finished with the Bill. We are discussing the Money Resolution, and the hon. Gentleman must keep to its terms.
Mr. Leadbitter: As on previous occasions, Mr. Deputy Speaker, the telepathy between us is remarkable, and I was finishing what I had to say on that point. I accept what you say, and will return to the Money Resolution and put one or two pertinent points.
The Minister said that the Government are not prepared to feather-bed even the port of Liverpool. We on this side do not accept the expression "feather-bedding". It is wrong for the Government to take over the small amounts of moneys and investments of people up and down the country and put them in a newly-formed company, which is what is happening. The Minister cannot support his prejudices against the nationalised ports, and make his plea as a corollary that financial support from the Government would be feather-bedding, if he is prepared so loosely to use other people's money to help create a new statutory company which, in the language of the advices sent to the stockholders, will operate as a commercial company. The country should be disturbed about this.
The Minister, when he voices his prejudices about public ownership, should be careful not to neglect the fact that he is responsible for a high proportion of the ports which are publicly owned and financially healthy. He cannot deny
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that. He should not run down the ports of which he is in charge on the basis that we advocate nationalisation.
10.31 p.m.
Mr. John M. Temple Mr. John M. Temple (City of Chester) rose—
Mr. Eric S. Heffer: On a point of order. I take it that there will be sufficient time for me to make my contribution before the debate is concluded.
The Chairman: I am sure that the hon. Member for the City of Chester (Mr. Temple) does not wish to speak for the rest of the debate.
Mr. Temple: I undertake to be extremely brief.
I have been provoked into making another speech because the speech of the hon. Member for The Hartlepools (Mr. Leadbitter) was an attack on the Bill and not on the Money Resolution. If hon. Members opposite had read the Resolution carefully they would have been in favour of it. It provides for the Government making good losses from public funds in order to help in every possible way the functions of the Mersey Docks and Harbour Board and particularly the situation of bondholders.
We have heard a pathetic story from the hon. Member for Putney (Mr. Hugh Jenkins) about widows and orphans who have invested in the Board. I realise that their situation is extremely tragic. But if the Resolution were lost their situation would be very much worse. I should have expected to hear Opposition speeches in favour of the Resolution, which is a concrete example of the Government giving assistance to the Board. I find the Opposition's speeches rather extraordinary.
Mr. Leadbitter: The hon. Gentleman is entitled to put his interpretation on what we have said, but our objection is that, although the Money Resolution might be acceptable to the hon. Gentleman as the mover of the Second Reading, it is not acceptable to us because it supports a Bill of which we disapprove.
Mr. Temple: That is a fair point. But I should have thought that the Resolution was drawn in terms which were acceptable to the Opposition.

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I wish to clear up one criticism of the Board, namely, that the Bill has been brought forward at a time when the accounts for 1970 are not available. My hon. Friend the Member for Bebington (Mr. Cockeram) explained that the Board is faced with very great complexities in the preparation of the accounts for the year ending 31st December, 1970. Therefore, it has called in consulting accountants and valuers to advise it on important points which it would like to get absolutely clear so that when the accounts are presented they will convey a true picture of the Board's position. I give that explanation again only because it has been challenged. Not because I moved the Second Reading but because I believe that this is an example of the Government's good will, I hope that the House will give unopposed approval to the Money Resolution.
10.35 p.m.
Mr. Eric S. Heffer: If the Money Resolution were not before the House, the situation for bond holders would be very much worse. I am not proposing, therefore, that we should oppose this Resolution, though some hon. Members may wish to oppose it, and we shall have to see what emerges when, or if, a Division is called. Our position was made abundantly clear when we discussed our reasoned Amendment earlier.
Apart from the big and small personal investors, a number of trade unions have invested money in the Board. For example, co-operative and other organisations, representing trade unions and the Labour movement, have put considerable sums—the T. & G.W.U. alone has invested about £250,000 in the Board—into this sphere and they stand to lose considerable amounts. They are not particularly happy about the provisions of the Bill and the likely outcome of this Resolution.
I have never been an advocate or supporter of the capitalist system. I appreciate, however, that many people support the system and have invested money in the Board. I will quote from two letters which have come to me, and in each case the writer had invested in the Board. One wrote:
"I feel sure they could if they so wished redeem these bonds and save a lot of people
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a great deal of hardship, especially those who have invested all their savings in what always seemed a gilt-edged proposition."
That was written by a person living in Childwall, Liverpool. A resident of Heswall wrote:
"Upon my retirement at 65 years of age, in 1965, I invested, out of my superannuation money, £1,000 in debenture stock issued by the Board, as I wished to aid local industry and ensure, as I thought, over the long term, a moderate rate of interest for my twilight years. I am now horrified to learn that this same Board are seeking Government aid to confiscate the money of bond holders who assisted them in the past!"
I suspect that both writers supported the Conservatives and were passionate believers in the capitalist system. I also suspect that their support has been rather diminished by these events.
The Times has published a number of editorials, each taking a different line, about the Board. I will quote from only two of them.
On 11th January this year The Times said:
"It is clear to both industry and the City that this is the year in which the Government's policy of not providing support for lame ducks could take its toll on business and the stock market. Last week's developments in the case of the Mersey Docks and Harbour Board have made it equally clear, however, that that policy requires consistency and clarification.
"For emotional and practical reasons, the accident that the Mersey Board appears as an exemplar of the rigorous new stance for government towards the private sector is unfortunate. Investors in the bonds of the port placed their money for security—buying fixed-interest stocks in a public authority with their investment secured on its revenues. About a third of the board's bonds, some £23 million, is held by investors with amounts of less than £5,000 nominal value."
The leader goes on:
"They may have been ill-advised to believe that these bonds were in effect Government-guaranteed. But the mistake was one from which the Government have previously profited in that such public authorities as the board have been able to borrow at favourable rates of interest because of it; and small investors in Mersey may feel, there is a contrast between their experience and the indirect assistance through government-supported intervention to the risk-taking ordinary shareholders of Rolls-Royce."
The leader reaches the following conclusion:
"It is hard to escape the conclusion that the Mersey bond-holders are victims of irreconcilable political aims. For the Government to reconsider their position and assume liability

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for bond repayment would not weaken their policy of insisting on commercial self-sufficiency."
I could quote at length from another leader that appeared in The Times on 12th March this year. Since all the top people read The Times—it is the bible of the top people—and since the top people are supposedly on the other side of the House, I am sure they will take due note of what that newspaper said on this subject. Perhaps I will quote a short passage from that March leader. In talking of the Port of London Authority it said:
"The proposal is necessarily an imitation of the second and revised Mersey capital reconstruction scheme and inevitably if the P.L.A. is to be able to raise new money which it badly needs. Superficially such a scheme may be to the Government's liking since it would establish that the ports are commercial enterprises in which it is management's duty to see that capital is not lost and the investor's problem, as in other commercial enterprises, if it is."
Then it continues in relation to the Mersey:
"But the enthusiasm for this plan seems misplaced. What it fails to recognise adequately is that the ports involved so far, Mersey and London, are statutory undertakings with a legal responsibility to provide port services—that they are in fact radically different in kind from a normal private enterprise."
Those editorials from The Times are extremely revealing and instructive. If I were a passionate Member on the other side of the House, I would do what I have done in the past six years when our party was in government. When I thought the principles on which my party was based were being departed from, I was prepared to speak and vote against my own party. But that apparently is not the situation of hon. Members opposite. This legislation is a serious departure from the basic principles of conservatism, but they are not prepared—apart perhaps from one or two of them—to stand up and make their voices heard. The majority are prepared to let this go through without showing that it is contrary to their beliefs. The credibility of the Conservative Party is now at stake.
If I had been a defender of the capitalist system in the past I would have been brought to realise now, because of this Measure, as, I am sure, thousands upon thousands of investors in this coun-
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try will also now realise, that investors got a much better deal whenever the Labour Government brought things under public ownership, because they were paid full and, sometimes, over-fair compensation from the Labour Government—much better treatment than they are getting from the Tory Government at present.
10.45 p.m.
Mr. Peyton: If I may, with the leave of the House, speak again very briefly in reply to some of the points which have been made, I should like to start by saying that, like my hon. Friend the Member for City of Chester (Mr. Temple), I am absolutely convinced—and I think, the hon. Member for Liverpool, Walton (Mr. Heffer) conceded his point—that the passing of this Money Resolution, whatever may be the difference of opinion on the Bill itself, is essential in the interests of everybody concerned, the Board and the bondholders alike.
I turn to the points which were made by the hon. Member for Putney (Mr. Hugh Jenkins). I am sorry not to see him in his place. I do not think that even if they were in order I could advise the House to accept them. To start with, they would have the very great disadvantage of prolonging uncertainty. Moreover, it would be very difficult to define the deserving people whom he has in mind. May I give one example of what I mean. If we judge a deserving person by the fact that he has £1,000 or less invested in the Board, that makes no reference to the size of his total wealth; it is a measure only of his investment in the Board.
I must advise the House that it is essential in the interests of clarity and certainty to adhere to what has been the Government's aim all along in what I readily admit is a very unhappy business, particularly for those who suffer—and that is that equality between all bondholders should be a fundamental aim of any settlement which is made, because to do anything else would be manifestly unjust.
To the hon. Member for The Hartle-pools (Mr. Leadbitter) I would say that I do not recollect having used the words "feather-bedded" for many years, and so I shall not follow him at length in his argument.

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The hon. Member for Walton accused us on this side of the House of departing from our principles. Nothing could be further from the truth than that. The point here is perfectly simple, even though painful. It is that a great many people have had the misfortune to invest their funds, their savings, in an operation which, for reasons which I have already given, was ill run. It is an operation which, for various reasons—to many of which I referred in my Second Reading speech and which it would be out of order to repeat now—has fallen upon evil days. We on this side of the House believe that the Bill, with its unfortunate consequences for some, is an inevitable but necessary step on the road back to restoring the port of Liverpool. The Money Resolution is essential to that Bill.
Question put and agreed to.

BROST FORGE COMPANY
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Fortescue.]
10.49 p.m.
Mr. George Cunningham: Our business tonight is of a particularly watery character, but the waters which I intend to discuss are backwaters compared with those which we discussed earlier. The aspect of legislation and administration which I want to discuss is a backwater in which injustices can occur.
I have asked for the debate so that I can press the Minister to take action to enable the Brost Forge Company in my constituency to be compensated for damage to property and loss of earnings caused by flooding after two large water mains burst in Islington last summer. I am sure the Minister will recognise that this matter goes further than an individual case, and I raise the wider and more general issues so as to achieve justice in this case.
I feel that there is a need, as the Minister will know from previous correspondence, to review the law on the responsibility of water boards for providing compensation when their escaped water causes damage, but tonight I am not arguing for a change in the law—
Mr. Deputy Speaker (Sir Robert Grant-Ferris): Changes in the law are out of order in Adjournment debates.
Mr. Cunningham: That, Mr. Deputy Speaker, is why I am not arguing for a change in the law, but rather inviting the Minister to operate the existing law and practice to provide justice to my constituent. I emphasise that I am not arguing for a change in the law and so anticipate the Minister's possible defence against my case.
I am describing a situation in which a water main, usually a large one, bursts and the water causes damage to private property in homes and factories in the area. This is not uncommon. In the Metropolitan Water Board area in the last five years there have been on average about 2,000 water main bursts per year, and in my Borough of Islington there have been in that period about 70 bursts a year. I make no criticism of the sense of responsibility and the administration of the Metropolitan Water Board. I am criticising the way in which the existing law has been applied in this particular case. I have a high regard for the administrative competence of the Metropolitan Water Board.
On two occasions last summer large water mains burst in the area of Holloway, and the Brost Forge factory was damaged because it lies at the bottom of a slope and the water collected and could not get away. The water rose to a height of several feet on both occasions, equipment was damaged—some quite expensive equipment—and some was damaged beyond repair. The operation of the business was held up for several days and the business suffered not only damage to property but loss of earnings because the property had been damaged.
The law, I understand, is like this. If the water board commits an act of negligence, for example by fitting a wrong connection to a pipe, it can be sued and will pay compensation. However, the mere fact that water bursts out of a pipe between one end and the other is not held to imply negligence on the part of the water board. I personally dispute that view in common sense, but that view has been upheld by the courts over the years, and there is, therefore, nothing we can do about it without passing legislation.
One consequence of this situation which has been allowed to become more and

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more restrictive over the years is that when a person suffers damage in this way he writes and asks for compensation. The kind of response he gets is an explanation that—and I quote from one such letter—
"as statutory undertakers acting without negligence, the Board is advised that it is under no legal liablity in this matter."
People throughout the country get that kind of response to requests for compensation. There is no indication there to the ordinary member of the public that this is an ex parte view of the water authority which he is entitled to contest and to test in the courts if necessary. If he knows about these things, then he will know his rights, but the ordinary member of the public who has suffered damage to his property does not know these things.
It is important, therefore, that the Minister should get it straight with the water authorities, that when they deal with requests for compensation, they should make clear, in repudiating responsibility, if they must, that this is their view, and provide some means by which a member of the public can test that view and take the matter further. It should at least be made clear that he is entitled to take the matter further if he wishes, together with information about the particular form of compensation to which I am about to refer.
Despite what I have said, compensation is paid in certain cases where the law places no legal obligation on the authorities to do so. If a water authority wants to pay compensation, it asks the Minister to approve an ex gratia payment. The technicality of this, I understand, is that the Minister issues a certificate under section 228 (1) of the Local Government Act, 1933. That has the effect of debarring the district auditor from inquiring into the legality of the payment. It does not make an illegal payment legal, but it removes the remedy from what seems to remain an unstatutory payment.
That procedure has been commonly used—and this is a large part of my case —in past years. Between 1966 and 1970, it was used 32 times and a total of up to £3,000 has been paid out by various water authorities under Section 228 (1) by means of ex gratia payments. So the principle of paying compensation has
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been conceded and a procedure, albeit a very curious one, has been firmly established over the years for doing so.
I contend that, since this procedure is both legal and firmly established, it should be applied in the case of the Brost Forge Company. But the Metropolitan Water Board has declined to put the case to the Minister for consideration. The Board's argument is that this procedure is only used, should only be used and can only be used in cases where hardship has been caused to persons of very limited means, and it says that the Brost Forge Company does not fall into that category.
In order to satisfy itself of this, the Board conducted a very detailed examination of the accounts of the company. The company is a small one; it is a private company and the people who own it work in it. It is one of those companies which have been built up slowly over the years by the sweat of the people who own it. For many hours, the Board's accountant went over the books of the company in enormous detail—in more detail than would normally be required for anything except for Inland Revenue purposes. After that examination, the Board concluded that the company was not in such a situation as to make it a hardship case for the purpose and practice of paying compensation.
Although I am not now asking for a change in the law to provide a general system of compensation, it is as well to look at some general principles involved here because of the guidance they give on how the system of ex gratia payments ought to be operated. It may be held that insurance companies exist to cover exactly this kind of risk, and many policies do cover damage from flooding, but flood insurance is a particularly awkward form of insurance, Many policies do not cover it and many policy holders do not realise until it is too late that the flood cover is either very limited or non-existent.
There is a more important consideration. Most people would think, in common sense, that a water board should be liable when a pipe bursts and damage is done, and are therefore less careful about acquiring the necessary private insurance. They normally acquire private insurance for risks like burglary, where one cannot

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be certain of getting recompense. But when people know that a water board has the necessary finances, perhaps ill-advisedly they think that there is no need for private insurance. That reasonable conclusion has been frustrated only by the technicalities of judges in making the law much more restrictive.
It is said that these bursts are sometimes pure accidents for which no-one can be blamed. This view which has been built up, and which is particularly based on the 1963 case, Dunne v. North Western Gas Board, should not be applied in these cases. The whole purpose of a water board is to conduct water from one end of a pipe to the other without the water getting out in between, and it should be liable when the unexpected happens.
It would be unreasonable to expect the water board to examine its pipes sufficiently frequently to ensure that they never fractured. In the London area especially, where the pipes are old, the traffic is getting heavier and there are one-way streets which impose an additional strain on the pipes, it is impossible for the water board to dig them up every so often for a check. One cannot ensure that there will not be bursts, but only that there will be sufficient compensation, so that the person at the bottom of the hill does not suffer alone but the burden is spread over all users by means of a small additional charge. Those general criteria should be applied in dealing with the question of the ex gratia payment system.
My case is this: until the law is changed to put a general obligation on the boards, I accept that when loss is covered by insurance the boards should not pay. The Brost Forge Company was not covered by insurance for the damage caused by the first burst. It was covered in time for the second burst but there were some losses, like stationery and, more important, loss of earnings, for which cover was either non-existent or not total. It is difficult to get insurance companies to accept every possible kind of risk in these cases. Consequently, the company has suffered a loss of about £800, which is not covered by insurance.
Second, on the hardship question, an old-age pensioner who needs £20 or so to buy a new carpet is accepted as a
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hardship case. I wish to make it clear that there has been great appreciation in the area of these bursts of the payments of that character which have been made—and promptly made—by the Metropolitan Water Board. But it is not regarded as hardship when a small company struggling to build itself up suffers a loss of £800 which could cripple it. I do not accept that that is not hardship. If it is argued that a company which can afford to lose £800 cannot be hard up, I am prepared to advance the counter-argument that anyone who loses £800 suffers hardship and should be regarded in that way.
Thirdly, there is a clear conflict between the Metropolitan Water Board and the Ministry about the conditions necessary for an ex gratia payment. This is an important matter which the Minister must pursue. In a Written Answer to a Question by me on 9th February, the Minister said that no guidance had been given to water boards on the nature of the applications that the Minister was prepared to sanction. I verified later that that answer was intended to apply to the Minister and his predecessors in office. Another reply told me that each application is considered on its merits. Moreover, as a matter of fact, there has been no single case in the last five years of an application passed on to the Minister having been turned down.
However, the Metropolitan Water Board have told me and the company that the Minister will consider sanctioning such payments only where there is evidence that the party concerned is in necessitous circumstances and where the damage or loss is not covered by insurance. So there is a clear conflict between the board and the Ministry about whether it is the Ministry which is insisting that there needs to be hardship before an ex gratia payment can be made. Neither side has defined what "hardship" amounts to, which is another matter.
My case, therefore, is that there is confusion in this matter between at least this one water board and the Ministry, and I do not see why my constituents should suffer loss in circumstances where there is this total confusion about the law and practice between the Ministry and the board. If there had not been this confusion and the situation were that the Minister will consider any case put

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to him, it is very likely that this case would have been put to him and, if the past is anything to go by, it would have been approved, since no case put to the Minister in the past five years has not been accepted.
In these circumstances, it is not possible for the Ministry to shuffle the matter off, saying that it has no responsibility. It has overall responsibility for the legislation and for the working arrangements between itself and the Metropolitan Water Board. If it allows this confusion to arise, it cannot expect my constituents to suffer as a result.
I conclude, therefore, that the company has suffered loss through no fault of its own, and suffered hardship as a result. A means is available under the law as it stands by which compensation can be made legally by way of an ex gratia payment. Such payments have been made in many cases in the last few years, and for about the amount that I have been discussing, or more. There is utter confusion about cases which can be accepted and those which cannot be accepted, and, on that ground, my constituents should be given the benefit of any doubt. I ask the Ministry to go into this matter with the Metropolitan Water Board with a view to ensuring that my constituents are provided with an ex gratia payment up to the amount of the loss that they have suffered which is not covered by private insurance.
11.10 p.m.
The Under-Secretary of State for the Environment (Mr. Michael Heseltine): There is not a great deal of doubt about the facts of the case as explained by the hon. Member for Islington, South-West (Mr. George Cunningham). I entirely accept that we are dealing with claims which he has been energetically pursuing on behalf of his constituent company, the Brost Forge Company, which has been claiming against the Metropolitan Water Board as a result of two bursts of their water mains last summer. However, there are difficulties which the hon. Gentleman would expect me to explain.
The Secretary of State does not have the power, which the hon. Member assumes him to have, to bring the sort of pressure on the board which would be necessary to make it accept liability for damages. Although it was not strictly relevant, in passing he made the point
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that the board and other water undertakers in letters turning down unsuitable applications in cases of this sort should be expected to explain that it was only their opinion which was expressed in the letter and that legal implications should be pursued through solicitors.
That may be applicable to people not sufficiently well versed in the normal practices of the law, but certainly that could not be said to apply to this company. It is clearly well able to understand the likelihood of a board of this sort being right or wrong. The Metropolitan Water Board is governed by the Statutes of the country, and the mere fact that the company has consulted the hon. Member indicates that it is not a company to take things lying down—and I would be the last person to suggest that it should. But the mere fact that it determined to raise the matter in this way shows that it had the determination to consult solicitors as soon as it discovered the legal situation within which the board operated. It is for the board to define its position in law, but the company is at liberty to pursue that definition through the courts. It is one of the facts of the case that it has not sought to do so, although that was entirely within its discretion.
This raises a fundamental question in these cases. The board is liable to pay when it is negligent. In this instance, however, it is advised by its solicitors that it was not negligent. In such circumstances, the board has made no application to the Secretary of State for exemption under Section 228 of the 1933 Act, because it believes that it has no liability.
Mr. Cunningham Mr. Cunningham indicated dissent.
Mr. Heseltine: I do no think that the hon. Member can dispute this explanation of the facts. The board believes that it has no liability because it is legally advised that it was not negligent. That is a matter of fact. It is up to anybody who disagrees to seek redress through the courts.
Mr. Cunningham: The board has not applied to the Minister. This is not on the ground that it believes that it was not negligent. Indeed, if it had been negligent, it would not have needed to apply but would have paid compensation without applying to anybody. It has to apply when it has not been negligent,

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but nevertheless wants to make a payment. It is on that issue that I make my case.
Mr. Heseltine: Whether or not the board believes that there is a special case of hardship arising out of the burst mains last summer which would justify the payment of an ex gratia payment and to protect itself against the surcharge which could follow, the board did not apply for sanction under Section 228.
The hon. Gentleman suggests that the Department is in some way responsible for laying down conditions under which the board can expect to receive support if it makes such an application. I will certainly look at any letter which the hon. Member suggests he has received, but my information is that this is entirely a matter for the board itself to decide. It is true that none of the applications made to the Department in the last five years has been turned down, but it is for the board to decide the conditions under which it will make ex gratia payments. It takes the view that it is responsible to its consumers as a whole and that it should not accept liability except where there is a case of negligence, believing that if it were to make ex-gratia payments of this sort, which would have to come out of its funds, it would be subject to criticism unless there were exceptional circumstances. The exceptional cases, in the view of the board arise, only where there is a degree of hardship over and above that which the person who suffers may be expected to meet—in other words, in cases of extreme personal hardship where a householder of slender means is not insured or where a firm would have been bankrupted if the board's decision were to be other than favourable.
I accept at once that in this case detailed examination was carried out and it was felt that the extreme conditions of hardship did not apply, fortunately. In these circumstances the board decided not to apply for a sanction under Section 228. It is entirely the board's decision. It is not a matter on which the Secretary of State could seek to intervene.
Mr. Cunningham: I quite understand that the decision is one for the board and that it has not put up a case to the Minister. However, I hope that the Minister will take my point that there is confusion
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between the Minister's saying that he has given no guidance and the board's saying this in a letter dated 21st October, 1970 to the Brost Forge Company:
"The Minister will only consider sanctioning such payments where the party concerned is in necessitous circumstances and where the damage or loss is not covered by insurance."
This conflict must be sorted out and the benefit of any doubt must be given to the member of the public who suffers. It cannot be left that the board has decided that there is nothing to be looked into. Clearly the whole matter needs to be examined and cleared up. In so doing, companies like the Brost Forge Company which have suffered must receive their just recompense. I hope that the Minister, who has spoken about hardship, will do something to try to lessen the hardship. One thousand pounds has been paid out in the form of an ex gratia payment in the past. If it were all right to pay £1,000 in one case, why is it not all right to pay out £800 in this case?
Mr. Heseltine: I said earlier that I will certainly study the letter to which the hon. Gentleman refers. I can only assume that the letter means that the board believes, in the exercise of its discretion, that it would be wrong to make application to the Secretary of State in terms other than those which I have outlined. However, if the hon. Gentleman would be good enough to let me have a copy of the lettter I will study it, because it is not the type of matter which I can be expected to study over the Dispatch Box or even to appreciate on having it read out to me by the hon. Gentleman.
I do not think that that letter changes the point that I wish to make, that no application has been made to the Secretary of State. I understand that it is not the board's intention to make any application, because it believes that in all the circumstances of this case there is no extreme hardship which would justify it in doing so. This is a matter for the board to decide. The remedy which is available in advance to the constituent company is one of insurance. In arrears it is a question of redress through the courts if the company believes that the board is in any way falling down or has fallen down on its statutory duties.
It would not be for the Secretary of State to urge or encourage water undertakers to make payment in circumstances

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in which they have no statutory authority to do so. It would not be part of the view we take of our responsibilities as a Department of State. It would be using the powers of sanction, which I suppose that we could argue that we have, in lieu of legislating. As the hon. Gentleman pointed out, this debate is not about a change in the law. That would be out of order, as the hon. Gentleman pointed out. It is outside the scope of the debate.
Therefore, I have to say that in the context of this case there is nothing that the Secretary of State feels able to do, al-
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though I qualify that by my offer that, if there is a letter which the hon. Gentleman wishes me to look at, I will be only too happy to do so; but I greatly doubt that there will be some new evidence—
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 past Eleven o'clock.