Commons Sitting of 2 December 1974

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

    Employment
    Mr. Tom Ellisasked the Secretary of State for Wales what proposals he has for making use of EEC funds in carrying out investigations into the changing employment situation in Wales.
    The Secretary of State for Wales (Mr. John Morris): I have no immediate proposals for sponsoring research jointly with the European Commission but where appropriate I would be happy to do so.
    Mr. Ellis: Is my right hon. and learned Friend aware that substantial funds which the European Commission was prepared to spend in 1974 on studies on the unemployment situation in Wales have not been taken up by Her Majesty's Government and will now have been diverted to finance studies in other countries? Will he say whether he was consulted by the Secretary of State for Industry before the decision was made not to make use of the funds and before Parliamentary Questions on the matter were tabled?
    Mr. Morris: I can assure my hon. Friend that the two offices concerned— my own and that of my right hon. Friend—have been in consultation on these important matters. What my hon. Friend suggested is not entirely accurate, in that my right hon. Friend has set out fully what occurred. One scheme is under way. Another is still being considered by the Secretary of State for Employment. A third one, where the British Steel Corporation is the sponsor, is also being considered. I have nothing to add to what my right hon. Friend has set out.
    Mr. Wyn Roberts: May we have a firm assurance from the Secretary of State that he will be consulted by his right hon. Friend before any of these grants are turned down?
    Mr. Morris: As regards the present proposal—the one which the Welsh TUC is considering—I can assure the hon. Gentleman that my office is in consultation with the Department of Industry to ensure that a proper scheme is fully worked out.
    Mr. Wigley: If there are funds of this type forthcoming from the EEC for these projects or for any others, will the right hon. and learned Gentleman assure the House that he will welcome on behalf of Wales any funds which can be used to help solve the unemployment problem?
    Mr. Morris: I always welcome any new money. What is important is that no scheme has been stopped in Wales. That was made clear by my right hon. Friend.

    EEC Grants and Loans
    Mr. Wyn Robertsasked the Secretary of State for Wales if he will list the grants and loans which have been agreed by the EEC institutions for Wales.
    Mr. John Morris: As the answer is long I will, with permission, circulate the information in the OFFICIAL REPORT.
    Mr. Roberts: According to The Times this morning, no less than £323 million has been obtained by this country in grants from the EEC since January 1973. Of this, £100 million has gone to the North of England. Will the Secretary of State say how much has come to Wales?
    Mr. Morris: I am not sure to which part of the issue the hon. Gentleman is referring, but I give in the answer a long list of schemes at Maelor, Llandyrnog, Glamorgan, Johnstown, Port Talbot, Llanwern, money from the European Social Fund, and one for Betws Colliery. A long list of schemes is set out in the full answer which I shall issue to the House.
    Sir A. Meyer: May we have an assurance that the Secretary of State will not allow his personal views on the EEC in any way to weaken his resolve to extract every possible advantage for Wales from Britain's membership of the European Community?
    Mr. Morris: I assure the hon. Gentleman that I shall always do my utmost to ensure that all moneys which are needed in Wales come to Wales. That is what I have done in the past, and I shall continue to do that.
    Following is the information:
    Agriculture
    Among individual project schemes listed in the OFFICIAL REPORT on 5th November were four projects relating to Wales alone and one of part Welsh interest. The EAGGF grant in respect of each was:

    £

    Cheese and milk factory, Maelor

    517,200

    Llandyrnog dairy

    198,581

    Glamorgan and Monmouthshire dairies

    25,680

    Johnstown dairy produce plant

    87,103

    Bulk milk collection in England and Wales

    *850,983

    * The Welsh element in this cannot readily be identified.

    The above projects were approved under the 1973 programme. This year's programme has yet to be finalised.
    European Coal and Steel Community
    A grant of £21,000 has been made under Article 56 of the Treaty of Paris for assistance to 131 workers following the closure of coke ovens at Shotton. The new Betws Colliery near Ammanford will benefit from a £14 million loan negotiated by the National Coal Board for developments at five collieries in England and Wales.
    European Investment Bank
    Loans have been negotiated by the British Steel Corporation for developments at Llanwern (£14·7 million) and a new sinter plant at Port Talbot (£8 million).
    European Social Fund
    Allocations estimated at £2·7 million were made from the Social Fund in respect of Welsh schemes in 1973. A further allocation of £2·1 million has already been made for 1974–75.
    Note
    In addition to these schemes Wales will derive benefit from certain other grants and loans some negotiated on a United Kingdom basis.

    Farmers (Aid)
    Mr. Geraint Howellsasked the Secretary of State for Wales if he will introduce a financial support system in addition to the Agricultural Credit Corporation to help young Welsh farmers who are on the verge of bankruptcy.
    Mr. John Morris: We have recently announced a new assured return to beef producers. Welsh farmers will also get extra benefit shortly from the increased
    1090
    hill sheep subsidy and the advance payment of beef cow and hill cow subsidy.
    Mr. Howells: I am disappointed with that reply. I am sure that the Secretary of State is aware of the crisis in the livestock sector. Will he agree to compensate farmers in the livestock sector, because they had to sell store cattle during September, October and November, through no fault of their own? Will he reconsider his decision?
    Mr. Morris: What we have announced gives to the industry the kind of floor which was required, perhaps to the surprise of some Opposition Members. We have brought forward the payments on the beef cow and the hill cow for next year, and that step has been welcomed by the industry. Perhaps the industry was not aware of the amounts involved. As regards the hill cow subsidy, there will be two payments of £24·50 each— one for June, most of which is already paid, and one for December. As regards the beef cow subsidy, £11 will be paid in respect of the December situation and another £11 shortly afterwards in January. That, coupled with almost a doubling of the hill sheep subsidy, will ensure a substantial injection of money into the industry. When I announced these particulars to the House there was a great deal of surprise among Opposition Members.
    Mr. Cledwyn Hughes: We have heard a number of reports recently about Welsh farmers becoming bankrupt. This would be an extremely grave and disturbing development. I should like to know whether there is any validity in that statement.
    Mr. Morris: There is no general picture. I have seen one report of a case in the newspaper over the weekend. It is important to ensure that within our resources we do our utmost to make sure that the industry remains liquid. The steps that we have taken by way of advancing these payments and giving a floor to the market will ensure that the industry has the necessary liquidity to tide it over what has been a very difficult situation.
    Mr. Nicholas Edwards: We welcome the measures taken, but is it not a fact that hay is now costing up to £100 a ton in parts of the Principality? Store cattle

    1091
    men who had to sell their cattle during October and early November are finding it very difficult to raise the funds necessary to obtain fodder even where it is obtainable. Will the right hon. and learned Gentleman reconsider the matter and look into the possibility of some kind of winter keep supplement, or other aid?
    Mr. Morris: We shall always consider suggestions by the hon. Gentleman. However, he must be aware that although the picture in some parts of Wales relating to fodder is and has been serious—there is another Question on this matter— every effort has been and is being made to see what can be done about it. There are limitations to what any Government can do in that sphere.

    Caernarvon
    Mr. Wigleyasked the Secretary of State for Wales if he will pay an official visit to the area covered by the Caernarvon constituency in the near future.
    Mr. John Morris: I visit all parts of Wales as opportunities arise. I have already visited the Caernarvon constituency on two occasions this year in my official capacity.
    Mr. Wigley: I am sorry that the Secretary of State is not intending to come to Caernarvon again very soon. If he were to come, I hope that he would take the opportunity of visiting the county offices there, where he would learn of the dismay of the officers of Gwynedd County Council at the rate support grant for next year. Is the right hon. and learned Gentleman aware that Gwynedd will suffer considerably on the sparsity element of the rate support grant. The sparsity element will drop from £2·9 million to about £928,000. The total increase in grants, taking all grants together, will be about 43 per cent. for Gwynedd, compared with 50 per cent. for England and Wales. Will the right hon. and learned Gentleman bring pressure to bear on his right hon. Friend the Secretary of State for the Environment between now and next week to try to get some modification introduced?
    Mr. Morris: The hon. Gentleman will be aware that there has been some misrepresentation about what has happened. We must start with our magnificent victory in March, which ensured a substan-
    1092
    tial domestic relief element, which was much better than anything our predecessors did. That was reflected by the complete absence of Welsh Tory Members and National Members in the Division Lobby in the House of Commons in March, because no one voted against the Government. The totality of the rate support grant for Wales will be very substantial. Gwynedd will benefit, looking at the total figure, by an increase of about 40 per cent. It is no use the hon. Gentleman's taking a tiny fraction. We must look at the whole picture, including the needs resources and the domestic element.
    Mr. Roderick: Will my right hon. and learned Friend speed up the publication of the figures on the rate support grant to dispel the distortions which are appearing in the various organs of the Press in Wales? We understand that we are to see an improvement in the rate support grant. To listen to Opposition Members one would think that the situation was becoming worse.
    Mr. Morris: The figures will be published as soon as possible—I hope in the course of the next few weeks. My hon. Friend is right to draw attention to the fact that Wales as a whole benefits substantially. It will get about £90 million extra.
    Mr. Wigley
    Mr. Morris: It is no use the hon. Gentleman shaking his head. There will be an increase in the domestic relief element, which is double that of England.
    Mr. Wyn Roberts: Is it not a fact that Gwynedd, Dyfed and Powys have the lowest percentage increase on last year's grant of all the English and Welsh authorities? Does that not mean that their interests have been neglected?
    Mr. Morris: It means nothing of the kind. We had a substantial increase throughout Wales of between 40 per cent. and 50 per cent. I think Gwynedd had an increase of about 40 per cent., and Dyfed had 40 per cent. or more. This is the pattern throughout Wales. In all, Wales will get about £90 million extra. I hope that the figures will emerge soon. That is in addition to the domestic relief support element which is double that of England. Does the hon. Gentle-

    1093
    man want the same kind of domestic relief support as previously?
    Several Hon. Members—
    Mr. Speaker: Order. There is another Question on this matter.
    Mr. Wigley: On a point of order, Mr. Speaker. In view of the unsatisfactory nature of that answer, I beg to give notice that I shall seek to raise the matter on the Adjournment at the earliest opportunity.

    Sports City
    Mr. Andersonasked the Secretary of State for Wales what representations he has received about the concept and location of the proposed Welsh Sports City.
    The Under-Secretary of State for Wales (Mr. Barry Jones): Since the Sports Council for Wales submitted its report my right hon. and learned Friend has received 22 representations about the location of the sports city, including one which also questioned the concept.
    Mr. Anderson: Does my hon. Friend agree that in the present economic climate it would probably be a wiser use of resources to concentrate on building up existing sports facilities in the Principality and creating modest and less costly new facilities?
    Mr. Jones: There is a substantial measure of agreement between myself and my hon. Friend who is always making the point that his locality should have extra provision. I cannot hold out any hope of this scheme going ahead when there is so much demand for money for more schools, housing and hospitals.
    Mr. Grist: Does the Minister accept that many of us would indeed agree that at a time of financial stringency, such as this moment, the eventual building of this sports city must be delayed? What would not be acceptable would be a delay in accepting the recommendations of the Sports Council for Wales which went into the matter in great detail. It would not be acceptable to the City of Cardiff if there were delay in accepting those recommendations. Cardiff is the premier sports city of Britain, and it wants to make provision
    1094
    at least for the eventual building of that sports city.
    Mr. Jones: I think that both matters would have to be delayed. However, we shall consider very carefully all the representations that have been received on this issue.

    Industry
    Mr. loan Evansasked the Secretary of State for Wales what further action is proposed to encourage and attract new industries to Wales; and if he will make a statement.
    The Under-Secretary of State for Wales (Mr. Edward Rowlands): The Government's regional policies, which include a wide range of measures to attract industrial development to the assisted areas, are kept under continuous review and proposals for a Welsh development agency are currently being worked out.
    Mr. Ioan Evans: I welcome that reply. I am sure that people in Wales will welcome the setting up of a Welsh development agency. As the previous Government discontinued the building of the new town of Llantrisant, will my hon. Friend give special regard to attracting industry and employment to the heads of the valleys of South Wales? In particular, will he have in mind—as the Welsh Office has recently sanctioned clearance of a large derelict area in the Cynon Valley, between Aberdare and Mountain Ash—attracting new industry there? The area is ideal for industrial development.
    Mr. Rowlands: As my right hon. and learned Friend the Secretary of State said, we do not believe that the Llantrisant New Town decision was negative. It was a positive decision in favour of the heads of the valleys communities. I assure my hon. Friend that all efforts are being made to promote industrial development in all our valleys.
    Sir A. Meyer: Is the Minister aware that parts of North-East Wales are in need of new jobs, which they are not getting because they are being discriminated against in being intermediate areas entirely surrounded by full development areas?
    Mr. Rowlands: That is a grave criticism. The hon. Gentleman must know that in South Wales we gave development area status to Cardiff, followed by special development area status for much of North West Wales. We have done more than the previous Conservative Government did to encourage industrial development.
    Mr. Geraint Howells: What further action is proposed by the Minister to bring nursery factories to mid-Wales, especially to Ceredigion?
    Mr. Rowlands: Tremendous effort is already going into the promotion of industrial development in mid-Wales. The Welsh Development Agency and our proposed rural development agency will have an important part to play in it. One of the main inhibiting factors is the lack of housing accommodation in mid-Wales. We must also put that right.
    Mr. Fred Evans: Will my hon. Friend bear in mind that the precarious position of coal reserves in certain regions of the valleys and the employment situation make it imperative that these developments go ahead as quickly as possible? Will he accept the thanks of the people at the northern end of the Rhymney constituency for the effort being made, but will he realise that this effort must be doubled and redoubled to deal with the perilous situation?
    Mr. Rowlands: I realise the problem facing communities such as those represented by my hon. Friend, and any scheme such as the Pontlottyn land scheme—a major derelict land reclamation scheme— will receive encouragement from the present Government.
    Mr. Nicholas Edwards: Will the hon. Gentleman bear in mind that unemployment in Pembrokeshire is higher now than at any time in the past 10 years? Is it not regrettable that the Government's tax and nationalisation proposals are slowing down development in the Celtic Sea? Is it not even more regrettable that the new advisory committee set up by the Secretary of State met only last week for the first time? Is it not time that more urgency was shown in this matter?
    Mr. Rowlands: That statement comes ill from the hon. Gentleman. The oil
    1096
    tax was first proposed by the Conservative Government, and we believe in such taxation. Secondly, and perhaps more importantly, if anyone is casting a blight over Pembrokeshire and oil development it is the hon. Gentleman rather than anybody else. There is no sign that the oil companies are not showing an interest in the Pembrokeshire coast area.

    Local Authorities (Staffing)
    Mr. Roderickasked the Secretary of State for Wales if he is satisfied that the staffing requirements of local authorities in Wales are being met following reorganisation.
    Mr. Rowlands: Local authorities do not have to inform my right hon. and learned Friend about how far they are meeting their staffing requirements. That is their responsibility. We are aware, however, that some authorities have experienced difficulties.
    Mr. Roderick: Does my hon. Friend recall that when the Government of the day created Powys we protested vigorously that this unit could never be viable because of its poverty and sparseness of population? Will he keep an open mind on the future structure of local government, and in this instance will he see the representatives of Powys to discuss their difficulties with them?
    Mr. Rowlands: I think we all appreciate the considerable difficulties of Powys County Council. My right hon. and learned Friend is ready and willing to meet the county council as soon as possible to discuss its pressing problems.
    Mr. Wyn Roberts: At the statutory meeting between the Secretary of State for the Environment and the local authorities last week it was agreed to establish a system to supervise the increase in staffs over the coming year. Has the hon. Gentleman anything more to say about that?
    Mr. Rowlands: The matter is under discussion with the local authority associations. We hope that we can get a reasonable arrangement by which we can monitor future staffing requirements. All hon. Members—and the public, too—are sceptical and worried about the large increase in staff at a time of financial stringency.

    Truancy
    Sir Raymond Gowerasked the Secretary of State for Wales if he has noted the concern expressed by the Welsh Secondary Schools Association about persistent truancy in schools in Wales; and what proposals he has for helping deal with this problem.
    Mr. Barry Jones: Yes, and I share its concern. My right hon. and learned Friend has set up a departmental working party to consider the problem in Wales. Its recommendations are expected early in the new year.
    Sir Raymond Gower: I thank the hon. Gentleman for that reply. Will he say when he expects the inquiry to be completed, and to what extent the working party will get statistical information that can be made known so that we can all assess the problems?
    Mr. Jones: We have already had a large amount of statistical evidence. It is well known, and it would be made available to the hon. Gentleman should he wish it. I should like him to know that Welsh Office officials have met the Welsh Secondary Schools Association and discussed this and other problems relating to secondary education. At the last meeting the association was invited to submit a paper on trunacy to the Department.
    Mr. Lipton: If as a result of this inquiry constructive recommendations emerge, will my hon. Friend be good enough to pass them on to the Inner London Education Authority, which is also concerned with truancy? We are willing to learn from anybody.
    Mr. Jones: All constructive recommendations are highly regarded in the Welsh Office and, with some modesty, we should pass them on to the ILEA.
    Mr. Fred Evans: I welcome a London Welshman to the fold. Does my hon. Friend accept that all those engaged in education have for a long time been deeply concerned about this problem and the impact that it has on the general social environment? Will he accept, also, that this is a factor that could easily be overplayed compared with downtown schools, and particularly downtown comprehensive
    1098
    schools? May I ask, therefore, that when the statistics are compiled and the discussions begin there will be a measure of constraint and not exacerbation?
    Mr. Jones: The whole House respects my hon. Friend's expertise in education, and I suspect that my opinions are similar to his. To blame the level of truancy on factors such as the raising of the school leaving age or the size, organisation and pattern of schools is to oversimplify what is clearly a complex problem.

    Rates
    Mr. Gristasked the Secretary of State for Wales what was the total amount raised in Wales by commercial rates in each of the last two years; and what is the estimated rise for 1975–76.
    Mr. John Morris: Information in this form is not collected centrally but it is estimated that the total amount raised in Wales by non-domestic rates in 1973–74 was about £59 million and in 1974–75 about £83 million. Any increase in 1975–76 will depend on the decisions to be taken by local authorities.
    Mr. Grist: Does the right hon. and learned Gentleman realise that these quite dreadful figures—I am surprised that there is not an Estimate for the next financial year—hide the fact that many small shopkeepers will be subject to the severe increase in national insurance contributions next year as self-employed people? In my own area, water rates rose by more than 80 per cent. this year, and they will rise by possibly 100 per cent. next year. Would it not have been fairer on ratepayers if the cost of education had been removed from local government to the Government, instead of having the scheme that has been announced?
    Mr. Morris: I am surprised at the hon. Gentleman's being surprised that there are no figures for next year's Civil Estimates. He must understand that it is for local authorities to decide what the rate will be. On the question of taking education and other charges off the rates, perhaps I may ask why, if hon. Gentlemen opposite have supported the idea over the years, the Conservative Government did nothing about it. We have set up a committee, under Mr. Layfield, with wide terms of reference to look into the whole rating system. That is what we are doing. The

    1099
    failure of the Conservative Party lies in not taking action on the important issue of rates.
    Sir Raymond Gower: Without wishing to make partisan comparisons, may I ask the right hon. and learned Gentleman to recognise that, owing to inflation and other conditions, the impact of rates on businesses, shopkeepers and industry is extremely savage and it would be unwise to underestimate the difficulties with which these people have to contend? Will the Minister consider what can be done to ameliorate their situation?
    Mr. Morris: I sympathise with anyone who has to cope with a rate increase. That is why the Government have taken the step of increasing the rate support grant from an average of 60·5 per cent. this year to 66·5 per cent. next year. That will be a major factor in bringing help to industry.
    As regards industry itself, we have made the part of the world represented by the hon. Gentleman a development area, and therefore it benefits from the regional employment premium. That is of major assistance.
    I sympathise with small shopkeepers and similar people who do not receive that kind of benefit. I very much hope that they will make their representations to the Layfield Committee so that in the end we can have a much better system.
    Mr. Nicholas Edwardsasked the Secretary of State for Wales what representations he has received from the Welsh counties on the subject of rate support in the coming financial year; and what estimates they have given him of anticipated rate levels in Wales.
    Mr. John Morris: The Welsh Counties Committee has written asking that the rate support grant formula should help counties with sparse populations and low income per head. It also asked that next year Wales should receive at least the same level of domestic relief as this year. On 19th November I subsequently saw a deputation from the committee to discuss these and other points. The committee has given us no estimates of anticipated rate levels in Wales.
    Mr. Edwards: Is it not a fact that Dyfed, Powys and Gwynedd will receive a much smaller share of the larger cake
    1100
    to which the right hon. and learned Gentleman referred earlier—in the case of Powys about 8 per cent.—and that there is a substantial loss on sparsity accounting of between £2 million and £3 million for Dyfed, and about £2 million for Gwynedd, and that the local authorities believe that ratepayers in the poorer and more sparsely populated counties will suffer severely as a result of the new formula?
    Mr. Morris: The hon. Gentleman is failing all the time to understand the whole picture. The history of the super sparsity factor is that the working party of local government and central Government officials—it is no good the hon. Genleman shaking his head—came to the view that there should be no super sparsity factor. When that recommendation came to Ministers it was decided that there should be a super sparsity factor, although not, perhaps, as generous as last year's. That is how the original recommendation was overturned, and that was applied to all the counties the hon. Gentleman has mentioned.
    The hon. Gentleman must look at the whole picture. When he considers all the other elements, and increases generally to local government, he will see that there have been increases for every county in Wales, amounting to a total of about £90 million extra for next year.
    Mr. Gwynfor Evans: Is the right hon. and learned Gentleman aware that I am informed that the Dyfed precept will be about the fifth highest in England and Wales, and that of the five highest-rated counties in England and Wales, four are in Wales? Is he further aware that I am told that that sparsity formula alone, despite the super sparsity element produced by the right hon. Gentleman, will add for Dyfed alone a loss of £3 million, and that because of this there will be an addition of 6·2 per cent. in the pound on the rate?
    Mr. Morris: With respect to the hon. Gentleman, he is making the same mistake on this matter as has another hon. Gentleman. We have sought to recover some of the ground from the recommendation of the official committee by introducing the super sparsity factor. When we look at the picture we see that in addition to that there has been

    1101
    a substantial general increase in the rate support grant from the Government's recommendations, whereas last year the grant percentage for England and Wales was 60·5 per cent. and the rate support grant for the whole of Wales was about 70 per cent. This year Wales will get more than England was getting.
    I come back to the additional part— the increase in the domestic rate element which has been increased in Wales and is now running at twice the rate of that of England.

    Bodelwyddan Hospital (Religious Facilities)
    Sir A. Meyerasked the Secretary of State for Wales what representations he has received about the provision of facilities for prayer and worship at the district general hospital at Bodelwyddan; and if he will make a statement.
    Mr. Barry Jones: My right hon. and learned Friend has received four letters. The area health authority intends to make provision for Sunday services and a room for the use of the clergy. Plans for a further phase in the development of the hospital provide for a separate chapel.
    Sir A. Meyer: Is the hon. Gentleman aware that there is real concern on the part of religious leaders throughout North Wales at the totally inadequate facilities provided for prayer and worship in this hospital which is now being built? Is he further aware that such facilities have even more than spiritual value, in that they have a real therapeutic value for both patients and their relatives? Will he ask his right hon. and learned Friend, who has great prestige and reputation in Church and Chapel circles, to use not only the influence of his office but his personal influence to see whether more satisfactory arrangements cannot be arrived at in time for the opening of phase 1 of the new hospital?
    Mr. Jones: I understand the concern to which the hon. Gentleman refers. We have corresponded on this matter. I can tell the hon. Gentleman that the area health authority will be ready to have discussions with the local clergymen to establish where there is suitable room available in the hospital for weekend worship. The majority of medium-sized
    1102
    hospitals and smaller hospitals in Wales do not have a chapel, but the ministry of the Church still goes on.

    Emeralda Ltd.
    Mr. Michael Robertsasked the Secretary of State for Wales when he intends to make an announcement about loan sanction for Cardiff City Council to pay compensation to Emeralda Ltd.
    Mr. Barry Jones: My right hon. and learned Friend will be meeting a deputation from the city council shortly and will then consider what action to take.
    Mr. Roberts: I am grateful to the hon. Gentleman for that reply. Will he tell the House whether it is possible for Cardiff City Council to pay compensation to Emeralda without the sanction of the Welsh Office? I know that the hon. Gentleman appreciates that this old-established firm and 160 jobs depend on payment of the compensation which is owed to the company. Will he act as expeditiously as possible?
    Mr. Jones: I shall not anticipate my right hon. and learned Friend's meeting with Cardiff City Council, which must be in the very near future, but I tell the hon. Gentleman that I appreciate his concern and that we know of the possible redundancies. My right hon. and learned Friend will discuss with the city council what steps can best be taken to overcome the problem.
    Mr. Fred Evans: Will my hon. Friend accept that not only the city of Cardiff but minor businesses north of Cardiff are vitally affected by this decision?
    Mr. Jones: Yes, Sir. This is very much taken on board.

    Fodder
    Mr. Cledwyn Hughesasked the Secretary of State for Wales if he will make a statement about the fodder situation in Wales.
    Mr. Hoosonasked the Secretary of State for Wales if he will disclose the result of the survey recently carried out by Her Majesty's Government into the fodder situation in the livestock-rearing areas in Wales.
    Mr. John Morris: The recent survey showed an overall shortfall in Wales of

    1103
    the order of 13 per cent. hay and 25 per cent. straw. The quality of much of the hay was poor. Other fodder crops appeared to be up to average in yield, particularly silage. Harvesting was not consistent, but the hills generally have come off worse than the lowlands. However, adequate supplies of cereal feed are available and the extra cash which is being made available this winter from the livestock subsidies and the higher returns for beef will help some farmers to pay for feed.
    Mr. Hughes: Does my right hon. and learned Friend not agree that a major operation is now necessary to enable producers of stores to keep their animals alive this winter? Is he aware that the best prospect would appear to be the purchase and transporting of feed straw from Eastern England to Wales and the West country, and that this should be available at a figure of under £30 a ton, although it would need some protein injection, such as poultry residues? Will my right hon. and learned Friend and my right hon. Friend the Minister of Agriculture therefore consider some co-operative action between the Government, the farming unions and ADAS advising all areas of greatest need? Otherwise there could be an extremely serious position, especially if there is a hard winter.
    Mr. Morris: I am deeply aware of the gravity of the problem in many parts of Wales. That is why my right hon. Friend and I have been holding discussions with the farming unions to see what might be done in the way of practical assistance. There is unfortunately a shortage of straw and roughage in other parts of the country as well.
    One of the questions which may have to be looked at is whether, instead of necessarily moving the feed to the animals, one moves the animals to the feed. All these matters will be looked at—indeed they are being looked at— anxiously. I hope very much that the confidence that the floor to the market gives to those maintaining stores will ensure that animals start moving to the more traditional fattening areas.
    Mr. Wyn Roberts: Bearing in mind the high cost of fodder, will the Secretary of State join the Chancellor of the Duchy of Lancaster and look into the possibilities of providing finance for agriculture
    1104
    on lines similar to those on which the Chancellor of the Duchy is providing finance for industry?
    Mr. Morris: That is exactly what we have done by bringing forward payments for hill cows and increasing those for hill sheep. All these matters are substantial. When we announced and spelt out the details in the last agriculture debate there was a great deal of surprise on the faces of hon. Members on the Opposition side.
    This is the kind of cash flow required by the industry, and it will bring a great deal of help.
    Mr. Gwynfor Evans: Is the right hon. and learned Gentleman aware that apart from giving Welsh farmers substantial financial help, the fodder situation would be greatly relieved if they could sell calves and barreners to Continental and other overseas countries, in respect of which there is at present a ban. Will the Secretary of State use his best endeavours to secure a debate on the O'Brien Report this side of Christmas?
    Mr. Morris: That is a matter for the Leader of the House, who is fully aware of the concern in different parts of the House for an early debate.
    Mr. Geraint Howells: Will the right hon. and learned Gentleman assure us that no hay and straw will be exported to the Continent during the next three or four months?
    Mr. Morris: In the first agriculture debate of this Parliament, I said that there was no evidence of the export of hay or straw. The farming Press has ventilated this problem, too. I said that I should welcome evidence of any significant export, or, indeed, any export. So far, none has been produced, although I have invited hon. Members on both sides to do so.
    Mr. Roderick: Will my right hon. and learned Friend discuss with the Minister of Agriculture the possibility of the Ministry being involved in the distribution of fodder? Will he consider subsidising imports of fodder? Although there is some excess in some parts of the country, overall, we understand that there is a shortage. Not only is there a shortage, but the price is out of the reach of many Welsh farmers.
    Mr. Morris: All these problems are being considered by my right hon. Friend and me. The problem in this country is that there is a general shortage of hay and straw. That is why I distinguished them from cereals. There have been poor harvests on the Continent, also. It may be possible to get some supplies from Canada, but I cannot raise any hopes that this could have any significant effect at the moment. However, we are deeply considering every possibility. The problem is the general shortage.

  CIVIL SERVICE

    Official Report
    Mr. Spearingasked the Minister for the Civil Service what plans he has for increasing the general availability and circulation of the Official Report.
    The Minister of State, Civil Service Department (Mr. Charles R. Morris): Issues of the OFFICIAL REPORT will remain readily available at HMSO bookshops throughout the United Kingdom and to order from HMSO official agents. Her Majesty's Stationery Office will continue to advertise for sales by subscription and of individual issues in its catalogues and lists of publications.
    Mr. Spearing: I am grateful to my hon. Friend, but does he agree that because of the high proportion of copies of the OFFICIAL REPORT already printed which go free for official use, the ongoing print cost of l0p could be used to distribute these copies of the OFFICIAL REPORT perhaps on a subscription basis to many institutions, and that the public should be able to see where the OFFICIAL REPORT is available, perhaps by means of an official sign outside libraries? People would then be able to see with greater facility what we do in this place.
    Mr. Morris: I certainly share my hon. Friend's motives. However, during the year 1973–74, the net loss on the Stationery Office publishing account for both the House of Commons and the House of Lords debates was £667,000. This is a factor which influences our approach to my hon. Friend's suggestion.

    Pakistanis
    Sir G. Youngasked the Minister for the Civil Service if he will issue instructions to prevent any further dismissals from the Civil Service of Pakistanis on the ground that they are no longer United Kingdom citizens.
    Mr. Charles R. Morris: No, Sir.
    Sir G. Young: Is it not regrettable that a civil servant who has discharged his duties perfectly adequately in the Department of Health and Social Security should be dismissed simply because the country in which he was born happened to leave the Commonwealth? Would there not be a national outcry if private employers treated their employees as the Civil Service treats its employees?
    Mr. Morris: The case to which the hon. Gentleman refers is being considered by the Home Secretary and the Home Office. On the major issue, I should point out that most countries restrict employment in their permanent Civil Service to their own nationals. The United Kingdom is no exception. Nationality provides a test of loyalty to the State which it is only reasonable to require of members of the Government service.
    Mr. Spearing: Will my hon. Friend confirm that in the case to which he referred the employee was employed subsequent to Pakistan's leaving the Commonwealth? If he was an employee before it left, is not the Ministers' decision somewhat unfair?
    Mr. Morris: As I said, this case is at present the subject of consideration by the Home Secretary and the Home Office.

    Scotland
    Mr. William Hamiltonasked the Minister for the Civil Service what is now the total estimate of Civil Service jobs to be transferred to Scotland.
    Mr. Charles R. Morris: As a result of decisions on the Hardman review announced on 30th July, some 7,000 posts from the Ministeries of Defence and Overseas Development are to be dispersed to Glasgow. A further 1,890 posts are

    1107
    still to be moved as a result of earlier decisions including the dispersal of the National Savings Bank to Glasgow. These figures do not include posts to be established in Scotland as a result of the policy of locating new offices away from London wherever possible.
    Mr. Hamilton: I welcome that transfer, but will my hon. Friend assure us that the Government will consider the possible dispersal of other jobs in public departments of all kinds, including the headquarters of nationalised industries? Will he look further at the dispersal not only to Glasgow but to other parts of Scotland, like the new town of Glenrothes, which I think is the only new town in Scotland which does not have this kind of job and desperately needs it?
    Mr. Morris: I recognise my hon. Friend's continuing interest in this subject. The Government have under active consideration the encouragement of nationalised industries to disperse their staffs from London in keeping with Government policy. As for the dispersal to places other than Glasgow in Scotland, the Government's decisions on dispersal have to take into account, first, the requirements of Departments in terms of communication and staff management, and, second, regional policy. On both those criteria, Glasgow's case is outstanding.
    Mr. Teddy Taylor: Will the Minister assure us that he will not be deterred from this excellent policy of dispersing jobs for Scotland by the apparent increase in talk of separatism? What precisely would happen to these 10,000-odd jobs in the event of Scotland's becoming independent? Would they all have to be dispersed back?
    Mr. Morris: The Government's policies on devolution will in no way effect the proposals and recommendations of the Hardman Committee in that regard.

    Government Departments (Dispersal)
    Mr. Hooleyasked the Minister for the Civil Service what progress is being made with the dispersal of Government departments from London.
    Mr. Charles R. Morris: Departments involved in the dispersal programme, announced by my right hon. Friend the
    1108
    Lord President on 30th July last, are now engaged in making the necessary detailed preparations for their moves. Discussions are in progress with Staff Side interests at departmental and national level, and the process of selection of sites for new offices at dispersal locations is in hand.
    Mr. Hooley: Is my hon. Friend aware that Sheffield is still very anxious about the decision concerning the siting of the headquarters of the Health and Safety Commission? Sheffield has offices available for this—there is the Safety in Mines Research Establishment handy—and we should welcome a favourable decision on this in the near future.
    Mr. Morris: No decision has yet been made about the location of the headquarters of that organisation, but I am confident that this authority will take account of the Government's dispersal policy.
    Miss Fookes: Will the Minister say why the West Country, and Plymouth in particular, have been singled out for unfavourable treatment, in as much as not a single job is being dispersed down there?
    Mr. Morris: I cannot accept that Plymouth or the West Country has been singled out for unfavourable treatment. The Hardman Report stated the criteria on which the Government's proposals are based.
    Mr. Cryer: Will my hon. Friend bear in mind the needs of Yorkshire as a whole when considering the dispersal of jobs? Does he accept that many Yorkshire Members were disappointed at the last dispersal of jobs and that the number of Members whose constituencies want jobs is also an indication that we need more control over the economy, so as to disperse jobs accurately where they are needed?
    Mr. Morris: I share some of my hon. Friend's views. There was appreciable disappointment among hon. Members representing Yorkshire constituencies about the recommendations which flowed from the Hardman Report. We have not lost sight of the wishes of Yorkshire Members in this regard and will certainly bear them in mind.
    Mr. Adley: Does the Minister recognise that the drawing of regional boundaries often assumes identical circumstances throughout a region, when on many occasions areas of apparently prosperous regions are badly in need of jobs? Is he further aware that the proposal of the Ministry of Defence to close the Signals Research and Development Establishment in my constituency will remove a major employer? May I suggest that the hon. Gentleman should not always listen to the siren calls of those representing areas which are always traditionally considered but are by no means the only areas where new jobs are needed?
    Mr. Morris: I assure the hon. Gentleman that I shall certainly listen to all the voices addressed to me on this question of dispersal. The closing down of individual defence establishments is a matter for my right hon. Friend the Secretary of State for Defence. I certainly accept the point made about contradictions which emerge from regional identities.

  PALACE OF WESTMINSTER (FIRE ALARM SYSTEM)
  Mr. Cryerasked the Lord President of the Council when he anticipates the completion of the fire alarm system in the Palace of Westminster.
  The Lord President of the Council and Leader of the House of Commons (Mr. Edward Short): I understand that the installation of the fire alarm system will be completed and tested by 16th December 1974.
  Mr. Cryer: Will my right hon. Friend consider introducing legislation to bring this building under the Offices, Shops and Railway Premises Act? Does he not think that taking this amount of time to install a fire alarm system is setting a bad example to industry and commerce? Does he not further consider that the size and complexity of the Palace of Westminster means that fire dangers are great and that much urgency should be attached to the installation of this fire alarm system?
  Mr. Short: My hon. Friend asked me a question on this subject on 1st July, when I gave a completion date of October. The delay has arisen because during installa-
  1110
  tion it was decided to modify the system so that it could broadcast messages in case of emergencies other than fire. When completed it will be able to broadcast messages and also the siren. The Palace of Westminster is certified by the Factory Inspectorate.
  Mr. Lane: Will the right hon. Gentleman tell us a bit more about these other messages? Will he explain whether the excellent banshee siren system which has been tested recently will be purely a fire alarm or will have a wider significance? If so, what will that be?
  Mr. Short: It is obviously primarily a fire alarm. I ask the hon. Gentleman to await 16th December to hear the correct sound. The speakers will enable other messages to be broadcast in case of emergency.

  PRIVATE MEMBERS' BILLS AND MOTIONS
  Mr. Biggs-Davisonasked the Lord President of the Council whether he will move to instruct the Select Committee on Procedure to consider, in the interest of hon. Members as a whole, the exclusion from the Ballots for Private Members' Bills and Motions for the rest of the Session, or of the current Parliament, as might be deemed more appropriate, those hon. Members who had already been successful in the Ballots according to a definition to be worked out.
  Mr. Edward Short: If it were the general wish of the House to do so, the Procedure Committee might be asked to look at the hon. Member's suggestion.
  Mr. Biggs-Davison: Is the right hon. Gentleman aware that while many hon. Members take a regular part in the Ballot some never draw lucky, whereas others are repeatedly fortunate? Does he appreciate that Privy Councillors and other hon. Members with whom I have discussed this suggestion have approved of it? Will he at least have it discussed by the appropriate Select Committee?
  Mr. Short: This is the first time the subject has been raised with me. If other hon. Members care to make their views known I shall certainly be prepared to consider referring this subject to a Select Committee.
  Mr. English: If this suggestion is to be considered, may I express the hope that it will not preclude hon. Members doing what the right hon. Member for Crosby (Mr. Page) is doing, namely, using the terms of the Parliament Act to get something passed which has been rejected in the House of Lords although not in this House?
  Mr. George Cunningham: Is not the truth of the matter that we do not have a Procedure Committee at the moment? Have we not rather got a Committee which has had referred to it specific procedural matters rather on the lines of the Select Committee on Parliamentary Questions in 1972? Would it not be sensible for the House to set up a Procedure Committee like that which we had in the Parliament before last, which, in addition to considering subjects referred to it by the House, was free to consider any other points which it thought of importance and needing attention?
  Mr. Short: Of course we have a Procedure Committee, set up by the House. This Committee is, first of all, invited to consider matters referred to it. These are matters on which there is a great demand for change. It makes good sense that the Committee should consider these first.
  Mr. William Hamilton: Is my right hon. Friend aware that for the first time, and probably the last, I am in agreement with the hon. Member for Epping Forest (Mr. Biggs-Davison)? Does my right hon. Friend appreciate that I have been in this House for a long time and have never yet come first, or even second, in any of the Ballots? If the hon. Gentleman's proposition were accepted we might stand a better chance than we have had up to now.
  Mr. Short: I am prepared to look at this. The great wheel of fortune brings luck to people in different ways, and I am sure that my hon. Friend is lucky in other respects.

  WELSH ASSEMBLY
  Mr. Gwilym Robertsasked the Lord President of the Council if he will ensure that, before any plans are implemented for a Welsh Parliament the opinion of the Welsh people will be sought on their views for the constitu-
  1112
  tional change; and if he will make a statement.
  Mr. Edward Short: The decisions announced in the recent White Paper on devolution were taken after extensive consultations during the summer, based on the consultative document. The people of Wales, and elsewhere, will have ample opportunity to express their views as we make our further decisions known between now and the publication of the devolution legislation.
  Mr. Roberts: Does my right hon. Friend not agree that one of the strongest cases for a referendum on the Common Market issue is that it involves a constitutional change, and that the same thing applies here? Will he bear in mind that only 10 per cent. of the people in Wales voted for the party whose main plank was to have a Parliament for Wales? Will he further tell the House who is to pay for having this Welsh Parliament and the associated jobs for the boys? Is it to be the people of Wales or the people of Great Britain as a whole?
  Mr. Short: I have said before that I think there is general agreement that the decision on the European Community is sui generis—a once-in-a-century decision. Clearly there is a case for a referendum in the case, but not for Wales. My hon. Friend overlooks the fact that all the parties in Wales, in their election manifestoes, proposed some kind of assembly for Wales.
  Mr. Thorpe: Is the right hon. Gentleman aware that the only unanimous recommendation in Kilbrandon was that the Parliaments or assemblies in Scotland and Wales should be returned by the proportional representation system? Remembering the dangers which have flowed in Northern Ireland from the gerrymandering which abolished the electoral system of PR—which was unanimously introduced in the Province at the time of Partition—may we take it that before the Government seek to have an unfair inbuilt permanent Labour majority in both Scotland and Wales they will at least consider more democratic systems which will allow everyone to be fairly represented in those areas?
  Mr. Short: If direct elections mean gerrymandering, we are all here by gerrymandering. The consultations which took

  1113
  place in Wales and Scotland in July were frequently concerned with the method of election. As a result of those consultations the Government came to the conclusion that they should reject that recommendation of Kilbrandon and recommend direct elections.
  Mr. Wigley: I appreciate the opinions of the constituents of the hon. Member for Cannock (Mr. Roberts) on this question, but is the right hon. Gentleman aware of the great desire in Wales to see a consensus arrived at quickly on this matter? Will he assure the House that the legislation will be published during this parliamentary Session?
  Mr. Short: No, Sir. It will be not published during this parliamentary Session but during the next parliamentary Session. There will be one Bill dealing with Wales and Scotland. As the hon. Gentleman has said, there was a great area of consensus on this subject during the election, and certainly during the consultations in July.

  SCOTTISH ASSEMBLY
  Mr. Reidasked the Lord President of the Council what studies he has commissioned into the independent fund-raising powers of the Scottish Assembly.
  The Minister of State, Privy Council Office (Mr. Gerry Fowler): This question was considered and reported on by the Kilbrandon Commission, and is being kept under review as part of our continuing work on devolution.
  Mr. Reid: In the course of that review, will the Minister give serious consideration to including among the powers of the Scottish Assembly the right to raise revenues directly from Scottish oil?
  Mr. Fowler: Oil is a United Kingdom resource, and we intend that oil revenues shall be used for the benefit of the community as a whole, including, of course, Scotland and those other regions of the United Kingdom which have suffered as a result of the aftermath of the first Industrial Revolution.

BAKING INDUSTRY (DISPUTE)
Mr. Madel(by Private Notice) asked the Secretary of State for Employment whether he will make a statement on the
1114
dispute in the baking industry currently interrupting bread supplies.
The Secretary of State for Employment (Mr. Michael Foot): The Bakers' Union has instructed its members employed by members of the Federation of Bakers in England and Wales to ban Sunday and overtime working from 1st December. I understand that in addition some 20 per cent. of bread production at federation plants is being lost today because of unofficial strike action.
Industrial action has followed the rejection, by ballot, of an improved offer by the federation for a new annual settlement. This would have established a new minimum rate for the main baking grade of £30 for a 40-hour week. The union is seeking, in line with its conference decisions, £40 for a 40-hour week, the end of Sunday working and a fourth week's holiday.
The federation bakers produce about 80 per cent. of all bread supplies in England and Wales, and the action will give rise to shortages, particularly on Mondays.
I understand that, following the breakdown in negotiations on Friday, the Conciliation and Arbitration Service has been in touch with both the federation and the union and has offered its assistance. I very much hope that an acceptable settlement can be quickly agreed, either with the help of the service or by the use of the industry's agreed procedural arrangements, which finally provide for arbitration.
Mr. Madel: I am grateful for the Minister's reply and for its length. As he says, this is a serious dispute which, if it goes on, will affect everyone. Are the management and the union willing to let the Conciliation and Arbitration Service try to find a solution? If both sides of the industry are so willing, will the Minister ask the union to suspend industrial action pending investigation by the CAS?
Mr. Foot: As I have said, the CAS is in touch with both parties and has agreed to assist if it has the opportunity to do so. I understand that the union executive is to meet today. I hope that it will not decide to escalate industrial action. I also hope that the CAS offer

1115
will be acceptable and that we may seek a settlement by that means.
Mr. Golding: Is the Secretary of State aware that the extent of the bitterness can be assessed by the fact that the moderate bakery workers in North Staffordshire this morning backed the unofficial strike 100 per cent.? Is he also aware that the workers are totally dissatisfied with an offer which would mean that they would have to work 40 hours in days and nights to earn £30 a week, and that they think that they should not have to work more than 40 hours to earn a reasonable living wage?
Mr. Foot: I understand the strength of feeling to which my hon. Friend refers. Undoubtedly, the action that has been taken reflects the strength of that feeling. Undoubtedly, the action that has been made which raises the pay for bakers considerably and moves towards the guidelines of the TUC. I hope that that factor will also be taken into account when consideration is given to the matter.
Mr. Peter Morrison: Is the Secretary of State aware that the absence of bread in the shops is yet another chapter in the catalogue of shortages? What is the Government's policy on rationing when shortages occur?
Mr. Foot: There is no question of our considering rationing in this respect. We hope that there will be a settlement of the dispute. I have indicated the way in which I think that can be approached, and the best thing is to approach the matter in that way and try to seek a settlement.
Mr. Tom King: Will the Secretary of State say what are the average earnings in the industry and for how many hours? Will he confirm how that figure relates to the average hours worked in manufacturing industry?
Mr. Foot: I understand that earnings currently average £45·50 for a 54-hour working week and that the offer would increase the average earnings to £55 a week. The hon. Gentleman may have seen the average earnings figure published a few days ago, which is roughly £55. It would not be the wisest course for me to comment on the claims of the contending parties. I suggest that
1116
the best way to secure a settlement is along the lines I have indicated.
Mr. Thorpe: The right hon. Gentleman will know that the whole House wants to see a speedy settlement, and the less said about the dispute the better. Has he had discussions with the Minister of Agriculture, Fisheries and Food or the Secretary of State for Prices and Consumer Protection about the supply position of bread for the consumer? Is he aware that few people hoard bread—and I doubt whether even the right hon. Member for Finchley (Mrs. Thatcher) hoards cake?
Mr. FootI do not think that I should comment on any remarks made by the right hon. Lady or even offer her and the right hon. Gentleman the assistance of the Conciliation and Arbitration Service, although that might come in useful for them, too. I agree that we shall have to watch the supply position carefully, but the best way to go about the problem is to seek an early settlement.
Mr. Hordern: Did not the executive of the Bakers' Union accept the offer made by the Federation of Bakers and, therefore, whatever the result, it cannot be blamed upon the employers? Will the right hon. Gentleman accept that the cost of the dispute must be met either by a higher price for bread or by an increase in the bread subsidy? Perhaps he will tell us which?
Mr. Foot: It is clear, as the hon. Gentleman suggests, that the cost not merely of the dispute but of the increased settlement will have to be met in one of those two ways. The Government have not said in which way they think it should be met. We hope that both sides will be prepared to consider a settlement within the TUC guidelines, and that the increased cost will be taken into account along with other factors in the dispute.
Mr. Prior: When may we expect from the Government some of the peace and quiet which we were promised in the General Election campaign would result from the return of a Labour Government? Is the right hon. Gentleman aware that the strike record of the last few weeks is the worst for many years, and that the situation is getting intolerable for large sections of the community?

1117
When will the right hon. Gentleman condemn industrial action being taken when, as in this case, it is agreed by the leaders of the industry that the settlement is a fair one? Presumably, the settlement comes within the terms of the social contract and, therefore, the right hon. Gentleman should support it. Would it not be better for the Government and the country if the right hon. Gentleman used some of his powers of eloquence in trying to persuade people to stay at work and abide by the social contract, rather than always findings ways of not speaking about it and finding excuses for going outside the social contract which is what he has done on so many other occasions?
Mr. Foot: I do not know from where the right hon. Gentleman gets the evidence for his last accusation against me. He would find it difficult to discover any speech of mine which has encouraged people to go outside the guidelines of the social contract statement laid down by the TUC. In the debate on this subject a few weeks ago I made my view and the Government's view quite plain. As for suggesting that the best way to deal with the dispute would be to make a general statement about all other disputes that are taking place, I am doubtful whether that is the best way of getting a settlement. If the right hon. Gentleman would like to raise the matter, I am prepared to discuss further in the House the question of the industrial disputes which have occurred. There are many different causes for those industrial disputes, and we are trying to seek ways to get settlements for all of them. There are different causes for different disputes, but, undoubtedly, one cause is the hangover from the whole hideous statutory system which we had to do away with.

TEACHERS' PAY (SCOTLAND)
The Secretary of State for Scotland (Mr. William Ross): With permission, I should like to make a statement about the pay of teachers in Scotland.
The House will recall that on 15th November I said that Lord Houghton had told the Secretary of State for Education and Science and myself that his committee thought that it would have determined the broad basis of its recommenda-
1118
tions by about the beginning of December and would then be able to suggest a flat-rate sum, which would not conflict with its conclusions, which could be paid to teachers by the end of December or early thereafter, depending on local circumstances.
Late on Thursday, 28th November Lord Houghton told us it would not prejudice the final recommendations of his committee if a lump sum payment of £100 gross were paid to those qualified teachers within its terms of reference who had been in full-time employment since 24th May 1974. This information was conveyed on Friday morning to both sides of the Scottish Teachers' Salaries Committee, and a meeting of the Negotiating Sub-Committee was held in the afternoon.
I regret to say that the Teachers' Side refused to accept an offer by the Management Side for a payment to be made in December on the lines indicated by the Houghton Committee. They regarded the amount as far below what they thought it reasonable to expect, and they broke off the discussions.
The sum of £100 took account of what would be due to teachers as back pay from 24th May to 31st December. It was therefore equivalent to an increase in the annual rate of remuneration of £164. This represents an increase of over 11 per cent. on the 24th May salary of the lowest-paid teacher.
In addition, the teachers have received threshold payments which are now running at a rate of £230 per annum. These payments, which represent an increase of 16 per cent. for the lowest-paid teacher, continue unaffected by the proposed payment to account. The lowest-paid teacher would therefore in December be being paid at a rate of 27 per cent. more than in May, and all teachers would have had significant increases.
Moreover, I must stress again that what is at issue at the moment is merely a payment to account. The substantive Houghton recommendations to be backdated to 24th May are still to come.
I know that many teachers had been looking forward to an additional payment in December in the light of my earlier assurances. I am sorry that this has been rejected out of hand by their own negotiators, but the payment is still available if they wish to accept it. I am

1119
sure that all Members of the House will regret as much as I do this outcome of the efforts made to ensure that teachers had a payment to account in December.
The Houghton Committee is, of course, an independent body, and any recommendations it makes on interim or substantive payments are a matter for it alone. The final recommendations of the committee will not be affected by strikes or other forms of disruptive action by Scottish teachers in the next few weeks.
I am sorry to say that the disruption in the schools is continuing.
With the report expected by Christmas, there is no justification for this continued action by teachers, which is seriously damaging the education of our children. I would urge the teachers to have second thoughts, to return to normal working, and to await negotiations on the full Houghton Report, which can begin as soon as the report is available.
Mr. Monro: I thank the Secretary of State for making his statement at the earliest possible moment, but I fear that he has done nothing to cool tempers. Is he aware that I am as anxious as he is that teachers return to work with good will and cease strike action and the disruption of examinations? Is he also aware that the blame for this unprecedented crisis rests with him? The Secretary of State and his colleagues scrapped the relativities procedure for a quick pay increase in the spring. He failed to introduce a new designation scheme in July and refused an interim award in October. Why does he stand by while industry obtains awards of over 30 per cent. and he offers teachers a derisory interim award of 4 per cent.? Is he aware that his attitude is bound to escalate matters, and that thousands of teachers walked out of school this morning?
Will the right hon. Gentleman do one of two things, either reconvene the STSC and put to it at once a realistic interim award for December and not hide behind procedure, or announce contingency plans for carrying on education in Scotland? Unless the right hon. Gentleman does so, he will have failed education, the children and the parents, and he ought to resign.
Mr. Ross: I have already resigned myself to the predictable fatuity of the
1120
remarks of the hon. Member for Glasgow, Cathcart (Mr. Taylor). I am sorry that a man who should know better and for whom I have considerable regard— the hon. Member for Dumfries (Mr. Monro)—should have joined in this competition for irresponsibility.
He should know that the last substantive increase that the teachers of Scotland obtained was under his statutory policy and that amounted to 7½ per cent. to 8 per cent. The hon. Gentleman talks about relativities. He should know that the teachers asked at the STSC in February for a relativities procedure to be set up and they were turned down by the management side because there was no machinery. The hon. Gentleman himself in the February election wrote an article for the EIS journal in which he contrived not to mention salaries at all. He must accept his responsibility for the conditions in the schools. I am prepared to accept my share, but he must accept his. These are facts.
With reference to the new designation scheme, the hon. Gentleman should know that we have made available £1·4 million more, added to the existing £900,000. The money is there for negotiation, which I hope will be undertaken quickly. It will mean improvements in respect of the number of teachers covered, which will be increased by nearly 1,000 to 6,000 and improves the rates, as well as introducing a two-tier system. The hon. Gentleman knows the difficulties which arose about that.
He suggests that we are offering 4 per cent. What we are offering is an interim payment on the settlement resulting from a report which has not yet been published. I do not know how anyone can anticipate that report by making any other offer. I welcome the fact that Lord Houghton and his committee decided that they would make a recommendation and anticipate their own report. They are the only people who are able to do so.
It is the height of irresponsibility for the hon. Gentleman to speak as he has spoken, bearing in mind that with threshold payments and with this offer, teachers who have been in full-time employment since 24th May would receive about £7 a week more. Hon. Gentlemen opposite ask

1121
us to condemn certain actions. I am surprised that the hon. Member for Dumfries has not condemned these actions by teachers and particularly the suggestion that examinations should be sabotaged.
Mr. Buchanan: Is the Secretary of State aware that this major review was set up to correct the fact that teachers were falling further and further behind their contemporaries in the matter of salaries? It is quite unfair to bring in the question of threshold agreements, because everyone is getting threshold payments. Is he aware that there will be no education at all in Scotland until a satisfactory settlement is reached? We hope that this offer of £100 does not reflect the noble Lord's thinking. Local education authorities in Scotland—my right hon. Friend will be aware that this is a measure of their thinking—have agreed to pay sums ranging from £200 to £300. Will he do all in his power and influence to reach a settlement as quickly as possible?
Mr. Ross: That is my hope and intention. That is one of the reasons why I suggested in the first place an interim settlement, and then I thought it would be possible to get an interim settlement with something in the pay packet in December. I have had very little thanks for my efforts and very little help from hon. Members opposite. We should bear in mind that we met the requirements of the teachers, and they welcomed it, when we set up the Houghton Committee.
Mr. Gordon Wilson: Too long.
Mr. Ross: The hon. Gentleman says it is too long. In relation to one item, London weighting, the Pay Board received that proposal in October 1973 and it was not paid until October 1974. What we did was to ask Lord Houghton's Committee for a comprehensive review of the salary scales and structure. It has not been too long, and most of the responsible teachers to whom I have spoken want it not to be short-circuited but want the committee to do a good job.
Mr. David Steel: Does the Secretary of State recognise that his own statement that £164 in a full year represents 11 per cent. to the lowest-paid teachers serves merely to illustrate dramatically how appallingly low paid are some of those who are responsible for teaching Scottish
1122
children? Was the right hon. Gentleman surprised when the amount offered was regarded as far below what the teachers thought it reasonable to expect? If he were, he must be the only one to be surprised among all the 71 Scottish Members of Parliament, since all the public discussion was centred upon whether it would be £10 or £15 a week. If the Secretary of State has nothing constructive to offer Scotland in order to get a settlement and see education restarted in Scotland, does he not agree that he should resign?
Mr. Ross: The hon. Gentleman should appreciate that we have already taken action to meet the justified claim that teachers had fallen behind. The final recommendations of Houghton, and the settlement, will put that right. What we are talking about here, however, is an interim payment to account, which will not affect that final settlement, and the only people who can give us an indication whether what is suggested now cuts across the final recommendations are the members of Lord Houghton's committee itself. But it would be quite wrong to deduce from the suggestion of £100 any idea of what those final recommendations may be.
Mr. Steel: Why not make it larger, then?
Mr. Ross: The only people who could make it larger now or who would be able to suggest whether it would be right to make it larger now are the people responsible for the final recommendations.
The other alternative was to wait until the report came out, before Christmas, and thereafter consider it. I do not rule out that when we receive the report we can reconsider the matter again in relation to continuing payments or further interim payments. That is a possibility.
Mr. Dempsey: Will my right hon. Friend take it that the offer of £100 as an interim payment is regarded as a positive insult to the teachers of Scotland, especially after deductions for superannuation and income tax? Has my right hon. Friend any authority at least to double the offer since, whether we like it or not, education has now been put in dire peril in Scotland? Further, will my right hon. Friend tell us whether the Cabinet is aware of the seriousness of the situation which has arisen and is ready to take steps to give a substantial increase of

1123
an interim nature to teachers to get them back to school and so saving the coming generation of Scottish school children?
Mr. Ross: We have to act here with a sense of responsibility in relation to what we have done and what has already happened. I say again that the only people who know, or who will know, whether what is put forward as an interim payment is appropriate are the members of Lord Houghton's committee. That committee could have told me to mind my own business and wait for the outcome of its work. Hon. Members should remember that in October—I think that it was 10th October—the committee was asked by various people to produce an interim report, but it said "No" because to do that would turn it aside from the main task, and the committee wanted to get on quickly with the job it was given.
Bearing in mind that we expect the report before Christmas, I think it disgraceful that some hon. Members should take the attitude of failing to do everything they can to get teachers to accept normal working. I overheard a remark from the SNP benches a few moments ago to the effect that this was not happening in London. Members of the Scottish National Party know quite well that teachers in secondary schools are better paid in Scotland than they are in London. At the top of the scale, a teacher with first-class honours is receiving £360 a year more than his counterpart in England. There has been misrepresentation of the Scottish-English position which does no credit to hon. Members in the teaching profession who sit on those benches.
Mr. Teddy Taylor: Will the Secretary of State realise that he does not help the children in our Scottish schools or our teachers if he persists in believing that he is right and everyone else, including all the teachers' associations, is wrong? Second, on a more serious point, does the Secretary of State say in the last part of his statement that when education in Scotland is breaking down he has no new proposals of any sort until the Houghton Report comes out round about Christmas?
Mr. Ross: I am saying that the offer is still open, and anything that arises in further discussion from that offer is a
1124
matter for the teachers to take up. As regards proposals in relation to the Houghton Report, we can get on with them very quickly, depending, of course, on the STSC. Furthermore, let it be borne in mind that the statutory position is that I cannot pay anything at all by way of an increase unless there is agreement and a recommendation from the STSC.
Mr. Dalyell: Was the £100 award known to the Secretary of State before Lord Houghton communicated it to the negotiators? Second, is there any chance of an interim payment from January as a way out?
Mr. Ross: It was not known to me. I did not regard it, and I do not regard it, as right for any Minister to interfere with an independent committee in its task. But when Lord Houghton offered it, I accepted his offer and was grateful for it. As regards what happens as soon as we see the Houghton Report, that is for the STSC, which will be making its decisions in the light of Houghton's final recommendations.
Mrs. Bain: First, I congratulate the Secretary of State on uniting the teaching profession in Scotland to a level never before witnessed in its history. Next, for clarification, may we be told who has the ultimate responsibility for accepting the £100 recommendation as an interim award? If the Secretary of State willingly accepted it, does that not show that he ought to resign since he is not in touch with what is happening in Scotland? If, on the other hand, he unwillingly accepted the £100, ought he not to make clear to the people of Scotland that he is subject to pressures within the Cabinet and cannot represent the interests of the Scottish people? On that score also, should he not resign?
Mr. Ross: The hon. Lady talks about greater unity in the Scottish teaching profession than ever before in its history. I wonder how long she has been in the teaching profession. I have been in it a long time. I have provided quite a number of teachers from my own family, and I think that I am well aware of what is happening in the teaching profession. The hon. Lady should appreciate that the one thing which can always guarantee unity among teachers is salaries, and

1125
the one thing guaranteed to create disunity among teachers is the way a global salaries sum is divided. As a woman teacher, she ought to appreciate that.
The Secretary of State is not responsible for the division among the various categories. Generally speaking, that is the responsibility of the Teachers' Side themselves. What the hon. Lady fails to realise, and fails to get over to everyone interested in the Houghton committee and its final recommendations, is that if teachers have more now they will get less later, and if they have less now they will get more later. There are very few people in this country with knowledge that whatever settlement comes to them is to be back-dated to 24th May. Other people do not know that. This is an addition to make up for the failures of the statutory pay policy, which was finalised and paid back to 1st April. No other organisation, apart from the nurses, has had that treatment.
Mr. Gourlay: Will my right hon. Friend take it from me, as one who tried to persuade teachers to resume normal working pending the interim Houghton announcement last week, that the decision to make the £100 payment was greeted by both the teachers and the parents with disillusionment and dismay? Only today I received a petition from 95 pupils of the Balwearie High School, Kirkcaldy which indicates how their education is being interrupted. Will my right hon. Friend assure the House that if the teachers were to accept this interim payment he would, on examining the final report from Houghton, make a further interim payment in January?
Mr. Ross: Of course, that is not ruled out. That is of the very essence. Then the STSC is free to do what it wants to do over the final recommendations of the Houghton Committee.
Mr. Gray: There are many Members on the Opposition side who, unlike the SNP Members, are not prepared to make political capital out of the position in which the teaching profession finds itself. However, will the right hon. Gentleman accept that the proposal of nearly £100 as an interim payment is as bitter a blow to us as it is to the profession and that the profession sees it merely as a way for the right hon. Gentleman to get
1126
himself off the hook? Will he now in Cabinet try to increase the advance to the profession over and above the £100 which has been recommended, because only by doing that can he hope to regain its confidence.
Mr. Ross: The hon. Member should appreciate that we are dealing here with an interim award in advance of a final decision by the Houghton Committee. Until we know what the committee will recommend, it is difficult to assess how that interim payment will be made up. The issue must be reconsidered after we have seen the final report in two or three weeks' time. I hope that the teachers will accept this award in the meantime as a payment on account and then proceed to further negotiations and complete the whole matter very speedily.
It first arose in September before the General Election. At the election the Conservatives said in their manifesto:
"We will consider sympathetically the recommendations of Lord Houghton's Committee on Teachers' Salaries."
That was all they had to say. It is now a bit late for them to wake up and realise what has happened and to step away from their responsibilities in this way.
Mr. Sillars: There is a very grave fear among teachers that the £100 payment on account is indicative of what they are likely to get when the Houghton Committee finally reports. If they are wrong in drawing that conclusion, is this not the most stupid act we have had from Houghton since he misled the Parliamentary Labour Party in 1971? We cannot allow this situation to boil on for another two or three weeks. We are facing not an educational situation but, in essence, an industrial dispute of a highly developed character. The only thing which will talk in that situation is money, and we shall have to talk louder than we have talked over the last two or three days. Is my right hon. Friend aware that it is as unrealistic for him to ask the teachers to go back before Houghton reports as it was for the right hon. Member for Sidcup (Mr. Heath), when he was Prime Minister, to tell the miner to go back before Wilberforce had reported?
Mr. Ross: I do not accept the relevance of my hon. Friend's comparisons. Money has already been offered. The

1127
teachers also know that a committee which they welcomed is working on the matter and will produce its final recommendations in two to three weeks. Very few people are in that position. There is also a possibility that as soon as we see the Houghton recommendations we should be able to make decisions about what will happen in January provided the teachers get down to a quick consideration of the issue. My hon. Friend is being unfair to Lord Houghton's Committee and to the Government in what he said.
Mr. Peyton: Is this an occasion on which the right hon. Gentleman is right in thinking that attack is the best form of defence? I hope he will convey to the Leader of the House that many of my hon. Friends who have questioned him today about this very serious matter are far from satisfied, will wish to have a debate on the matter in the House and hope that it will be in Government time.
Mr. Ross: I take note of what the right hon. Gentleman said about a debate. I have taken note of what the other hon. Members said today and on other occasions, and I regret some of those things which were said not just today but even before Lord Houghton's Committee was able to make its interim recommendation. There has been a certain amount of anticipation of this by some Conservative Members and I am entitled to remind them of what they have done on the matter.
Mr. James White: I agree with a great deal of what my right hon. Friend said. I am a little dismayed that this matter has been made a party issue. I am not impressed by the argument about how long the London teachers waited. Teachers have been second-class citizens under successive Governments. More money must be brought forward very quickly because the teachers see Rolls-Royce workers, lorry drivers and other trade unions with muscle getting £8 or £10 a week rises while their position drags on. I am worried because we cannot backdate the education of children who are missing it today.
Mr. Ross: My hon. Friend's final point is the most serious of the whole matter. When he talks about relativities he should bear in mind that it was a Labour Government who accepted that the teachers
1128
had a case and set up the Houghton Committee to look into it. Having given the committee a task, we are duty bound to wait and not to cut across that task with interim payments that might in the long run make that much more difficult a final acceptance by the teachers of a solution.
Mr. Gordon Wilson: Is the right hon. Gentleman aware from what has been said today that there is considerable concern throughout Scotland and in his own party about the factual position of teachers, namely, that the offer which has been made is inadequate, that there is educational chaos in Scotland, that children's examinations are being jeopardised, and that other children are left from school? Will he, in these circumstances, emerge from his King Canute posture before the waters overwhelm him and make an increased offer which will be acceptable to the Scottish teachers?
Mr. Harry Ewing: That was a bit better than normal.
Mr. Ross: My hon. Friend says that the hon. Gentleman's contribution was a little better than normal. I am sorry that he should have to go to Denmark to find a king. He might have found a better one in Scotland in connection with trying, trying and trying again. That is what we have been doing to meet the needs of the teachers, not just on an interim payment but on an interim payment in advance of Houghton. There the difficulty arises. If the hon. Member would join us in trying to cool the situation instead of getting easy cheers and advancing the case for claims that are way beyond even what has been considered by the teachers, he would do more credit to himself and his party.
Mr. Lambie: While we are all disappointed at the figure of £100, will my right hon. Friend remind Mr. John Pollock and the leaders of the EIS that the interim award is more than the 10 per cent. interim award they asked for young teachers in the primary schools? Will my right hon. Friend remind the teachers that in the period from 1970 to 1974 they accepted average wage awards of between 7 per cent. and 8 per cent. which ment for them a declining standard of living, yet they did not strike once against a Conservative Government? Will he remind the teachers that they are winning,

1129
that under the Labour Government they are being granted everything they have asked for in the last two years—and I say that as a former teachers' leader.
Will my right hon. Friend remind the teachers that under the Labour Government they have been granted an independent, in-depth inquiry to investigate not only the relative position of teachers' salaries but the differentials between certain grades of salary structure, and that, moreover, they have been granted threshold agreements which will give the young teachers in the Scottish schools, if the EIS accepts it, a £7-a-week rise in their December pay cheque, compared to last April?
Will my right hon. Friend also remind the teachers that it is their job and that of their leaders to implement the Houghton recommendations immediately the committee reports, and that that will give the teachers the biggest rise they have ever had?
Will my right hon. Friend also—[HON. MEMBERS: "Too long".] Sometimes hon. Members do not like the truth. Will my right hon. Friend tell the teachers that immediately Houghton is settled they can start negotiations for the further increase in salaries to come into effect on 1st April 1975, and that this will give the teachers the best deal within a year they have had during my 19 years in the teaching profession?
Mr. Ross: My hon. Friend has said everything that could be said. I am sure that it comes better from him than it does from me, because I bear in mind that the last time we had a teachers' strike in Scotland, he led it.
Mr. Galbraith: Is the Secretary of State aware that while I was listening to his statement I received a telegram from the Scottish teachers seeking justice for Scottish education? The telegram contains serious words. Some other hon. Members may have received them, but I received them while the right hon. Gentleman was talking. We should beware of jumping on a popular bandwagon and demanding inflationary settlements for all classes and sections of the community with whom we have sympathy. I am not certain whether I heard the right hon. Gentleman aright. Did he say that since
1130
May—seven months ago—the increase amounted to 27 per cent.? If so, will he tell the House, because one can do anything with percentages, how much in hard cash the lowest paid will receive each month?
Mr. Ross: With threshold payments of £230 and this proposed payment of £164 the increase for all teachers since 24th May is £394 per year. That means for the lowest-paid teacher an increase of 27 per cent. so far. What must also be borne in mind is that there is more coming, and that that more is to be back-dated to 24th May. The Government have accepted that the Houghton settlement will be paid from that date. Let us face the facts and figures, and realise that the teachers have not been standing still since 1st April.
Mr. Teddy Taylor: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter that should have urgent consideration; namely,
"the breakdown in negotiations in the Scottish Teachers' Salaries Committee."
There can be no doubt that the matter is serious and urgent, as you will have heard from the exchanges this afternoon, Mr. Speaker. I cannot recall, nor can any of my colleagues, a previous occasion on which the problems of education in Scotland have been so great as they are today or when the outlook has been so bleak. In our view, the matter requires an immediate debate because, despite what has been said on both sides of the House today, unless a new initiative is taken there is every indication that serious and irreversible damage will be done to the education and careers prospects of Scottish schoolchildren.
Mr. Speaker: The hon. Member for Glasgow, Cathcart (Mr. Taylor) asks me to allow an application under Standing Order No. 9 for a debate on the breakdown of negotiations in the Scottish Teachers' Salaries Committee. The hon. Gentleman gave me notice that he would raise the matter, and I had formed a preliminary view of what my answer was likely to be, which is why I allowed questions to go on for as long as I did on the statement of the Secretary of State for Scotland.

1131
I am not prepared to allow a debate and disrupt the business of the House already fixed. There is, clearly, substantial feeling about the matter in the House, and no doubt those who arrange these matters will discuss how to debate it further. But as to the application under Standing Order No. 9, the answer is "No".

BILLS PRESENTED
  HOUSING RENTS AND SUBSIDIES (SCOTLAND)
  Mr. Secretary Ross, supported by Mr. Bruce Millan, Mr Hugh D. Brown and Dr. John Gilbert, presented a Bill to repeal certain provisions of the Housing (Financial Provisions) (Scotland) Act 1972; to make further provision as to the rents of houses provided by housing authorities in Scotland and of those subject to the Rent (Scotland) Acts 1971 to 1974; to amend the law relating to housing subsidies and accounts in Scotland; and to make minor amendments to certain enactments relating to housing and new towns there: and the same was read the First time; and ordered to be read a Second time tomorrow and to be printed. [Bill 38.]
  EXPORT GUARANTEES AMENDMENT
  Mr. Secretary Shore, supported by Mr. Secretary Benn, Dr. John Gilbert, Mr. Michael Meacher and Mr. Eric Deakins, presented a Bill to make further provision in connection with the powers and duties of the Secretary of State under the Export Guarantees Acts 1968 and 1970: and the same was read the First time; and ordered to be read a Second time tomorrow and to be printed. [Bill 37.]

  STATUTORY INSTRUMENTS
  Ordered,
  That the draft Patents (Fees Amendment) Order 1974 be referred to a Standing Committee on Statutory Instruments.— [Miss Boothroyd.]

ORDERS OF THE DAY
  SUPPLY
  [3RD ALLOTTED DAY]—considered.

  CIVIL ESTIMATES, SUPPLEMENTARY ESTIMATES 1954–75
  Resolved,
  That a Supplementary sum, not exceeding 1,499,985,000, be granted to Her Majesty out of the Consolidated Fund, to defray the charges that will come in course of payment during the year ending on 31st March 1975, for expenditure in respect of the Civil Supplementary Estimates as set out in House of Commons Paper No. 35.
  Bill ordered to be brought in upon the foregoing Resolution by the Chairman of Ways and Means, the Chancellor of the Exchequer, Mr. Edmund Dell, Mr. Joel Barnett, Dr. John Gilbert and Mr. Robert Sheldon.

  CONSOLIDATED FUND
  Mr. Robert Sheldon accordingly presented a Bill to apply a sum out of the Consolidated Fund to the service of the year ending on 31st March 1975: and the same was read the First time; and ordered to be read a Second time tomorrow and to be printed. [Bill 39.]

  PRICE CODE
  Motion made, and Question proposed.
  That this House takes note of the consultative document on the Review of the Price Code (Command Paper No. 5779).—[Mrs. Shirley Williams.]
  4.18 p.m.
  Mr. Timothy Raison: I am reluctant to interrupt this inaugural meeting of the Scottish Assembly, but I welcome the fact we are having this debate on the draft Price Code. We were to have had it last week, but it was lost for understandable reasons. The Government have shown signs of reluctance to debate the code in draft, but we welcome the fact that we now have a chance to debate what is by any standards an important document, and to do so before, one assumes, the Secretary of State has finally made up her mind what changes, if any, she will make in the revised code.

  1133
  I want to start with one or two general points about the background to the document. The Price Code was the creation of the last Conservative Government, but it is vital to stress that the situation today is radically different to that in April 1973, when the code began. That must be the background to everything that we shall discuss. Earnings were then rising by about 8 per cent. to 10 per cent. per year, and the economy was growing at 4 per cent. to 5 per cent.
  In those circumstances, growth in volume could to a fair extent offset the productivity deduction, which is a basic part of our code, and its other ingredients. At least it was true that prices were rising faster than earnings. Now earnings are racing ahead, although costs are still rising sharply. Company profits are falling dramatically. If the effect of inflation is excluded by subtracting stock appreciation, profits in the first half of 1974 were 45 per cent. lower than in the first half of 1973, and 35 per cent. lower than in the second half of 1973. In other words, industry faces a serious situation. There is little wonder that it is so gloomy.
  We continue to have a tough prices policy. Indeed, part of that policy was intensified in May of this year. Our incomes policy, however, is fast becoming a sick joke. Growth has slowed down considerably, and all the signs are that it will slow down considerably more. Much of industry suffers a desperate shortage of not just of meaningful profits but of the working cash which it needs if it is to survive. That can be shown by the fact that the amount of bank lending to companies increased by a net figure of £2,480 million in the first half of 1974 compared with a net increase of £590 million in the first half of 1973. That is not basically money to invest but money that is needed to survive.
  There is an ominous loss of confidence in industry. Anyone who has seen the survey published in this morning's Financial Times will find that fully confirmed. The income side of the equation is particularly serious. Wages have increased by 22·8 per cent. over the past 12 months. The Economist of 23rd November said:
  "It is optimistic to say that wage inflation is now running at only 23 per cent. a year. Although hourly wage rates in October were up 23 per cent. on a year ago they were up
  1134
  an unbelievable 16 per cent. on the last six months. So over the last half year wages have been rising at a compound annual rate of 35 per cent.".
  I accept that thresholds have had their effect, but they are far from being the major factor in the escalation.
  The truth is that new deals are repeatedly being struck above anything that the social contract could allow. They are repeatedly breaking the 12-month rule. Admittedly, the social contract is a little imprecise—it is not always easy to know when it is being broken and when it is not—but, as the Economist argued in the same article, it cannot possibly allow any increase of over 20 per cent. Of 24 major deals listed only five may have been within its terms, and even some of them are doubtful. Moreover, 13 of the 24 agreements break the 12-month rule. Even that situation does not help industrial peace.
  Today we see the Post Office workers apparently asking for the third increase in one year. The Price Code is being used by the Government to fill the vacuum caused by the absence of any effective incomes policy. The threatened use of a penalty mechanism through the productivity deduction only highlights the situation. Earnings or wages are racing ahead while industry is starved of the money it needs to survive, quite apart from the funds it needs to invest and to grow.
  We hear a great deal of talk from the Government benches about the need to invest. The Government must realise that industry cannot possibly be expected to invest unless there is some hope of making investment worth while. The threat that the present situation poses is becoming clearer the whole time. It will inexorably mean lost jobs. I have seen some figures recently which show what is happening in the food manufacturing industry. We have already seen jammaking plants close, and bakeries have been forced to close. I believe that one has closed in the Prime Minister's constituency. I gather from the food industry that there is a serious degree of planned reduction of numbers of people employed. From September 1974 to April 1975, in terms of redundancy or wastage not replaced, one company is expected to shed 2,500 employees, another company 1,400, another 3,000 and another 1,800. We are beginning to see

  1135
  intense pressure in some parts of industry. It is inevitable at the present rate that unemployment figures will rise rapidly over the next few months.
  The problem is not only that of people losing their jobs, although that is serious. Consumers will also suffer. If manufacturers and retailers go out of business, at worst the consumer will not be able to buy any of the things that he or she wants from an accessible shop, and at best choice will increasingly disappear. More and more we are hearing from the retail industry that the ability to keep a full range and choice of stock is becoming increasingly difficult.
  We must ask what the Government propose to do. We have seen in the Budget some sign of awareness of what is happening. We have seen the proposed tax changes and the proposed changes in the Price Code. The Government say that they will provide about £1,600 million of relief for industry. Of that sum, apparently £800 million will be used to help the private sector as a result of the changes in the Price Code.
  Obviously, in principle that help represents a step in the right direction. It represents a different and more realistic understanding that the sort of line we heard from the Labour Party during the election campaign. The talk then was designed to show that everything was not so bad after all. It was not just the Chancellor of the Exchequer with his 8·4 per cent. For instance, the Secretary of State for Prices and Consumer Protection on 7th October said
  "Meanwhile, there is no evidence at all of price increases stored up in the pipeline."
  Had the right hon. Lady no inkling at that time that the October RPI figures, which were announced on 10th November, would show a 2 per cent. leap? Had she no idea that that was going on, or was she talking only in election terms?
  It seems that the Budget brought some limited injections of honesty into the situation. The question that we must consider is whether the changes in the Price Code are adequate. More and more I wonder whether the code will for long continue to be the right weapon for dealing with the problems now facing us. We are not advocating scrapping the code now. We made that clear during the
  1136
  election campaign. However, the signs are that before long the job of holding down prices will more and more be done through competition. The factor that will slow down prices will be the difficulty that firms will have of finding buyers in the tougher climate which lies ahead. I believe that will be a more effective way of controlling prices than any mechanism that the code can provide. I recognise that so far wage inflation has insulated us from the position that I have described, but if it continues at the present rate what I have prophesied may be proved to be true.
  We must recognise that there are other measures which the Government are taking, such as putting up the prices of the products of nationalised industries. That will undoubtedly lead to a tighter situation. We accept that the code will have to remain in being for some time to come. I have some sympathy with those who say that the right way to control prices now might be through profit margins alone rather than the code.
  Given that we have the code, will the proposed changes help industry to any adequate extent? It is hard to know the extent to which they will help. It is hard to know exactly what the proposed changes will do to prices. The Undersecretary of State for Prices and Consumer Protection on 25th November said that the Government did not know what effect they will have on investment.
  The impression can be gained that the £800 million has been plucked out of the air. The Secretary of State gave no detail to justify it when she spoke during the Budget debate. I am not aware that she has given any detail to justify it since. We know that it does not include the increases due to the nationalised industries.
  We are extremely hazy about what the Government expect to happen to nationalised industry prices. The increases which they are being allowed to make are an important part of the Government's economic strategy. Clearly, they could have a significant effect on our economy in many ways. So far the replies that have been given to any questions touching upon this matter have been singularly uninformative. I ask the right hon. Lady to tell us in some detail what she thinks will happen to prices charged by the nationalised industries and what the real

  1137
  basis is for estimating £800 million as the relief to industry that the code will provide? It is clear to me, from having talked with a variety of organisations and firms in the private sector, that there is no confidence there that the relief will come to anything like £800 million. Indeed, the CBI has affirmed that it regards the figure as very optimistic. We are entitled to know the detailed basis for a calculation which, after all, plays a major part in the Government's economic policy.
  What about the substantial changes proposed in this document for the code? Many comments have been made about points which should or should not have been made in the document. I shall not try to take up every one. The right hon. Lady and her colleagues have spent a lot of time listening to representations, and industry has not been slow in making them. I will pick out one or two of the major representations made and say why I believe that some of the proposals in the document should be altered between now and publication of the final code.
  First, there is one major omission from the proposed changes. Unlike the Chancellor of the Exchequer, the Secretary of State for Prices and Consumer Protection has made no concession to the problem of inflation accounting. Inflation accounting is accepted under the provisions of the code only if it was in operation within firms before September 1972. This must be wrong in the present circumstances. I know that the Government are waiting for the report of the committee set up by the Conservatives to look into the whole problem, and in normal cirmumstances it would make sense to await such a report. But the circumstances are not normal. The problems of industry and unemployment are pressing hard, and I hope that the right hon. Lady will consider making an immediate change in this respect.
  Secondly, I come to the positive proposals. The first is a proposal for investment relief. All of us are agreed on the vital need to encourage investment, so there is no need to stress that. At first sight, the right to recover 17½ per cent. of expenditure for investment looked attractive. Among a lot of people in industry the immediate reaction was favourable. But over the last few weeks, since the draft code was published, people have increasingly begun to doubt whether it is
  1138
  anything very significant. This is partly because it excludes important parts of industry—shops, for example—which will not make for efficiency or help to the consumer. Vehicles and distribution warehouses are also arbitrarily excluded. Most important of all, the 17½ per cent. relief goes to firms only for a year. It is on this factor that the great dispute centres. It is true that it will help to pay for the investment decisions, but it does not help to provide the increased profit which would make investment attractive.
  The right hon. Lady should think seriously about whether it would be better to have, if necessary, a lower percentage than the 17½ but to make the price and reference level provisions permanent. This would not merely give industry the chance to recover the cost of the investment but would make the situation attractive enough for industry to have some spur to invest. The Government must realise that there is no point in calling for more investment unless there is some point in investing.
  The second positive proposal concerns distribution. Some of my hon. Friends will talk about this aspect with considerable expertise. I have no doubt that, in spite of the proposed improvements, the position of the retail trade today is becoming very difficult. The 10 per cent. cut in gross margins of distributors was a severe measure. There is some alleviation for them now, but it seems to be widely believed in the industry that it will not be enough, and it is interesting that it is not only the Retail Consortium that is bitterly disappointed but the Co-operative Union. According to Co-operative News of 22nd November, the Acting General-Secretary said:
  "We had hoped there would have been greater relief to the retail trade to provide the necessary cash for developments."
  There is great disappointment that the problems of the retail trade have been persistently underrated by the Government.
  Next, there is the question of the safeguard. I will not go into the argument about paragraph 34 in great detail, but I think that it is the Schleswig-Holstein question of the prices policy as a whole. It is the most obscure and difficult part of the argument. There is agreement that broad improvements in the safeguard

  1139
  are of value. There is a strong feeling that to raise from 10 per cent. to 33⅓ per cent. the degree of net profit erosion at which the new safeguard operates will hit some companies very badly.
  I hope that the right hon. Lady will consider carefully the argument of the CBI that companies should have a choice between the old paragraph 34 of the Price Code and the new paragraph 34. It seems to me that a measure designed to improve the situation of industry but which can be clearly shown to hurt part of it should be re-shaped so as to give companies the option of these two approaches.
  The other major point concerns the proposal to raise the safety net below which an enterprise is not constrained by the rules of the code—first, from a return of 8 per cent. on net assets to 10 per cent. and, second, from a return of 1½ per cent. on turnover to 2 per cent. The right hon. Lady must know that these measures are not adequate.
  The 2 per cent. in some industries, again on the retail side in particular, is very far from being an effective figure. The 10 per cent. figure as a basis for return on assets is laughable, particularly when one has to pay 16 per cent. for borrowed money. To say that in the circumstances 10 per cent. is an adequate level of return is nonsensical.
  The right hon. Lady should pay attention to the fact that the recent report of the Joint Review Board for Non-Competitive Government Contracts has suggested that the rate of return for such contracts should be raised from 14 per cent. to 20 per cent. I ask her to note that the figure of 20 per cent., regarded as a reasonable figure for non-competitive Government contracts, is exactly double the 10 per cent. she is proposing as a fair figure. One wonders whether the Government are even half-serious about the need to stimulate investment.
  I turn now to the very vexed question of the productivity deduction. Everyone will agree that, overall, the productivity deduction has been the most resented feature of the Price Code. Originally, when the Conservative Government brought it in, they were justified in doing so by the fact that prices were rising faster than wages, and wages were then subject to the Pay Code. It was, over
  1140
  that year or so, possible to make some sort of productivity saving, at least in the short run. Now, as the right hon. Lady said on 13th November:
  "It would be unfair to believe that firms which have already moved on productivity can move on it time and time again."—[OFFICIAL REPORT, 13th November 1974; Vol. 881, c. 434.]
  The truth is that the productivity deduction has become a largely penal measure and should go. It makes it impossible for industry as a whole to manage its own affairs or to plan its own activities over the next year or two, and I hope that the right hon. Lady will, on this perhaps on more than anything else, be prepared to realise the facts of the situation.
  Overall, we recognise that the proposals in the new code are by and large an improvement on what has gone before, but it is time to start thinking about what the future of the code should be, and I believe that we must start thinking in terms of when we can phase the code out. In particular, we have to stress that it is quite wrong that the code should be used as a substitute for an effective incomes policy. Frankly, I am very doubtful whether the productivity deduction in any way stiffens industry's resolve to withstand pay claims. As many people have said, it is important to understand that companies which are financially weak because they are not making a worthwhile profit or not getting adequate returns are in no position to withstand outrageous pay claims. They simply will not be able to do the Government's job for them.
  I hope that the Secretary of State will reconsider the productivity deduction in particular. At the very least, she must make clear that she has dropped the notorious suggestion implicit in paragraph 13 of the consultative document. This was the passage to which she referred in her speech in the Budget debate, when she said:
  "What we are asking is whether it would be right for the code to impose an additional penalty—I choose the word deliberately—when the increase in salary or wage costs is very high."—[OFFICIAL REPORT, 12th November 1974; Vol. 881, c. 456.]
  Note that the right hon. Lady chose the word deliberately. She said that, and although it was somewhat watered down in later speeches by Ministers, the fact remains that the Secretary of State stressed that she regarded this, apparently, as a

  1141
  serious possible instrument in Government policy. In doing so she was doing no more than echo the Prime Minister's remarks at Cardiff during the election campaign about "rogue employers".
  Fortunately, paragraph 13 indicates that this approach would have to be acceptable to both sides of industry. As we now know, however, the only people to whom this seems to be acceptable are members of the Liberal Party. Given that that is so, and given the clear opposition to this notion which has come from both employers and the trade unions, I hope that the Secretary of State will now confirm that this idea has been dropped. I assure her that if she does so it will produce not merely a cheer from the Opposition but a cheer from the whole of industry. Indeed, the fact that it should ever have been entertained shows the parlous condition into which the Government have been driven by reliance on a social contract which is becoming less and less tenable every day.
  The main function of the Price Code is clearly now a desperate attempt to keep the social contract alive at all. I do not grumble about the idea of a voluntary policy, but the Government must realise that the country cannot be expected to give enthusiastic backing to a document which is obtainable only from the TUC, and which was never properly discussed with management, and over which Parliament has had no say.
  I believe that the social contract is a constitutional outrage. If the Government want to bind the country in a properly agreed voluntary incomes policy, which they are perfectly entitled to do, they must go for consent on all sides and must bring Parliament into the business. We of the Conservative Party have sat here time and again and listened to Labour spokesmen enunciating the importance of consent. I cannot believe for one moment that the Government would dream of bringing out a document on which only employers were consulted and on which the trade unions were given no say. The Government must recognise that if they really want to persuade people to back up this policy, everyone in the country must have a chance, either through organisations such as the CBI or through Parliament, of having some say in shaping it.
  1142
  In conclusion, I believe that the case for substantial further amendment of the Price Code is powerful, for industry is facing more serious trouble than it has known for years. I want to quote a few lines from a very telling letter from Mr. I. J. Fraser, the Chairman of City Capital Markets Committee, which appeared in The Times on 26th November:
  "What seems to British investment managers to be unique is that private enterprise in this country is beset by so many adverse factors at once These are (a) rampant inflation (b) growing recession (c) price controls (d) dividend restriction (e) exceptional fiscal penalties on dividend distribution (f) the threat of outright or creeping nationalisations and above all (g) public hostility towards the very concept of profits."
  Abviously, the Secretary of State cannot deal with all these things off her own bat, but I think she has enough sense to realise the truth of what Mr. Fraser was saying. At least the right hon. Lady has the power to see that if we have to have a Price Code it must be based on realism rather than on the vindictiveness which we see so often on the Left-wing of the Labour Party, and which came out at last week's Labour Party conference. That comment, I regret to say, includes some of the right hon. Lady's senior colleagues. I hope that this afternoon, if the right hon. Lady cannot tell us exactly what she proposes to do when the final code is published, she will at least give some assurance on the very important points I have sought to raise.
  4.45 p.m.
  The Secretary of State for Prices and Consumer Protection (Mrs. Shirley Williams): I shall try to deal with a number of the points which the hon. Member for Aylesbury (Mr. Raison) has raised. Before I do so, however, I should like to take issue with him on one or two of them.
  First, the hon. Gentleman endeavoured, I thought rather enthusiastically, to throw out the baby along with the bath water. But we on the Government side of the House have been quite clear that this was a legitimately begotten baby of the previous Government and that it will not be quite so easily lost as the hon. Gentleman was seeking to lose it.
  The Opposition have lost all enthusiasm for the Price Code ever since

  1143
  they became the Opposition. They now argue that they have done so because of a change-over to a voluntary incomes policy. But during the election campaign they repeatedly said that they did not favour a return to a statutory incomes policy. They will be placed in exactly the same situation in which they accuse us of being placed. Furthermore, they said that they would not get rid of the Price Code either. I cannot see that they have found any way out of the dilemma.
  Mr. Raison: I apologise for interrupting the right hon. Lady so soon, but when we talked of a voluntary incomes policy we did not talk of anything remotely resembling the present "phoney" social contract which the Government are trying to implement.
  Mrs. Williams: That is not an answer to the point I have made. Abusing the name of the social contract does not allow one to escape from the consequences of the voluntary incomes policy, which the Opposition have said would be their policy as well.
  The hon. Gentleman said that the situation was vastly different from that of April 1973. It is not so vastly different. He quoted a figure of 7 per cent. to 1½ per cent., I think, for the increase in earnings at that time. I have looked up the official figure. It was 13·4 per cent. for that month, and for the whole of 1973 it was 14·2 per cent. Therefore, the situation is not as different as the hon. Gentleman suggested. Indeed, the figure is twice the figure that he gave.
  I also quarrel with the figures on which the hon. Gentleman was arguing as to the effect of the Price Code, which are estimated to be about £800 million net, and, with other Budget measures, in a full year £1,600 million net. Unless I misheard the hon. Gentleman, I think he gave a figure of £600 million.
  Mr. Raison: The right hon. Lady misheard me.
  Mrs. Williams: I apologise to the hon. Gentleman.
  The hon. Gentleman also pointed to possible increases in unemployment. He will recognise that preventing this was one of our main motives for moving an
  1144
  amendment to the code. He will recognise that this is now a universal problem throughout Europe and North America and not one which is special to this country. In response to what he said about increases in prices stored up in the pipeline—a phrase used by his right hon. Friend the Member for Penrith and The Border (Mr. Whitelaw) in referring directly to applications before the Price Commission—I must say that it was untrue. As the Price Commission pointed out in its annual report, published shortly after the end of the previous Parliament, it was facing a smaller number of price increase applications for a lower level of prices than at any time in the previous 12 months. The Price Commission went on to say that there was a very good chance of lowering the consequences of inflation subject to the level of income settlements. I have never made the slightest bones about this, either during the election campaign or since then. It is clear that to a greater extent than in the past the level of inflation has been in our own hands.
  With regard to the position on commodity price increases, the right hon. Member for Penrith and The Border was referring to the period during the election campaign, and he was wrong. There are not two ways about that. He referred to applications before the Price Commission. I shall, if necessary, quote his words to the House, but it will take a long time. He was quite wrong in what he said.
  Mr. Tom King: Will the right hon. Lady tell the House the date of the Price Commission's report and the period to which it was referring?
  Mrs. Williams: The report referred to the period up to the end of August. The right hon. Member for Penrith and The Border was referring to the same period in his remarks. If he was not, he was misleading the populace, because he knows perfectly well that the Price Commission does not keep a record of price increase applications which are proposed for the ensuing two months. I did the right hon. Member for Penrith and The Border the honour of supposing that he was basing his remarks upon evidence which could be substantiated.
  Finally with regard to the position on inflationary pressures generally, it would be wrong not to mention that there has

  1145
  been in the past two months a turn-up in wholesale prices. Earlier, wholesale prices were falling steadily. In the past two months they have hardened and increased again, largely in consequence of the harvest position, and this is more true of food manufacturing inputs than of general inputs.
  The point made by the hon. Member for Aylesbury about safeguards was not well taken. His own Government's safeguard on turnover was 1½ per cent. Their safeguard on capital return was 8 per cent. Both were minimum safeguards and were not intended to be related to the return on investment to be expected. Our proposals in the amended code are in line with the original approach and not with what could be expected to be the return on interest to normally provided commercial capital.
  I turn now to some of the presentations which have been made to me, including those made by the hon. Member for Aylesbury, and our response to them. I am grateful for the opportunity that the Opposition have taken to provide time for this debate. We were seeking to find time, and there will be a further debate on the affirmative resolution—
  Mr. Raison: This is coming out of Government time. It is important to understand that it is not coming out of one of the Opposition's Supply Days. It will be repaid to us.
  Mrs. Williams: My point is that the Opposition asked for this debate in their time, and I am grateful to them. Originally, we had sought to provide a debate last week. There will be a further debate on the affirmative resolution, and we wish to keep to a timetable in which the final document will be laid by the middle of December. This is according to the wishes of industry as well as those of the House, and I hope that that will be possible.
  We have had two weeks of intensive consultations in which my Department has met some 30 organisations and receiverd about 100 written representations. The Ministry of Agriculture, the Department of Trade and the Department of Industry have also had consultations. We have been able to see all those who wished to present points to us on the
  1146
  code in detail, and we have taken them into consideration.
  I shall deal with the major submissions made to us and, as far as I can, with any steps that we feel able to make.
  I turn first to the productivity deduction. The House should be clear that the removal of the productivity deduction which has been pressed in some quarters of industry would be tantamount effectively to the removal of any kind of price control. We cannot accept the removal of virtually all price control. Without any form of productivity deduction, cost increases would pass straight across to prices with no form of investigation. Furthermore, it would be a situation in which we encouraged the pass-through rapidly into prices in a way which would have devastating effects in a short period on the RPI.
  The gentleman who wrote to the hon. Member for Aylesbury said that the two things that most worried industry were rampant inflation and the Price Code. But the gentleman must have been aware that there was a certain contradiction in the situation that he presented, and this House should be aware of it as well.
  One of the Government's jobs is to try to limit the effect of inflation on the RPI and on the public. To remove the productivity deduction would be an irresponsible way of attempting to counter inflation. We have tried to meet a genuine difficulty. It is a difficulty which, unless there had been a change, would have involved very substantial additional unemployment in consequence. We have tried to strike a balance between the effect on prices and the effect on what industry can afford in respect of the cost of labour. This is why we intend to keep to the proposals we put in the consultative document, having received representations in different directions on this matter.
  We also indicated that there would be a sliding scale. I want to say a word or two about that because there has been some misunderstanding. Some of those who will be subject to paying the higher rate have represented to us that, although they are not capital-intensive firms, their raw material costs are a substantial part of their overall costs. But they do not appreciate fully that the main reason for tapering the productivity deduction upwards as well as downwards

  1147
  is to take account of the effect of labour costs on a firm's overall costs. There will be an advantage even to the capital-intensive and the material-intensive in the proposals that we have made because at the worst there will be reduction to 35 per cent., and I am informed that for most of industry the reduction will be greater than that, leaving out of account those on the average or below the average figure.
  The House will know that I made it clear in my remarks that this would be submitted to both sides of industry. It was part of a general review in considering what steps could be taken to strengthen the effectiveness of the social contract.
  The CBI does not like paragraph 13 and feels unable to accept it largely on technical and administrative grounds. Because of that, although I intend to review with my colleagues the general position, this paragraph will not be implemented further. We made it clear at the beginning that it was a matter for industry to agree upon but that other possibilities broadly along these kinds of lines were firmly under consideration.
  With regard to investment relief, I take on board what the hon. Member for Aylesbury said about the need to establish that investment relief is an on-going process. But if the hon. Gentleman is being fair-minded, he will at least appreciate that we are in difficulty because of the lapsing of the Counter-Inflation Act in the spring of 1976. If we endeavour to keep to the kind of timetable that we have promised both sides of industry, we must explore ways in which we can build in the investment relief beyond the Counter-Inflation Act.
  We recognise that it is important for both sides of industry that this is done, and for that reason we intend to guarantee as far as we are able the investment relief. But I ask the hon. Member for Aylesbury not to press me on the matter at the moment because it involves what ought to succeed the Counter-Inflation Act, and I do not think that industry would be very happy if I were to announce that the Government intended to move the indefinite extension of the Counter-Inflation Act from March 1976 onwards. I recognise this. We are con-
  1148
  sidering the matter at the moment, and we shall inform the House when a decision has been reached.
  Meanwhile, we have been able to make one more minor relief. Where a firm wishes to embark upon an investment year for the purposes of relief, it will be for the firm to decide what the date of that investment year should be. It can put it back to when the Price Code is laid in its final form, and it does not have to wait for the 56 days' notification before it announces the beginning of its investment relief year.
  We propose to allow the investment relief to extend to the point where the Counter-Inflation Act ceases to be in operation. Therefore, we shall offer investment relief until the end of the period of operation of the Act, and we shall permit industry to back-date for the 56 days in which it has to ask for notification. After careful investigation, we have established that there is no real prospect of limiting the 56 days.
  The Price Commission will take on a fairly major taks because the investment relief applies to category one, two and three firms, and we are anxious that the investment relief shall be properly accounted for. It would be irresponsible to suggest that we could cut down the notification period if we want the Price Commission to ensure that monitoring for investment relief really takes place. I have said that we are anxious that that position should be guaranteed.
  The position on plant and machinery is as defined in the taxation code. We understand that under that code it is possible to take a fairly generous view on warehouses under the term "industrial buildings". But I am looking into the position which has been urged by distributors, that distributive warehouses should be included. If that can be done we would like to do it. The problem is the definition by the Inland Revenue. That presents a difficulty because, perhaps not very flexibly from the point of view of the House, the division comes clearly between distribution, on the one side, and manufacturing, on the other, although the type of plant is much the same.
  We have looked into the point about commercial vehicles which has been urged upon us by some quarters of industry.

  1149
  We are considering the matter, but I must point out that it will be difficult to give way on this point because of the present situation in which commercial vehicle order books are heavily booked up for export purposes. We would not want to take steps which might divert commercial vehicles from export, but there would be room to come back on that if the investment relief figures fall below what the Government have estimated.
  Mrs. Sally Oppenheim: In considering the whole position relating to commercial vehicles, may I ask whether the Minister is giving special consideration, for example, to fork-lift trucks, which are not vehicles in the sense intended in the code revision?
  Mrs. Williams: I thank the hon. Lady for that suggestion. I will look into it. Again, it is largely a matter of definition. Some kinds of machinery of this type come into the definition of machinery for the purposes of plant and machinery. I will see whether fork-lift trucks come into that category as well.
  I want to make some brief remarks about shortages. While the Government have written into the draft code a provision that would enable a reserve power to be used in exceptional circumstances for shortages, I should point out that this is intended to be an extremely limited exception. It has been used in a different form on sugar. The purpose is to act in the interests of consumers where a shortage of supplies might be made worse by the operation of the Price Code. However, it would be unfair to suggest that this is in any way a general exemption. It is not.
  On the three-months' rule, the definition is now to include materials. That will cover the point that has been made in various parts of the House about, for example, the rapid increase in price of some materials which are not defined as raw materials, but it will still be limited to the overall figure of 75 per cent. of total costs. Therefore, again it will be a limited concession, but a concession which in certain instances, particularly the food industry, can be useful, especially where the use of fuel and energy is exceptionally high. Beyond that the three-months' rule will stay in place.
  1150
  On safeguards, which the hon. Member for Aylesbury mentioned, three points have been made to me. One is that while industry is grateful for the clarity of the new safeguard, it does not in the least like the level at which it has been placed. The CBI has informed me in no uncertain terms that it regards it as being very mean. The CBI and other parts of industry have urged strongly that there might be an option between the old and the new safeguard. This would be administratively very difficult. I should make it clear that it would not satisfy industry, which regards neither the old safeguard as being comprehensible nor the new one as being adequate. I am looking into the position and will take careful cognisance of the points that have been made to me.
  It has also been urged upon me that the level at which the safeguard is placed under the new terminology, which is based on products and on a general erosion, should go up to 75 per cent. or 80 per cent. I must make it clear that I see no possibility of moving as far as that. It would mean a substantial impact on the RPI. However, I am looking to see whether any lesser concessions might be made here. It is only fair to point out that I have no intention of moving back to the 90 per cent. safeguard on the product basis. It would, in my estimation, be far too expensive for us to sustain at the moment.
  On distribution, again strong representations have been made that there should be a much higher safeguard. The figure of 90 per cent. of net has been suggested and also figures running up to 110 per cent. of gross to meet that safeguard. Again, while I recognise that there are considerable problems in distribution—it is probably true that it is the hardest hit by the old and the new code—I do not think that there is any possibility of reaching those suggested figures. Indeed, it would not be right to do so. But, again, I am considering carefully the representations that have been made to me. It is no part of our intention to prevent firms reaching the safeguard laid all, in trying to make sure that they are down to protect them, and it is, most of at least able to get a safeguard that Parliament agreed to that. I am looking at the matter in these terms rather than

  1151
  in terms of large changes in the level of safeguard.
  I hope that, even though I may not carry the Opposition with me, I shall carry my right hon. and hon. Friends with me in believing that a Price Code which has very high safeguards is a recipe for stagnation and for people, as it were, making profits without working for them, and I cannot support it.
  The Government intend to bring nationalised industries gradually under the same regime as for the private sector. That is why the safeguards relating to return on capital and turnover have been brought into line for the nationalised industries. The hon. Member for Aylesbury will appreciate, however, that the regime for nationalised industries under the Price Code is necessarily different from that for the private sector, or it has been in the past, because the nationalised industries were constantly kept below what their allowable costs would have brought them by the decisions of the last Conservative administration. It is for my right hon. and hon. Friends to decide over what period and in what way the nationalised industries can recover their viability.
  My right hon. Friend the Chancellor of the Exchequer, in his Budget speech, said:
  "One of our policy objectives must be the elimination of subsidies to the use of energy through artificial prices for the products of the nationalised industries … I have set it as my objective to phase out these subsidies completely as fast as possible."—[OFFICIAL REPORT, 12th November 1974; Vol. 881, c. 255–68.]
  The Opposition have every right to ask: how fast is "as fast as possible"? The Price Code permits nationalised industries to recover allowable costs, but anything that goes beyond allowable costs and the safeguard returns on capital and turnover—I assure the hon. Member for Aylesbury that it is quite a large space—is still subject to the decisions of Ministers. It is for Ministers, if they wish, to intervene and to decide where in that very wide area the level of prices shall be set.
  We are considering these matters. I am afraid that I cannot give the hon. Gentleman a final reply on them. The Price Code would make it possible for nationalised industries to move towards
  1152
  viability, but the rate at which they do so depends upon ministerial decision as distinct from the allowable costs figure.
  The Government are taking steps in the course of their review of the whole of nationalised industry prices to see what can be done to minimise the cost of those industry price increases on small or poor users. When we came into office we found that, although subsidies to nationalised industries were colossal, the structure of tariffs allowed very little for the poor or small consumers and, to some extent, militated against them.
  Mr. Raison: I appreciate what the right hon. Lady has said. However, may I ask her to give us some figure for the nationalised industries comparable with the £800 million that she claims will apply as relief to private industry? At the moment we have no idea of the scale of operation that the Government have in mind.
  Mrs. Williams: I understand that if no price increases were permitted in the 1975–76 financial year the present deficit, which is running at about £1,000 million a year, would at least double. In terms of the public sector, borrowing requirement, that is unacceptably high. But precisely over what period of time—one, two or three years—the return to viability will take place in the nationalised industries I am not in a position to tell the hon. Gentleman, not because I am holding out on the House, but because the basic consultations with chairmen of the nationalised industries have not taken place. They do not arise in my Department, but I understand they are going forward, and the House will be informed at the earliest possible date.
  Finally, as I have indicated to the hon. Gentleman, we are still considering a number of submissions that have been made to us. I have tried as far as I am able, subject to continuing those consultations as I promised to do and to considering some matters that were put to me late in the day—as late as the end of last week, when the official consultation period ended—to indicate to the House where I feel unable to go further and where I am still carefully considering the position.
  I end by saying that the Government, at least, regard the Price Code as still

  1153
  having an important job to do with regard to counter-inflation policy, and, although we are willing to go a considerable way towards trying to guarantee employment and investment in so far as we are able over the coming couple of years, I believe that we have struck a difficult balance at about the right place.
  5.11 p.m.
  Mr. Richard Wainwright: The draft Price Code represents the third attempt by the Secretary of State in a Labour Government to tinker with a Price Code that is essentially the product of a Conservative Government. Liberals were inclined to be merciful in their verdict on the earlier tinkering, having regard to the minority position of the Labour Government in the summer Parliament, but we say now that this third attempt at tinkering is more than enough. It is incumbent on the Government, if they intend to continue the counter-inflation legislation, to produce a more dynamic code embodying their own ideas and not go on patching up a code that was described by the right hon. Member for Bristol, South-East (Mr. Benn), now the Secretary of State for Industry, when it was first introduced by the Conservative Government as
  "the most complex and bureaucratic structure of controls ever imposed upon the British economy in peace or war".—[OFFICIAL REPORT. 7th November 1973; Vol. 863, c. 1015.]
  The bureaucratic complexities that arise from three separate attempts by the Secretary of State to patch up the Conservative Price Code is not, in our view, the main evil, but it is an evil, and I hope the House will bear with me if I give one or two examples.
  I deal first with the procedure for gross percentage margins allowed to non-food distributors. This was originally allowed at 100 per cent. of the reference level. Earlier in the summer the right hon. Lady reduced that to 90 per cent., accompanied by a safeguard that was to protect up to 75 per cent. of the distributor's gross profit. But now we have the third tinkering which introduces in paragraph 74(b) the most extraordinarily complex proposal that the distributor's margin can go up to 105 per cent. but only—and literally only—to the extent that that enables his total gross margin to reach 75 per cent. of the reference level. The
  1154
  moment 75 per cent. is exceeded, any further increase is chopped off.
  This is a game of snakes and ladders which I am assured by a number of nonfood distributors whom I have consulted will be very difficult for them to try to administer. It will involve their looking into a many-sided crystal ball and almost certainly getting the answer wrong. The thing could not have been made more elaborate by the late Heath Robinson himself. However, it is not the additional bureaucratic complexities that result from continuing to tinker with what is now an ancient document but the effect of making companies look backwards all the time that seems to Liberals to be the most unfortunate result of this procedure.
  Everything is to bear a reference to what was happening way back before September 1972, or at the latest April 1973. I am sure that the right hon. Lady meets enough young, thrusting, dynamic executives, in both the nationalised and the private sectors of industry, to realise that to young men and women who are looking to the future in industry September 1972 is an aeon away. In fact, to politicians it is also a long time away because it takes us back to a period of a very different régime. Why must we in this House, time and again in debate after debate, sanctify this reference back to 1972?
  This proposal also puts a wholly unjustified premium on companies that have stuck in a rut and have retained old-fashioned accounting principles at a time when everybody in the accountancy profession is trying to experiment with new devices to account for inflation. To be respectable under the Conservative Government's Price Code as amended by the right hon. Lady, one has to say that one has been consistent in years past in one's accounting treatment.
  That comes out in paragraph 28, under which it is binding upon anybody appealing to the Price Commission to show that over the years he has been consistent in his treatment of depreciation. Under paragraph 35 he has to be consistent—the word is used with monotonous emphasis— in his allocation of overhead costs. Under paragraphs 36 and 77 he has to show that he has been consistent in his treatment of stocks, and it is an accountant who is as dead as mutton who has been consistent

  1155
  in his treatment of stocks in view of inflation in recent years.
  Mr. Ian Lloyd: Does the hon. Gentleman agree that the standard of consistency is the consistency with which the Government have controlled the money supply?
  Mr. Wainwright: That is off my point. I am concerned about what both Governments have called consistency, but what I call being stuck in a rut. It is a badge of shame amongst enterprising accountants to have to confess that their methods have not altered during the past three or four years, but it is of the essence of the prices document to show that their methods have not altered. Even under paragraph 75 the calculation of gross margins, of all things, has to be shown to have been consistent during the reference period and since.
  The value of assets is the essence of concerns that are capital intensive. I must say in passing that the present Government do not show very much concern for businesses that are capital intensive. They are much more interested in those that are highly labour intensive. But with concerns that are capital intensive no revaluation of assets ranks for consideration under the Price Code unless it was done before September 1972. The value of properties and industrial plant of all kinds has undergone revolutionary changes in different ways according to the nature of the industry since September 1972, but this document always harks back to that date, and nothing since can be considered by the Price Commission except perhaps under one of the clauses that allow special exceptions.
  When we come to the right hon. Lady's in many ways splendid provision for allowing for new investment to earn its keep—which by and large we welcome from this bench—here again we find a reward for the staffs of businesses who prove bad at their budgeting. What is the penalty for companies that budget for large capital expenditure and then fail to keep up with their budget when it comes to installing those capital items? The penalty is not that they should have to pay back the excess prices which they have been charging wrongly, but merely that in a time of rapid inflation, when money received yesterday is far more valuable than money that will be received
  1156
  next week, they are required to stand still with their price until other costs have caught up with them and overtaken the price which had previously been allowed. This is a reward for bad accounting, or in certain cases for companies which chance their arm by deliberately over-budgeting their capital expenditure and then put on an innocent face when eventually bureaucracy catches up with them, if indeed it ever does.
  The Price Code is still as it was when it left the breast of its Conservative progenitor because it does not get down to the real dynamics of cheap production and cheap marketing. There is no adequate check in any part of the Price Code on the many forms of industrial extravagance. A great many types of spending on what are, in present circumstances, frivolities and a great deal of bad industrial housekeeping are sanctified in the Price Code under the respectable heading of "allowable costs".
  We on this bench want to see every encouragement given to those who will not simply rely on ancient cost formulae but will apply their minds and take commercial risks in producing drastically reduced costs of production and distribution.
  This is essentially a Conservative document which is not fundamentally radicalised by the frequent attentions of the right hon. Lady. When the document comes before the House in the form of an affirmative resolution, as the right hon. Lady promised, in a matter of days or at the most weeks, she must not assume that we on the Liberal bench will allow it to go unchallenged.
  5.22 p.m.
  Mr. Mike Thomas (Newcastle-upon-Tyne, East): I rise to refer briefly to two topics. I raise the first on behalf of the Co-operative movement, the interests of which I represent in the House, and the second on behalf of myself regarding my concern, which I know my right hon. Friend the Secretary of State shares, on the topic of nationalised industries' prices.
  With regard to the Co-operative movement the hon. Member for Aylesbury (Mr. Raison) secured my agreement when he said that he regarded my right hon. Friend as by and large making an improvement on the Price Code. But I must disagree with him, from impeccable

  1157
  sources, when I say that it is wrong and inaccurate to describe the Co-operative movement as having been "bitterly disappointed" over the review. That is not so. We in the Co-operative movement—perhaps in this respect we are rather more privileged than the hon. Gentleman—were not brought up to believe that in matters of public policy everyone should win and have a prize. We welcome the document and we are in the main satisfied, but there are three points arising which I would like to mention a little later, and I would like my right hon. Friend to give more attention to these.
  We take a balanced view of the document. We do not want to see an end of the Price Code just yet. While inflation is running at its present level, and while we have the social contract, as well as the problems of managing and dealing with the pay situation, it would be irresponsible of any Government to tear up the Price Code. We are prepared to live with it and take a balanced view of the review which the Department has undertaken.
  For the benefit of hon. Members on the Opposition benches, I compare that attitude with the view of some companies in the distributive sector which go public on mouth-watering terms and then appear to wish their representatives on the other side of the House to come here and say that the suppliers must provide the working capital and that the customers must provide the finance to expand and increase the value of their investments, and to ask that the Government kindly arrange this. They also have the effrontery to tell us that the Government must preside over the situation with a Price Code which will not only allow such an arrangement but actively encourage it—
  Mr. Tim Sainsbury: I would like the hon. Gentleman to clarify this matter and say that he was not referring to a company with which I am associated. But if he is, would he please give the context to which he is referring?
  Mr. Thomas: I was dealing with a number of companies with which it might be the misfortune or fortune for British consumers to deal. The hon. Gentleman's company may be one of those companies to which I refer. The only reply I can
  1158
  give him is that if the cap fits he should wear it.
  A document such as the Price Code— here I agree with the hon. Member for Colne Valley (Mr. Wainwright)—inevitably goes out of date, and it is in the main with that that we are especially concerned. But in the Co-operative movement we are also concerned with what may seem a relatively small point—the question of gross margin reference levels. To take the best two of the past five years is not necessarily the best way to deal with the matter. There might be merit in having a 12-monthly review, perhaps on a sector basis, and I would like my right hon. Friend to look at this suggestion in detail.
  My colleagues would be glad to hear my right hon. Friend say that she is looking again at the question of distributors' profits. We welcome the relaxation in this area but we support the Retail Consortium suggestion that there might be a sliding scale for the relationship of gross and net profit in this respect. Indeed, there is a good precedent for that in the productivity deduction. I hope that my right hon. Friend will give further attention to this point.
  I am on common ground with the hon. Member for Aylesbury in regard to investment relief. We are extremely unhappy about the question of investment relief on shops and distribution warehouses. I was glad to hear my right hon. Friend say that she is looking into this matter, although it is an Inland Revenue problem. I hope that my right hon. Friend will regard her own view of the matter as being infinitely superior to that which will emanate from the Inland Revenue.
  I turn now to nationalised industries' prices. I think that all hon. Members on this side of the House will recognise that these prices must go up. We must not get into a situation in which nationalised industries are running at a £2,000 million deficit. That is a prospect that we cannot countenance in any way. It was irresponsible of the Conservative Government to get us into this situation. But it would be equally irresponsible of the present Government not to take the opportunity to make the price structure of the nationalised industries more socially responsible. I believe that many of my hon. Friends would think that that was the precise

  1159
  reason that these industries were brought into public ownership.
  I was pleased to hear my right hon. Friend say that she wants to minimise the impact of nationalised industries' prices on small and poor users. I know that she is concerned about this, and that my right hon. Friend the Secretary of State for Energy is looking at the whole question of the problems of small consumers. I draw attention to the fact that we have had a good precedent. My right hon. Friend, in her voluntary agreement with the retailers, has been able to keep prices of key products down. This is of vital importance to old-age pensioners and other small and poor consumers. If it is possible to apply this arrangement to private industry it would be ludicrous if we were unable to do so with publicly owned industries, and I shall certainly be pressurising my right hon. Friend on that point.
  I had my breath taken away by my right hon. Friend's reference to the tariffs in the nationalised industries. She said that to some extent the tariffs militate against small and poor consumers. I would like to give one or two examples of the extent to which nationalised industries' tariffs militate against small and poor consumers. I take for example 12,000 old-age pensioners in my constituency. I am not talking here about abstract statistical groups. These people sit in their homes in fear of switching on even one bar of their electric fires because of what they will be charged when the quarterly bill arrives.
  Let us look at some comparisons on this. An electricity bill for a small consumer contains, in effect, a charge of 4p per unit, but for the large consumer the charge is only 1½p per unit. The position is the same regarding gas. A person using 100 therms of gas in the North Thames area pays 16p per therm, while the person who uses 800 therms—he may have a large house, with perhaps an extension to it, as well as an outhouse— pays only 8p per therm, half as much.
  Although the telephone and telecommunications systems are slightly different because different aspects of capital investment are involved—a phone has to be installed—the differences there are staggering, too. If one makes phone calls amounting to 100 dialled units in a
  1160
  year, one pays 28p a unit—in other words, nearly six bob for a short local call—whereas if one uses 500 units, the cost comes down to 7p per unit, a quarter of that amount, because the rental is such a high proportion of the expenditure.
  Mr. Bryan Gould: I entirely support the powerful case which my hon. Friend is making. Would he also agree that as night storage heaters are a form of heating much favoured by small consumers like pensioners, his case is also a case for concessionary rates for off-peak electricity?
  Mr. Thomas: Yes, I think it is. My hon. Friend is right, save that I would enter one caveat—that when we are supposed to be trying to conserve energy— to encourage people to consume it profligately at low prices is insane. Yes, let us have cheap off-peak electricity, but let us have a ceiling at the point at which a three-bedroomed house is comfortably heated, and above that make gas and electricity tariffs penal, make it much more expensive for people to waste heat once they have heated an adequate space, and also make it cheaper to double glaze and so on.
  I do not know, and a reading of this wonderfully elegant and literary document has not, I am afraid, enlightened me, whether or not it is possible to include this sort of social consideration in the Price Code. I suspect that it might not be, but I wish it were, and I shall be seeking with other hon. Members to find ways in which some Minister can give this kind of consideration. I hope the Minister can say that there is some way in which his Department's control of the price system through the Price Code could make this kind of impact on nationalised industry prices instead of just allowing them to proceed higher and higher, as I suspect they inevitably will over the next few years.
  5.32 p.m.
  Mr. Giles Shaw: This debate has rightly centred on two different considerations—the budgetary aspect and the detailed provisions of the code. Taking the budgetary aspect first, this is an important arm of what the Chancellor was seeking to do in his Budget. About £800 million was due to go back into industrial liquidity through the improvements made in the code. So it is an important part

  1161
  of the Government's economic and, indeed, social policy because, as the right hon. Lady confirmed today, she regards the Price Code as the strong arm of the social contract.
  Essentially, however, this is a hybrid measure. On the one hand, the right hon. Lady seeks to restrain prices to fulfil her obligations to the social contract, but, on the other, she seeks to free prices to ease industrial liquidity. So this measure is a house divided against itself, and must surely fall short of both criteria.
  I cannot see how the relaxations embodied in this review will improve industrial liquidity to the level of £800 million claimed by the Chancellor. The Government are operating here on different time scales. There is the tax time scale for the £800 million from tax changes, and the commercial year time scale for the improvements in the Price Code. The Price Code is also operated in different years according to different companies. We are dealing also with current costs—such as the costs of wages and materials—alongside historical costs.
  As for the productivity deduction, I do not accept the right hon. Lady's claim that to remove it altogether would result in a complete consumer disaster in terms of pricing. When this was introduced by the previous administration, in addition to the fact that it was accompanied by the pay restraint provisions, it was also introduced at a time of economic growth and development and when markets were increasing in value.
  If we relate the productivity deduction to an average wage claim of, say, £2 a week in 1972 or 1973, that 50 per cent. deduction—namely, £1—would have had to come off the employer's margin. Today's average claims are nearer 17 per cent., involving wages of £7 or £8 a week. The average productivity deduction at the 20 per cent. level will now involve the employer in absorbing £1·40. That is a substantial absorption of profitability.
  Removing the productivity allowances would not provide the disaster that the right hon. Lady suggests. The market is contracting. We have growth of 2 per cent. at best, as the Chancellor says. There are real prospects of no increases in consumption or living standards. Against that background, the impost of the productivity deduction has to be seen in a
  1162
  different light. The right hon. Lady could have gone substantially further.
  The other claim made in the Budget was that these adjustments of the Price Code would not have a significant effect on the retail prices index. The Chancellor was quoted as saying that the effect would be under 1½ points by the middle of next year. Yet he went on to announce the possibility of a reduction in nationalised industry subsidies, worth some £1,000 million, and said that a number of other things would happen which will substantially increase costs. We have also seen the continuing decline in the value of the pound and the upward swing of commodity prices. Given that the background of the economy will be virtually static, therefore, I cannot see that we can expect the retail price effects of the code adjustments to be as low as the Chancellor suggested.
  Nowhere will this become more obvious than in the area of food prices. When we study the fine print of the Minister of Agriculture's agreements on sugar supply—we do not yet know what price will be involved—I am certain that we shall be in for a major increase in the food price index. The food industries have estimated that the sugar price alone must be, in manufacturers' terms, £250 to £260 a ton next year, which by itself will increase the food price index by 4 per cent. This index alone will probably significantly increase the total level of retail prices beyond the Government's projection.
  Therefore, on the budgetary level, I doubt whether the contribution of £800 million to industrial liquidity will be produced. The restraint on the RPI seems likely to be beaten by events.
  Turning to the details of the code, I should like to see greater flexibility in the operation of this instrument. In paragraph 34, the enterprise should be reinserted as a cost consideration, as well as the product or range of products. This would give a number of companies a welcome flexibility. Second, the three-months rule should be reduced to 28 days. I am disappointed that the right hon. Lady has not made that reduction. Surely, with the onward rush of material prices, some rapid review of prices is essential.
  Third, on investment allowances, I welcome the commitment to review the

  1163
  problems of warehousing and distribution costs. I do not welcome the Government's somewhat negative way of viewing investments in commercial vehicles and cars for sales use, and so on. This side of the coin should be given adequate treatment. I welcome the fact that the 12-months rule may possibly be expanded but the whole question of investment must be considered in terms of the returns to the companies investing.
  When we come to the extraordinary lifting of the returns level from 8 per cent. to 10 per cent., I do not accept that the right hon. Lady should compare that with the previous code and say that it is a step in the right direction. That would be all very well if we had a bouyant economy in which to invest, but we require additional encouragement in order to invest. The level of 10 per cent. is quite inadequate, surely, with this growth rate, as a return on investment. The Government must review the figure sooner or later.
  Fourth, I would like to see depreciation based on replacement costs of assets. If necessary, the Government could consider tying these replacement costs to investment intentions. That would be helpful. Fifth, when the Secretary of State sees fit to grant exceptions to the Price Code, I must emphasise the importance of these exceptions being carried through to all users of the product or service. I quote the recent example of sugar, when refiners were able to obtain exemption from the Government for certain reasons but all those who subsequently used sugar had to pay higher prices and abide by the full restraints of the code. I regard that as grossly unfair. If exemptions are made under the statutory instrument they should be available to all users of the material.
  There is another aspect which I regard as important and which has not so far been referred to. I believe that the Government should consider introducing some appeals procedure in relation to the decisions of the Price Commission. We saw the recent judgment given in the case of GEC which highlighted the powers given to the Chairman of the Price Commission, Sir Arthur Cockfield, as being quite Draconian. This move towards an appeals mechanism is only right, if the
  1164
  Government seek to continue to use this code and wish it to be an important arm of their economic policy. Some appeals procedure from decisions of the chairman of the commission should be introduced. That is essential if the Government are seriously considering some kind of penalty provisions being attached to those who make so-called exceptional wage agreements.
  As a general point it must be emphasised that the House is reluctant to give Governments excessive powers over individuals. The same should be equally true when we set up commissions which seem to ride roughshod over British industry in the way that the Price Commission has previously been prepared to do. I should like to see an appellate procedure included in the Government's review.
  Industry requires to be encouraged to invest. Above all, it needs the confidence of knowing that investments will be well made and that an adequate return will be forthcoming. The burdens of this code, even in revised form, are extremely heavy in terms of private and public industry. When the code was introduced there was some merit in the fact that it was to be reviewed over short periods. The phases of the prices and incomes policy were reviewed regularly. I commend to the Government the view that they should review the workings of the code as frequently as possible.
  I very much regret that we have not seen nearly as many revisions to the code as industry has pressed upon the Government. I am sorry that the Government have not given way on some of the more important points concerning productivity deductions. When industry looks to the future it asks how confidently should it be planning its investment policy, what are its chances of improving its return on capital, what will the climate be for industrial costs and wages, and what is Government policy likely to be as it affects industry in getting on with its job? When industry asks these questions and looks at the Price Code revisions proposed here industry will be profoundly disappointed.
  4.45 p.m.
  Mr. Leslie Huckfield: Labour Members have marvelled today at the miraculous conversion in attitude towards the Price Code that has taken

  1165
  place among Conservative Members since we last debated this issue. We can almost be forgiven if we forget that it was the Conservative Party which introduced the code. It was the Conservative Party which introduced the counter-inflation legislation. Further, it was the Tories who insisted that the Price Commission should select its own devices and that the rules under which it should operate must be stringent and strict. Lastly, it was the Conservative Party that insisted that individual references to the commission could not be debated in the House.
  To hear the hon. Member for Pudsey (Mr. Shaw)—I mean him no personal disrespect—arguing that we ought to have more flexibility and an appeals mechanism makes me wonder whether he realises how many additional civil servants would be required to operate such a mechanism, particularly with reference to the sliding scale of productivity deductions. Where does he think we shall house these civil servants? I suggest that if we went through with this sort of thing it would not be new parliamentary accommodation we would need; we should need a new Whitehall to take up the Civil Service machinery necessary to deal with appeals against decisions of the Price Commission.
  I have been rather impressed by my right hon. Friend the Secretary of State for Prices and Consumer Protection. Although I cannot agree with everything she does and says, I believe that, overall, the impression she has given in her Department is one of activity. She has been a busy Secretary of State. It was she who introduced the scheme of food subsidies—an integral part of the social contract. Likewise, she introduced the voluntary price restrictions inherent in the so-called "shopping basket" scheme. It was she who introduced the 10 per cent. reductions in distributors' margins and who produced the saving to pensioner couples of about 60p a week and, to the average family, if I can so define it, of more than 40p a week.
  Mr. Mike Thomas: No. Over 80p.
  Mr. Huckfield: I am glad that my hon. Friend corrects me. He remembers the figures we were using during the election much more accurately. I hope that his interjection will be faithfully recorded.
  1166
  We on the Government side of the House realise the contribution that my right hon. Friend has made to keeping down the cost of living for the average working family.
  Tory hon. Members, particularly the hon. Member for Aylesbury (Mr. Raison), complain about the market being depressed and about demand being inflated, but at the same time they loathe wage increases. I am not sure which school of economics the hon. Member for Aylesbury follows at the moment. I know that there have been some changes of fortune among hon. Members opposite, but it has to be said that they cannot logically complain about the market being depressed and wages being increased in the same breath.
  If there are wage increases it stands to reason, since those receiving them will have a fairly high marginal propensity to consume, that those increases will be spent on pushing up demand in precisely the sectors where the hon. Gentleman says demand is deflated.
  In their constant harping and carping references to the social contract I cannot help wondering what Tory Members would put in its place. We have reached the state when they use every chance they can—whether it be in "The World This Weekend" or the correspondence columns of The Times, which is the latest method—to decry the social contract. Never have I heard any constructive alternative being put forward, except perhaps by one or two hon. Members like the hon. Member for Oswestry (Mr. Biffen) who, I know, has never agreed with any kind of restrictions.
  The hon. Member knows as well as I do that certain hon. Members on both sides of the House would take that line. The hon. Member for Aylesbury knows that in his alleged 35 per cent. compound increase in wages, which he says has taken place in the past year, are included not only threshold increases but the special case increases like railwaymen, miners, postmen and nurses, of which my right hon. Friend the Secretary of State for Employment has never made any secret.
  We have always conceded that the difficulty with a prices and incomes policy, whether voluntary or otherwise, is that there have to be special cases. The hon. Gentleman should not overlook the

  1167
  fact that within some of the larger settlements which have been made over the past six months there are, justifiably, bigger than average increases in special deserving cases.
  The hon. Gentleman referred to his desire for the complete abolition of the Price Code. No doubt we shall hear that desire repeatedly expressed from the Conservative benches. The Conservative Party's policy now seems to be the abolition of the Price Code. I hope the Conservative Party will say that in much more precise terms, so that working people, particularly my constituents, will understand that the Conservatives do not want any price controls. If the Conservatives are honest—I know that until the leadership struggle is concluded they may be disinclined to be completely so—they will tell the people that they do not want any price controls, and they will see the effect that has on wage claims.
  Much of the relaxation of the Price Code has been demanded by the CBI because we are, above all, in a low-growth economy. Anyone who has studied the effects of higher investment, higher rates of growth and higher rates of growth of productivity will accept that had we been able to maintain a higher rate of net investment, a higher rate of growth of gross domestic product and a higher rate of growth of productivity, many of the concessions which have of late been demanded by the CBI would not have been necessary.
  Despite the relaxation in the Price Code, which makes some concession in the direction of new investment, I am still not content that the concession will push up the rate of investment to push up the rate of growth. So long as we have a low-growth economy and a low rate of growth of productivity we shall get more demands from the CBI and the Conservatives for concessions in the Price Code.
  I have always taken the Price Code in conjunction with the rate of new investment. Since the war we have tried almost every carrot—every incentive—that Government can try to push up the rate of net investment. Yet in 1973 private manufacturing industry did not invest more than 3.5 per cent. of the gross domestic product in new investment. Some of my hon. Friends and I are so sick and tired of giving carrots to private
  1168
  industry that we think it is about time we took over the carrot patch. We keep on dangling concessions in the hope that in the distant future, after a nebulous gestation period, there will be investment in new machinery which should produce a higher rate of growth and a higher rate of growth of productivity, but I am extremely dubious whether this generalised approach will succeed in the way my right hon. Friend hopes.
  The National Enterprise Board should have been inaugurated much sooner. With its inauguration my hon. Friends and I foresee the establishment of an instrument of counter-cyclical investment policy. At present, with a depressed market, with industry not being able to get much new money from the Stock Exchange and perhaps being cajoled towards the new consortium called Finance for Industry, I remain unconvinced that we shall get anything like the rate of net investment increase which my right hon. Friend hopes to see.
  What checks and examinations does the Department intend to make on the way in which the 17½ per cent. allowance is spent by firms? When I examine past concessions on investment allowances, free depreciation and initial allowances, I am far from happy about the way in which firms have done what they told Government Departments they would do in using the concessions.
  Mrs. Sally Oppenheim: Is the hon. Gentleman trying to maintain that low investment in industry is the only cause of low productivity? Does he not recognise that a network of restrictive practices, over-manning and poor incentives is equally responsible?
  Mr. Huckfield: I do not know what discourses on this subject the hon. Lady has studied, but almost every OECD and independent study of this subject has shown that the chronic difficulty in the British economy ever since the end of the Second World War has been the failure to invest a sufficient percentage of the gross domestic product in new investment—not replacement investment, but new investment. I am not talking about "like with like." I am not talking about 1920 and 1860 "spinning jennies," but about pushing investment to the frontiers of modern technology. That, I suspect, is the real fault in the British economy.

  1169
  What examination has been made of the rôle of multi-national corporations in the concessions which are studied in the consultative document before us? I am sure that my right hon. Friend knows that about 100 major corporations control about half our gross domestic product. I am sure she knows that about six multi-national corporations control the top half of our 20 main manufacturing industries. I am sure that even Conservatives no longer believe in that old Marshallian world of perfect competition, free competition or imperfect competition. I am sure that Conservatives realise that the typical firm in the British economy does not employ only 50 people and that the conditions which are far more appropriate for further study are the conditions of oligopoly, duopoly and complete monopoly. Those are the subjects for further research to which I hope my right hon. Friend will apply herself.
  If we are suggesting putting a ring fence around oil companies exploring the North Sea for profits purposes, why cannot we examine the possibility of putting a ring fence round some multi-national corporations which are trading in this country for prices purposes?
  It is gradually seeping through, although the Conservatives do not have the guts to tell the people the truth, that their policy is to get rid of the Price Code. The concessions which were being asked for by the CBI before the Budget were about 20 per cent. of the gross domestic capital formation of the country. Under the heading of the £3,000 million concession the CBI was asking for a concession which would have equalled one-third of the gross trading profits of the private sector in any one year. I am fairly sure that Opposition Members who have spoken are not asking for that kind of concession.
  I am not enamoured of some of the overall hypergeneralised figures of overall profits last year produced by the hon. Member for Aylesbury. Mr. Melville King, in the Department of Applied Economics at Cambridge, produced figures to show that after stock depreciation and taxation the overall returns of private manufacturing industry last year were more than 14½ per cent. I wonder whether the description of the
  1170
  liquidity crisis in British industry by some hon. Members opposite is quite so accurate as they would have us believe.
  Mr. Geoffrey Dodsworth: Does the hon. Gentleman recall that the average investment per person employed in manufacturing industry is about £10,000, and of that sum between 45 per cent. and 55 per cent. is produced from retained profits and 30 per cent. is produced from loan capital? The figure of 17½ per cent. in the Price Code review is quite inadequate. It should be increased in order to measure up to the cash requirements of British industry.
  Mr. Huckfield: I am grateful to the hon. Gentleman for reinforcing my point about the crucial need to increase the rate of investment.
  The other question I want to ask is this: what kind of distinction has been made, for the purpose of the code, between category 1 and non-category 1 firms? I should have thought that there were bound to be substantial liquidity differences between firms in the various categories. I have always thought that the kind of concessions that we ought to be giving to category 1 firms ought to be given only in conjunction with planning agreements. I am not at all convinced that the reserve position of category 1 firms is exactly analogous to that of category 3 firms, for example. There ought to be many more differentiations between the firms in the various categories before we give these very generalised relaxations about which my right hon. Friend is talking.
  According to the Sixth Report of the Price Commission the commission found that in category 3 about one-quarter of the firms examined were already exceeding the reference level. When we have such differences not only in the success of enforcement between the various categories but in the need between the various categories and the spread of those needs, I should have thought my right hon. Friend ought to have been far more cautious in her approach to the generalised concessions which she announced this afternoon.
  If the Price Commission found such a degree of difficulty in enforcing the Price Code under the old régime, where the

  1171
  rules were complex, and they had a degree of enforceability in them, how will the Price Commission enforce this sliding scale of productivity directions? I am rather sceptical about the possibility of my right hon. Friend's enforcing all that she set out in the code.
  I should have liked to say more about nationalised industries, but other hon. Members wish to speak. I support what has already been said from the Government benches about the concessions which are necessary at the smaller end of the consumer range. I should also like to ask about the possibility of excluding transport industries from the nationalised price increases which are envisaged. I am sure that my hon. Friend the Undersecretary recognises that in the main it is the public sector that is energy-conserving. I am talking about buses and trains. I should have thought that to reinforce the market mechanism and to keep transport industries prices down would have had a very substantial reinforcing effect.
  Mr. Speaker: I remind the hon. Member that this is only a half-day debate. It began rather late, and the hon. Gentleman has already spoken for over 20 minutes.
  Mr. Huckfield: Finally, Mr. Speaker, I appreciate the kind of difficulties in which my right hon. Friend finds herself in view of the pressures to which she is subject, but I hope that in the further and final document on the Price Code which will be produced we shall see far more specific references and far more detailed consideration of different categories of firms, and, above all, a really determined approach against multinational corporations.
  6.4 p.m.
  Mr. Tim Sainsbury: I first declare that I am a director and a substantial shareholder in a well-known distribution company. Having declared that interest, I am sure it will not surprise the House when I say that I wish to speak mainly about distribution.
  Before doing so, however, I should like to make one or two other brief remarks. I do not intend to follow the hon. Member for Nuneaton (Mr. Huckfield) across the whole field of economics, but I should like to remind him of what my hon. Friend
  1172
  the Member for Aylesbury (Mr. Raison) said. The Conservative Party is not opposed at this stage to having a Price Code, and it is not proposed that it should be removed, but I do not share the hon. Gentleman's conservative belief that because something was introduced in a certain form it should for ever be kept in that form, however much circumstances change.
  I think we are indebted to my hon. Friend the Member for Pudsey (Mr. Shaw), who said that what we want is flexibility. In our discussion what has emerged is that the longer we go on with this sort of Price Code, the more all-embracing and rigid it is and the greater the confusion and complexity, the greater the distortion. If we have had one preeminent example, it is in its peculiarity about a distributive warehouse and whether it constitutes an industrial building. A building for exactly the same function can be put up by a manufacturer at the end of his production line. It can be put up by a wholesaler as part of a distribution chain. It can be put up by a retailer as part of a shop. Some of the most efficient shops are so designed that they can take the product off the end of the production line to save handling costs, to the benefit of the consumer. It is when one tries to differentiate between these different aspects of the same thing that the problem becomes impossibly complex.
  In the matter of distribution it is helpful if we first consider how we come to be at the stage where the proposals which are before us for distributive trades have been arrived at. The difference between the distributive trades and manufacturing industry is that the control for distributive trades has been based upon margins and not upon products. This recognises the multiplicity of lines, the variation in range and the differences in styles in retailing which would make it impracticable to try to control every line.
  There is a further difference. The control operates on both the gross and the net margins. If we have goods costing, to the customer, 100 and the product price is 75, the operating cost 20 and the profit 5, we have a gross margin of 25 and a net margin of 5. If the goods go up by 15, the costs by 4 and the profit by 1, we have a cost to the consumer of 120. There has been no change

  1173
  in the margin at all. If the goods go up again by 15 and the costs by only 3, there is a possibility, if there is no net margin control and if competition allows for the profit to rise by 2, to bring the total profit to 5·8 per cent. instead of the previous 5 per cent.
  This was the situation perhaps when the celebrated—or perhaps "notorious" would be more accurate—10 per cent. cut was first made. It was also regarded as the distributive trades' contribution to the fight against inflation. But it is not the situation now. We now have a situation, which nobody denies, where expenses for the distributive trades as well as for manufacturing industry are rising faster than the cost of goods. We are likely to find goods up by 15 and costs up by 5, and no extra profit. The profit, being 5 on 120, is now 4·2 per cent., which is a 16 per cent. reduction in the profit margin.
  The other change—this is the most important, I think—is that it has been recognised in the document before us that there should be an alleviation of the productivity deduction, which did not affect distribution and, again therefore, was a background factor to the idea of the 10 per cent. reduction in the gross margin of retailers. There is also a welcome emphasis on investment throughout industry. The hon. Member for Nuneaton has made frequent reference to that.
  What, then, do we have for distribution against that background? We have but one proposal of any significance; namely, that it is permissible to increase one's gross margin to 105 per cent. of one's reference level to get to one's 75 per cent. reference level for net margin, where—I quote these words—"market conditions allow".
  That 75 per cent. has been referred to as a safety net. One has a nasty feeling, however, that by inference from that sole concession to the distributive trades the 75 per cent. permitted level at which one can go to 105 per cent. of the gross has become not a safety net but a maximum.
  What are the implications of that sole concession for consumers and for investment? Again, I use an example. A retailer is operating at the permitted 90 per cent. reference margin and getting only 60 per cent. net. That is 90 per cent. gross and 60 per cent. net. But he
  1174
  is now able to move to 105 per cent. of his gross reference margin to get 75 per cent. net. If, however, he suddenly sees a way of reducing total costs by five points, not one point can go through to his net. He must go back to 90 and 61.
  It is no wonder that the Retail Consortium has referred to this system as snakes and ladders. It provides absolutely no incentive at the 105 and 75 level to improve one's efficiency, for it one does improve efficiency no part of that improvement can be taken through to net profit. Indeed, it could be said that a system so devised is a positive incentive to inefficiency. Perhaps it is a disguised way of ensuring that not only are staff kept on but extra staff are employed to keep up costs.
  That is illogical enough, but I take the example further. Perhaps a retailer is at 102 per cent. of his permitted gross margin and, say, 72 per cent. of his net margin. In that situation, he will find it preferable to operate at 90 and 71, for what one has to remember is that for the retailer it is the net margin that matters because that is his profit, whereas for the customer it is the gross margin that matters because that is what affects his price.
  Thus, we now have a system which provides an encouragement to keep one's gross margin up in certain circumstances. The proposal, such as it is, is of help only to the less efficient retailers who cannot get to their 75 per cent. net margin level when they operate at 90 per cent. of their gross margin. They may be the majority. It has been pointed out—the right hon. Lady is aware of this—that at present no less than two-thirds of all retailers are operating below 75 per cent. of their net margin reference level.
  But there are others who are operating at 90 per cent. and 75 per cent., and because they are so doing it becomes doubtful whether this single concession will help even the less efficient, because the others, the most efficient, will have their prices held down to a level which does not provide them with the possibility of investment, and because their prices are held down so will the others by competition have to be held down.
  It is unfortunate, though perhaps to some extent inevitable, that those responsible for drafting and implementing these documents lack practical experience of

  1175
  the working of a competitive market, and perhaps because they lack that experience they lack understanding, and again, because they lack understanding they in turn tend to mistrust the operation of the competitive market. But we have to recognise the reality of the situation of competition, that the most efficient held at 90 per cent. of their gross margin and 75 per cent. of their net margin will limit the opportunity of the less efficient to benefit from the proposals before us now. Thus, we have the most efficient held at a level which is too low, and is recognised by all, I think, to be too low, for investment, and the less efficient held on that account at a level which is likely to be too low for survival. In consequence, investment in distribution will inevitably suffer, which will quickly bring disbenefits to consumers and to others.
  There will be closures. At one end of the market the large retailing groups will tend to close their less efficient or less satisfactory outlets, and some of the less efficient units operating less profitably will eventually go to the wall altogether. Again, the consumer will suffer, as my hon. Friend the Member for Aylesbury so clearly pointed out earlier.
  We must improve on what is in the code now if the consumer is not to suffer increasingly. It is illogical. It is of only dubious help to the less efficient, and it is no incentive to investment. The only logical improvement, I suggest, is to move back to permitting 100 per cent. of both gross and net reference level at the margin. That would be both logical and fair.
  6.16 p.m.
  Mr. Ian Lloyd: I am glad that the hon. Member for Nuneaton (Mr. Huckfield) is still in his place, because by his interesting arguments he often tempts me to take up points which he makes. However, I shall resist that temptation this evening and content myself with responding to only one, that one being of considerable importance.
  When challenged, the hon. Gentleman drew a comparison between the United Kingdom and our major competitors in areas of high technology, namely, Germany, the United States and Japan, and asked why there had not been suffi-
  1176
  cient investment by the United Kingdom at the fringes of modern technology.
  The answer is simple. Certainly, there has not been sufficient investment, on any reasonable basis of comparison, at the fringes of modern technology, but, as the hon. Gentleman will be the first to admit, I am sure, the fringes of modern technology are areas of very high risk. If one wants people to invest their capital in such high-risk areas, they for their part are entitled to ask for a return proportionate to that risk.
  That is where we fall down every time. The moment the question of return is raised, we rear back and say that it is unearned income, let us put ring fences round it, let us tax it, let us make sure that, whatever else happens, the final reward to the investor on the capital which we seek does not acrue to that investor. All sort of pejorative terms are used, many of them well thumbed in the Socialist vocabulary, to destroy the investors' incentive to invest in this country in that way. But that is not the position in Germany, Japan or the United States. That is the answer to the hon. Gentleman's question why we do not have sufficient investment in the United Kingdom in the areas of high technology.
  Mr. Mike Thomas: Is it not conceivable that it has something to do with low wages in high technology here in comparison with Germany, and with some comparison with Germany, and with worse management here than in Germany?
  Mr. Lloyd: We may criticise our industrial performance on various grounds, but if the hon. Gentleman is concerned about low wages I take him back to another point. One of his hon. Friends commented earlier that it was deplorable that old-age pensioners are finding it hard to pay the cost of running a one-kilowatt electric fire. I suggest that such an old-age pensioner should be asked to direct his or her attention to Mr. Scargill, whose coal miners have put up the price of coal so that 50 per cent. of the increased cost of electricity is accounted for by the wages paid to miners. Does the hon. Gentleman dispute that? I give him another example. I was told over the weekend that right here

  1177
  in London in the printing industry—that is, in the printing of our national daily newspapers—some members of the printing unions are earning £5,000 a year, and in some cases as much as £10,000 a year. Is that under-payment? Certainly not. I shall leave that point now, tempted through I am to take it further.
  I am glad that the Secretary of State is in her place, because she challenged us earlier to declare ourselves if we had lost our enthusiasm, as she put it, for price control since the election. I have no difficulty in declaring myself. I have never been an enthusiast for price control. Far from it. The right hon. Lady referred to it as a legitimate child. For my part—I believe that some of my hon. Friends would say the same—I have always regarded it as an ill-begotten monster which should have been strangled at birth.
  It is a classical illustration of the macro-economic illusion. The illusion is shared not only by the Government and their predecessors but by virtually most Governments in modern complex economics. They believe that when they sit at the controls in the Treasury they are at something resembling the panel of a Boeing 747. They feel they have only to move a lever and the controls will alter so that the economy swings into the pattern or shape they desire. This is far from being close to reality. The reality is that the modern industrial economy is about as complex as the weather system—and it is impossible to predict the weather. From time to time attempts are made to seed the clouds with iodine, and modern Governments are increasingly trying to seed the economy with the iodine of modern prejudice, thereby assuring their supporters that they are doing what their supporters think they should be doing to provide an increase in incomes which can be produced only by increasing productivity and investment.
  Only today I came across a relevant quotation from "The Wealth of Nations", by Adam Smith. I have no hesitation in saying that many of the things which the great Alfred Marshall wrote are as relevant today as when he wrote them. Adam Smith said:
  "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy
  1178
  against the public, or on some contrivance to raise prices".
  There is a fine allusion here to all Governments today. I believe the quotation should read something like this, "Politicians seldom meet together even for merriment and diversion but the conversation ends in conspiracy against private industry or in some contrivance to control prices."
  This extraordinary document, the Review of the Price Code, has been produced virtually in complete ignorance and with a complete unwillingness to reflect or to use the vast experience which modern economies have acquired whenever they have tried to control prices in detail. We can go back to the Second World War when Britain and the United States, in far more justifiable circumstances, produced the most labyrinthine apparatus of control, and that was unsuccessful.
  If one looks at the figures in the IMF publication "International Financial Statistics", and if one plots against the trends in most modern economies those occasions when price controls were introduced and withdrawn—it can be done for this country, for the United States, France Germany and Japan—one can draw the conclusion, in the correlation between inflation and the implementation and abandonment of price control, that price control has no effect on inflation. Across the chart the result is explicitly clear, but for political reasons that we all understand Governments must pretend that they can control these situations when we know that they cannot.
  We therefore come back to the most fundamental factor, namely, whether there are other things which Governments can do besides producing this type of macro-illusion. Governments feel that by sitting on top of the thermometer they can control the illness in the body. They are under increasing and continuous pressure to increase public expenditure for all kinds of reasons, some good some bad. The pressure is there and it is relentless, and it is the one phenomenon of which the politicians must take notice, or else.
  Almost without exception, therefore, the Governments of modern industrial economies overspend their public resources massively and continually. As a result, they generate inflation, and

  1179
  because of that they have to say, "Of course, we must now control this dreadful thing for which we, as the Government, are only partially responsible". That is a plausible, a far-reaching and a much-used argument.
  I have but a few minutes left and I should like to deal with one or two of the irrelevancies in the code. Where in any recorded economic history has price control ever had any serious effect on hyperinflation except to restrict supply and aggravate the whole process? On page 34, paragraph 92 of the Code there is an excellent example of the utterly impractical attempt to control the non-interest charges of banks, finance houses and similar enterprises. What could be more far-ranging? How many thousands of different prices and charges are there which are employed by the financial enterprises other than banks and finance houses and what if any serious practical signs are there of controlling them?
  There is another example in paragraph 101. It deals with vehicle sales and servicing. Here the charges for repair, maintenance and servicing of vehicles are subject to the provisions. Is there any serious possibility of charges of this kind being effectively covered by the most well-staffed, well-informed far-reaching car repair Gestapo imaginable? The answer is that there is none, because the man who controls car repairs and who decides what goes into the work he does is the mechanic. The only charge which can be controlled is the charge that he makes for his labour. Virtually all the other great complex of charges for jobs both complicated and simple are charges which will not show up.
  If any hon. Member here, faced with what he regarded as an excessive charge for a repair, went to a garage and asked for an explanation, the man at the garage would probably attempt to explain, but the simple fact is that the next time the hon. Member concerned took his car there for servicing it would be done in a way of which he would not approve. That proves the futility of this type of economic illusion.
  6.27 p.m.
  Mrs. Sally Oppenheim: We have made it abundantly clear during the debate on the consultative document
  1180
  that we accept that there is an urgent need to redraft the Price Code. We have expressed our fears that what is proposed will be too little and too late, that the Secretary of State has come to recognise now what she might have recognised sooner—that a healthy and prosperous business sector is advantageous to consumers.
  Perhaps it was not so much that the right hon. Lady failed to recognise this as that she succumbed to the political priorities of a six months' election campaign waged by her Government throughout the last Parliament. It would be doing less than justice to the right hon. Lady's considerable perception and that of the Chancellor to imply that they did not entirely accept, long before the election, the inevitability of having to revise the Price Code. Yet they both managed, as my hon. Friend the Member for Aylesbury (Mr. Raison) pointed out, to get through the election campaign without anything more than a glancing reference to this. They did not spell out in detail that within weeks of an election they would be putting proposals before the House to relax the code to allow higher prices, and significantly higher prices in the nationalised industries, with the consequential effect of a sudden leap in the cost of living.
  Earlier, the right hon. Lady denied the significance of her remarks that there was no evidence of price increases being stored up in the pipeline. However, on the BBC in an interview on 20th September she said:
  "All one can say about inflation is that it is beginning to move down wind."
  She said that at a time when it was clear from business surveys in the Financial Times and elsewhere that costs and prices would continue to rise. This morning's Financial Times Business Review said:
  "Bigger price rises to come. The underlying trend for costs and prices continues to deteriorate. All three sectors were more pessimistic than in July."
  That indicates a certain degree of pessimism in July, which I am sure the right hon. Lady would have known about.
  These bland assurances were all part of the syrupy stream of assurances that came from the Labour Party during the election that things were getting better,

  1181
  largely due to six months of Labour Government, in which the bandying about of figures about the rate of increase in inflation figured very large. The famous figure of 8·4 per cent. which was misleading, contrived, irrelevant and thoroughly dishonest, played a prominent part.
  In the debate on the Budget on 13th November, when she was discussing the revision to the Price Code in the consultative document, the right hon. Lady was asked what was the current rate of inflation. She replied that on the basis of the past three months it was 8·75 per cent. adding triumphantly,
  "much below the rate in the last year in which the Conservative Party was in office."— [OFFICIAL REPORT, 13th November 1974; Vol. 881, c. 447.]
  I ask the House, is it relevant to compare an annual rate projected on an entirely unrepresentative three-months period with an actual 12-months period? Was the right hon. Lady implying that in the first 12 months of the present Labour Government, if they survive so long, the rate of inflation will be lower than during the last 12 months. of Conservative Government, when it was 13·2 per cent.? If not, her reference was highly irrelevant.
  I hope that the right hon. Lady will not think it presumptuous of me if I tell her that she is regarded as a politician of great integrity. She is widely admired and regarded on both sides of the House, and outside the House, and quite rightly so, but she does less than justice to herself by bandying about statistics in this silly way. I hope that we shall have no more of it.
  I entirely appreciate the magnitude of the task that must have confronted the right hon. Lady in trying to redraft the existing Price Code, and in attempting to reconcile what are possibly, in the present economic climate, the conflicting objectives of protecting consumers and safeguarding jobs and protecting investment. The great stumbling block to the achievement of those entirely admirable objectives is that there is no effective wage restraint. A price code, redrafted or otherwise, which is deprived of its natural partner—a pay code, or some form of effective pay restraint—is a blunt weapon to wave in the face of the kind of inflation we have now. The two are as comple-
  1182
  mentary as bricks and mortar. To try to operate a price code without effective pay restraint is like locking the front door to keep burglars out while leaving the bathroom window wide open.
  The hon. Member for Nuneaton (Mr. Huckfield) was passionate in his defence of the social contract. I entirely accept that many Labour Members attach some spiritual, almost mystical, significance to the social contract, and of course it is true that, equally, there is little evidence of any earthly significance to it. The figures quoted by my hon. Friend the Member for Aylesbury bear witness to that. On top of that, it is said that of 30 major settlements between July and October, 27 have broken the only known criteria of the social contract.
  On the point that the hon. Gentleman specifically raised about the composition of wage inflation, he might like to know that the Department of Employment Gazette, reviewed in The Times on 27th November, made the point very cogently that threshold pay is not a major factor in recent wage inflation.
  Mr. Leslie Huckfield: I put this question to the hon. Lady, as I would to all the people who appeared on "The World This Weekend", "P.M.", and "Today". and who have written in The Times: with all the caustic, carping comments they keep making about the social contract, what is the Conservative Party's alternative?
  Mrs. Oppenheim: The hon. Gentleman can read in our election manifesto what the Conservative Party's alternative is. The manifesto made it clear that we would attempt to have a voluntary pay code and that if we did not succeed it would have to be backed up by statute law or, alternatively and regrettably, we should have to impose the very economic sanctions that the Prime Minister proposed at the Labour Party conference last week. He must have taken them from our manifesto. Conservative spokesmen do not have to carp about the social contract, because it stands condemned by itself. It is certainly high noon in terms of judgment day on the social contract. The results over the past six months prove that. And I am afraid that the effect of the record rate of wage costs on profitability has made it more urgent than ever to revise the existing Price Code.

  1183
  Therefore, we are discussing the consultative document against a sombre background of economic recession and accelerating inflation, which is whittling away living standards at a frightening rate. As a result, by the end of this winter many people will have to do without things which they took for granted only last winter.
  It is impossible to over-emphasis the effect of the present rate of inflation or the anxiety and hardship that it creates among many people. It is no longer confined to the social priority group, but pervades the entire middle income group as well. It is to these people, worried to death as they are about the cost of living—as well they might be—that the right hon. Lady offers a price code crippled in its effectiveness by the absence of any effective pay restraint.
  I return to the proposals in the document. The point has been made by a number of my hon. Friends that the proposed revision to the code will make it considerably less rigorous than was the original code, but that the original code was introduced in the context of a pay code and very different economic circumstances. What we have before us in the White Paper is a tangled nightmare of bureaucracy. I accept that the right hon. Lady has tried to introduce a maximum amount of flexibility. Some of my hon. Friends have called for more. But her flexibility has been achieved at the cost of immense complexity. It has been represented to me by some firms that they will have to employ a full-time Price Code consultant to help them deploy reliefs as advantageously as possible.
  A number of my hon. Friends have pointed out that the reliefs and safeguards in the document are inadequate and discriminatory. My hon. Friend the Member for Hove (Mr. Sainsbury), who has specialised expertise, has pointed out in particular the discriminatory effect of the 17½ per cent. investment relief on the distributive trades. We are grateful that the right hon. Lady has given some consideration to the fact that this needs to be amended. The new investment relief will be of far less use to the distributive trades, which is a matter for considerable concern at a time when profit margins on turnover are so eroded, and when a company as internationally
  1184
  admired as Marks & Spencer annonunced in its recent annual report that although turnover had risen by over 20 per cent. profits had substantially declined.
  A number of my hon. Friends have complained, as has the CBI, that the productivity deduction has not been entirely phased out. I should like the Under-Secretary to tell the House what proportion of all the companies which are subject to the restrictions of the Price Code will fall into each of the new productivity deduction categories. The House should be given this information so that we can judge the inflationary effect of what the General Secretary of the TUC described on television a couple of weeks ago as "variations in the social contract".
  When we come to the reliefs and safeguards, which have been the subject of a good deal of discussion in the debate by my hon. Friends and the hon. Member for Newcastle-upon-Tyne, East (Mr. Thomas), we see that, because they provide new alternatives in some respects, they tend to overlap, so that the overall effect of the reliefs and safeguards is much less than they would at first appear to be.
  I should like to return to a point made by my hon. Friend the Member for Aylesbury about the new raised level for the saefguard in paragraph 68, in that the terms of reference are net assets. This is not a new definition. But net assets are very different from the total capital employed by a company, which, at a time of such inflation, would have provided a fairer basis on which to calculate the total percentage return in establishing new reference levels.
  Equally, in paragraph 69 there is the safeguard level of 2 per cent. on turnover, which is derisory in any industry but the high-turnover industries. In the first case, far from encouraging more hard work to be realised in profits, some companies, because of the relatively small sum of money which could be earned on the total capital employed, would be better off to liquidate their assets, put them on deposit in the bank and not employ a single person. In the second case, 2 per cent. on turnover for a capital intensive engineering company would be the equivalent of bankruptcy.

  1185
  I accept that I have dealt with lower level limits. They are safeguards, and they are the bottom limits. However, I am sure that the right hon. Lady will acknowledge that the longer the Price Code exists the more it becomes institutionalised in the profit structure of companies, until there is nothing left but the structure in the code. It seems that she recognised that point in the remarks that she made on the debate on the Budget, as did her right hon. Friend the Chancellor of the Exchequer. So the return at which reference levels have been set is not adequate in terms of any increased liquidity for the companies, or as safeguards themselves.
  It has been said that the restriction in cash flow, even after the revision of the code, will be so great, as a result of the combination of circumstances of inflation, wage costs and the operation of the code, that standards will not be maintained let alone any capacity released for additional investment. It should be noted in this context, with regard to the relief that may have been given in the Budget through FFI, that most companies have already reached their overdraft limits. Therefore, that may be of no help. Indeed, it has been represented to us—this is borne out in the Financial Times survey this morning—that the position of business and industry is grave.
  We do not want the Price Code abolished, but the right hon. Lady may be forced to remove it within six months. Even that may be too late to prevent a number of bankruptcies not only among small firms but among firms which are household names. The House is entitled to know that that is the economic background against which we are discussing the consultative document.
  It would be churlish not to acknowledge that there are points in the proposed consultative document which are welcome and imaginative, I welcome particularly the new entitlement in paragraph 34(ii)(a) to gross profit of 2 per cent. on the total cost per unit of output of individual products and product ranges. That will make the application of the code simpler in the case of by no means all but of some companies. Further, I hope that it will make communications with some consumers a little easier, where applicable.
  Like the right hon. Lady, I never felt it was helpful to reply to housewives
  1186
  anxious about what seemed to be a sudden and unexplained leap in the price of a carrycot or a packet of lentils that all was well because the overall gross profit margin had not exceeded the permitted level. I hope that in some cases more specific information can be provided to consumers as a result of the new concession.
  There still remain a number of matters which I hope the Under-Secretary of State for Prices and Consumer Protection will clarify. For example, Category III firms now have to register for the first time. Does that mean that there will be large increases in the staff employed by the Price Commission? What will be the cost of the staff? I am sure that the hon. Gentleman will wish to clarify the points that have been made regarding the inflationary effect on the retail price index of the code.
  There seem to be a number of contrived and confusing arguments about the code's inflationary effect. The right hon. Lady has said that its revision will release some £800 million worth of liquidity in respect of the private sector. But in a BBC interview on the night of the Budget the right hon. Lady said:
  "the code now makes much less distinction between private or public so what we've given back, we've given back to the public sector as well as the private sector … the net effect of this is about £800 million, or in other words … a penny in the pound on the retail price index."
  The right hon. Lady seemed to indicate that she was including the nationalised industry sector in the £800 million, which I understand now is not the case. Calculations were made on the basis of about 1½ per cent. by the right hon. Lady in the debate on 13th November. Is that 1 per cent. plus 1½ per cent? I am sure that the Under-Secretary of State will be pleased to clarify that point.
  Reference has been made to pensioners and the cost of small units of energy. Obviously pensioners are in the worst position. Those who are council tenants cannot opt for the most economic form of energy. Very often they have to subsidise council property with their own additional forms of heating which are costly.
  Finally, overshadowing the debate have been threats, referred to by my hon.

  1187
  Friend the Member for Aylesbury, which were made by the Prime Minister and the right hon. Lady, namely, that penalties will be imposed upon industry if it gives in to excessive wage claims. I am glad that to some extent the right hon. Lady has withdrawn those threats. However, I am afraid that her withdrawal was of a highly qualified nature. No doubt she is likely to argue that there is no point in giving increased liquidity to industry if the money will be used to subsidise excessive pay claims rather than investment. That is a simplistic argument that assumes that employers have sole responsibility for giving excessive pay claims. It seems to imply that they go around tapping trade union leaders on the shoulder and begging them to accept excessive pay increases.
  That is monstrously unfair, and a highly dangerous concept. It would mean that a company faced with an excessive pay claim from a militant trade union would have the choice of going bankrupt either as a result of a long strike or as a result of having to absorb greatly increased costs. That is not a recipe for a three-day week, it is a recipe for a no-day week! The House and the country should know that that is what the present Labour Government propose. Worst of all it is a fundamental example of the unfair and biased attitude of the Government in making a whipping boy of business and industry in imposing statutory sanctions and penalties on industry.
  The Government appear to assume that they are not to be trusted, while the other side of industry has no responsibility whatever, and is allowed to go scot free.
  I submit that this attitude is no way to safeguard jobs, to encourage investment and to increase prosperity in business and industry essential to the provision of the goods and services that consumers want and need. And in the end, indeed, in the near future, it will be the consumers who will have to pay the price in terms of extra inflation and in a reduction of choice as a result of this Government's complacency over the past six months about their futile social contract.
  6.47 p.m.
  The Under-Secretary of State for Prices and Consumer Protection (Mr. Robert Maclennan): This has been a valuable debate. It comes at the end of an intensive period of consultation with industry on the proposals contained in the consultative document on the revision of the Price Code. The shortness of time stems very much from the Government's view, which I believe industry fully shares, that it was necessary to effect the changes as quickly as possible.
  In this short debate hon. Members from both sides of the House have made a number of specific suggestions. Some of the suggestions had already been made to us by industry in the consultations that took place for amendment of the code. I give the House the fullest assurance that within the scope of the overall Budget judgment, of which the Price Code changes form part, the Government will consider carefully all the points that right hon. and hon. Members have made before bringing forward the code.
  Before I turn to some of the broader issues I shall try to answer a number of questions which have been raised about particular points contained in our proposals. I shall try to deal with as many as possible, but I recognise that in the time available it may be difficult to cover them all. The House will have a further opportunity to probe during the debate on the order embodying the amendment to the code.
  The hon. Member for Gloucester (Mrs. Oppenheim) spoke in combative tones which reflected more the atmosphere of six weeks ago than the considered discussion which we have been having since the General Election. She made one or two accusations which deserve to be answered. She said that nothing had been said about this exercise before the election took place. We had not only made it clear to the public that we were proposing to relax the provisions of the Price Code—
  Mrs. Sally Oppenheim Mrs. Sally Oppenheim rose—
  Mr. Maclennan: The hon. Lady made the point and I must answer it. I remind her and other hon. Members, even though they need no reminding, that the proposal to review the Price Code fundamentally was announced as early as July and that consultations began long before the election.
  Mrs. Sally Oppenheim: I did not say that no reference had taken place. I said that there had been nothing more than a glancing reference.
  Mr. Maclennan: That is simply wrong. We have had a number of major consultations with industry, of which the hon. Lady must be aware. Furthermore, the hon. Lady made accusations about the impact of the proposed changes in the nationalised industry subsidies not having been made clear before the General Election. She is again wholly wrong. In his April Budget my right hon. Friend the Chancellor of the Exchequer spelt out in clear terms the need to change the situation we had inherited from our Conservative predecessors.
  Mrs. Shirley Williams: Quite true.
  Mr. Maclennan: The hon. Lady also spoke about my right hon. Friend the Secretary of State being misleading about the nature of price increases in the pipeline in the period before the General Election. I remind her that on 20th September my right hon. Friend quoted from the August quarterly report of the Price Commission, which had drawn attention to the fact that the rate of price increases within the Commission's direct control had fallen significantly since the turn of the year.
  The hon. Lady also accused my right hon. Friend the Chancellor of the Exchequer of not having made the position clear during the General Election. On the contrary, he spoke twice on the subject—once at a Press conference and once in a party political broadcast. On both occasions my right hon. Friend made it plain that the level of inflation would depend significantly on income settlements which were under discussion. The hon. Member for Gloucester, in her attempts to continue the General Election campaign, has been most misleading and extremely unfair to the Government.
  I turn from these more partisan questions to some of the points of substance raised by the hon. Lady. I hope that I shall give her some pleasure at least in response to her question about fork-lift trucks. We understand that the investment relief will cover all forms of plant and machinery except road vehicles. It will be for the Price Commission to work out the detailed refinements and definiti-tions in operating the relief, but I expect
  1190
  that, by and large, fork-lift trucks are not road vehicles and will, therefore, be included within the relief.
  My hon. Friend the Member for New-castle-upon-Tyne, East (Mr. Thomas) made an interesting contribution. I understand the point he made about firms which may find that the nature of their business has changed significantly since the period in which their gross margin ceiling was assessed. It is difficult to avoid such a problem in any system of control which measures the present profits against the firm's own performance in some past period. I have had similar representations from parts of the Cooperative movement and other organisations representing retailers, and I am considering them most carefully, although I cannot make any promises now.
  The hon. Member for Pudsey (Mr. Shaw) raised the question of the possibility of instituting an appeals procedure from decisions of the Price Commission. We are stuck with the counter-inflation legislation of the Conservative Government and there is no scope within it for an appeals procedure. That legislation comes to an end in March 1976, and if there is further legislation we can look at this point again.
  The hon. Member, speaking of paragraph 34, took issue on the question of the substitution of the product test for the enterprise test. It is true that one test would suit one firm and the other test would suit another. If industry had to choose a single test, however, I think it is clear that it would opt for the product-based safeguard rather than the enterprise-based safeguard.
  Mr. Giles Shaw: Does not the hon. Gentleman accept that, in seeking this modest change, one is merely pursuing the principle of flexibility within the code, a flexibility which the hon. Member for Newcastle-upon-Tyne, East (Mr. Thomas) also urged?
  Mr. Maclennan: It is true that we need the maximum flexibility possible, but when we provide these safeguards it is essential that firms should know where they stand. We should not allow any element of confusion to creep in.
  My hon. Friend the Member for Nun-eaton (Mr. Huckfield) raised the question of multinational corporations. The code

  1191
  gives the Price Commission considerable flexibility to disallow transfer prices where it is considered that these are artificial, and to substitute its estimate of fair arm's-length prices. The power is contained in paragraph 37. During our consultations my right hon. Friend has been urged by some firms to water down this provision, but I promise my hon. Friend the Member for Nuneaton that it is extremely unlikely that my right hon. Friend will see her way to doing so.
  My hon. Friend made the interesting suggestion that we should distinguish in our treatment between firms in Categories I and II, relating the treatment to their co-operation in a planning agreement. This is an interesting suggestion, and it will doubtless be considered with industry as we move towards legislation covering planning agreements. My hon. Friend recognises that the Price Code has to deal with the present situation and that we are bound to operate with the instrument we have to hand.
  The hon. Member for Aylesbury (Mr. Raison) and the hon. Member for Colne Valley (Mr. Wainwright) spoke of the desirability of recognising within the Price Code amendments new accounting procedures. The hon. Member for Colne Valley in particular was critical of what he described as the consistency in accounting procedures. But predictability is one of the most important aspects of the code as far as industry is concerned. It wants to know where it stands. If we adopted a whole range of different accounting techniques it would greatly confuse the issue.
  The general question of inflation accounting raises wide issues. The CBI has pressed us for an allowance to be included for stock appreciation in net profit margin by analogy with the tax relief given in the Budget. But it is more difficult to allow price increases "on account" in the interim period than to allow deferment of tax. The Government are considering this point, but we think that it will be necessary to await the outcome of the Sandilands Committee on inflation accounting.
  The hon. Member for Aylesbury and the hon. Member for Gloucester both criticised provisions in paragraphs 68 and 69 for relief for low profits. Industry has
  1192
  criticised our proposals to improve this relief. We propose to raise the safeguard levels available to everybody, whether manufacturers, providers of services or distributors, from 8 per cent. to 10 per cent. return on capital, and from 1½ per cent. to 2 per cent. margin on turnover. I emphasise that this is a basic safeguard. It is a minimum. It is not a measure of what average firms would like to earn or should earn. It is a safety net and not a high wire. Below these levels the Price Code does not apply, and it is not appropriate, therefore, that these levels should be set above the actual returns of a large segment of industry. Hon. Members of the Opposition who have complained that these levels are too low would do well to remember that they are twice the levels which were set by the Conservative administration in April 1973.
  One matter not raised in the debate but which was raised on an earlier occasion in the House is the extension that we have made to the list of allowable costs. We see this as a useful change in the regime. The cost control is based on the principle that certain costs—for example, advertising and promotion—are non-allowable. Increases in such costs cannot be invoked to justify increasing prices. It is clear from the White Paper that the Government are prepared to give sympathetic consideration to sensible suggestions for extending the list of allowable costs. We propose to add a number of items: royalties, fees for professional services and the cost of a wide range of bought-in services. This will help industries such as publishing and the newspaper industry, which have special problems and have made representations to us. Further suggestions for additions to the list are being considered on their merits, but I think that on balance we have got it just about right.
  I now turn to a point which figured largely in a number of speeches today, including that of the hon. Member for Colne Valley, my hon. Friend the Member for Newcastle-upon-Tyne, East, and the hon. Member for Hove (Mr. Sainsbury). It related to the representations that have been made to us by the Retail Consortium, among others, that the safeguard of net profit margins in the Price Code would have an anomalous effect in relation to distributors whose net

  1193
  profits rise about the 75 per cent. safety net whilst gross profits are over 90 per cent. of reference levels.
  The consortium has suggested that a company allowed to go up to its full gross profits reference level, disregarding the 10 per cent. reduction, in order to achieve the safety net level, would, on going above 75 per cent., need immediately to apply the 10 per cent. reduction and so revert to a gross profit reference level of 90 per cent. The consortium accordingly suggested that the permitted gross and net profits as a proportion of reference levels should vary inversely between the upper and the safety net levels in accordance with a sliding scale.
  I should explain that there has been some misunderstanding of the way in which the Price Commission operates the code in relation to distributors whose net profits rise above the 75 per cent. safety net at a time when their gross profits are between 90 and 100 per cent. of their reference levels. Companies in these circumstances would not automatically be asked to reduce their gross profits to 90 per cent. of their reference level. The commission would instead seek from the company an undertaking that profits would be reduced—preferably by reduced prices—by an amount representing the difference between their achieved net profit and the 75 per cent. level. To take an example, if a retailer had net and gross profits of 75·8 per cent. and 95·8 per cent. of the respective reference levels, he would be asked so to arrange his affairs that 0·8 per cent. of net profit would be eliminated. In this way he would finish effectively with 75 per cent. net and 95 per cent. gross. This is, of course, very much more favourable to the company than the consortium had feared. Of course, he would not need to reduce profits in this way if he were able to keep his gross margin below 90 per cent. of reference level.
  So the so-called problem of the "snakes and ladders" is not something which would require the introduction of a sliding scale along the lines suggested by the consortium. I recognise, however, that a suitably devised sliding scale could have other merits. It could, for example, provide an incentive in terms of increased net return for efficient operations reflected in lower gross margins. The proposal is
  1194
  not without its difficulties, since it would effectively require each company's reference levels to be recalculated. We are nevertheless giving it very careful consideration in the light of the representations which the Retail Consortium has made, in order to see whether there is anything that could usefully be done to provide an incentive to companies operating within lower gross margins.
  I turn briefly to the anticipated effect of the proposed changes to the code of prices. My hon. Friend the Member for Newcastle-upon-Tyne, East, the hon. Member for Pudsey and my hon. Friend the Member for Nuneaton spoke with some concern about the possible impact of the new treatment of the nationalised industries under the code. In particular, I think this anxiety may stem from some misunderstanding of the purpose of the code proposals. It is intended to put in place of the existing deficit containment provisions of the code new provisions to enable the nationalised industries to raise prices sufficiently to make a modest surplus, defined either as 2 per cent. on turnover or 10 per cent. on net assets. This is seen as a move towards treating the nationalised industries equivalently to the private sector. It does not, however, imply anything about the timing of the moves towards the Government's objective of phasing out the subsidies to the nationalised industries. Equally, under the new provisions Ministers will retain the power they have at present to restrict price increases to those justified by allowable costs.
  As my right hon. Friend the Secretary of State said, the Government are further examining what might be done to minimise the impact of nationalised industry prices on the small or poor users. My hon. Friend the Member for Newcastle-upon-Tyne, East forcefully argued the case for restructured tariffs, and his argument will be given very careful consideration.
  I have also been asked about the effect on prices of the changes in other parts of the code, particularly by the hon. Member for Gloucester. This matter was dealt with by my right hon. Friend the Chancellor of the Exchequer in his Budget Statement. The hon. Lady asked me to explain what he has said. It is a somewhat complicated matter.

  1195
  I start with the figure of 1½ per cent. increase on the retail price index. The Chancellor was saying that if one starts from the hypothesis that the stage 3 Price Code was to continue unamended, the retail price index would be perhaps 1½ per cent. higher by the middle of 1975 than we now estimate it will be if the code is amended on the lines proposed in the White Paper. This is a purely hypothetical case. A better comparison would start not from the present Price Code but from the state of company profits as they stand today.
  It is on this basis that my right hon. Friend the Chancellor of the Exchequer has judged that it will be necessary to restore £800 million to company profits through changes in the Price Code. The various changes we propose are calculated to produce this result. The effect on retail prices by the middle of 1975 will be something under 1 per cent. on the retail price index, or an extra 1p in the pound. I am obviously not saying that prices next year will increase by only 1p in the pound. I wish that I could say that. What I am saying is that the additional element, to which I have drawn attention, is that which can be directly attributed to changes in the Price Code.
  The hon. Member for Gloucester also asked about the position of Category III firms. We expect a further improvement in administering the controls by the Price Commission as a result of the main change, to which she referred. We are blocking a gap here which was left by the previous Government's structure of control. The Price Code applies to all firms, whatever their size, and all are expected to be guided by it. For the smallest firms there are no further requirements. For the larger firms—Category III—there is an obligation to keep records but not to make regular reports to the Commission.
  The Price Commission has pointed out in a recent report that it is hampered by the fact that it has no means of knowing which firms these are or where they are. We hope that the change will be very useful.
  My right hon. Friend the Secretary of State made it clear today that her proposed amending of the Price Code was
  1196
  done with the primary object of safeguarding investment and jobs. It has been said that, notwithstanding the Government's proposals in the Budget and the code, there is anxiety about the level of investment in the United Kingdom today. There is anxiety about investment not only in the United Kingdom but in other advanced industrial countries, and the events of the past year have caused uncertainties for the future of world trade on which we are so dependent. Other industrial countries are among our best customers for exports, and, naturally, this affects the outlook here.
  What is certain is that the action which the Government have taken to assist investment means undoubtedly that investment and, therefore, employment will both be higher than they would have been had the Government not acted.
  It may be said that the Government have not gone far enough, and a number of Opposition Members have said as much. But these are very difficult matters of judgment. There must be a limit to the assistance to industry which can be afforded by rising prices, and inflation itself poses a substantial threat to employment.
  My right hon. Friend has said already that she does not want there to be any misconceptions about the date from which the investment relief operates. I stress this. Because large companies have to wait 56 days before they can take their relief, we do not want to hold up investment for this period. Therefore, firms will be able to include in their relief year investment undertaken from about now.
  To those who suggest that the Government's measures are inadequate, I say that the total package of the Chancellor of the Exchequer, taking account of the Price Code, the tax deferment and the finance to be provided by Finance for Industry, adds up to about £1½5 billion for industry and commerce. This is substantial help, by any standards.
  In a speech of great thoughtfulness and importance my hon. Friend the Member for Nuneaton took the view, which a number of people take, that the Government have been deceived by industrialists who claim that their liquidity position is critical. There are differences about this, as there are about the effect of the code proposals. The latest Financial Times

  1197
  Monthly Survey of Business Opinion makes it clear that some companies say that the changes proposed in the Budget and the code will not help, and others see little benefit.
  There are a number of indicators which the Government must look at carefully—
  Mrs. Elaine Kellett-Bowman: On a point of order, Mr. Deputy Speaker. Is it in order for the hon. Gentleman to take up so much of the time allocated to the debate on the National Health Service?
  Mr. Maclennan: I am going a little beyond the time at which it was agreed the debate should end because I started my speech later than was expected. This was to allow two Opposition Members to intervene at an earlier stage.
  Mr. Leslie Huckfield: The hon. Lady should have been here.
  Mr. Maclennan: We have used a combination of remedies to deal with the problems that we see. We take the view that not all the finance needed for industry can be provided by demolishing the Price Code. Even more price rises would only fuel the inflation which lies at the back of many of industry's problems.
  The action of my right hon. Friend the Chancellor of the Exchequer to defer some tax on the element of stock appreciation in profits is intended to provide immediate relief for companies this winter. His proposals to expand the medium-term lending finance for industry provide a facility which industry has not enjoyed to date, and there is a limit to what industry is ready or able to borrow.
  My right hon. Friend will consider all the comments that have been made in this debate, but when hon. Members see the new Price Code Order I hope that they will consider it carefully as a genuine attempt to reach the right balance between encouraging new investment and assuring the public that profits are not inflated and that prices are not increased without justification.
  Question put and agreed to.
  Resolved.
  That this House takes note of the consultative document on the Review of the Price Code (Command Paper No. 5779).

  NATIONAL HEALTH SERVICE
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Pavitt.]
  7.15 p.m.
  Sir Geoffrey Howe: The Opposition have thought it right to give the House this opportunity to debate the most important subject of the National Health Service and to do so because it is a subject of grave and growing concern for a number of reasons. Some but by no means all of the concern arises from the attitude and actions of this Government. On those matters, I shall be critical. It is right to say, however, that other areas of concern arise from the institutional shortcomings and failures of the way in which the service is run. It would be wrong to suggest that these are the exclusive responsibility of this Government. But it is right, even so, to press this Government about them because they have now the responsibility for putting them right so far as they can.
  The third group of problems arises from the present economic position of the country, from the condition of inflation and from the lack of economic expansion, both of which together raise fundamental questions about the volume of resources available for the Health Service and about the way in which we raise and deploy those resources.
  The present position of the service and its resources is probably most fairly summarised in the recent report produced by the Royal Colleges, reported in the British Medical Journal of 26th October. I refer to it en passant only to summarise the way in which I approach the subject.
  The Royal Colleges say that it would be wrong to conclude that the service is nearing disintegration. They point out that the service has provided, since its foundation, improving standards of service for the community but that advances in techniques and scientific progress have led to an almost indefinite expansion in demand; and that rising standards have themselves led to rising expectations, so that the service has always appeared to be chronically under-financed and probably, because the factors will always be at work, always will appear under-financed.
  There has been a growing realisation that the problem of matching resources

  1199
  to demand is theoretically insoluble and as if that was not demoralising enough that continuing inflation makes matters for those working in the service a great deal worse.
  Against that background, I hope that the Secretary of State will not seek to avoid responsibility for those matters which can fairly be laid at her door by trying to transfer all the blame for the present problems of the service to the previous Government. In previous debates, the right hon. Lady has had three more or less regular alibis which have never been convincing because they refer to only part of a continuing problem. And they become less and less relevant and more and more unattractive.
  In the past the Secretary of State has argued that the problems of the service to a large extent are the fault of reorganisation. That is not so. In any event the necessity for substantial change in the organisation of the service was recognised by her predecessor but one, Richard Crossman. A substantial change was bound to come. When it came, it was bound to be a burden for all those working in the service. The right attitude to the consequences of reorganisation should be that of the Royal Colleges when they say that the structure of the service has been reorganised with the aim of making more effective use of existing resources and that the Royal Colleges and faculties will co-operate in an effort to achieve this objective. That should be the objective of everyone concerned with the service.
  I hope that the Government recognise the unwisdom of the further disturbance involved in carrying through their proposals for the so-called democratisation of the service. It would be wrong to do that at this time, because the area health authorities would become too unwieldy to perform their management jobs. Secondly, it would be wrong to draw the community health councils, designed to be independent critics and champions of the consumer, into an unwieldy coalition with the area health authorities, involving them in a joint responsibility. It would be wrong, thirdly, because there is a fundamental misconception in believing that strengthening local authority membership is relevant; for that ignores the extent to which the service is financed
  1200
  largely from central financial resources, so that democratic control should to a large extent be exercised in this House.
  The final reason why I urge the right hon. Lady not to press ahead with these changes now is that the prospect of any further substantial change may threaten a serious organisational breakdown. Indeed, if the Secretary of State is right in her original diagnosis, which I do not accept, that some of the problems spring from reorganisation, that is all the more reason for resisting the temptation towards further change at this time— change that is not directed to remedying whatever defects may eventually appear as the new organisation settles down. It is all the more true if this evening's reports of threatened industrial action by hospital administrators should turn out to be right. I hope that the Secretary of State will tell us something about the substance of that matter, because we have had only the briefest indications on the evening news bulletins.
  The second of the Secretary of State's alibis is that the problems of the service are caused as a result of the curtailments of expenditure introduced in December 1973. Like other curtailments in public expenditure introduced by successive Governments over the years, they created difficulties. They underline the case, which has so far eluded all Governments in similar circumstances, for seeking a more sensitive method of reacting to the recurrent need to curb public expenditure programmes. But the right hon. Lady would be wrong to blame those for the much larger problems now facing the service, if only because she has not restored, except to a very limited extent, the effects of those reductions in public expenditure.
  I understand that the only restoration undertaken by the Secretary of State was the increase of £25 million for capital expenditure for the social and health services announced by the Chancellor of the Exchequer. But there has been no restoration of any curtailment of resources relating to revenue expenditure.
  The extra money for which the Secretary of State has taken credit has come in only two ways: first, that which is necessary to meet those pay awards beyond stage 3 that have been made to the nurses, the para-medicals and some

  1201
  other groups, although not to the doctors and dentists, to whom I shall turn later; secondly, those increases that were simply designed to take account of the impact of inflation on the service.
  The Minister of State, in our debate on 1st November, at col. 641, recapitulated and enlarged on them slightly. The hon. Gentleman pointed out that £40 million had been made available during July and that an additional £14½ million was made available as announced in his speech there and then.
  It is important to understand that those additional resources were made available not in any sense to restore the cuts made last December but for the limited purpose described in the Press release of 10th July 1974:
  "The additional money now provided by the Government compensates health authorities, so that reductions need not be made in the level of services to patients in order to accommodate these recent increases in prices … further additional allocations will be made as necessary in the light of experience of further price increases."
  It is only in those two ways that the Government have made any additional resources available and only to a very limited extent attempted to restore the cuts made last December.
  Looking at the picture in the longer view, the fact is that throughout the period of the last Government there had been growing provision in real terms for capital and revenue needs of the health service and the personal social services. The position was well set out by my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph), then Secretary of State for Social Services, on 28th January 1974 when he said:
  "Over the last three years we have spent, on average, in real terms, 30 per cent. more each year than the average of Labour's last three years, and from that high rate of increased expenditure we now come down to a disappointingly lower rate: one which is lower than we would wish but still higher than Labour's last spending figure."—[OFFICIAL REPORT, 28th January 1974; Vol. 868, c. 115]
  That is a measure of the extent to which resources had been increasing.
  The same is true of revenue expenditure, which was running for 1974–75 at 15 per cent. more in real terms than in 1970–71.
  The Minister of State, in the debate on 1st November, dealt with the personal social services. He said:
  1202
  "I need hardly remind the House how rapid has been the expansion of expenditure in real terms in social services over the past few years. In real terms, the growth was 11 per cent. in 1971–72, was 17 per cent. from 1971–72 to 1972–73, and is estimated at 15 per cent. from 1972–73 to 1973–74."—[OFFICIAL REPORT, 1st November, 1974; Vol. 880, c. 643.]
  Therefore, throughout the period of the last Government until we have come up against the realities of the present economic situation, there had been a continuing expansion in real resources going into the service.
  The reality today, as the Secretary of State was candid enough to tell the Directors of Social Services in Coventry on 6th November, is as follows:
  "I will tell you frankly that you are not going to have it so good next year…. You won't be surprised if there has to be some check on this considerable growth."
  That is a candid statement of the position. It is a realistic recognition of the great difficulties facing our economy. I should like the Secretary of State to spell out the scale and implication of what she there said and, if possible, how she reconciles that statement with the reported statement of the Prime Minister to the British Medical Association, that the £111 million cuts of last December will be restored "as soon as is practicable".
  The third argument advanced by the Secretary of State is that the problems of the service are due to the frustration of the last Government's incomes policy. That, again, will not wash. It is idle to deny that any attempt to contain the growth of incomes in a public sector service is bound to produce some difficulties and frustration. But it is equally idle to deny that any Government can escape from that problem in a publicly financed service of this kind during periods of inflation. It is idle to deny that this Government are now creating, prolonging and magnifying similar difficulties for themselves. Some of them are part of what seems to be the pattern of the service and its inadequate and often frustrating machinery for negotiation. I do not blame the Government for this. It is a feature that both sides have blamed each other for at different stages. However, I should like to refer to certain examples which are causing particular concern.
  I begin with the position of the orthoptic profession, a small group of

  1203
  which we have not heard a great deal in our proceedings in this House. These people, who work in small units, have had their grading structure under review since 1971. Like many such groups, they find it almost impossible to secure answers and commitments in negotiations with the Department with which they are trying to deal.
  I raised this subject in correspondence with the Secretary of State in mid-July and, after a delay of three months, obtained the somewhat Delphic response to the particular questions that I put as follows:
  "The negotiations to which the Society refer took place not with this Department but within a sub-committee of the Professional and Technical Whitley Council 'A' with the Society represented on the staff side. None the less, I understand that there was no lack of will on either side to find alternative criteria on which to base a grading structure for orthop-tists, simply a failure to find criteria which adequately matched the way in which their service is actually organised."
  That is a fairly unsubstantial response to a genuine and continuing grievance.
  A similar situation arises with the speech therapists, about whom there is particular concern at the moment, because, despite the recommendations of the Quirk Report and the Department's advice on the effect of reorganisation on the speech therapy service, no appointments have yet been made of area speech therapists, who form part of the intended structure. I should like to know when those appointments will be made and how far the Secretary of State regards a similar response to queries on behalf of that profession as likely to induce a great feeling of confidence that advance will be made.
  In her letter to the Chairman of the College of Speech Therapists, of which the right hon. Lady sent me a copy, of 26th November she said:
  "Whilst it may not be true to say that all pay developments in the meantime are, as it were, 'sub judice', the question whether any interim moves are possible … must be left to the judgment of the Whitley Council. … I do not think it is true in terms, unless informal advice has been misconstrued, that the Department has assured authorities that no Area Speech Therapist salary will be back dated. The Department is in fact in no position to say this because the operative date of any agreement is, of course, a matter for the Whitley Council—although it seems only fair
  1204
  to add that if no appointments can be made the issue of backdating does not, in logic, arise."
  That series of sentences makes the utterances of the oracle of Delphi a model of clarity and is hardly designed to encourage that profession to think that its problems are likely to be resolved quickly.
  I turn from those, which are representative of the reasons why there is concern at the difficulty of trying to negotiate, as it has been put, with a jelly, to the difficulties facing the dental profession. Eight months after reorganisation no steps have yet been taken to secure the appointment of regional and district dental officers. This failure is severely limiting the effectiveness of area dental officers. Great concern is felt in the profession about the level of pay of clinical dental officers transferred from the local authority school dental service, and recruitment to that part of the service is virtually at a standstill. I should like the Minister to tell the House when progress may be expected on that front.
  Finally, I turn to the position of the medical profession, leaving the work of the Owen Committee to the end, and ask the Secretary of State to tell us the position of hospital junior staffs, who are sometimes overlooked in the current concern with consultants and other grades.
  A new model contract for junior staff has been under discussion—to say that it has been under negotiation would be to use too meaningful and purposive a word—since November 1973. So far there have been five meetings between representatives of hospital junior staff—in December last year and in January, April, June and September of this year—and they have apparently ended in an incapacity to agree minutes as to whether any agreement had been reached. Four letters have since been written by the junior hospital staff to the Department, but only one has received an acknowledgement. It is small wonder that three-quarters of this grade of staff in Northern Ireland have submitted undated resignations and that frustration amongst junior hospital doctors is extreme. This is illustrative of the way in which it appears to be impossible to get on top of the organisation to produce effective communication with the people with whom they are trying to negotiate.

  1205
  Another example is the family planning service. Failure to agree on a proper level of remuneration for family planning services in hospital and GP services is placing intolerable burdens on doctors, and it is even clearer than before that agreement on this should have preceded rather than succeeded the introduction of a free national family planning service. We ask the Secretary of State to tell us what is happening there.
  The superannuation of doctors is a much more long-standing difficulty, that has persisted over many years. But detailed submissions were made earlier this year by the medical profession. Its representatives saw the Secretary of State on this matter on 8th May, and since then they have had no reply except on one or two minor points. It is becoming a matter of urgent and increasing concern, and one asks whether it might be possible to place responsibility for this with the Review Body as a means of making progress on it.
  Turning now to the Review Body itself, one wonders about the further difficulties that arise. At the beginning of August of this year the professions were assured that the Review Body would be free to make a substantive review of doctors' and dentists' remuneration, to make such recommendations as it thought fit and to decide on the timing of those reviews. And in the light of that assurance the professions completed giving their evidence to the review body on 9th September.
  Since then confusion appears to have reigned, partly because of the circumstances in which Lord Halsbury came to resign, partly because the Prime Minister I understand it is his function—has not appointed any chairman to take his place and partly because the Secretary of State in a rather disingenuous Written Reply said:
  "It is for the Review Body to decide whether it is practicable for it to continue its work pending the appointment of a new chairman."—[OFFICIAL REPORT, 26th November 1974; Vol. 882, c. 111.]
  It is no wonder that the medical and dental professions are asking what has happened, who will be the chairman, when will there be a report, and what status will it have?
  I deal next with consultants and private practice. Great concern is being caused
  1206
  by the way in which the Government appear to be forging ahead, in a way that is bound to provoke trouble, with two policies to both of which a substantial majority of doctors are opposed; namely, the commitment to a whole-timed salaried service and the phasing out, as it is put, of National Health Service private practice.
  The folly of phasing out private practice from the point of view of the National Health Service and its patients was well summarised in an article in The Times on 20th November, when it was said:
  "Separation of private and public medicine is bound to lead to a waste of resources, both of manpower and equipment. There will be a partial duplication of facilities, and the expensive equipment so important in modern medicine cannot be made full use of in the relatively small hospitals that the private sector needs. The existing uneven geographical distribution of medical services will be aggravated. There is likely to be competition for the service of doctors with high reputations, who may be lost to the public sector. The NHS will be deprived of its marginal but still useful income from private beds. If middle-class patients enter NHS hospitals less often it it possible that the pressures against their becoming a second-class service will be reduced."
  That seems to speak for itself, as it has on many occaisons.
  From the point of view of the doctors, what is worse is the Government's total unwillingness to regard this commitment as negotiable. The Secretary of State seeks to reassure them about the future of independent medicine by asserting her willingness and that of the Labour Party to support private practice, albeit outside National Health Service hospitals in the future.
  That assertion is rendered increasingly unconvincing by the enthusiasm with which back-bench Labour Members press the right hon. Lady to go further down this road; and by the fact that the Labour Party conference in October 1971 passed without dissent a resolution calling upon the National Executive Committee to press for the abolition of private medical insurance schemes and demanded that all private nursing homes should be brought into the National Health Service.
  It is against that background that the Secretary of State must judge the credibility of her protestations that she intends to go thus far and no further. They carry no conviction.

  1207
  This is the importance of the other ground of concern, the massive pressure—financial, practical and moral—which the right hon. Lady is offering towards a full-time salaried service.
  The right hon. Lady said on 7th November:
  "At no time have we ever said it was our policy … to move to a whole-time salaried service in the National Health Service",
  but that, too, is rendered wholly unconvincing by the statement in the consultative document CJWP/FC 13—part of the welter of paper with which the Minister of State is surrounding himself—that
  "The Government broadly accepts the argument for the desirability of a whole-time salaried service."
  The Government must realise the extent to which they are seen to be threatening professional independence and diminishing the good will and effectiveness of consultants and those who work in the service.
  On this the arguments and the profession are indivisible. The hon. Lady the Member for Wolverhampton, North-East (Mrs. Short) has sought to suggest that the consultants are at odds with other members of the profession.
  Mr. William Hamilton: So they are.
  Sir G. Howe: The hon. Gentleman must hearken for a moment. The Chairman of the BMA's Hospital Junior Staffs Group Council said in the British Medical Journal of 16th November that hospital junior doctors fully supported the action being taken by the professional side of the Owen Working Party. He added that,
  "These new proposals would force many doctors into the whole-time salaried service and so preclude them from doing any kind of work outside the National Health Service. This would greatly reduce the freedom of patients and doctors alike and provide further disincentives for junior doctors to go through the long training courses to become consultants."
  The medical profession sees the dangers of what is being proposed and this anxiety is not something that emanates only from Harley Street. Considerable anxiety is being conveyed to me from all corners of the country, from Newcastle, Manchester, Birmingham, Crewe, Preston, the East Midlands and Merseyside—not
  1208
  only from the cloistered precincts of a select few in Harley Street but from working doctors serving whole communities in the North, East, South and West. The Government ignore this at their peril.
  The Government are wholly failing to understand the extent to which the National Health Service gets a great deal more value for its money than theoretically it is entitled to. Part-time consultants work many more hours than they are contractually obliged to do. I quote from one letter from a rheumatologist in the South of England because it is typical of many:
  "I am writing to advise you that unless the present doctrinaire campaign being waged by Mrs. Castle against the most essential members of the Health Service is tempered by common sense and a greater regard for truth she will be very fortunate indeed to have a Health Service to manage by the middle of next month.
  On a personal note, I might inform you that in addition to being the only Consultant in my Specialty … doing 7,000 consultations a year I am also a member of the District Management Team, Chairman of the District Medical Committee, Secretary of the Cogwheel Committee, medical member of the Regional Authority's Working Party on Management Studies, Possum Assessor to the Regional Authority, member of the Disablement Advisory Committee and Director of the Department of Health's Demonstration Centre in Rehabilitation … I say this, not to attract any praise, but to point out how bitterly untrue and disgraceful it is to suggest that people such as myself devote only part of their efforts to the Health Service. I have a thriving Private Practice but it makes me very little more in money than the sum I have to give up from my National Health Service salary to indulge in Private Practice."
  Labour Members may scoff at that, but the reality is that the National Health Service is supported and sustained by people such as that working many hours beyond the call of strict duty to keep it operating. Those people feel that to make the changes proposed by the Government in the current negotiations will be to serve the National Health Service badly as well as them. I have another similar quotation, this time from a surgeon in the North of England. He states:
  "I feel also that everybody after a forty-hours week should be eligible for extra duty payments and this would give rise to a greater and a happier National Health Service. Most of us have been working a sixty to a hundred hour week for thirty-one and a half hours pay. Why destroy good will for dreadful dogma like Mrs. Castle is trying to do? Above

  1209
  all, the retention of Merit Awards is very necessary. Everybody, part-timer and full-timer, should be given the chance of displaying merit. If, however, Mrs. Castle disposes of merit, seniority payments to both part-timer and full-timer should be the rule of the day, but let there be no doubt in anybody's mind that seniority payments give rise to mediocrity."
  That is the other aspect of the case. That is why it is essential that the Government move away from their present destructive and provocative attitudes and make it perfectly plain that they will not seek to pursue their objectives by compulsion, inducement, any other unfair weighting of the alternatives which may be made available to the medical profession.
  Anyone who today is responsible for administering the National Health Service faces enough trouble, heaven knows, without seeking to generate other sources of strife and dissension. Shortages of resources, which I spoke about, pose a serious dilemma and an almost infinite scope for disappointment. We can all quote examples involving deterioration of the service in hospitals.
  It is necessary for us to face up to the challenge of the present shortages of resources. It is no use pretending that those concerned in the NHS or in the other social services—or any of us who discuss these matters—can simply go on as though nothing serious was happening to the rest of the country's economy. Are the Government prepared to respond to the plea from the Royal Colleges and from the professional associations for an independent re-examination of alternative sources of finance of the NHS? If not, then the Government—and the Opposition—must have the courage to spell out to those in the NHS the implications of continuing shortages, and the necessity for choices to be undertaken between salaries and continuing expansion of services, between people and the provision of capital equipment, and between restricting functions and raising standards in other directions.
  It is for all these reasons that I say that it is time for the Government to refrain, above all, from provoking new causes of disagreement, to get on with abating those that already exist, and to provide the leadership of continuing and open debate about priorities in this as in other social services, in a time of grave economic difficulty.
  7.43 p.m.
  The Secretary of State for Social Services (Mrs. Barbara Castle): This is a short debate and it will not, therefore, be possible for me to follow up all the detailed points fired at us by the right hon. and learned Member for Surrey, East (Sir G. Howe) in a cascade of unco-ordinated grapeshot. I owe it to the House to deal seriously, not superficially, with the problems facing the National Health Service. There will be other opportunities for dealing with other aspects of the details of our policy, such as our proposals for greater democratisation in the running of the service, to which the right hon. and learned Gentleman referred.
  We have carried out detailed consultations on this aspect of our policy, and we shall be making statements on this and on other aspects to the House from time to time. There were certain details in the right hon. and learned Gentleman's speech to which my hon. Friend the Minister of State will refer in the concluding speech.
  I want to deal in the short time available to me with two of the more fundamental issues to which the right hon. and learned Gentleman referred; the more far-reaching aspects of the future of the NHS, on which he was long on gloom but short on remedies. I shall concentrate on two of the major issues in which the House is interested: first, the financial prospects for the NHS and, secondly, the progress we are making in our discussions with the profession on a new consultants' contract and on our proposals for phasing out private beds in NHS hospital. I choose these two because in my view they are inter-linked. The greater the economic stringency with which the country is faced, the more essential it is that the Government should be seen to be building a fairer society. I do not expect hon. Members on the Opposition side to accept this. They have never understood this basic principle, because they are the instinctive guardians of privilege and, therefore, the instinctive guardians of pay beds and private privilege within our National Health Service. We on this side of the House take a different view of society. We believe that in a situation in which all of us in the country have to draw in our

  1211
  horns and make sacrifices, it is impossible for the Government to tolerate queue-jumping within a National Health Service designed to give equality of treatment to all our people.
  The greater the pressure on the medical resources of this country the more imperative it is that those resources should be allocated on the basis of strictly medical priority. I have always made it clear that it is not our intention to outlaw private practice. That would be impracticable, even if it were desirable in principle. But I have also made clear that access to beds in the NHS hospitals must be on the basis of clinical need, not on the basis of ability to pay a fee and jump the queue. I do not believe that this country can get through the difficult economic time ahead unless the Government are seen to be endorsing this principle firmly. It is not a question of refusing to allow people to pay for privacy if they want it. Aneurin Bevan, the architect of the NHS, always catered for this need in the National Health Service through the institution of amenity beds, and we shall continue with them. Indeed, I believe that privacy is something which should, and can, be provided within the NHS. It is paying for priority of treatment that we reject. This principle remains central to our whole policy.
  At the same time the consultants have some legitimate grievances about the nature of their contract, a contract which has remained unmodified and un-modernised since 1948. In the joint working party under the chairmanship of my hon. Friend the Minister of State we have been examining the consultants' proposals carefully and constructively. Our aim is to reward adequately those who give a greater commitment to the NHS and are willing to help us secure a better distribution of medical skill among neglected geographical areas and neglected specialities, such as geriatrics and psychiatry. Naturally, the negotiations have been tough, but we are trying to bring them to a conclusion as quickly as possible.
  This issue highlights what I believe has been at the heart of all the recent talk about a crisis in the NHS—staff discontent. This has been the most serious part of our grim inheritance from the Conservative Party. When we took over
  1212
  from them, everyone who served the health service, from top to bottom, was in a state of revolt. The consultants in the health service were seething with dissatisfaction under the right hon. and learned Gentleman's administration long before the question of pay beds was ever mooted. Staff morale generally when we took over was at an all-time low as a result of his Government's rigid statutory pay policy. We decided then on a policy which has been summed up in the phrase, "People before buildings". The right hon. and learned Gentleman referred to it in passing but was very careful not to come down on either side of that choice.
  I wonder sometimes whether the NHS staff realise the extent to which, in eight months, this Government have already put their priority on people and on ensuring that they are paid an adequate salary. First, there was the Halsbury award for the nurses. The professions supplementary to medicine are also being looked at by Halsbury. It is a little late for the right hon. and learned Gentleman to start talking about the complaints of pay clerks, orthoptists and speech therapists, We found them in a state of revolt as a result of three and a half years of Conservative policy.
  The professions supplementary to medicine are also being looked at, as I said, and have already had an interim award, which will be followed by a final award when the substantive report is received. Hospital technicians, hospital pharmacists, work staff and ambulance men have all had substantial increases in pay. An offer has now been made to ancillary workers. All these awards have been broadly within the terms of the social contract. For the doctors and dentists, there will be a substantive review by their Review Body in April next year.
  The effect of these improvements in pay has been to increase the proportion of total expenditure in the NHS devoted to salaries and wages from 48 per cent. in 1973–74 to an estimated 54 per cent. in the current financial year. All this costs money. The Halsbury award so far will cost over £180 million in England alone this year. The award goes further than a straight pay increase, further than merely dealing with the effects of inflation, and it has within it elements designed to develop a higher standard of

  1213
  patient care. Just one example is the provision of a proper reward for nurses who wish to stay in clinical nursing rather than enter management. Nevertheless, the Government have met the pay bill in full through additional money, without seeking offsetting savings elsewhere in the programme.
  Then there are the steps to which the right hon. and learned Member referred which the Government have taken to protect and inflation-proof the NHS. The extra £40 million for England which I announced in July to offset rising costs, plus the additional costs of health services transferred from local authorities, has been followed by further payments of £17 million, and we have assured the health authorities that additional money will be made available as necessary to close the gap between the cost element originally allowed in their allocations for the current year and the actual level of prices. In all, Supplementary Estimates providing nearly £450 million additional money for the NHS in England to cover pay increases and increased costs have already been presented to the House.
  The second half of our inheritance from the Conservative Party was inflation. The temporary bursts of expansion in NHS expenditure which the Conservatives launched in 1970 and 1971, and which they planned to finance by printing money, came to an abrupt end in December 1973, as all such exercises in financial profligacy do. This Government have been left to pick up the pieces not only in the NHS but over our whole economy. It is folly to pretend that this country can go on as our predecessors were doing, ricocheting from one extreme of financial policy to the other and ending with a disastrous climax of tight and arbitrary pay controls plus slashing cuts in public expenditure.
  This Government's policy is to disengage this country steadily and systematically from the mess that we inherited. As the Chancellor of the Exchequer has said, this means that the rate of expansion must be slowed down over all public expenditure until inflation has been brought under control. Otherwise, we shall be continually chasing our tails and real improvements in the services that we provide will continue to escape us. That is why the Chancellor has announced that public expenditure as a whole will be
  1214
  planned to grow by only 2¾ per cent. a year over the next four years. The Government have been having intensive discussions on the application of this general formula to particular services.
  The last Government's abrupt 20 per cent. cut in National Health Service capital expenditure for 1974–75 not only savagely reduced expenditure for that year but, if carried through to subsequent years, would have meant that there could be no new major building or development schemes for two years at least. We, on coming into office, therefore, faced the prospect of a complete moratorium on all major hospital starts. It was this sudden disruption which helped to create a sense of crisis in the service. That is why, despite the economic difficulties which will be particularly acute in the coming year, the Government have decided to restore some of the December cuts of the previous Government.
  National Health Service capital expenditure for 1975–76 will be £255 million against a capital expenditure figure for this year, as a result of the Tory cuts, of £236 million—an increase in real terms of £19 million, or 8 per cent. This additional money is important because it allows us to lift our predecessors' moratorium and enables me to give approval to starting in 1975–76 a few—possibly about 30— substantial new building schemes of high priority. In addition, we are making another £10 million available next year for the revenue expenditure of the NHS to enable authorities to catch up on the backlog of essential maintenance work.
  Nevertheless, I am well aware that many important schemes will have to be deferred. I must warn the House that the outlook for the next few years is not encouraging. As things now stand, it will not be possible to maintain this increase in expenditure in real terms over the next few years. In such a situation, we must all learn the language of priorities. I will now make it clear what my national priorities are.
  First, I have decided to give top priority to capital facilities for primary care. Expenditure on health centres will be increased, not cut. Next year we expect to spend £20 million on health centres compared with £15 million this year. This should ensure an expanding health centre building programme. We are developing

  1215
  criteria of selection which, I hope, will ensure that we give priority to building health centres in areas of special health need. We intend, in this area as in others, to be selective and to start redressing the inequalities of health provision which, I fear, are still far too great.
  Second, I have decided to maintain present levels of capital expenditure on geriatric, mental illness and mental handicap schemes. As I have frequently pointed out, these three areas have been neglected over many years. To cut them back now would be to prolong the life of some of the most appalling buildings and leave quite scandalous gaps in our present provision for these important groups.
  Third, I am absolutely determined to ensure that we maintain our expanding medical student intake. I shall be in consultation with the University Grants Committee and, through that, with the deans of the medical schools. I shall do everything possible to ensure that those capital schemes absolutely vital for medical training are not affected. I have already committed myself to establishing the regional medium security units which are so badly needed. I will continue to allocate money to experimental schemes which help establish the pattern of services which will be most valuable in future.
  One of our priorities will be to establish clinical priority as the sole criterion in the allocation of NHS hospital beds. When resources are tight, queue-jumping becomes all the more intolerable. One way of overcoming the problem is to shorten the queue. Nothing gives rise to a greater sense of frustration than long waiting lists. That is why I intend to allocate part of our limited resources to reducing them. Part of the answer lies in good management, and I shall shortly be issuing a circular to local authorities on the management of their waiting lists—a circular which has been agreed with the professions.
  As we know this is partly a problem of staff shortages. But I know that the medical profession feels that extra capital resources are also required. I accept that capital is needed. As part of the other actions which I hope we shall be taking to deal with waiting lists, I shall be asking health authorities to identify specific capital schemes which will help
  1216
  reduce bottlenecks and which need not cost a great deal. I will do my best to provide scope for specific capital expenditure in this area to reduce waiting lists.
  I accept that it is not only for the Government to decide the priorities. The present situation is a challenge to all who administer the health service and who work in it. For some months both the health authorities and the medical profession—and I include the Royal Colleges, whose representatives came to see me to discuss their memorandum—have been asking me to let them know where they stand and what resources they are likely to have so that they can put on their thinking caps and plan how they can put those resources to the best use.
  This I am now in a position to do, and I shall be keeping my promise to them to call them into detailed consultation about the shape of the capital programme for future years and what would be the most cost-effective strategy. It is not just a question of eliminating waste, important though that is, and I believe that there could be great scope for savings of that kind. It is something more far-reaching that we have to do. We must work out a comprehensive system of health care, embracing both the health and the social services, which will deliver the highest possible level of provision for our clients' needs.
  Having done that, we must then examine the implications of this for our capital programmes. I believe that they can be reviewed with benefit. Community hospitals, for instance, will clearly have an important rôle to play in future as part of the hospital complex in districts. So we now have the chance to re-think our health planning by health districts in a comprehensive way, linking primary health care, community care and hospital provision. If we seize this opportunity we may well find that, despite our limited resources, we strengthen the health service and enable it to give us even better value for money than it is already widely recognised as giving. That will be our aim, and I am confident that in pursuing it we shall have the understanding and co-operation of all who serve in the service.
  8.5 p.m.
  Mr. Michael Alison: It is difficult to assess what the reputation of the right hon. Lady will be in the

  1217
  annals of history, but I suspect that she will be marked above all by the description of "propagandist". There is no great demerit in being a propagandist—a great many distinguished people have been propagandists at different times. At least the right hon. Lady has had the grace, as a propagandist, to change the tune of her propaganda when occasion dictated. We all remember the famous change of tune with "In Place of Strife". We are concerned with only one crucial feature of the propagandist in this context and that is the real hazard to the people of this country that she should come to believe in the myths which she propagates.
  The supreme myth that the right hon. Lady has sought to propagate tonight—she has sought to base upon it far-reaching changes of policy—is the myth of queue-jumping occasioned by private practice in National Health Service hospitals. This is the greatest and most distinctive myth that bedevils the whole of this debate. I want to lead the right hon. Lady and some of her supporters step by step through the realities of this situation.
  Patients make progress not when a hospital bed is available but when a doctor or a consultant is available. There can be any number of hospital beds, two-thirds of which may be empty. We could fill them with patients from the queues. But if there were no doctors available the condition of those patients would in no sense improve. When doctors treat private patients in hospital they are by definition—they must be otherwise they would be breaking their contracts—part-time consultants on a part-time contract, probably on a nine-elevenths contract. If they were full-time consultants on an eleven-elevenths contract they would not be allowed, nor would they want, to practise private medicine in hospital. On a part-time contract the time that they spend in treating private patients in hospital is, by definition, not available to NHS patients. It is time which does not belong to the NHS.
  Mr. William Hamilton: But the equipment does.
  Mr. Alison: That is a subsidiary point with which I should be happy to deal for the benefit of the hon. Gentleman. When
  1218
  they are dealing with private patients in hospital they are spending time on those patients which is not available to ordinary NHS patients.
  Mrs. Renée Short: What about the use of the nine-elevenths of their time?
  Mr. Alison: I should be happy to engage in an exchange with the hon. Lady, private, personal or public—
  Mrs. Renée Short: O.K. Answer the question.
  Mr. Alison: I greatly admire and respect the hon. Lady's insight into this complicated area, and I am sure that I am carrying her with me in this area so far.
  Mrs. Short: You are not, dear.
  Mr. Alison: The right hon. Lady must recognise that a part-time consultant who treats private patients in hospital is treating them in his own time. If the right hon. Lady's desire is to expel private patients from NHS hospitals and for doctors to continue to have a part-time contract, it necessarily follows that in the time that is available for private patients, doctors will continue to treat them, but away from the NHS hospital.
  There are about 130 private hospitals and nursing homes outside the NHS, with some 9,000 beds being available. The bed occupancy for private patients in NHS hospitals is about 2,500. If private patients are expelled from NHS hospitals, the 2,500 will move into the private sector, displacing the 3,500 NHS patients in private hospitals, who will come back into the public sector. Doctors with part-time contracts will cease to practise in NHS hospitals and will continue to treat private patients in the private sector.
  If private patients have been expelled from the hospitals, and if part-time consultants who are looking after private patients follow those patients out of the NHS hospitals into private hospitals, it will make not one iota of difference to the waiting list of NHS patients. The doctors will no longer be in NHS hospitals—they will be practising privately. The worst of all possible worlds will descend upon the unfortunate NHS patient. The doctor will have to spend more time in travelling, and will, therefore, spend less time in the

  1219
  National Health Service, and the queues will get longer. Furthermore, because NHS patients in private hospitals will have to come back into the public hospital sector to make room for private patients in the private hospital sector there will be a net increase in the queue. The myth of queue-jumping is exactly the reverse of what the right hon. Lady, by her own propaganda, has kidded herself it is.
  The myth is that a privileged group is holding up the queue of NHS patients. The reality is that by expelling private patients on this trumped-up and propagandised myth of an excuse all we are doing is increasing the queue, the waiting time and the non-availability of doctors for NHS patients, and increasing the number of NHS patients seeking admittance.
  The key question is: does the right hon. Lady believe her own propaganda? Does she believe that there is such a thing as queue-jumping, in this sense? Do her advisers get across to her that if private patients left NHS hospitals and there were still available for consultants a part-time contract, it would make not the slightest difference to the amount of time that NHS patients have to spend waiting for the doctor's time? The doctor's time is the key factor. The fact that doctors practise privately in NHS hospitals is of minor importance to private patients but of overwhelming importance to NHS patients who are given so much more than the contracted time by part-time consultants.
  I come now to the contract which the right hon. Lady was at pains to spell out. I am delighted to see the way in which she has placed herself at the head of all personnel in the National Health Service who are out for a better deal in terms of remuneration. It is a glowing, encouraging and endearing picture to see her at the head of the marching nurses, waving her red banner and leading them forward into the promised land of better terms and conditions. The right hon. Lady has successfully led this marvellous inarch of the nurses to Halsbury, seeking to persuade Lord Halsbury to give them more than they have ever had before. So much for the nurses.
  There is only one group in the hospitals more important than the nurses—the con-
  1220
  sultants, the people who actually deliver the fundamental curative health care. Will the right hon. Lady place herself at the head of marching doctors, to get an enormous increase? Let me remind her of the truth about the doctors. [Interruption.] I can hear a great deal of dissatisfaction at the presentation of the truth from the other side. The truth about the hospital consultant's contract is that it represents one of the biggest of confidence tricks. My hon. Friend the Member for Reading, South (Mr. Vaughan), who is a consultant at Guy's will agree with what I say. Hospital consultants work considerable overtime on the basis of a small notional time and pay contract. If they are full time they have a salary, in round figures without merit awards, of, say, £5,000 a year. They are paid that £5,000 a year to work eleven sessions of three-and-a-half hours each. That gives a Monday-to-Friday week, say, from 9.30 a.m. to 12.30 p.m., from 2 p.m. to 5.30 p.m., and from 9.30 a.m. to 12.30 p.m. on Saturday. That adds up to about 38½ hours, worth £5,000. My hon. Friend the Member for Reading, South will confirm those figures, as will any doctor whose advice the Minister has taken.
  Has anyone heard of a hospital consultant who works to rule and interprets his contract in a narrow sense by coming in at 9.30 a.m., going to lunch at 12.30 p.m. and working again from 2 p.m. to 5 p.m., and on Saturday working from 9.30 a.m. to 12.30 p.m.? That is what he is paid for. On my calculations, most consultants work at least 14 hours a week over and above the 38½ hours for which they are remunerated, that is to say, at least two hours per day from Monday to Friday more than they are contracted to work, and another one hour or two hours over the weekend, which is at least 14 hours extra overtime.
  Let us say that that is equivalent to four sessions. A session is worth £450, calculated by dividing the £5,000 by 11. What the consultant should be paid, pro rata, and assuming overtime at time-and-a-half, is at least another £2,500 to £2,700 without putting in any further work, just to compensate for the overtime at reasonable overtime rates.
  I hope that the right hon. Lady, with the zeal she showed for increasing remuneration to the most important

  1221
  people in the profession of health care, will be in the van in the discussions on the new contract, to make certain that at least £22 million is made available to compensate hospital consultants for the vast amount of overtime which they work on their ordinary contract before there is any question of buying out private hospital patient time.
  The right hon. Lady is a great propagandist. I sincerely hope that she does not believe the myth that by expelling private patients from the National Health Service she will reduce the hospital queue. On the contrary, the queue will get longer. I hope, furthermore, that the right hon. Lady will be in the van with the consultants, as she was with the nurses, to make certain that they are paid a proper rate for the number of hours they put in, which is about one-third as much again as the hours for which they are contracted. When she has put those two things right, we shall begin to believe that she has been persuaded about the truth of what the National Health Service needs and not just reiterate the old claptrap of propaganda about privilege.
  8.20 p.m.
  Mrs. Renée Short: The right hon. and learned Member for Surrey, East (Sir G. Howe) had the grace to say that not all the present troubles facing the National Health Service stem from the actions of this Government. He more or less said that some of the difficulties which the service is now facing stem from the period before 1964 when his Government were largely responsible for what went on in the National Health Service.
  The hon. Member for Barkston Ash (Mr. Alison) seems not to take that view. He spun a fairy story this evening. I do not know whether many people accept it, but I suggest that instead of spinning stories of that sort he should take the trouble to read some of the evidence submitted to the Expenditure Committee which considered this problem. He will find a very different story told by junior hospital doctors and by full-time and part-time consultants. If his story of the long hours worked by some consultants is true—and I accept that many consultants in the National Health Service are working very long hours indeed—this is surely an indictment of what the Conservative
  1222
  Government were prepared to tolerate for so long from 1951 to 1964 and later during the recent period of nearly four years when the hon. Gentleman's party were in office.
  Was the hon. Gentleman marching for the nurses? Was he marching for the BMA? Did he support them when they were campaigning for better conditions? Of course he was not. He need not think that he can make that sort of speech to the House and make us feel that we ought to fall flat on our faces before his propaganda. In fact, I do not think that he believes his own propaganda.
  Going back to the difficulties which the National Health Service faces as a direct result of what was done in December 1973—because this is the legacy which my right hon. Friend had to inherit, as she said—the programme of capital expenditure in the health service by the action of the then Conservative Chancellor of the Exchequer was cut by one-fifth and the procurement expenditure on goods and services was cut by one-tenth. This was to meet a reduction in public expenditure for the year 1974–75 of £1,200 million in toto. This was a very considerable cut which was spread more or less right across the board. It meant that the Department of Health and Social Security had to face a cut of £111·2 million at that time. My right hon. Friend has indicated that she has been able to replace that money—and more: that she has been able to put back £450 million by means of Supplementary Estimates—[Interruption.] The hon. Lady was not listening.
  Mrs. Elaine Kellett-Bowman: I was.
  Mrs. Short:—and that a good deal has been done and will be done in order to make good those cuts.
  The House needs to understand what all those cuts in the Department of Health and Social Security meant in both the major areas of my right hon. Friend's responsibility. The effect of those cuts was disastrous.
  Mrs. Kellett-Bowman: The Labour Party has done nothing about it.
  Mrs. Short: The cuts in the Department were extremely difficult to carry out. The National Health Service building programme, for example, is not a

  1223
  programme which starts and stops at certain specific times. It is a rolling programme. Very flexible operation is necessary in order to carry it out and bring each phase forward when necessary. It means that commitments which were already undertaken could not be interfered with; otherwise building programmes would have stopped. Hospital building programmes would have ended and there would have been considerable claims for compensation as a result.
  Therefore, about two-thirds of the building programme of the Department was already committed when those cuts were made. Only about one-third of the programme could bear the cuts that had to be carried out as a result of the Conservative Chancellor's decision. It meant that many new construction projects which were due to start had to bear the burden, but the burden fell on them to a much greater degree than would otherwise have been the case. According to evidence submitted to the Expenditure Committee which considered the effect of these cuts on the National Health Service, it amounted to a cut of about 60 per cent. on all new building projects. That was a considerable burden which had to be borne.
  This is why in many parts of the country consultants are concerned about the shortage of beds to cope with the pressures on their own particular specialities. The consultant orthopaedic surgeon in Northampton wrote to me last week and said that he has only 58 per cent. of the beds that he ought to have in order to deal with all the cases on the waiting list, and that some 50 of those cases comprise elderly people waiting for hip replacement operations. They are now waiting 15 or 16 months before they can be offered a hospital bed. I hope my right hon. Friend will be able to say that in the new capital programme which she is prepared to underwrite she will look at the needs of areas like Wolverhampton where the second phase of the new district general hospital is awaited.
  The cuts on the capital building programme were very considerable indeed. As a result, once the decision was made by the previous administration that these cuts had to be carried out, officials from the Department, instead of looking at the way in which the Department is run and
  1224
  considering ways in which the money already allocated could be better spent, were having to go round to the area health authorities and to the hospitals and decide how the cuts were to be made. That was a fruitless use of the officials' time.
  Then there are the cuts in current expenditure, the procurement of goods and services, which, again, made very considerable difficulties for the hospitals. It meant that, besides capital projects being delayed, more minor capital works were held up, too. Such projects were of the kind that really help the patient and very often help the staff considerably. For a comparatively small expenditure of money a considerable improvement in services and conditions for patients and staff can be affected. I refer to such projects as improvements in lavatories, sluices and bathrooms, the provision of day rooms for patients and fire precautions. Surely economies ought not to be made in fire precautions. Also included in this type of project are improvements in old kitchens. This kind of project had to be abandoned because of the cuts in the minor capital works.
  Regional disparities, too, were affected and made more severe. One of the greatest regional disparities is in the distribution of consultants. Perhaps the hon. Member for Barkston Ash will exercise his mind and tell us on another occasion the extent to which certain parts of the country, perhaps including his own, are short of consultant cover. He might be able to offer an explanation for that.
  Although, with hand on heart, the Conservative Chancellor of the Exchequer and the Secretary of State for Social Services said that patients' interests would not be affected, the result was that patients' interests were in fact affected, including some of the vital provisions which are of considerable significance in maintaining a good standard of patient care.
  More important, in order to save money hospitals left staff training schemes unfulfilled, and they left staff vacancies unfilled. In an already under-staffed and over-burdened service this also was a disastrous decision, and it was bound in its turn to affect patients. The treasurers of area health authorities, giving evidence to the Expenditure Committee, said that they were short of many millions of

  1225
  pounds in trying to carry through the programmes to which, they had assumed, they were committed according to the previous year's estimates.
  We never have had enough money to finance the National Health Service adequately. That criticism, of course, applies to both Governments, but, without doubt, the effect of the uncaring attitude of the Conservative Party when in office has been to make the situation far more difficult for the people working in the service and for my right hon. Friend herself.
  My right hon. Friend has given us the priorities of medical care and of capital expenditure which she intends to pursue. I have no quarrel with the health centre programme. I have no quarrel with her underlining of the previous priority for geriatric and mental illness care. I hope, however, that when my right hon. Friend is considering the expansion of medical students numbers she will make sure that the medical schools adopt a more reasonable attitude to women applicants.
  This has been the cause of one of the major setbacks in the supply of doctors during recent years. I think it a great pity that there has been a numerus clausus against women medical students. I hope, therefore, that in the coming year, and especially since next year we are to celebrate International Women's Year— I must put in a plug for that—my right hon. Friend will make absolutely clear that there should be a fair number—I should like it to be fifty-fifty, of course—of women medical students in training.
  I hope also that my right hon. Friend will spare some thought for the needs of the dental service within the National Health Service, a sector grossly neglected by the Conservative Party, which virtually presided over the disappearance of the dental service within the National Health Service. Attention must now be given to that.
  Never again, I hope, will any British Government inflict upon the National Health Service cuts such as those inflicted on it by the Conservative Party when in power. We must decide what our priorities are to be. I hope that hon. Members on the Opposition benches will be here tomorrow when my right hon. Friend the Secretary of State for Defence makes his statement about defence cuts, and that they will be pressing the claims of the
  1226
  National Health Service for a share of that expenditure in the future.
  8.32 p.m.
  Mr. David Crouch: We all respect the hon. Lady the Member for Wolverhampton, North-East (Mrs. Short) for her knowledge of expenditure in health matters through her position on the Expenditure Committee, but I feel that she has misled the House with regard to the cuts announced in December last year by the Conservative Government. They were cuts across the board in capital expenditure necessary to meet a grave economic situation. The cuts in the National Health Service were capital expenditure cuts; that is, cuts in forward expenditure, not in expenditure this year. Those cuts have not been restored by the present Government, and we must have a statement tonight from the Minister about that to clear up the misunderstanding.
  I should say at the outset, although I believe that the House knows it, that I have an interest in the health service. I am a director of a pharmaceutical company, and, more particularly, I am a member of a regional health authority. I speak in this debate, therefore, with that particular specialisation in mind.
  I welcome what the right hon. Lady the Secretary of State said in stating that her aim was a strengthened health service. We ought not to bring too much party politics into these matters or criticise one another when we have aims of that kind. However—I am sorry that she is not here at the moment—I must tell the right hon. Lady that I do not believe, any more than my hon. Friend the Member for Barkston Ash (Mr. Alison) believes, that she has got things right. I think that she is deceiving herself by political dogma and doctrinaire beliefs in this matter.
  I should like to think that, through the powerful position which she occupies, the right hon. Lady could take action to strengthen the health service, for, my goodness, it needs strengthening today. It is a weak service, weak in money and weak in people—not in ability but in numbers. The right hon. Lady spoke about the additional capital expenditure she would make available for progress in improving psychiatric and geriatric hospitals. I welcome that, of course, but

  1227
  the House should not be deceived into thinking that the sort of sums she was talking about can do more than scratch the surface of the real problem in the geriatric and psychiatric hospitals. The latter used to be known as mental hospitals.
  In my regional area in Kent I have seen a geriatric hospital 120 years old that is more like Holloway Prison. Parts of it are designed on the basis of a nineteenth century prison because in the nineteenth century mental patients were regarded as prisoners. The hospitals were called mental colonies, and in 1974 they require not a few hundred thousand pounds to patch them up and modernise them but £10 million per hospital at 1973 prices. I do not know what today's price would be with the current rate of inflation.
  The same situation applies across the country to psychiatric and geriatric facilities. This has been an area of great neglect, and we should not deceive ourselves into thinking that the neglect can be put right by small works.
  The Secretary of State said she was planning to make specific capital expenditure grants to reduce waiting lists. I say "Thank you", and I shall be watching to see how successful that is. I shall not be carping about it.
  I wish now to deal with a problem facing the National Health Service, those who work in it and its patients. It arises from the reorganisation which came into force on 1st April. I made a plea in the debate on 1st November for the National Health Service to be given a period to settle down. It does not yet have its new relationships right or sorted out. People in the health service, as the Minister knows, are spending too much time in committees on administrative matters and not enough time with patients and in dealing with their problems. Under the new structure it is much harder to get a decision in the health service than it used to be. People are feeling their way about. One senior administrator said to me today that it seemed necessary sometimes to consult 20 persons if a decision had to be made. He told me recently that he had rung up a member of a district team with a proposal which he said should be im-
  1228
  plemented at once. "Oh, no," said the team member," I am afraid that I must consult my colleagues, and that will mean weeks of delay". Of course, we recognise that doctors and members of the health service need time to settle down under the new structure, and we must give them that time.
  The regions are not yet fully established but they are much more advanced than the areas. It has been necessary to ensure that the health service keeps going, even though the areas have yet to be established. The patient, quite rightly, must come first. The trouble is that the districts have begun to consider that they can do without the areas and are assuming area responsibilities. Since the area teams are not yet fully established, the regions are being forced to do the area jobs and provide area services which it was not planned they should do.
  It may be difficult in the months and years to come to change this growing pattern back to the structure which the House decided upon for management of the health service. We all know how difficult it is to move civil servants in an administration once they become established, and the trouble is they may become established in the wrong pattern, a pattern which was not originally intended.
  But we must allow the new system, the planned system, to sort itself out and settle down. The National Health Service and those who work in it cannot take much more disturbance. I have a letter from the Chairman of the East Sussex Area Health Authority, referring to my speech of 1st November. He says:
  "I think you have put the situation very well, and the feeling of all of us is 'for God's sake leave us alone for a couple of years so that we can digest the present reorganisation.' The danger of the entire organisation collapsing is a very real one. I am going to the funeral of"—
  here he mentions the name of one of the former administrative secretaries who had died—
  "this afternoon, whose untimely death was undoubtedly hastened by the strain and overwork of the past two years. I don't want the same thing to happen to my officers but two of them have had coronaries this year and both of them have been severely disabled."
  In quoting that letter, I do not seek to overstrain the House with any emotional

  1229
  overtones. But I know, and other who have seen the health service in these months of settling down know, that under the new administration there are people working long hours. I refer not just to the consultants but to all those in the service as they have tried to get the thing off the ground and to work.
  The Secretary of State is creating today a disturbance that we cannot take, and I wish that she would stop it, for medical reasons. I know that she has political reasons for changing the health service yet again. Those political reasons are irrelevant and positively harmful to the service.
  I want to take up the question of the consultants and their dispute with the Secretary of State and the Government. Some of those who put pressure on the Government have made a call for more dedicated men in the National Health Service, so the Government are considering a new contract for hospital doctors which would commit them exclusively to working in the NHS. I understand that the Government want a whole-time salaried service. It sounds idealistic at first hearing that everyone should become a whole-timer and that the part-time consultant should cease to exist. But what will this mean? There is a danger of its creating for the first time two standards of health care.
  Mrs. Renée Short: We have them now.
  Mr. Crouch: This would make Aneurin Bevan turn in his grave. There would be one standard in the NHS and a better one for the private patient. I should not be prepared to countenance that. We have seen it happen in the United States, and we should never let it happen here.
  What is a part-time consultant or maximum part-time consultant in the NHS? He is a consultant who contracts to give nine half-day sessions a week in the service. The rest of his time—two half days and evenings—he can use for his private practice. Many such consultants are not only doing as much as the whole-timer but are putting in more than eleven-elevenths, although their contracts with the NHS are for only nine-elevenths. In studies that I have seen the part-time
  1230
  consultant has been putting in as much as thirteen-elevenths in his contract with the NHS, for which there is no question of extra pay.
  The Government are now talking about a 10-session contract. The compensation to the consultants will be about an additional £1,500 a year. That is an increase in their basic pay of about 20 per cent. I am putting that percentage at a generous level. Today a consultant can earn nearly £8,000 a year at the top level if he is a full-timer or nine-elevenths of that if only a maximum part-timer. In addition, he can obtain a merit or distinction award. That would increase the basic salary of nearly £8,000 by a maximum of between £1,200 and £1,500 a year to more than £7,000 a year if the consultant receives a merit award of A-plus. To do so he would have to be a man of great distinction in international medicine.
  We must consider something much more than a consultant's salary or contract and how much he should be earning. Doctors may well think that another £1,500 a year is a poor substitute for giving up private practice. I want to think much more widely than that. The Secretary of State has chosen to upset the whole basis of the National Health Service and the consultants' place in it. She will remove the private fee-paying patient. She wants to cut out that source of income for doctrinaire political reasons. She is prepared to give the doctors more money from the State and from the taxpayer. She will give the consultants a new contract but it will be an anti-social contract for the patient.
  The right hon. Lady is against private patients because, as she says, there is no moral justification for them. But by her action she will be hurting the prospects of the public patients. I create that phrase. Private practice will continue outside the National Health Service if the right hon. Lady takes the steps that she has outlined. I am afraid that such a move will attract the cream of the consultants and the National Health Service will be left to try to cope with ever longer queues of patients. That is not something that we can allow to happen. I have no time for the right hon. Lady's doctrinaire views. They are set in the nineteenth

  1231
  century and unrelated to the real problem of looking after the peoples' health.
  My right hon. and hon. Friends have to fight the right hon. Lady's doctrinaire approach. We must all stand up for the patient. We must stand up for the doctor and the medical service that seeks to look after the people. That can include any of us when we are ill. If the right hon. Lady bans pay beds has she thought what that will mean? There will be a severe drain on the existing hospital facilities in many parts of the country. In some areas it will be much worse than in others. For some patients privacy is a medical need, and in many areas it will be unobtainable in the National Health Service.
  Privacy is obtainable in some parts of the country. I have checked on the position with a consultant. It is obtainable in Aberdeen, for example, but not in the South-East. It is obtainable in a private nursing home in the South-East but not in a National Health Service hospital. The teaching hospitals will almost certainly lose many of their part-time consultants and teachers. The NHS will be faced with an influx of patients and an exodus of some of its best practitioners.
  It is not only the NHS which needs a rest. I suggest that the right hon. Lady should also take a rest. Her NHS aims are irrelevant and dangerous. Her speech today was doctrinaire, dogmatic and utterly lacking in wisdom. The best service that she can give the NHS would be to leave it alone and to go.
  8.50 p.m.
  Mr. William Hamilton: I, too, must declare an interest. As I think the House already knows, I am sponsored by the Confederation of Health Service Employees.
  I remind the hon. Member for Canterbury (Mr. Crouch) that the National Health Service itself was introduced for doctrinaire reasons. When Aneurin Bevan initiated it, he was a doctrinaire Socialist. He said that the principle was to be that people would get health treatment on the basis of need and not on the basis of the depth of their purse. At the time, that doctrine was rejected vehemently by the medical profession and the Conservative Party. Indeed, the Conservative Opposition then voted against the principle on the Second Reading of the National
  1232
  Health Service Bill, and throughout its stages in the House they continued to vote against various provisions. The pay beds were a compromise enforced upon Nye Bevan to get the consent of the doctors to work within the NHS.
  My hon. Friend the Member for Wolverhampton, North-East (Mrs. Short) referred to the statement to be made tomorrow about cuts in defence expenditure. The survival of this country depends as much on expenditure on health and education as it does on arms. In fact, arguably it depends more so. Yet the workers in both education and health— teachers, nurses and ancillary staff— remain, even now, after Halsbury, among the most underpaid and disgracefully exploited of all our workers.
  I do not think that anyone would seriously dispute that the National Health Service is an example of practical Christianity and practical Socialism. It has managed to survive the almost continuous inflation we have had since 1945, and I believe that it is still the envy of the world, although it is drastically in need of resuscitation.
  In the most difficult economic crisis since the war, the Government have acted. I think that my hon. Friend the Member for Wolverhampton, North-East got the figures wrong. We have not restored the cuts of £111 million imposed in December 1973. What my right hon. Friend the Secretary of State said was that the capital expenditure was to be £236 million in 1974 and £255 million in 1975, which represents a restoration, in real terms, of much less than the 20 per cent. cuts announced last December. According to my right hon. Friend, revenue expenditure is to be increased by £10 million next year. This goes some way towards restoring the cuts, but by no means as far as we would like to go.
  Similarly, the Government produced the Halsbury Committee on nurses' pay, and its recommendations were backdated to the day it was set up. Those recommendations have been accepted and are in process of implementation. They go some way towards remedying the immediate grievances of some of the hospital staff, although by no means all.
  We should be deluding ourselves if we pretended other than that it is going to be a very long and expensive haul before

  1233
  we can build the National Health Service to the standard we all yearn for. By its very nature, despite all the technological developments, it is going to be for a very long time—right into the foreseeable future—a labour-intensive industry. It cannot, in the nature of things, be depersonalised. In that sense, of course, it is subject more than any other service to the vagaries and evils of inflation. In such a situation we are caught, as a nation, in a net of conflicting and competing priorities.
  We simply cannot do everything at once. The fact that £180 million was found in England to implement the Halsbury recommendations showed at least some earnest of the good intentions of the present Government. But I must point out to the Opposition that Halsbury showed that between April 1970 and April 1974—in effect, the whole of the lifetime of the previous Conservative Government—average earnings of nursing staff barely kept pace with the increase in the cost of living, while the earnings of all other salaried workers more than kept pace with that increase.
  In April 1974 the average annual earnings of a nurse were £1,578. That is just about £30 a week gross. I have got pay lines from many nurses showing that they were taking home less than £20 a week. At the same time, the average annual earnings of all salaried workers were £2,168. That is roughly £40 a week gross—in other words, one-third more than the average earnings of nurses. In general, over those four years the standard of living of most workers improved, but the standard of living of women nurses, at best, remained static, and that of male nurses actually fell.
  The COHSE happens to represent a large proportion of the male nurses, who are predominantly mental health nurses. What astounds me is how we get men to work in that field at all, still less within the present salary scales. I am very glad that my right hon. Friend said that one of her top priorities was mental health. The hon. Member for Canterbury rightly referred to some mental health institutions as being prison-like. We have them in Scotland. We all have them up and down the country. It will need a colossal amount of capital expenditure before we get on top of that problem. How right was my right hon. Friend when she said,
  1234
  "People before buildings." We want both, but they both cost a tremendous amount of money, which is simply not there. It would be completely in line with the social contract—indeed, an essential part of it—if all workers in the National Health Service, including the consultants, received substantial pay increases over the next few years.
  I want to make some comments about the doctors within the National Health Service. My hon. Friend the Member for Wolverhampton, North-East referred to the evidence given by the junior hospital doctors to the sub-committee of which she was chairman. They have endured a long-standing and intolerable injustice in their salaries and conditions of work. Their salaries and conditions are a menace not only to themselves but to the patients whom they presume to serve. The growling of the consultants comes into a category very different from the grievances of the junior hospital doctors. The consultants' high-toned moralising posture smacks to me and to many others of a mixture of humbug and greed.
  There is a growing body of opinion within the medical profession that believes in the abolition of all private practice within the National Health Service. I should like a quote a letter which appeared some time ago in The Guardian under the names of two doctors:
  "It may be salutary to point out that of 75,000 doctors in the NHS there are 10,000 consultants, of whom 60 per cent. are part-time. The rest, the majority, have no truck with private beds in the NHS and for the most part will welcome the Government's intention of phasing out private beds from NHS hospitals …
  For too long now have these powerful consultants spoken for the medical profession as a whole. The MCAPP"—
  that is, the Medical Committee Against Private Practice—
  "would like to say that there are many doctors, most health workers, and 95 per cent. of the population who believe in the NHS, and who wish to see it improve.
  We believe that this can only happen if the burden of private practice is removed, and, with it, a major source of the conflict of interests that separates ideal health care from impoverished health care."
  The letter goes on to point out that we have now half a million National Health Service patients on waiting lists, and that 85 per cent. of NHS beds are full although

  1235
  only 65 per cent. of the private beds in National Health Service hospitals are full at any one time. The empty private beds facilitate the queue-jumping which an Opposition Member said did not exist. We all know that queue-jumping exists. We all know that anyone who has the money can go to a consultant and get an operation which otherwise he would wait for for 18 months, two years, or more. Everyone knows it, and no one can defend it. It it time that it was stopped, and I hope that my hon. Friend will say something about that.
  The right hon. and learned Member for Surrey, East (Sir G. Howe) does not often break into a sweat in this House. The only time that he broke into a sweat today was when he was talking about this and about the need to defend the consultants and their part-time practice in the health service.
  No one wants to deny the right of a consultant to engage in private practice in his spare time and with his own equipment. But let him get outside the health service, build his own buildings and use his own equipment, instead of stealing it from the National Health Service, as was confirmed by the evidence given to the Exependiture Committee a few months ago. That evidence spoke of consultants stealing equipment from the National Health Service and using it in Harley Street to fill their pockets. That is quite indefensible, and I hope that my hon. Friend will stand firm against it.
  The whole of the Labour Party is firm on this. We have to return to the basic principles on which the NHS was founded. To have a situation in which private consultants use health service equipment, time and personnel is obscene. Nurses and junior doctors are being used to line the pockets of consultants. In times of scarcity all round we have to get our priorities right. I wish my hon. Friend good luck in his job. If he is accused of doctrinaire practices, I remind him that we need not be ashamed of our Socialist doctrines and philosophies. That is what the National Health Service is all about.
  9.3 p.m.
  Mr. Michael Morris: At the outset of my remarks I must declare an indirect interest, in that I am married to a practising general
  1236
  practitioner. As a result, of necessity my comments are coloured by 10 years of mutual experience of the National Health Service.
  Listening to the debate and remembering the comments on our previous debates on the subject, I cannot help marvelling at the way that the Secretary of State has managed to cloud the immense problems facing the National Health Service by the emotive issue of payment for medicine and the tiny proportion of private beds in the National Health Service.
  In emphasising one point, I take issue with the hon. Member for Fife, Central (Mr. Hamilton). I hope that he will remember that it is we, the public, who own the National Health Service hospitals. Through our contributions on our stamps, it is we and our families who own the facilities in the service. Every family in the land, regardless of whether they decide to top it up with private expenditure, own these facilities. It is we who own them and not the consultants. It is we who have the right if we wish to top up and to use those facilities. It does not lie with the Government to rule that those facilities should no longer be available to those who wish to top up.
  Will the Minister, in reply, indicate whether it is the Government's intention, according to the current rumour, to remove the facilities of the regional blood transfusion service from those who are at present using it outside the National Health Service?
  The Minister of State, Department of Health and Social Security (Dr. David Owen): I can reassure the hon. Gentleman on that subject now. There has been some speculation, which is totally unfounded. We have no intention whatsoever of limiting the blood transfusion service, whether people are in private or NHS practice. The service will be available to everyone.
  Mr. Morris: I am sure that the public and those who take note of these matters will welcome that statement and reassurance from the Minister.
  It is fairly common knowledge that we spend a lesser proportion of our gross national product on health than do many industrialised nations. I shall not weary the House with the figures. The latest

  1237
  figures that I can find in a recent reply by the Minister, refer to 1969.
  It is also accepted by economists and medical practitioners that the demand is limitless. As our resources and wealth grow, albeit at a slow rate at the moment, the demand for medical services rises.
  It is against these two factors—the reduced proportion of our gross national product and the unending demand—that we must judge the Secretary of State's actions over the last nine months—not eight months—and her plans for the future.
  I believe that it is convenient to look at the situation from two angles—the hospital service and the general practitioner service. We have had a number of contributions on the hospital service. The issue of private beds is one aspect of the problem. On to this the Government have cleverly grafted their determination, once and for all, to get rid of medical independence by ensuring that we have a full-time salaried Civil Service-like contract. This seems to be the underlying desire behind the Government's actions.
  The Minister knows full well that any person in this land faced with a medical emergency will be dealt with immediately, whether or not he or she be a private or NHS patient, to the best abilities of those who look after us.
  Reference has been made to queue jumping. The truth of the matter is that there are parts of the country where there are no waiting lists of any great length. In certain parts of the country the private and NHS waiting lists are different, but key stress areas, of which Northampton is one, have grown so fast that there is no queue jumping by anybody because there are long waiting lists for both private and NHS patients. Therefore, regardless of any action to remove private beds, there will be no benefit at all in stress areas.
  General practitioners are men and women who, by their contracts, have to provide cover 24 hours a day, seven days a week, 52 weeks a year, for the princely sum of £1·50 a head. These devoted people are angry at the way their real incomes have been eroded, particularly in the last two years. I recognise that that is not entirely the fault of this Government. These people are angry at the way in which some of their services
  1238
  are being abused by the public. They are angry at the way in which the family planning service has been removed, particularly those who have trained and spent a great deal of time building up skills in that area. They are angry because they have to spend so much of their professional time patching up under-staffed and under-financed services.
  Having listened to the Secretary of State this afternoon, I am forced to say that if she wants to make greater provision for health centres she should restrict them to those areas of social need that are pressing for them, and where the general practitioners themselves are pressing for them, because at the moment local authorities are demanding health centres regardless of the conditions of doctors' surgeries. There are some areas with good doctors' surgeries and a good patient-doctor relationship, yet the local authorities there are still insisting on having health centres.
  Looking to the future, I cannot help but draw back and wonder whether, just for once, the Secretary of State would reflect for a few moments whether it is right to push through some of the doctrinaire policies that she is suggesting. We have in the medical profession, as I think all hon. Members will agree, a body of men and women who are dedicated to healing. That is the motivation for their going to medical school, and it is that that keeps them going when they come out at all hours of the day and night— those of us who are married may experience this more than others—to deal with somebody who is ill. If these dedicated people are to be motivated in the best way possible, it will be done by working with them instead of against them. It will be done by providing them with incentives to seek to improve the service and by considering ways of encouraging them.
  I believe that we have had, and still have, some of the best doctors in the world. I regret to say that we have never had—though one hopes we shall have at some time in the future—the best health service. Surely it is not beyond the wit of politicians to find a way in which to use the energies and resources of the medical profession. If we do not—this is the great worry today, nearly 30 years after the passing of the National Health

  1239
  Service Act—the best will emigrate. The signs are not encouraging at the moment, as the figures are 10 per cent. up on a year ago. We shall see the standards of newcomers to the profession falling—the Minister knows as well as I do that the signs are not encouraging here, either— and we shall see those who are left in the service begin to work to rule. I see that as being basically alien to the desires of the medical profession.
  The Secretary of State rightly said that the outlook at the moment is not encouraging. It is a question of the language of priorities, and surely in that context we ought to be saying that the nation's priority should be to work with the doctors, not against them.
  9.13 p.m.
  Mr. Bryan Davies: When I first realised that the Opposition had chosen this subject for debate on a Supply Day I assumed that the debate would be about—and that is what it has turned out to be in the later stages— those actions for which the Government are responsible. I assumed that the debate would focus on the issue of pay beds and that some of the more charitable Opposition Members would recognise the Government's contribution to improving the pay of nurses in the National Health Service.
  I was, therefore, surprised when the right hon. and learned Member for Surrey, East (Sir G. Howe) opened the debate with a widespread attack on the Government on a whole range of issues which most of us would recognise are beyond the capacity of any Government to cope with in the short space of nine months. We all recognise the problem of under-capitalisation of the health service. We all recognise the poverty of resources in crucial areas within it. We also all recognise that several classes of workers in the health service remain crucially underpaid. But that fault lies not at the door of the present Government, who are already taking steps to remedy some of the worst abuses; it clearly reflects the Opposition's attitude regarding social expenditure.
  The remainder of the debate, so far as Opposition speakers have been concerned, has been constructed upon the basic pretext of "I am principle, you are doc-
  1240
  trinaire, and he is bigoted." We on the Government side may be accused of being doctrinaire, but our definition is of one principle—a principle which I do not think Opposition Members seek to challenge. It is the principle of the National Health Service that help should be given to those in need.
  We may get, as we got from the hon. Member for Barkston Ash (Mr. Alison) a rationalisation of private beds, in terms that the abolition of them would not increase resources to the NHS. But we all know—this point comes regularly from our constituents—that private beds represent queue jumping, privilege and advantage in terms of medical care. If that is not so, how can one explain the vast increases of private insurance schemes and the fact that these schemes are available to executives in firms, and not to the other workers, because the firms are putting high priority on this extension of priority care to those whom they value the highest and to whom they pay the most.
  I maintain that two standards of health care within the NHS are contrary to its principle and contrary to good practice, and should be opposed. On that basis, I welcome the initiatives that are being taken by the Government and by my right hon. Friend the Secretary of State.
  The defence of private beds, as we have heard it this evening, has been based on a number of points. First, it seems that there must be among the Opposition a belief in the inalienable right of people to purchase good health. We challenge that. People do not seek to purchase good health. People want and need good health, irrespective of their purse. It would be a sorry day if we were to ration health according to a person's purse, and in so far as we do this at present, such an abuse should be remedied, lest we move towards the situation in the United States where priority for medical care for road accident victims may depend on the strength of the insurance card which each individual carries in his pocket. We are a long way from that situation. We are a long way from it because of the absolute principle of establishing the National Health Service in 1947–48. Any deficiencies which were revealed in the health service at that time and which still exist today should be remedied.

  1241
  Secondly, it is suggested that private beds inject resources into the NHS. My hon. Friend the Member for Fife, Central (Mr. Hamilton) emphasised that private beds and private practice in relation to the NHS may represent a detraction from its facilities.
  Thirdly, there is a suggestion that basially the same facilities obtain whether in the private health service or in the NHS, mainly with regard to requests for privacy. If that is the case, and privacy is to be defended as an essential medical need in some cases—as it almost certainly is— it is a facility that we ought to extend to all NHS patients, not just to those who can afford to pay for it according to the size of their purse.
  It has been suggested from the Opposition benches, in a desperate attempt to defend consultants, that professional independence is at stake. Is this the position that the Opposition would adopt, for example, with regard to salaries in the universities, such as the salaries of university professors? Is it being suggested that such people have sacrificed their independence and capacity to criticise because there they are paid full salaries? Certainly not.
  I believe that my right hon. Friend the Secretary of State should stand firm in her intention to abolish private beds. We must recognise that there may be some vested interests in the thin ranks of the Opposition, but on this side of the House there is a determination not only of a united party but of millions of people to fight privilege in the NHS, because they are no longer prepared to tolerate it. The Opposition have argued that when resources are scarce we should not concern ourselves with redistributing resources. There are always too few resources to promote equality, according to the Opposition, yet they are always sufficient to maintain savage inequalities.
  One other thing which reflects on private practice and its relationship to the Health Service is an abuse which is growing and should be terminated before it equals the present abuse of pay beds. I have mentioned it before. I refer to the growing employment of agency staff, rising at present to as much as 10 per cent. of the staff in London hospitals.
  Agency staffing leads to a sapping of the morale of those in the NHS. It en-
  1242
  courages the part-time, so that there are fewer full-time people to bear the load, and they then have to take the burden of the extra and onerous services while the part-timers can be much more selective. Second, it reduces the efficiency of the services. Agency employment is often used as a means of overtime, which often means a reduction in the quality of service provided because of the tiredness of the individual.
  Third, the crucial resentment is that agency staff work alongside full-time staff but get more pay. They receive increased rewards for similar work. This abuse leads to demoralisation. Finally, of course, some aspects of agency work are degrading, such as the tawdry offers of free summer time holidays if nurses register with agencies at increased pay and more perks if they sell themselves to the agencies.
  The Government aim to bring in legislation to remove the abuse of tax evasion by means of agency work in the building industry. But the "lump" is emerging also in the NHS, and it should be speedily terminated.
  9.22 p.m.
  Mrs. Elaine Kellett-Bowman: The primary object of everyone who cares about the well-being of the National Health Service and of those who work in it should be to make the best possible use of all available resources. This requires, first, that the terms and conditions of service should be sufficiently attractive to provide the happy team spirit which is so essential and to prevent doctors, nurses and ancillary staff from going to greener pastures abroad. Highly trained medical personnel are very much an international market today, particularly on the American continent.
  Second, it requires that as much money as possible from all sources be channelled into the service. The greatest weakness in the health service is its almost total dependence on central Government funds. When our economy was expanding and plenty of money was, or appeared to be, available to the health service, its total dependence on State money was less damaging. Now, however, when so-called Government funds— which is simply money forcibly removed from the wage packets of members of the public by means of the highest tax rate

  1243
  in the world today—are seriously limited, alternative sources of finance should be carefully nurtured, and not cut off at the root as the present Secretary of State apparently wants.
  If our health service, as it once was, were still the envy of the world, it would seem strange that other countries have not modelled their hospital services on it. The answer, which it is almost heresy to state to the Labour Party, is that there can never be enough Government money for all the calls upon the service. As the Secretary of State herself obliquely illustrated today, there is never enough for building, equipment, wages and research, because the calls are infinite. Yet we are the only industrial democracy in which State hospital treatment is wholly paid for by the Exchequer and private financing is actively discouraged. Yet more, not less, non-Exchequer assistance must be channelled into health care if we are not to face a steady run down in the service, with crises in one sector after another.
  As my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) said, we are this evening faced with trouble among 150,000 administrative staff. This is inevitable if we do not give to the service the money which it needs. With cash in such short supply this is not the time to be cutting off the £30 million which private medicine brings to the NHS. When Aneurin Bevan set up the Health Service he put private beds inside the new hospitals, not for the convenience of doctors, or as a bribe, as the hon. Member for Fife, Central (Mr. Hamilton), who is no longer with us, suggested, but to make sure that the time and skill of the doctors were used to the best advantage. Instead of NHS patients and private patients being miles apart, having them under one roof meant that doctors could keep an eye on all of their patients at once instead of travelling hither and thither from public to private institutions.
  The hon. Member for Wolverhampton. North-East (Mrs. Short) said that hip operation delays were due to the shortage of beds. This is in no sense the case. It is because there is a shortage of the consultants who perform such operations. The waiting time for a private operation of this kind is very nearly two years,
  1244
  which is about the same as that in the NHS. These surgeons are very much in demand abroad, and I fear that they may very well go if they are not given adequate remuneration and an adequate chance of practising privately in this country.
  It is often said, as a reason for getting rid of private education, that too many middle-class parents send their children to private schools and, therefore, have little interest in the State system of education. Surely this should be equally so with our system of health care. It we drive from NHS hospitals those who are prepared to pay, and to sacrifice part of their heavily taxed income to do so, they will have that much less incentive to see that the national health hospitals are kept up to scratch. What is equally important is that these private patients bring great benefits by way of benevolence to the hospitals. They give private benefactions for research purposes. If we drive them from our hospitals we will drive their funds away with them.
  In the hospitals in my constituency the Halsbury Report has made little difference to recruitment, I regret to say. The recruitment situation is much as it was six or eight months ago. We are down on establishment, and the only way we can come anywhere near to establishment is by recruiting untrained staff. We are thankful to have them because they do a wonderful job, but we do not want to reach the stage when we have to rely upon more of these people.
  We have to give our health service workers of all grades a fair crack of the whip. In our Conservative election manifesto, at the time of the last election, we said categorically that we would put people and their wages before hospital building, necessary though that was. That is still our view today. We believe that it is still the human element that is important. We believe, too, that those who give their very lives to the health service should be allowed to do what they wish in their spare time. Why should they be driven to the golf course or to doing their gardening when, if they so choose, they can be giving help to private patients in their own time? They are not stealing the equipment. They are paying handsomely for it.
  It is time we got rid of this sterile argument between private and public patients

  1245
  and all worked together for the benefit of the health service and the good of all.
  9.28 p.m.
  Mr. Cranley Onslow: This has been a short debate but one which, I hope the House will agree, has been useful. Its theme, which has been obvious to those who have listened to all the speeches with care, as I have, has been one of probing and warning. Hon. Members have been probing the many aspects of the health service about which the House and the country have every right to be concerned and have been warning the Government about the programme upon which they are embarked and which we believe to be dangerous. It is these areas which are most in need of closer attention.
  It was clear from the opening speech of my right hon. and learned Friend the member for Surrey, East (Sir G. Howe) just how many grounds for anxiety exist within the National Health Service. He spoke of a "grave and growing concern," and no one who spoke after him—least of all the right hon. Lady—said anything to dispel the truth of that description of the situation we face.
  The unfortunate truth about the right hon. Lady's speech is that it was in many aspects as inadequate as it was embittered. She at least made statements of fact which the House would have benefited from having in the debate on the Queen's Speech. Hon. Members who take an interest in this subject will want to look with some care at what she said about the finances of the health service and at the precise meaning of her forecasts, which I am not sure are particularly encouraging. If I took down her words rightly, the right hon. Lady told us that many important schemes will have to be deferred. The House will want to know as soon as possible which schemes. That, no doubt, is a subject to which we shall return in an early debate.
  Again, if I took down her words rightly, the right hon. Lady said that it will be impossible to maintain an increase in expenditure in real terms over the years ahead. The country would like to know what those words mean. Is there to be zero growth in expenditure, or is there to be a decrease? If. as appeared from something else the right hon. Lady
  1246
  said, more and more proportionately of the NHS budget is to go on salaries, is the decrease in capital expenditure to be proportionately greater? I ask the Minister of State to tell us when we are likely to have a statement about this, because it is a matter which we in the House, the NHS and the country view with great concern. [HON. MEMBERS: "Where is the right hon. Lady? "] I do not know where she is. I would much rather that she did not come. She would only annoy me.
  The right hon. Lady spoke of cutting the waiting list. One of the best ways of doing that might be to staff up the empty beds in public wards. If more patients could be treated, the waiting list would be cut.
  The right hon. Lady talked about priority for health centres. It is as well to be sure that transport will be available, so that patients whose doctors' surgeries are centralised some distance away will be able to get to the health centres and make use of the marvellous new facilities. I say that with a typical case in my constituency in mind.
  The right hon. Lady's speech was characterised by an ungenerosity and narrowness of mind which undermined her arguments and eventually they must destroy them. It is perhaps some consolation to reflect that the right hon. Lady carries within her the seeds of her own political destruction, and I do not think it will be long before they ripen.
  I should like to give the Minister of State the chance to do what the right hon. Lady might have done, which is to answer the questions which are of public concern. I shall give him as much of the remaining time as I can so that he will be able to give us the answers.
  It is not enough, as the right hon. Lady told my right hon. and learned Friend when he asked about democratisation in the health service, to tell us that statements will be made in the House from time to time. I reiterate the question asked by my right hon. and learned Friend. What is the time scale for a decision on that subject?
  I will rehearse some of my right hon. and learned Friend's other questions in case the Minister did not get a note of them. It is perhaps too soon for a statement about the industrial dispute which

  1247
  has blown up amongst hospital administrators, but may we have an undertaking that there will be an early statement in the House about that?
  May we have an early statement by the most convenient means about the orthoptists; about the anxiety of the speech therapists over the appointment of area therapists; about the anxiety of dentists over the appointment of regional and district dental officers; about remuneration of the family planning service; about contracts for hospital junior doctors; about the time scale for the decision on the Halsbury review into the remuneration of nurses and other para-medical services? In particular, may we be told what is the situation about the non-Hals-bury review which is looking into the remuneration of doctors and dentists? What is the state of play? When may we expect a new chairman to be appointed, and what is the relevance of the statement that a pay review will start in April? It may be that I failed fully to follow what the right hon. Lady said, but I do not think I was the only one in the House to be slightly puzzled about the exact state of that review body.
  Finally, in this connection can the Minister give us any further reason why the Government so obstinately refused to commission an independent review of the sources of finance of the National Health Service on the lines suggested by the Royal Colleges? As a newcomer to this scene, I was surprised to see how little of the cost of the treatment of victims of road accidents is recovered from the insurers, and I was amazed that none of the cost of the treatment of accidents at work is recovered from the insurers of employers. It seems to me that substantial sums are involved and that this is a matter which ought to be considered very soon.
  The dominant issue of this debate has been the pay bed controversy and the question of consultants' contracts. I regret that this should have been so. I share the view that this is an unnecessary and irrelevant controversy, and I hope very much that this matter will not dominate the Minister's reply. There is a whole range of other matters which are of great importance to every hon. Member because he and his constituents from ex-
  1248
  perience are the best judges of the way in which the National Health Service is living up to the duty which we lay upon it.
  My hon. Friend the Member for Barkston Ash (Mr. Alison) dealt skilfully and inimitably with the so-called queue-jumping. He dealt very well with the hon. Member for Fife, Central (Mr. Hamilton) as well. My hon. Friend the Member for Canterbury (Mr. Crouch) was absolutely right in expressing the need to strengthen the Health Service, although I am not sure that I would agree that the relationship between the regions, the areas and the districts applies to every region or area or district throughout the country. However, I agree that there is a clear need to allow things to shake down. This makes me wonder why the right hon. Lady has thrown the joker of so-called democratisation into the situation.
  There were, amazingly enough, one or two matters which were not mentioned. We did not hear about the Briggs Report. The House will want to know what is happening about nurses' training. Hon. Members will also be interested in any thoughts which may be developing on the humanisation of Salmon, if I may use that phrase.
  I am sure the country will be interested to know what the Minister of State has to say about a recent report in the Press that new immigrant doctors will have to go through a language examination before they become active participants in the National Health Service. This is something which we may want to probe in the future. A more important subject is the adequacy of the number of doctors actually practising in this country and whether this is increasing or whether we face the danger of a decline.
  May I say a word about a very important subject, the status and treatment of ancillaries which the right hon. Lady mentioned briefly. She told us that an offer had been made to the ancillaries under the Whitley Council procedure. I wish she could have explained why, when for years the hospital ancillaries have been treated as being comparable to local government manual workers, the local government manual workers have been allowed a £30 settlement whereas hospital ancillaries have been offered £29·45.
  Mr. John Tomlinson Mr. John Tomlinson (Meriden) rose—
  Mr. Onslow: No, I am not going to give way to the hon. Member. These facts, which come to me from the chairman of my local COHSE branch, I am happy to hear commented upon and challenged by anybody, even the hon. Member, whose voice delights us, but we shall have to forgo that pleasure tonight.
  I turn to another point of substance. How do the Government intend to deal with the anomalies which have sprung up in the South-East, in particular, in relation to the London weighting allowance? Hospitals in the same town—this is so in my case, at least—will be on one side or the other of the line, and the effect on hospital recruitment will be damaging to those which lie outside the London weighting ring. Yet within the same county—again, this is true in Surrey— all local government employees have been given a London weighting allowance.
  I wish to honour my promise to give the Minister of State as much time as possible.
  Mr. William Hamilton: Nothing left to say, I suppose.
  Mr. Onslow: There is no question of my having nothing else to say, though I assure the hon. Member for Fife, Central that I can find nothing to say about his inherently irrational remarks. I do not know why he bothers to bore us with them. If he wrote them all down, people would be able to buy them, and I dare say that some would. But the purpose of a debate of this kind is to afford the Minister an opportunity to give the House and the country information. One can always spin out a speech with a bit of waffle turned out by the Department, as the right hon. Lady reminded us this evening. But I want to give the Minister a chance to give us some facts.
  However, before doing that, I must return for a moment to the right hon. Lady herself in order to ask her whether she really meant what she said when she told the House that the greater the stringency the nation faces the more necessary
  1250
  is it that the Government should be seen to be building a fairer society.
  Mrs. Castle: Hear, hear.
  Mr. Onslow: Plainly, the right hon. Lady means what she says. I have to tell her, however, that that sort of argument puts me in mind not so much of "Animal Farm" or "1984" but of "Planet of the Apes", for who is to say what is fair? Is it to be only those who are parties to the social contract? Is it to be only those who are lucky enough to have the right hon. Lady's ear? Are the professions to be given an opportunity to say what is fair? Are the patients to be given an opportunity to say what is fair?
  Mrs. Castle: Not under a Tory Government.
  Mr. Onslow: Instantly, the right hon. Lady reacts, as she has so often done, by putting all the blame on her predecessors, never on herself. Ask her a question and she gives a non-answer.
  Probably, it is impossible for any Government ever to spend enough on the National Health Service to satisfy everyone or to meet every need. The demand must always outrun society's collective ability to pay. I hope that the right hon. Lady will agree with me at least about that. It follows that the more that ability is limited the more irresponsible and the more obscene it is, to borrow the favourite word of the hon. Member for Fife, Central, to constrict the individual's right to add from his own resources to the total sum spent on care or the total effort devoted to care.
  This debate takes place against the background of great national anxiety. The Government have a special duty to set dogma aside, to forgo narrow political objectives and to prove that they really do care, to prove that they are not interested in narrow political objectives but that they want the nation to have the chance to do everything it can for itself. When she comes to be judged—and may it be soon—the right hon. Lady will be judged not on her political invective but on her practical achievement. It is a tragedy that she has shown so little sign today of knowing what the real needs of the nation are.
  9.45 p.m.
  The Minister of State, Department of Health and Social Security (Dr. David Owen): I am sure the whole House will welcome the hon. Member for Woking (Mr. Onslow) to the Dispatch Box to talk for the first time on the subject of the National Health Service. No doubt we shall disagree on certain matters, but we are well aware of the interest which the hon. Member's wife takes in the subject and which the hon. Member will now increasingly take, and we welcome him to these debates.
  I shall do my best to pick up certain points of detail raised during the debate and subsequently to deal with points of principle which hon. Members have been discussing.
  The right hon. and learned Member for Surrey, East (Sir G. Howe) and other hon. Members asked about democratisation of the health service and the time scale of decisions. The hon. Member for Canterbury (Mr. Crouch) also raised this issue. We shall certainly not be putting proposals before the House until the new year. We have recognised all along that we shall have to proceed at a pace which the health service can stand.
  Since we came into office only three weeks before the date set for re-organisation, we have accepted reluctantly that the room for manoeuvre and change would always be limited by the state of the health service, and as the reorganisation problems grew so we were bound to temporise on any changes we wanted to make by that fact, but we did not accept it as an argument for maintaining the status quo. We intend to adopt a voluntary appoach, and the proposals put forward for consultation primarily affected membership of the various health authorities.
  The right hon. and learned Gentleman asked me about the most recent industrial dispute, and I shall deal with it briefly. The Administrative and Clerical Whitley Council has offered to reduce the conditioned hours of administrative and clerical groups from 38 hours to 37— 36 in London—from 1st April next, this being the date of the next 12-month pay settlement for this group of staff. The staff side has been seeking a much earlier operative date for the reduction of the conditioned hours. The management side did not feel that a date earlier than the
  1252
  next annual review was appropriate, but it has offered to submit the case to the Conciliation and Arbitration Service for arbitration, and I hope that the staff side will take up the offer of arbitration.
  We recognise that many of the people involved in this matter have worked very long hours and have taken on the very difficult task of implementing some of the recent pay settlements, some of which have been extremely complicated, and I would hope that they would agree with us that this question should at least be put to arbitration.
  A number of other questions have been raised concerning the orthoptists and speech therapists. These form part of the professions supplementary to medicine, and the Halsbury inquiry is now proceeding with its examination in depth bearing in mind the staff side's request to review each of the eight professions independently. We have been told by Lord Halsbury that it would be unwise to assume completion of this examination before the end of the year. It will be the first time some of these professions have been looked at individually and in such depth for many years.
  The remedial professions generally need special consideration. They are extremely important in terms of rehabilitating people back into the community, and I hope that Lord Halsbury's inquiry will lead to major improvements which the whole House will be able to support.
  I have been asked about dentists. I will look into the particular problem referred to, but I accept that the dental service needs close scrutiny. It is facing severe problems because of inflation. We have recently had to increase substantially the fees that dentists receive, and rightly so. We took the decision that we would not increase the charges to patients, and I agree that we now need to look in a fairly fundamental way at the problems of the dental service.
  I turn now to family planning. It needs to be put on the record that the question of the GP's fee was put to the Doctors' and Dentists' Review Body and it made a recommendation which the Government accepted but which the profession felt unable to accept. It was largely because of that that we were not able to bring general practitioners within

  1253
  the embrace of the comprehensive family planning service, which is something the whole House wishes to happen. Negotiations are taking place between representatives of the family doctors and representatives of the hospital doctors, and I hope we shall reach a solution to these problems.
  I have also been asked about junior hospital doctors. In November last year the Hospital Junior Staffs Group Council of the BMA submitted proposals for extensive changes in junior doctors' contracts. It was a lengthy document, which included 30 detailed and far-reaching proposals for changes in the contract. I do not complain about that. They relate to the content of juniors' contractual commitment, arrangements for residence, and hours of work. We have had a number of meetings with the council to discuss those proposals. I am very sympathetic to their objectives. Hon. Members on the Government benches have fought the case for junior doctors for many years. Firm agreements have been reached on several counts. Further consideration is now required, and we are due to have a meeting with the juniors next month.
  Sir G. Howe: I hope that the hon. Gentleman understands, and will convey to those representing him in the talks, the extent to which the junior doctors feel that they are not receiving authoritative responses. They are truly frustrated—I know, because I had the opportunity to talk with them last week—by the recurrence of meetings which seem to lead nowhere. If the hon. Gentleman will impress on those conducting the discussions the importance of reaching firm conclusions it will be much appreciated.
  Dr. Owen: I shall certainly do so. It is a cause near to my own heart. We need to look carefully into this matter and many other aspects of doctors' pay.
  I was also asked about the appointment of a new chairman to the Doctors and Dentists Review Body. My right hon. Friend the Prime Minister told the House only last week that he would make a new appointment as soon as possible. The Government recognise the need for speed in that area.
  1254
  I come now to some of the detailed comments. The Government attach a great deal of importance to the Briggs Report on nursing, which offers the possibility of a major change in the whole nursing profession. Some hon. Members have said that despite the increase in nurses' pay recruitment in some areas has still not increased. There is much more to the problem of nurses than the matter of pay, although that is an important ingredient. Legislation will be needed before the reforms can be brought into effect. We intend to try to introduce a Bill at the earliest opportunity. On 18th September more details of the Briggs proposals, made after full consultation with all the interested parties, were sent to the statutory and professional bodies and service authorities for their consideration. Therefore, it can be seen that we are moving ahead as fast as we can.
  My hon. Friend the Member for Enfield, North (Mr. Davies) referred to a problem which I know has worried him and many other hon. Members for some time—that of agency nurses. We are determined progressively to reduce the dependence of the National Health Service on nursing agencies. Increases in nurses' pay, together with the changes that have been taking place, the prospect of implementing Briggs, widespread concern about the use of agency nurses in hospitals, and the current financial restraints, make this an ideal time to take firm action. We shall be consulting the staff side before we issue a circular to help authorities on agency nurses.
  Having dealt with many of the detailed points, I come to two central themes of the debate. The first was the question of financial resources. The hon. Member for Woking said that the House would want to know what schemes were likely to be deferred and when there was likely to be a statement of the details. The main thing that we must do first is to consult widely. My right hon. Friend the Secretary of State made clear that a number of consultations must take place. If we are to protect medical students' intake, we must consult the University Grants Committee as well as the deans of the medical schools.
  The priorities that my right hon. Friend outlined have not yet been challenged.

  1255
  Although the debate has had some elements of controversy, the one area where there does not appear to be controversy in the House is the Government's decision to put the priority, at a time of difficult financial circumstances, on people before buildings. However, I hope that the House realises the consequences of making such a choice. Many projects close to the hearts of all hon. Members, and affecting their constituencies, will have to be postponed. The economic situation on capital account is not easy. Therefore, we shall all have to make choices, and the sort of choices outlined by my right hon. Friend will have severe consequences.
  We cannot do as we hoped to do— namely, to protect the geriatric services, the mentally handicapped services and the mentally ill services—without feeling the pinch elsewhere. What must stop is the degree of special pleading in the House which tends to dominate the health services. If we are to make broad choices there is a responsibility on both sides of the House to try to stick to them through difficult times. We have laid out the basis on which we shall go to the health authorities. We shall let the House know the full implications for some of the capital projects as soon as possible.
  I now deal with the issue of private practice. The right hon. and learned Member for Surrey, East talked about the Government seeking to generate strife and dissension. This is not a new cause of disagreement. The right hon. and learned Gentleman fails to realise that private practice within National Health Service hospitals has been a subject of controversy for many decades. It aroused controversy even before the National Health Service was established. The controversy has increased. It is bound to be the case that as health services are rationed services we cannot provide for and meet every need. If we are to provide a private service within a National Health Service hospital the co-location or the proximity tends to cause ill-feeling and emotion and raises controversy.
  I must tell the right hon. and learned Gentleman and many Conservative hon. Members that they would do well to look at some of the documents—they were only negotiating documents but they had to be released and published because of
  1256
  a lot of leaks—before criticising some of the Government's proposals. Some of the documents to which I have referred appeared in the House in early November. They make it clear that the Government are not seeking to generate strife and dissension. The House owes it to itself to put some of the criticism in perspective. The Lancet, one of the most distinguished medical journals, says of this matter
  "Another interpretation, to which we inclined, was that the Government proposals (to which, as yet, no costing has been applied) formed a basis for negotiation. There was nothing here which inevitably put 'professional independence at stake' or which could be convincingly called 'the persecution of part-time consultants'. Indeed, on reflection, many consultants and near-consultants might find the proposed full-time contract decidelly attractive. Anyway they should be given a longer chance to consider all its aspects, before their representatives precipitate them into a confrontation which would drive deeper wounds into the vitals of the NHS.
  The fevered stance of the BMA and the Hospital and Consultant Specialists Association is almost, but not quite, one from which their representatives can unbend only with loss of dignity; and the Government must strive to offer them every chance to yield not too uncomfortably, to compromise."
  That is the view of one professional journal. In addition, we must consider some of the correspondence that has been published in the British Medical Journal. Many people believe that the Government's proposals offer a great deal to the National Health Service.
  When considering private practice the House should ask itself a few basic questions. If society decides, as it did in 1946, that its national pattern of health care should be organised on the basis of need, it is inevitable that people will question the justification of a health care system organised on the ability to pay. The fundamental issue of principle is whether the Government should support a system of health care which may mean that the time of highly-skilled people is allocated not to those who most need such skills but to those who can pay for them.
  The hon. Member for Barkston Ash (Mr. Alison) put his finger on the point when he said that doctors' skills are scarce. What we hope to have is distribution of such skills according to need and not according to the ability to pay. We recognise that the problem of waiting

  1257
  lists will not be completely solved by the abolition of pay beds within National Health Service hospitals. That is only part of the problem. One of the proposals—
  It being Ten o'clock, the motion for the Adjournment of the House lapsed, without Question put.

  POST OFFICE (COMPENSATION)
  10.0 p.m.
  The Under-Secretary of State for Industry (Mr. Gregor Mackenzie): I beg to move,
  That the Compensation for Limitation of Prices (Post Office) Order 1974, a draft of which was laid before this House on 29th October, be approved.
  This order—
  Mr. John Stanley: On a point of order, Mr. Speaker. We are in an unhappy position. The order has been considered by the Select Committee on Statutory Instruments, but although the Committee has produced its report, which is available to hon. Members, the minutes of oral and written evidence on which it is based are not available to hon. Members at this moment. I appreciate that this is no responsibility of yours, but could you advise the House as to what is the status of the proof of the minutes of oral evidence which has been made available to some hon. Members by courtesy of the Clerk to the Select Committee for purposes of debate?
  Mr. Speaker: As the hon. Gentleman rightly says, it is not a matter for me. Therefore, my advice is that the piece of paper he has is worth exactly what he thinks it is worth.
  Mr. Mackenzie: I appreciate what the hon. Member for Tonbridge and Mailing (Mr. Stanley) has said. I was only made aware of the situation a short while ago. I apologise to the House.
  I take this opportunity of welcoming the hon. Member for Henley (Mr. Heseltine) to what we used to regard as the "Post Office club". This is my first ever effort as a member of the Government in a Post Office debate. I made many speeches from the Opposition as a spokesman on Post Office matters, and thoroughly enjoyed doing so over the years. I can only hope that the hon. Gentleman will, in the fullness of time, become a Post Office man, like my right hon. Friend the Secretary of State for Industry and myself, and will spend many happy years in which he can make speeches against us on these matters.
  1260
  This order is made under Section 2 of the Statutory Corporations (Financial Provisions) Act 1974. I think it would be helpful to the House if I were to explain first of all how the order fits in with the Act and with the other orders which have already been considered, and then to describe some of the background to the present order.
  Section 2 of the parent Act, which the hon. Gentleman knows well, provides that the appropriate Minister may make by statutory instrument an order in the case of a number of bodies corporate, including the Post Office, for the purpose of compensating them in respect of financial losses which may be or have been incurred by them, in either of the financial years 1973–74 and 1974–75, in consequence of their compliance with the national policy relating to limitation of prices.
  This order deals only with the Post Office and only with the year 1973–74, and proposes the payment of £123,567,000 by way of that compensation. My right hon. Friend's powers are limited by the Act in the following ways: the amount in the order shall not exceed the Post Office's deficit on revenue account in 1973–74; the order may only be made after consultation with the Post Office and with the consent of the Treasury; and the aggregate amount of all orders made under this section of the Act is limited to £400 million.
  There is also a special provision affecting the Post Office, and that is that reference to financial loss incurred and to a deficit on revenue account shall be construed as if each branch of the Post Office's business were taken on its own.
  I am sorry to have wearied the House with that explanation, but I thought it wise to spell out the statutory background, for two reasons. The first is to remind the House of the legislation which was passed. The House has seen fit to provide for the payment to nationalised industries of compensation for price restraint in 1973–74, and my right hon. Friend is now simply complying with that desire in making this order. On the other hand, the parent Act does not provide for compensation to exceed the deficit in 1973–74. It was suggested in the debates on the parent Act that compensation should be on the basis of revenue forgone, which in the case of some industries

  1261
  would have been greater than the deficits, but in the event the legislation did not permit this in the case of 1973–74. The other reason for referring in detail to the provisions of the parent Act is to remind the House of the duties and discretion given to my right hon. Friend, and to explain how he has fulfilled the various requirements.
  One point I should like to deal with straight away concerns the provision that the compensation shall not exceed the deficit. The Joint Committee on Statutory Instruments has advised that the wording of the order should make it clear that this provision has been complied with. That is, I think, a matter of judgment and opinion; the parent Act merely stipulates that compensation shall not, in fact, exceed the deficit, and is silent on how this point shall be dealt with before the House. However, in view of the Joint Committee's advice, let me state here and now that the amount specified in this order does not exceed the Post Office's deficit on revenue account for 1973–74, and, further, that the amount calculated in respect of each of the Post Office businesses which is to receive compensation does not exceed the deficit of the business in question. I think that all of us present tonight know that national policy has played a very major part in limiting prices and that the Post Office has complied with its limitations on prices over the period concerned.
  During the financial year in question statutory price controls were in force throughout, all of which applied to the Post Office. In April 1973 the statutory price freeze was replaced by the stage 2 Price Code, which in turn was replaced by the stage 3 code before the end of the year. Under stage 2 and stage 3 the Post Office businesses were permitted to increase prices to contain their deficits to the 1972–73 level, but this was subject to the power of Ministers to cut the increases back to those necessary to pass on increases in allowable costs since September 1972.
  However, in looking at the effect of price restraint in 1973–74 we should not concern ourselves primarily with events which took place in that year. The deficit of a business in a given year is determined by a number of factors. One is, of course, the cost increase incurred in that year as a result either of the
  1262
  expansion of the services or of increased pay and price levels in the business. This may be offset by increases in income earned from business expansion or from higher selling prices. But even if all the cost increases which arise in the year are passed on at once in higher prices, if the business has started the year in deficit further price increases are necessary to eliminate the inherited deficit. The Post Office entered 1973–74 with an inherited deficit, as a result of price restraint policies in earlier years. There was, for example, the price freeze imposed in November 1972, and this followed a continuous period of price restraint for nationalised industries under the CBI initiative which began in July 1971. Even before then the Post Office had been discouraged by the Government from raising prices on the postal side to the levels which would have been necessary if it was to meet its financial target.
  Thus it was that in 1971–72, the first year of the CBI initiative, although the retail price index rose by 6·3 per cent., postal charges went up by only 5 per cent. and telecommunications charges rose by only 2 per cent. As a result, the postal business incurred a deficit of £12 million, while the telecommunications business saw its profits reduced from £94 million to £58 million. In the following year, 1972–73, although retail prices went up by 9·2 per cent., telecommunications prices went up by only 3 per cent. and postal charges did not go up at all. As a result, the Post Office recorded its first overall deficit since 1956, amounting to £64 million. Of that sum, £10 million was incurred on the telecommunications side and £43 million on the postal side, the balance being accounted for by the Giro and remittance services.
  Mr. John Page: The hon. Gentleman referred to telecommunications prices going up by 3 per cent. overall. Does that include the capital charges for installations?
  Mr. Mackenzie: That is the point that I have made.
  Mr. Page: That is right, is it?
  Mr. Mackenzie: Yes. I shall explain the Giro situation a little later in my comments.

  1263
  In the circumstances, the Post Office having incurred those deficits, there was very much concern and, naturally, the desire was to strike a happy balance. If it had not been for the fact that there were such restraints on the Post Office, there is no doubt that it would have put on charges which were more comparable with the situation obtaining at the time. However, the provisions of the Price Code prevented increases of the size required, since the deficit containment provision of the code limited the Post Office to the levels of 1972–73, which was a deficit year. Although the Post Office applied for the largest increases which it judged to be achievable under the Government's policies, events did not go its way.
  As is made clear in the Post Office's report and accounts for 1973–74, the Post Office inherited a loss of £64 million from the previous year. It then had to face increased costs of £172 million and an increased pension fund provision of £37 million. To some extent these were offset by business expansion coupled with improved efficiency, which yielded £20 million in the year. Even so, to bridge the residual gap price increases bringing in about £180 million in the year would have been needed. But, because of counter-inflation policies, the stage 2 increases finally granted yielded only £52 million in 1973–74.
  This is how, in 1973–74, the Post Office, having been unable over a period of years to respond to inflationary conditions by raising its own prices, incurred a record loss of £128 million and why the Government have decided to pay compensation equal to the deficits in respect of the postal and telecommunications business.
  For the Giro and remittance services, the agreed compensation will be equal to the loss on remittances but less than the total loss on Giro. This is because only a part of the Giro deficit was incurred as a result of compliance with price restraint policies, the remainder being attributable to marketing and commercial factors which cannot reasonably be laid at the door of the Government.
  I should not like to leave the year 1973–74 without a reference to the more positive side of the record. More than
  1264
  1,460,000 telephone connections—a record number—were added to the system, which grew to nearly 12 million. The telephone waiting list—always a matter of great concern—was reduced from 200,000 to 109,000. Local telephone calls increased by nearly 10 per cent. to more than 12,000 million, trunk calls by 10 per cent. to more than 2,000 million, and international calls by 14 per cent. to more than 60 million. By the end of the year, more than 99 per cent. of local calls and 87 per cent. of trunk calls could be dialled direct by customers. In the telecommunications business, continued productivity improvements resulted in savings equivalent to 4,800 engineering and 1,550 clerical and executive staff. In all, staff numbers increased from 240,000 to 242,000 or by less than 1 per cent., much less than the rate of growth of the business.
  As for posts, the year was difficult. Despite acute staff shortages in London, the Home Counties and the Midlands and disruptions due to letter bombs, which have caused so much concern in recent days, vigorous efforts were made to maintain an acceptable quality of service whilst absorbing a 2 per cent. increase in the number of letters posted.
  I should mention here that counter staff coped very successfully with the payment of the £10 bonus to pensioners as well as issuing 18·5 million petrol coupons to motorists during the busy Christmas period.
  Additional post-bus services were introduced in the rural areas of England, Scotland and Wales, increasing the total number of such services from 13 to 41 during the year. Giro, too, often a point of conflict within the House, made good progress, reducing its operating loss to £4·1 million and increasing its turnover by about 40 per cent.
  Mr. John Page: I apologise for seeming to interrupt more often than anybody else. Was the cost of issuing petrol coupons given a figure or swallowed? Was the cost made up by any other Department to the Post Office as a service charge by the Post Office or was it a charge that was put upon the Post Office completely for its account?
  Mr. Mackenzie: The Post Office only distributed the petrol coupons. The hon. Gentleman knows the system much better

  1265
  than I do. I had nothing to do with it then. I do not see why I should have to defend the issue of petrol coupons or anything else.
  Mr. John Page: I was not attacking the hon. Gentleman. I was merely asking what the cost to the Post Office might have been in extra staff and effort in distributing these petrol coupons. It was done with incredible efficiency and courtesy.
  Mr. Mackenzie: I do not have the information for which the hon. Gentleman asks. The only information that I have is the number of coupons issued by the Post Office at Christmas last year. I was paying a mild tribute to the Post Office staff for coping so valiantly with that problem.
  I refer to these achievements because it is worth making clear to all concerned that whilst there is this loss, for which we are asking for compensation tonight, in my view it does not reflect on the management of the Post Office, nor on the staff, who have applied themselves so magnificently to the task over this last year. However, while this House is able to make good the loss by the payment of compensation, this does not in any way remove the cause of the problem that we face. As long as price increases lag behind cost increases, so does the underlying deficit carried over from one year to the next grow in size, the greater are the price increases needed to rectify the situation, and the greater are the losses recorded in the meantime.
  This, then, is the background to our present policy on nationalised industry prices which my right hon. Friend the Chancellor of the Exchequer spelt out in his two Budget speeches. My right hon. Friend recognised in March that it was necessary to take immediate action to reduce the deficits of the nationalised industries and to reflect costs more closely in prices. The alternative was a heavy excess of demand for the products concerned, the collapse of financial disciplines and an unacceptable level of support by the Government.
  Mr. Tim Renton (Mid-Sussex): Before leaving the financial year 1973–74, will the hon. Gentleman tell us how the pension fund deficiency was treated in that year? Was full account taken in the
  1266
  accounts for 1973–74 of the necessary deficiency in the pension fund according to actuarial calculations?
  Mr. Mackenzie: I shall be dealing with the pension fund in the borrowing powers order, which is the more suitable place to deal with it.
  I wanted to get across the point about prices because I regard it as extremely important. I wanted to emphasise what the Chancellor said about increasing prices to meet the deficits that we are facing. At the moment we are all concerned, as is the Chancellor, who made this clear last month, that we should not allow these deficits to go any further than we have done so far.
  Our expectations about prices in the earlier part of the year were only partly fulfilled, and experience shows that after prices have been held at far below their true cost for several years it is impossible to achieve a realistic level all at once. But it is our objective to phase out the subsidies completely, and as fast as possible. The specific measures needed will depend upon future movements of labour and material costs and be in large part for the industries themselves, subject, of course, to the jurisdiction of the Price Commission and the Minister concerned.
  I think we have to ask ourselves how far the Post Office fits into the strategy of the two speeches made by my right hon. Friend the Chancellor of the Exchequer. In his earlier speech he referred to proposals for price increases. These were put to the Price Commission in the summer, and they have now been implemented. However, there was some delay in the timetable envisaged in March, and in the case of telecommunications the increase was cut back by the commission.
  Further, in common with other nationalised industries, the Post Office has found its costs increasing faster in the current year than it had anticipated. For these reasons, the deficit of both the postal and telecommunications businesses is expected to be larger in the current year than in 1973–74, and the total Post Office deficit is currently expected to be a little over £300 million in 1974–75.
  The Post Office's forecasts for future years show that the deficit will grow larger unless it is checked by tariff action. Substantial tariff increases in 1975–76 seem to me to be unavoidable, but these will need to be considered within the

  1267
  broad general Budget strategy, and they will, of course, have to conform with the stage 4 Price Code and be the subject of consultations with the Price Commission and the Post Office Users' National Council.
  I have already referred to the situation in 1974–75 and the prospects for future years, because, clearly, the present financial problems of the Post Office and other nationalised industries are of a continuing nature and do not stop short at the end of a particular year.
  It is evident that this will be a testing time for the Post Office. The deficit will grow unless action is taken, and I think that in such circumstances strong management is required. It is, therefore, a particular pleasure for me to be able to tell the House this evening that Sir William Ryland has agreed to accept my right hon. Friend's invitation to continue to serve as Chairman of the Post Office for a further three years.
  The order that we are discussing is confined to the money needed to compensate the Post Office in respect of the single year 1973–74, and there will no doubt be later opportunities to discuss the present and future years in more depth. I have tried to show, perhaps at length, how the present order fulfils the will of the House that gave rise to the Statutory Corporations (Financial Provisions) Act, and I commend the order to the House.
  Mr. Tom King: The hon. Gentleman said that the deficit of £300 million for this year would involve tariff increases in 1975–76. Is he saying that the Post Office is suffering from the fact that it is difficult to recover from deficits that have built up? Is he saying anything about an intermediate tariff increase?
  Mr. Mackenzie: The hon. Gentleman and some of his hon. Friends have a bit of a crust in raising some of these points. I wish to repeat that the order we are now considering arises as a result of legislation passed by the hon. Gentleman and his hon. Friends. The deficit we are concerned with—it is a very big deficit— is the result of measures passed by the hon. Gentleman and his hon. Friends.
  In the order I am having to ask the House to pay the bills incurred by the hon. Gentleman and his hon. Friends.
  Mr. Tom King: With respect to the Minister, the deficit which he has just announced is twice as much as the figure in respect of the order which he is now moving. As I understand his speech, he has made absolutely no statement about a deficit of more than twice as much. The figure he quoted was, I think, £300 million, but the figure covered in the order is £123 million. The deficit for the period during which his Government took responsibility is more than twice the other figure—
  Mr. Speaker: Order. This is becoming much more like a speech than an intervention.
  10.26 p.m.
  Mr. Michael Heseltine: I bow to your judgment, Mr. Speaker, about the length of the intervention of my hon. Friend the Member for Bridgwater (Mr. King) but he seemed to have a valid point. The Minister has not answered the gist of my hon. Friend's question. My hon. Friend was taking the Minister to task for suggesting that we in some way failed for incurring a deficit of £123 million. The Minister said this only a few seconds after announcing that his Government had incurred a deficit of £300 million—
  Mr. Gregor Mackenzie: A likely deficit.
  Mr. Heseltine: I am glad to hear that the deficit is disintegrating before our eyes. If the hon. Gentleman deplores what we did in the interests of counterinflation, it is disturbing to hear that he has succeeded in almost trebling the deficit within the short period of a few months. Perhaps my hon. Friend will have an opportunity to pursue this point later in the debate.
  The figure of £123 million, which the Minister referred to in moving the order is compensation for three of the Post Office's divisions in which losses have been incurred, and these losses aggregate just over £123 million. The divisions are telecommunications, posts, and the Giro and remittance service, the first two of these having accounted for 100 per cent. of the recoupment, while the Giro and remittance service has not recovered 100 per cent. but only half of the deficit incurred as a result of the price restraint policy.

  1269
  The question that I did not hear the Minister answer is a critical one. I understand the totality of the amount because that is clearly in the Post Office's accounts, but how does the Minister know that these figures are the figures that were imposed on the Post Office as a consequence of the price restraint policy? I understand that the deficits are included in the audited accounts, but that is not the point. The point of the counter-inflationary legislation which we introduced was to compensate the Post Office for the deficits it incurred as a consequence of the legislation.
  I find it extraordinary that the Minister should come to the Dispatch Box and simply accept the balancing figure in the accounts as having been the figure that was caused by the counter-inflationary legislation, without producing a single shred of evidence to support that contention. Perhaps when he replies to the debate the Minister will show where in the accounts it is suggested, or where calculations are to be found, that the Post Office lost £123 million as a consequence of the price restraint legislation. I do not believe that such figures are shown in the annual accounts of the Post Office, and this is what the debate ought to be about.
  I fully understand the Minister calling, as he seems to be, on the Secretary of State for Industry for assistance. If the Secretary of State is to reply to the debate I would be even more enthusiastic to hear the winding-up speech than I already am. We are concerned with a critical question, and I am sure that the Minister will have taken the point on board. We simply want to know what is the basis on which the calculations were made. I believe, having read the accounts for 1973–74, that no such figures are included in those accounts.
  The Minister said that the loss did not arise because of the management or the staff. How does he know that? He said, as the stark figures show, that commercial factors played a part in the Giro and remittance service. That is why the loss is not wholly claimed by the Post Office. But how do we know what the figures are? Only if we know the figures can we judge the Post Office's results.
  In the Government memorandum, intriguingly, we read that the figures in
  1270
  two important sections of Post Office activity are precisely equal shown on the profit and loss account of those two divisions. The report and accounts for 1973–74, for example, show on page 83 that in none of the past 10 years has the postal side broken even. Is it not a remarkable coincidence that in this one year the break-even result, to the nearest £1,000, should have been achieved and that the difference between the figures in the accounts and the deficits should have been attributed to the price restraint legislation?
  Precisely the same argument applies to page 71, where one finds the 10-year trading record of the telecommunications division. In none of those years did it come near breaking even. There were surpluses in some years, losses in others. Why, this year, has it precisely broken even, the difference between deficit and break-even point being matched by the amount supposed to have been incurred as a result of the price restraint legislation? The Government will have to persuade the House why we should not be incredulous about this coincidence of financial accounting, of a kind rarely seen in documents of this complexity.
  In the minutes of evidence of the Select Committee, on 19th November 1974, the hon. Member for Keighley (Mr. Cryer), whom I am glad to see in his place, asked one of the officials concerned about the accounting procedure, and whether they were satisfied that it had been properly carried out. He was on the right track, although, with respect, he did not pursue the point with the force which he will no doubt show tonight. He was talking about the electricity boards, but precisely the same arguments apply. He said:
  "I imagine that you are happy that the various area electricity boards are not asking for lavishly high sums and disguising behind round figures extra costs which they have not already incurred Were the accounts audited to your entire satisfaction?"
  That, in much shorter form than I have been able to manage, is the question that I am directing to the attention of the House.
  The reply to the question was:
  "They were certainly audited to our satisfaction, yes. They were audited to the normal standards which apply to the industry."

  1271
  The hon. Member took that at its face value and accepted it for the assurance that it could have been assumed to be. But was it an assurance? Did it actually say that the deficiency had been audited?
  Will the Minister say that these great accounting firms had put their names to the contention that these claims were valid? Did the auditors agree that the sums claimed in respect of these deficiencies had been incurred totally as a consequence of the price restraint legislation?
  Mr. John Golding: Can the hon. Gentleman explain precisely how those figures have been calculated, and can he go on to tell us what evidence was given to the Select Committee on Nationalised Industries by a Minister of the Government of which he was a member when this problem was ventilated?
  Mr. Heseltine: Sadly, the hon. Member will recall that a General Election took place between the giving of this evidence and the time when the Government of which I was a member were in power.
  Mr. Golding: The hon. Member is obviously under a misapprehension. I am referring to the Select Committee on Nationalised Industries, which studied this under the heading of "Investment for Nationalised Industries" when a Minister from his party was in control and answerable on that point.
  Mr. Heseltine: I do not wish to cross swords with the hon. Gentleman on this because I believe that this House is incapable of monitoring the performance of the nationalised industries. There is no method, no expertise, here or within the Civil Service, sufficient to exercise the necessary control over the nationalised industries. I say that having been a Minister responsible for a nationalised industry. If Labour Members believe that there is such a method they are deceiving themselves. They have not come to grips with the massive task, which the Secretary of State for Industry is beginning to understand.
  It is one of the reasons why I am so fearful of expanding public ownership. I know that in the end the judgments are political compromises, taken for reasons
  1272
  which never see the light of day on the floor of the House. We deceive ourselves; if we think that we have the ability to probe and understand what is being done in our names every day. Later tonight we shall be coming to the £1,000 million issue. It is only the Secretary of State and I who understand the nature of spending such sums of money. Few Ministers have an understanding of this.
  Mr. Golding: The hon. Gentleman has waffled on. Does he know what evidence was given to the Select Committee by a Minister from his party when in Government?
  Mr. Heseltine: If I can build up the expectancy of the House, no, I do not know what evidence was given. It will give the hon. Member an opportunity to make an interesting contribution to the debate. I shall listen with interest to him. I doubt whether it will change my views. I have had some experience in the administration of these affairs.
  Page 27 of these accounts says, under note 2 of the report of the auditors:
  "A summary of the fixed assets and procedures for recording fixed assets and depreciation are set out in Note 13. With the exception of the assets referred to in that note, having an aggregate net book value of £730 million, for which asset registers are maintained, we are not yet able to verify the net book values appearing in the balance sheet and the depreciation charged to the profit and loss account nor to ascertain the actual surpluses and deficiencies on net book values which should be included in the profit and loss account in respect of assets withdrawn from service. The Post Office is continuing to study possible methods of overcoming these difficulties."
  What is being said there is that in respect of the net assets of the Post Office only £713 million have been properly recorded in the register of assets. That seems worth probing, especially if we turn to page 29 and find that the net assets amount to £4 billion. The auditors are saying that, while net assets are in excess of £4 billion, only £730 million of those assets have been recorded in the books of the Post Office in a way that enables the auditors properly to establish whether depreciation charges are rightly recorded.
  The House will wish to know what depreciation charges are included in the accounts. I refer the House to page 32, where in respect of telecommunications the depreciation charge is given as £286

  1273
  million, almost none of which could conceivably have been verified by the auditors, because the auditors were not able to inspect the register of assets of the Post Office. Will the Minister tell us whether he was satisfied? The management and staff of the Post Office are not responsible. The previous Government are responsible for the deficiency. Perhaps the Minister will tell us how he knows what two international firms of accountants are incapable of finding out.
  Perhaps the Minister will also tell us what is the procedure in the Post Office which is described as a continuation of study of possible methods of dealing with the situation. How far has the study gone? I am not trying to make a party point. I am not blaming the Undersecretary of State for what has gone on, because I realise that he was responsible only for approximately one-sixth of the period covered by the accounts. I want to know what is happening in the Post Office and what the Minister has done to expedite the study referred to in note 2 on page 27, signed by the accountants on 22nd July 1974.
  Mr. Bob Cryer: I take it that the hon. Gentleman is questioning the system and not the integrity of the people involved in the Post Office, the accountants or the civil servants? The hon. Gentleman is talking about the principle, and I think he accepts that everyone concerned works to the utmost of his ability to get out accurate accounts.
  Mr. Heseltine: I am not prepared to follow the hon. Gentleman along the lines he suggests I should go. It would be tempting to suggest that everyone has done his best, but it is equally possible to interpret this set of accounts as saying "That is what we have lost, that is the method of recovering it from the Treasury, because legislations exist to recoup it, and that is what we will do." That would be a soft option to pursue. Holding the view I hold about lack of accountability for expenditure in public sector activity, for me to say that it was all right and that everyone had done the best possible job would be to deceive the House of my deep convictions. There was a soft, easy option, and that option was pursued for the softness it offered.
  Until the Minister tells the House that he has tried to check what went on and
  1274
  that his civil servants tried to check what went on, I am not prepared to give the bland assurances which come easy to the lips of politicians, and I am not prepared to pretend that I do not understand the difficulties of coming to conclusions of that sort.
  Mr. Cryer: Will the hon. Gentleman be a little more precise about the bland assurances from his political lips? He has examined the accounts and claims that he has scrupulously read the minutes of evidence. Will he be more precise about the areas where he thinks there might have been some declaration of duty?
  Mr. Heseltine: I think that I clearly pointed out that no one has said anything which one can say is a misstatement of fact. It is the omissions that are clear and that have to be studied by the House tonight. No one has said that the deficiency was arrived at after certain calculations which we can all examine. Had anyone done that and been wrong, the situation would be serious. The Undersecretary of State was told by officials that the accounts had been audited. Yes, they had been audited; but the auditors never said that the figures in the accounts had been arrived at because certain actions had been imposed upon the corporation by the Government. That is the question which the House has to ask and on which it must receive an answer from the Government.
  I suspect that the Minister has not thought of this point, and I shall be interested to hear what he has to say. If he has thought of it, I hope he will tell us "The Post Office would have been able to increase its charges by X amount if there had not been any such price restraint." If we have stopped the Post Office from doing certain things, as the legislation gave us power to do, it is necessary to see what it would have done if there had not been that legislation. Then we could understand the calculations made.
  Mr. Golding Mr. Golding rose—
  Mr. Deputy Speaker (Mr. George Thomas): Order. The hon. Member for Newcastle-under-Lyme (Mr. Golding) has had four bites of the cherry. The debate lasts one and a half hours. If I am to be able to call all those hon. Members who wish to speak, we had better have fewer interruptions.
  Mr. Gregor Mackenzie: Perhaps the hon. Member for Henley will explain why he chose to introduce the Statutory Corporations (Temporary Provisions) Act in the first place. What was the purpose of compensating the Post Office?
  Mr. Heseltine: That point can be clearly dealt with. We wish to compensate the Post Office for losses incurred because it did not take certain steps which it would otherwise have taken and which would have enabled it to earn extra revenue. That is what the Act was about. If the order is now compensating the Post Office for steps it would have taken otherwise, the hon. Gentleman should tell us what those steps would have been. He should show us the figures, and then we could see whether there was a fair calculation. Nowhere in these accounts are the figures calculated.
  Mr. Gregor Mackenzie: The hon. Gentleman was a Minister in the Department which put the Act through. Did he not envisage some of the questions he is now asking me? How did he propose that these calculations should be made? I should be fascinated to hear.
  Mr. Heseltine: The hon. Gentleman will understand that I was not actually responsible for posts and telecommunications in the last Government. But if I were now the Minister in the hon. Gentleman's position, I believe I would have asked the questions I am now asking. I say this without in any way holding the hon. Gentleman responsible for decisions taken by the last Government. I believe, but I cannot demonstrate it beyond question because it is hypothetical, that in these accounts there would have been some calculation to show where the Post Office had refrained from taking certain steps thus enabling it to make claims upon us of the magnitude in this order. I believe that that is what I would have done, but I accept that I was never in a position to do it and the House can only accept my word on it.
  Note 11 on page 57 of the order refers to the pension fund deficiency. I believe that it is necessary for the hon. Gentleman to indicate the present state of the fund in order to give the sort of assurances to the recipients of those pensions which I am sure the House will wish to give.
  1276
  Every time the Prime Minister gets up and knocks the City of London for whatever purpose he may have in mind—I understand his party difficulties—he should understand that the asset-backing that the City of London gives to every pension scheme in the land is depreciated in direct consequence of speeches he makes, and the problem the Post Office has with the pension fund is in some part attributable to the language of the Left in British politics. I hope that the Left will take the message, measured in the substantial sums of money we are being asked to deal with tonight.
  Finally, I turn to a question which the hon. Gentleman has in part already dealt with. He has told us that we are facing a £300 million deficit in the current year on the Post Office's total accounts. What he has not told us is how it is going to be dealt with.
  It will not be enough—I am glad to be able to say this to him now—when we get to the borrowing powers order simply for him to repeat the phraseology of the Chancellor of the Exchequer. We all know that it is the Chancellor's intention to phase nationalised industry subsidies out "as soon as possible", or "as soon as reasonably practicable" and every other cliché he can fling into the situation.
  Colin Chapman, writing in the Observer on 17th November forecast that there would be a 6p and 5p post, and said that proposals were before the Secretary of State whereby there would be dramatic increases in the cost of telecommunications. These are the things we wish to know about and which the hon. Gentleman will wish to inform the House about in his reply.
  10.50 p.m.
  Mr. Ian Wrigglesworth: I do not think that I have ever heard such a staggering speech in the House as the one we have just heard from the hon. Member for Henley (Mr. Heseltine). It was full of contradictions. The hon. Gentleman demands that the House shall know the facts regarding the details of the accounts. Then he says that he does not believe that the House is capable of going into that detail on the accounts.
  Second, the hon. Gentleman says that he does not want to take the soft option of pinning blame, forgetting that for four years, when his right hon. Friend the

  1277
  Member for Bournemouth, West (Sir J. Eden) was fully responsible for these matters, his own Government allowed accounts to be published with notes and reservations from the auditors without, as far as I know, any eyebrows raised at that time and nothing, apparently, done about it. The deficiencies, or some of them, are still there in the accounts this year.
  The most staggering feature of the hon. Gentleman's speech was that he failed to recognise that all the deficiencies and actuarial calculations to which he referred appear in the report and accounts for the year ending at 31st March this year. In other words, they relate to the period when his own Government were in office, but he asks the present Government to answer for all the matters which he has raised. The hon. Gentleman should study the dates on the accounts as well as the figures in them before he fires his arrows at my right hon. Friend.
  Mr. Heseltine: I asked about those matters because on 24th July 1974, in compliance with the Act, the Chairman of the Post Office sent the accounts to the Secretary of State, who was the right hon. Anthony Wedgwood Benn.
  Mr. Wrigglesworth: But the accounts which the Chairman of the Post Office Corporation sent to the Secretary of State were the accounts for the period up to 31st March.
  As a former Post Office employee, I welcome the order as a necessary measure for the Post Office in the predicament in which it finds itself. But I regret the need for the order. I agree with the comments on compensation for price restraint which the Chancellor of the Exchequer made in his Budget Statement:
  "It is the escalation in this latter type of subsidy which we set out to reverse and, since our initial attempt has not fully achieved its purpose, we must continue a sustained assault on the problem until it has finally disappeared … It will be painful and disagreeable to carry this policy through, even step by step, but I believe that the future health and efficiency of the public sector depends on our success."—[OFFICIAL REPORT, 12th November 1974; Vol. 881, c. 268.]
  It took courage, I believe, to make that statement. It is never easy to tell the country that prices will have to go up
  1278
  fairly substantially in an area of the public sector which involves every consumer in the land.
  In my view, however, the trouble with the price restraint policy and the compensation which follows from it is that the situation is never-ending, and the compensation entailed does not deal with the basic problem caused by the under-pricing and by the losses accruing as a result. Under-pricing and losses in the nationalised industries lead to lower morale and to lower public esteem because of the losses incurred. That stimulates artificial demand and, therefore, gives rise to greater losses.
  In no industry is this more the case than in the Post Office, which suffers because of its labour-intensive character. There is greater and greater use of the postal and telecommunications services as a result of the demand created by the low prices. That destroys any hope of achieving proper financial controls and disciplines and leads inevitably to the first major point which I wish to raise, which is that as a result of this policy there is too much Government intervention in the public sector and in the Post Office in particular. [HON. MEMBERS: "Hear, hear."] Hon. Members may cheer that point, but no Government have ever intervened more in the public sector than did the Government of 1970…74.
  The Post Office is a vast conglomerate, and that is often forgotten. It employs one in every 50 of the working population of the country, so that on any bus there will be, on average, one Post Office employee. It has a vast postal service responsible for delivering mails from Land's End to John O'Groats. It has a retail business with more than 22,000 outlets in the High Streets and back streets. It has a vast telecommunications industry with satellites, Goonhilly and all the other technical, research and scientific-based activities. It has data processing and it has the Giro banking service. It impinges on the lives of everyone in the country. There may be an argument that we could debate at some time for doing something about the size of the Post Office Corporation. Because of its size, I believe that it has great difficulties in management which need looking at, although the present time is not the correct one for that.

  1279
  The Post Office has suffered badly over recent years from too much intervention. Its investment programmes have been delayed by indecision and cuts. Investigations such as the one into Giro, which lasted two years, had a severe effect upon the management and marketing ability of the organisation. The action taken recently on prices has been very welcome, but it will still leave the Post Office in the red, and these constant restraints and the shilly-shallying on price increases lead to indecision and lack of financial control and discipline. Every request for a price increase has to go not only to the Price Commission. It has to go through the Government machine and through the Post Office Users' National Council for consultation. It is a long, wearisome process which holds up the vital decisions which are necessary. This process has a debilitating effect on the management and the objectives of the organisation.
  The Post Office has been hit most unfairly by wage freezes which have affected personnel at all levels. There is great resentment in the Post Office at the way in which staff have been treated in comparison with the Civil Service, to which many of them belonged until the Post Office became a corporation in 1969.
  There is great difficulty in getting staff to work in the cities, in particular, on current levels of pay. We know that only too well in London. There is the added problem that the Post Office faces, and that faces many similar organisations, of getting people into the city centres, where housing is disappearing, to work at all hours of the day and night, particularly at four o'clock and five o'clock in the morning which are the sort of times that postmen work. This is an added problem which probably not even aid will make it easy to get over.
  In the light of the great interference on wages, prices and investment, and investigations into the future of different parts of the business, we must tell any Government that the Post Office must be given a degree of commercial freedom to pursue policies over a period within a framework laid down and agreed with the Government. We propose that our major industries should have planning agreements with the Government. That is the right policy, as industry will see as the planning agreements become a reality.
  1280
  If we are to have planning agreements for the private sector, let us have them for the public sector and such organisations as the Post Office. Let us have corporate planning, which can be agreed with the Government on a rolling programme, so that once the guidelines and plans are laid down the management of the organisation can do its job. Until we have that sort of freedom I do not think we shall have the improvement in morale and enthusiasm which are vital for any organisation to be a success.
  One bright star on the Post Office horizon, in which I have a special interest because I was closely associated with it while working in the Post Office, is the National Giro. It is a bright star because, despite the dreadful trough into which it fell when it was under the cloud of investigation, it has been able to pull itself round to its current situation. In the report and accounts already mentioned we see that the losses have been reduced to £1 million from a considerably higher level in previous years. Last year the loss was £4·1 million. The growth over the past year has been remarkable. Any concern which can increase its business by the percentages given in the report and accounts deserves our congratulations. There were increases in the collection of rent payments for local authorities by 300 per cent.; in the cash deposit service by 47 per cent.; in the overall transactions by 15 per cent.; in turnover by 40 per cent.; and in balances by 37 per cent.
  But there is one point in the report and accounts which I must draw to the Government's attention. I hope that my hon. Friend the Minister will relay it to other Government Departments. The report and accounts refer to the fact that Giro has secured little Government business—under £1,000 million a year out of a potential market of £40,000 million a year. Giro is not asking for special favours. It is just asking to be given a fair crack of the whip. I know of occasions when the National Giro has put highly competitive proposals to Government Departments, leading to the clearing banks reducing their charges to those Departments. In their strong position, they can do that, even if in some cases it means that they make a loss. But I hope that the different Departments, with the substantial business that they do through

  1281
  the banking system, will give Giro a fair crack of the whip.
  I also hope that the Government will give Giro freedom to compete on equal terms with other banks in the private account market. Unless the National Giro is allowed to lend to its customers it cannot do that. The funds which it invests and the funds which the clearing banks invest are just not comparable in the return that they attract. When we consider lending funds to private customers and think in terms of the Barclay-card the rate is approximately 18 per cent. The National Giro is restricted to gilt-edged, local authorities and the discount market. There is a return of approximately 12 per cent. That is obviously not a competitive position. Unless the full range of investment opportunities—including loans to customers—can be given to the National Giro it will not be in a competitive position and it will not be able to do what many of my hon. Friends would wish—namely, to return to its original concept of being a bank for the man in the street.
  The National Giro is now providing an excellent service for big business. Over recent months many of our largest High Street shopping combines have opened accounts and have started collecting their cash through Giro. On the basis of the finance that has been built up, there is no reason for its not extending into the current account market for private customers. It could then return to the original concept of being a bank for the ordinary man in the street. It cannot do that unless it has the freedom to be able to lend in the same way as the clearing banks.
  I hope that in extending its operations the Government, with the Post Office, will consider the possibility of National Giro building up closer relations and working with the National Savings Bank and with the Trustee Savings Bank. It seems that there is a great potential for a large public sector bank involving those three organisations. If it were given the right headway and encouragement from the Government—that would obviously involve the Treasury—it could make a useful contribution to our banking services. In addition, it would provide much-needed investment capital and revenue resources for the Post Office. That
  1282
  one bright star on the Post Office horizon could be of enormous benefit in future.
  None of these matters will develop in the way that we wish unless the Post Office is allowed to have the freedom to manage its business in commercial terms once it has agreed its policies with the Government.
  11.8 p.m.
  Mr. John Stanley: Like my hon. Friend the Member for Henley (Mr. Heseltine), I have serious doubts about the justification of claiming £123 million under this order in the light of the statutory authorisation provided by the Statutory Corporations (Financial Provisions) Act 1974.
  I remind the House that the total amount that can be claimed under the Act must be in consequence of compliance with the national policy of price limitation. It is apparent from the legislation that the amount that can be claimed should be related to the normal trading activities of nationalised corporations. I wish to demonstrate that the lion's share of the £123 million which is being claimed under the order is not directly related to the normal trading operations of the Post Office. The lion's share is made up of extraordinary items which have been charged to revenue account. We shall be seeking justification of this from the Minister.
  In an intervention my hon. Friend the Member for Mid-Sussex (Mr. Renton) referred to the deficiency of the Post Office pension fund. The Minister said that that was a matter to which he wished to return when we consider the following order. However, the deficiency is directly related financially to this order, and it is a matter of great surprise to my hon. Friends and myself that the Minister has failed to point to the relationship between that deficiency and the measure that we are now discussing. It is generally known in the House that when the last actuarial valuation was made of the Post Office Superannuation Fund it showed that on 30th September 1972 the fund had an actuarial deficit of £1,100 million. The meeting of that deficit is directly related to the provisions of this order.
  May we look at the £123 million in detail and break it down? The Minister may like to get a copy of the annual accounts, which will be directly related

  1283
  to what I want to say. The breakdown of the £123 million compensation payment is on page 28 of the accounts, in Statement Al. The breakdown is between the three divisions, the telecommunications division which claims £61 million of the compensation, the posts division which claims £57 million of the compensation and the Giro and remittance service which claims £4½ million of the compensation.
  May we now look at the breakdown within those three heads? A total of £61 million is claimed as compensation for the losses in the telecommunications division. We see how that is arrived at by referring to page 32 of the Post Office accounts, Statement B1. We see there that the sum of £61,386,000 represents the total loss of the telecommunications division in the last financial year. But we also see in the revenue account that there has been brought into it an extraordinary item of a very large amount—a total of £43 million representing the extraordinary amount which has been charged to revenue for pension fund deficiencies for the financial year 1973–74, plus a further £10½ million for pension fund deficiencies for the previous financial year. The Minister was wrong—I do not say that he was deliberately wrong—to say that this £123 million relates solely to the last financial year. It has incorporated into it losses which have been arrived at as a result of pension fund deficiencies which have been brought forward from the financial year for 1972–73. The net position is that of the £61 million which has been claimed in compensation under the telecommunications side, a total of £53,648,000 is represented by the extraordinary charge on revenue of Post Office Superannuation Fund deficiencies.
  Turning to the posts side, we see exactly the same. A total of £57 million is claimed by way of compensation, but within that £57 million there has been extraordinarily charged to expenditure a total of £35 million for superannuation fund deficiencies for the 1973–74 financial year, together with over £8 million for superannuation fund deficiencies for the previous financial year 1972–73. So the position on the posts side is that, of the £57 million claimed, over £43 million is represented by the extraordinary charge to the revenue account of the deficiencies of the superannuation fund.
  1284
  If we look at note 11 on page 58 of the accounts we see that the total amount charged extraordinarily to expenditure in the financial year 1973–74 as a result of meeting the deficiencies in the pension fund is £97,805,000. Of that, £79 million represents pension deficiencies in the 1973–74 financial year and £18½ million pension deficiencies in the 1972-73 financial year. In other words, of the £123,567,000 which has been claimed as losses supposedly from normal trading under this order, £97,805,000 is actually represented by an extraordinary charge of two previous years' deficiencies on the Post Office Pension Fund. In other words, 79 per cent. of the total sum being sought under this order is represented by this extraordinary item which bears no relationship to the normal trading activities of the Post Office.
  Mr. John Page: We have listened with amazement to what my hon. Friend has said. Does he agree that not only is it not appropriate as an accounting figure to add those items into these years' figures but that the order specifically says that this is in
  "compliance with the national policy relating to limitation of prices"?
  It has nothing whatever to do with it.
  Mr. Stanley: I entirely agree. Under the legislation, it would seem to be compensation for normal trading losses, but what have been brought in here are extraordinary items which in no way relate to the trading activities of the Post Office Corporation.
  I ask the Minister to deal with two very important questions. First, is he satisfied that this entire £123,567,000 is properly claimable as compensation for price restraint within the terms of the 1974 Act? Second, and equally important, why has he at no time, neither in the context of the order nor in its explanatory note, nor in his introduction of the order this evening, indicated that almost 80 per cent. of the sum being claimed is made up of an extraordinary item—namely, the historic deficiences on the Post Office Pension Fund?
  11.17 p.m.
  Mr. John Golding: I was very pleased to hear tonight that Sir William Ryland has been appointed Chairman of the Post Office

  1285
  today. He has shown great understanding, particularly about telecommunications. I believe that in the next three years, with the influence of my right hon. Friend the Secretary of State and my hon. Friend the Under-Secretary—about whose appointments we were also delighted to learn—the Post Office will make great progress.
  I am sorry that we are not debating the two orders together, because logically they are linked. It is because of the over-stringent restriction on tariff increases that the Post Office is entitled to compensation. I take the point about superannuation, and that must be dealt with. But it is because of the restrictions on prices over the years that the compensation order has to be made and the level of borrowing must be increased.
  I welcomed the statement in the Budget that there is to be a return to commercial pricing in the public sector. I am delighted, because I was a member of the Select Committee which examined various Conservative Ministers and leaders of the nationalised industries on this point. I became very impressed with the case presented by the Government of the day against the present system of pricing policies.
  I see that a Government Whip has come to sit next to me. This being my maiden speech in a debate about the Post Office since I left the Whip's Office, I am perhaps less intimidated by the Whip who sits next to me than by the sight of my hon. Friend the Member for Wakefield (Mr. Harrison), who is sitting next to the Clerk at the Table. Having received the message that the Minister is to reply to the debate at 11.20 p.m., and being thoroughly intimidated, I merely say that these two subjects are linked and that the case for compensation, on this occasion, but the case against having deficit financing in future, can perhaps best be presented in total on the next order. It is for those reasons that I resume my seat.
  11.20 p.m.
  Mr. Gregor Mackenzie: The sheer effrontery of the speech of the hon. Member for Henley (Mr. Heseltine) surpassed anything that I expected of him—
  Mr. Tom King: Answer the debate.
  Mr. Mackenzie: I was putting forward, I thought in good faith, a compensation order which I must confess—
  Mr. Tom King: On a point of order, Mr. Deputy Speaker. The Under-Secretary must be asked to answer the debate. There is a serious point here which he must answer.
  Mr. Mackenzie: I will answer the debate in my own way, just as the hon. Member for Henley made his points in his way.
  The hon. Gentleman asked, first, how it came about that, when in years past there had been deficits in the Post Office, we did not have this elaborate system of compensation. The hon. Member for Bridgwater (Mr. King) will remember what happened, because it was only in 1972 that we had a Post Office (Borrowing Powers) Order. The then Minister of Posts and Telecommunications, the right hon. Member for Bournemouth, West (Sir J. Eden), was obliged to ask the House to give him money in order to write off the debts of the Post Office at that time.
  The second feature in the speech of the hon. Member for Henley which surprised me was his whole questioning of the management of the Post Office and his attitude to the staff of the Post Office. I should have thought that the morale of Post Office staff had suffered quite enough in the past few years without that. They have experienced price restraints, restrictions on tariffs and all the other difficulties. They do not need the hon. Member for Henley now to make a virtue out of the deficiencies of the past four years.
  In the past few years the morale of Post Office staff has gone down considerably. They wanted to see tariff increases which were appropriate to the work that they were doing. The policies of the Conservative administration would not permit of them. It is singularly unfortunate now for the hon. Member for Henley to compound these difficulties by nit-picking speeches of the kind that he made tonight.
  The hon. Gentleman asked me about tariff increases, and he wanted me to say precisely what these would be in the next year. He knows the attitude spelt out by my right hon. Friend the Chancellor of the Exchequer in his first Budget. He knows the attitude spelt out in my

  1287
  right hon. Friend's second Budget. My right hon. Friend said that over a period the nationalised industries would be self-financing. He said, in other words, that we would no longer expect our large national public corporations to continue subsidising private enterprise and other organisations, as they had been forced to do for a very long time at considerable cost to themselves.
  We hear repeated appeals from the Opposition Front Bench for honest government. The one factor which I want to underline is that there will be a substantial deficit in the course of the next year, and no doubt appropriate action will be taken by the Post Office, after consultation with the Price Commission and the Post Office Users' National Council, to bring forward tariff increases.
  I do not believe that we should seek to hide that. I believe that it should happen, and it would be dishonest of me if I were to leave anyone thinking that there were any soft options on prices. For a very long time there has been under-pricing both on the postal side and on the telecommunications side. In my view, it is high time that the considerations referred to by my hon. Friend the Member for Thornaby (Mr. Wriggles-worth) were acted upon. The Post Office should be given an opportunity of putting its house in order by being allowed to charge an economic price for what I regard as an excellent service.
  Mr. Tom King: That is the point that I was making. Why is the hon. Gentleman unable to announce those increases? The longer the increases are delayed, the greater they will have to be to recover the deficit and match the costs involved.
  Mr. Mackenzie: The hon. Gentleman knows better than his hon. Friends the procedure on this matter. It is a matter for the Post Office to put to the Price Commission and to the Post Office Users' National Council. The hon. Gentleman knows that it would be improper for me to make any further comment on that matter other than that it is right for the Post Office to charge an economic price.
  The hon. Member for Henley made allegations about the depreciation in value and asked about the reservations in the
  1288
  Post Office accounts. It was a serious point and I will deal with it.
  Mr. Heseltine: Did the auditors agree that the deficiency claimed in these accounts was justified? Did the auditors agree that the deficiency, the subject of the order, was the consequence of price restraint?
  Mr. Mackenzie: Of course they did, or I should not be presenting it.
  Mr. Heseltine: I heard the advice given to the hon. Gentleman by his right hon. Friend the Secretary of State. I am asking a specific question: did the auditors agree that the deficiency had been caused by the price restraint introduced by the last Government? Did the auditors agree that particular figure?
  Mr. Mackenzie: It is my view that it was caused by the price restraint policies introduced by the last Government.
  Mr. Heseltine: I apologise for interrupting again. I asked the question: did the auditors agree?
  Mr. Mackenzie: That is not the point I am making. I agree that this has happened. In my view, it was the result of the price restraint policies of the last Government. The hon. Gentleman may sneer and giggle as much as he chooses, but there is no doubt that if the Post Office had not had these constraints laid upon it it would certainly have increased its prices to an economic level and we would not be put in the position of having to present this compensation order tonight. I realise that this order and the policies of the previous administration may embarrass the hon. Gentleman, because he likes to make abrasive speeches and to make a bit of a star of himself on these occasions. The point is that these policies brought a lot of trouble to the Post Office. We are now asking the hon. Gentleman's help in bailing it out of the difficulties which he created for it.
  Mr. Heseltine: If the hon. Gentleman now confirms that the auditors did not agree, upon what basis of calculation does he know that these figures are right?
  Mr. Mackenzie: Because this is the deficit of the Post Office and this is the compensation that we want to make for that deficit.

  1289
  The hon. Member for Henley and my hon. Friend the Member for Thornaby referred to the deficiencies in the Post Office Pension Fund. This is a matter of concern to all Post Office employees, and we should put their minds at rest. This point has not arisen in the last few months. This problem was raised in the summer of last year. Unhappily, we did not get any satisfactory explanation from the then Minister, who simply said that the fund was in good order. I should like to say very much the same tonight. Post
  Question accordingly agreed to.
  Resolved.
  That the Compensation for Limitation of Prices (Post Office) Order 1974, a draft of which was laid before this House on 29th October, be approved

  POST OFFICE (BORROWING POWERS)
  11.40 p.m.
  The Under-Secretary of State for Industry (Mr. Gregor Mackenzie): I beg to move,
  That the Post Office (Borrowing Powers) Order 1974, a draft of which was laid before this House on 11th November, be approved.
  The order would increase the limit of the total indebtedness of the Post Office from £3,800 million to £4,800 million. These are the limits laid down by the Post Office (Borrowing) Act 1972, under which the order is laid. When I am asking for an extra £1,000 million, it is only
  Office employees have nothing to fear as of this moment about their pensions being intact. That is the main point that should be emphasised in this debate.
  Mr. Stanley: On the pension fund, I should like to raise an important matter to which the Minister has not referred at all. Will he tell the House—[Interruption.]
  Question put:—
  The House divided: Ayes 43, Noes 11.

  Division No. 20.]

  AYES

  [11.30 p.m.

  Bagler, Gordon A. T.

  Ellis, John (Brigg & Scun)

  Penhallgon, David

  Benn, Rt Hn Anthony Wedgwood

  Ford, Ben T.

  Roberts, Albert (Normanton)

  Boardman, H.

  George, Bruce

  Smith, Cyril (Rochdale)

  Buchanan, Richard

  Golding, John

  Snape, Peter

  Campbell, Ian

  Harrison, Walter (Wakefield)

  Watkinson, John

  Carmichael, Nell

  Hughes, Rt Hon C. (Anglesey)

  Weetch, Ken

  Carter-Jones, Lewis

  Leadbitter, Ted

  White, James (Glasgow, P)

  Cocks, Michael (Bristol S)

  Lyons, Edward (Bradford W)

  Whitehead, Phillip

  Cox, Thomas (Wands, Toot)

  McElhone, Frank

  Wise, Mrs Audrey

  Cralgen, J. M. (Glasgow, M)

  Mackenzie, Gregor

  Woof, Robert

  Cryer, Bob

  Magee, Bryan

  Wrigglesworth, Ian

  Dalyell, Tam

  Maynard, Miss Joan

  Dean, Joseph (Leeds West)

  Noble, Mike

  TELLERS FOR THE AYES:

  de Freitas, Rt Hon Sir Geoffrey

  Oakes, Gordon

  Mr. Joseph Harper and

  Dormand, Jack

  Palmer, Arthur

  Mr. Donald Coleman.

  Dunn, James A.

  Parry, Robert

  NOES

  Clarke, Kenneth (Rushcliffe)

  Mayhew, Patrick

  Tebbit, Norman

  Eyre, Reginald

  Montgomery, Fergus

  Young, Sir George (Eallng)

  Gow, I. (Eastbourne)

  Renton, Tim (Mid-Sussex)

  James, David

  Shaw, Giles (Pudsey)

  TELLERS FOR THE NOES:

  Marshall, Michael (Arundel)

  Mr. John Stanley and

  Mr. Tom King.

  right that we should spend some time considering some of the serious points about Post Office services.
  It has been the long-established practice of the House to set limits to the borrowing of all nationalised industries which may be extended alternately by order and by fresh legislation. The limits are customarily calculated to provide for a full-scale examination, such as I hope we shall have tonight, of an industry's financial needs and the operational background every four years or so, with an interim debate at the mid-point of this period. This present occasion is one of the interim debates, and, as it happens, is taking place exactly two years after the passage of the Post Office (Borrowing) Act.
  In the Second Reading debate on the Act the right hon. Member for Bournemouth, West (Sir J. Eden), who was then the Minister for Posts and Telecommunications, said that the net new borrowings of the Post Office had in recent years been

  1291
  on a rising scale and that they were expected in 1972–73 to exceed £400 million. With the continuing growth in capital requirements then foreseen, the net borrowings in the next four or five years were expected to lie between £400 million and £500 million a year. Provision was, therefore, made in Clause 1(1) to increase the borrowing limit by £2,000 million, and it was expected that this would be sufficient for 1972–73 and the next four years. The increase in the borrowing powers was divided into two equal tranches, and the further approval of the House is needed before the second tranche can be granted.
  It so happens that borrowings have followed fairly closely the pattern forecast by the right hon. Gentleman. The Post Office borrowed £423 million in 1972–73 and £526 million in 1973–74. Borrowing in 1974–75 is expected to be considerably higher, but there are special reasons for this, and the underlying trend is similar to that forecast in 1972. So we may expect next tranche of borrowing to last well into 1976, and further legislation will probably be required during the financial year 1976–77.
  However, although the rate of Post Office borrowing has not departed very far from the long-term trend, it would unfortunately not be true to say that this was because the Post Office's financial affairs were in a healthy state. The borrowing requirement is determined by a number of factors. The underlying need is to finance the Post Office's investment programme, and the indebtedness of the Post Office should grow in line with the expansion of the business, just as a firm's issued share capital might in normal times be expected to increase as the firm grew.
  The capital investment of the Post Office is, as hon. Members will know, regulated by the Government as part of the general control of public expenditure. The right hon. Gentleman said in the debate I have already referred to that, whilst expenditure in the current financial year was expected to be about £700 million, the Post Office had forecast that over the five years from March 1973 more than £4,000 million of further investment will be needed—in other words, an average of over £800 million a year from 1973–74 onwards.
  Unfortunately, events turned out differently. The energy crisis in the last financial year, and the three-day working week, meant that the Post Office was not able to achieve its planned level of investment, and spent £723 million against the originally planned £739 million. In physical terms this means that 1,460,000 new telephones were installed, as opposed to the planned level of 1,670,000. The investment programme for 1974–75 was also disrupted. The three-day week would have been enough to cause some reduction in investment in the current year, but on top of this the then Chancellor of the Exchequer slashed the programme by 20 per cent. in December 1973. Only by a death-bed repentance some time during the General Election campaign of February this year, did the right hon. Gentleman reduce the cut to 14 per cent. We were grateful that he did so, even though 14 per cent. was not an easy figure. We were able to reduce that figure still further, from 14 per cent. to 12 per cent., for the second half of this year. I should like to pay a warm tribute to the management and staff of the Post Office, and in the supplying industry who have coped with this very difficult problem which caused trouble, especially in the assisted areas.
  This, then, is the story of the investment which has been financed by the first tranche of borrowing under the Post Office (Borrowing) Act. I am not at the moment in a position to talk in detail about the investment to be financed by the next tranche. Post Office investment is considered together with other public expenditure programmes in the light of the Government's social and economic priorities and of the level of Government resources available in the economy.
  I have already indicated the prospects for the rest of 1974–75, which will, of course, be financed out of the next tranche. The levels of investment for future years will be contained in the annual Public Expenditure White Paper. It is in practice impossible to recover from the sharply reduced level of investment in a single year. However, we hope that over the next few years it will be possible to recover from the set-back. The Post Office aims to continue to pursue its objectives of expanding and

  1293
  improving the telephone network and other telecommunications services, to introduce new services, and to replace obsolete equipment with modern designs.
  Special efforts will be made to improve the international services, and top priority is being given to services connected with the exploitation of the British sector of the Continental Shelf. At the same time, efforts will be made to improve the service by converting the few remaining manual telephone exchanges to automatic working, reducing the proportion of shared lines, and completing the coverage of subscriber trunk dialling.
  Although dwarfed by expenditure on the telecommunications side, the postal business has a substantial capital investment programme which is equally essential if existing services are to be maintained, and which is also aimed at increasing the efficiency of the business. As I have already indicated, levels of investment for future years will be contained in the Public Expenditure White Paper. I can say tonight, however, that the larger part of the postal share of the programme will need to be devoted to the provision of accommodation, mainly to replace obsolete buildings which are seriously deficient in space and to give service in new areas of population growth. Investment will also be required for the replacement and growth of the motor vehicle fleet and for office machines.
  The remainder of the programme is expected to be spent on mechanising the sorting process for both letters and parcels. The postal business is labour intensive, with staff costs accounting for three quarters of the total cost of running the service.
  It is this heavy dependence on manpower that causes the postal service to be particularly badly hit at times and in areas where labour is scarce, as many of its users have been aware over recent months. While it is too early to reach any firm conclusion about the results of the special pay review for Post Office staff which the Government sanctioned earlier this year, there is some sign of improving recruitment.
  Technology cannot solve the problems of the postal business. The only way of getting a letter delivered is for one man to take it up the street, come hail, rain or snow, and put it through the letter
  1294
  box. But mechanisation of the sorting process offers significant manpower savings over the traditional manual methods. This in turn should make it easier for the Post Office in future to avoid the chronic staff shortages which recently have so disrupted the quality of service.
  The programme envisages substantial progress towards the completion of letter and parcel mechanisation. However desirable this programme of mechanisation may be, hon. Members may be aware that some installations have not yet been brought into use. This—along with other matters—is the subject of negotiations between the Post Office and its unions, and I hope that a settlement will be arrived at that will be to the benefit of the Post Office, its staff and its customers.
  I have spoken at some length about investment because of its importance in determining the standard of service given to the customer, and because of the close connection between investment and borrowing. To complete the story, however, we must also consider the Post Office's ability to raise finance from internal sources. That constitutes the third side of the triangle. Traditionally, the Post Office has been set financial targets under which it raised about half its financing needs from internal resources—that is, from depreciation and from retained profits. However, the last targets lapsed in April 1973, and were not renewed.
  At the same time, the previous administration's policy of holding down the prices of nationalised industries has meant that losses have been recorded by the Post Office from 1972–73 onwards, and the self-financing ratio has suffered accordingly. I am glad to say that the contribution being made from depreciation still outweighs the losses, but there is unfortunately a great deal of leeway to be made up.
  The Post Office does not at the end of the day have to finance its deficits from borrowing, because successive Governments have thought it right to pay compensation for price restraint. We have just had a debate on an order to pay compensation to the Post Office, and the House will, therefore, not expect me to deal at length with the subject of compensation in discussing the borrowing powers order. I will confine myself to the effect of compensation on borrowing.
  There are two effects which need to be noted. First, there is a considerable time lag between the incurring of the deficit and the payment of compensation. That means that the Post Office has to take out a temporary borrowing at the time of the deficit to cover the time lag until compensation is paid, and that is the special factor which has inflated borrowing in 1974–75. The Post Office took a bridging loan of £120 million from the National Loans Fund earlier this year, which will be repaid when the compensation for 1973–74 is paid.
  The other effect is that compensation does nothing to alleviate the basic problem of under-pricing, so that the underlying deficit in one year is carried forward into the following year and any tariff increase has to combat both the inherited deficit and new increases in costs. In this way deficits increase very fast in the absence of corrective tariff action. The Post Office made a profit in 1971–72, but in the following year it incurred a deficit of £64 million. By 1973–74 the deficit had doubled to £128 million, and in the current year we expect it to be even greater still.
  The question of the reduction of the deficit which I dealt with in the previous debate is not, however, central to the increase in borrowing powers, since it remains Government policy to make up, by means of compensation, deficits which are the consequence of price restraint. The new borrowing envisaged in the order will, therefore, be used for the maintenance and expansion of Post Office services on the lines I have outlined, and I am sure that the House will wish to approve it, if for no other reason than that without it the Post Office would within a month be unable to carry on its normal business. I therefore commend the order to the House.
  11.55 p.m.
  Mr. Michael Heseltine: The Under-Secretary of State was right in setting the context of the debate. He made it clear that this is the interim debate which comes once every two years and that every four years there is a major review of the Post Office's activities. But I wonder whether the House feels— perhaps the Minister shares our anxieties—when one considers the scale of opera-
  1296
  tions—the number of people, the degree of capital investment, the complexity of the problems—that Parliament is able to exercise the sort of control over the sums and activities involved on that sort of scale in a debate lasting one and a half hours at two-yearly intervals.
  I do not wish to criticise the hon. Gentleman for the inadequacy of the briefing he may have received, but perhaps the debate reveals the doubts and anxieties we have. The House will have listened to the answers he gave, and its judgment would be that a large number of questions were asked in the last debate which have not been answered. Yet there is nothing that we on this side of the House can effectively do to get the answers. Now, another two years is to pass before we have another of these grand one and a half hour probes into the Post Office's activities, and that is the lot as far as I can gather. I do not wish to pursue the last debate again, but the evidence is sufficiently strong in itself for the conclusions I would draw.
  Does the hon. Gentleman believe that he has told us anything tonight on which we can make any sort of judgment as to the way in which the strategy for the Post Office is to be modelled over the time to come? He is right in pointing out the levels of capital investment, which are astronomic by any normal commercial terms, that the Post Office will absorb. That, we understand.
  One realises that a considerable part of this will have to be borrowed, and it was always envisaged under the Conservative Government that it would have to be. That is not in dispute. But what the House should be discussing is whether the strategy of the borrowing and the rate at which the borrowing is taken up is right, set in the context of the internally generated resources which the Post Office is capable of producing. It is this side of the equation into which the House is not allowed so much as a peep.
  The hon. Gentleman has several times quoted the words of the Chancellor of the Exchequer in the Budget debate, in which the Chancellor said that his strategy is to move towards the financial viability of the nationalised industries— a target I would praise—as fast as possible. The hon. Gentleman may agree with me when I say that I do not know

  1297
  what that means—whether it is to be done this month or next month or this year or next year or over the next five years. I do not know how the figures are to be broken down between the postal services and the telecommunications services. I do not know whether they are to be broken down between one class of user and another. In no way are we in the House invited to play any part in that deliberation.
  That the deliberation is proceeding we all know. We know that all the arguments are available for scrutiny by Ministers. We know that the Post Office has the evidence. But we do not have it.
  Mr. Gregor Mackenzie: How does this differ from what has happened in past years?
  Mr. Heseltine: That is a perfectly fair intervention. I am only making the point—I think that the hon. Gentleman agrees—that the House is playing no part in that process. In the scenario which the hon. Gentleman outlined, of one and a half hours of debate every two years, there is no way in which it can play a part. That is my complaint. I have no doubt that it has been made with great eloquence by members of the Government party when they sat on this side. The reality is that not only are these sums of money very large but they are, from Parliament's point of view, uncontrolled.
  Mr. Ian Wrigglesworth: Will the hon. Gentleman make clear whether he wants the Post Office run by the House or whether he does not?
  Mr. Heseltine: I want Parliament to have an opportunity to debate and to scrutinise the problems which we are discussing. In reality, we have no such opportunity. Of course, everyone knows— although no one has yet found a way of making it happen—that the ideal arrangement would be for us here in the political forum to determine the strategy and the policies and for management to carry on the executive work. But in reality it is not like that, as anyone who has ever held a Government post knows very well. In fact, interference from Ministers on a day-to-day continuing basis is deep and constant, and we all know that there is no way by which, in the context in which we arrange our affairs, Ministers can be persuaded to do anything other than inter-
  1298
  vene constantly from day to day, being pressed by hon. Members on both sides to do so ever more deeply.
  But the harsh reality is that, while we press for intervention, we are never allowed to be part of the process of deciding the consequences of the intervention which we seek, and no clearer indication of that could one have than tonight's debate, in which none of the options has been put to the House, none of the strategy, none of the figures, none of the costs, and none of the rates. None of that has been made available, although all of it is available to Ministers in charge of the Post Office.
  It is not only a question of the figures. There is the associated question of the standard of service. My right hon. Friend the Member for Bournemouth, West (Sir J. Eden), when the Minister in charge, requested the Post Office to commission a report setting out the options which could be pursued by the Government or by the Post Office, whichever was responsible for carrying out the decisions. That was a report in depth examining the quality of service, examining the options, examining what services would have to be withdrawn in a given range of circumstances. That report was available to the Minister in January this year, and, I dare say, available to the Post Office Users' National Council. But it has not been available for public scrutiny, and there has been no action as a consequence of that report.
  What is the precise situation regarding that report which was in Ministers' hands in January this year? It has not seen the light of day, and at present it is identified only by the rumours which are published or leaked occasionally with regard to, for instance, the withdrawal of Saturday postal services or the like. Why has the Minister not given us any indication of what is in that report? Why did he not even refer to its existence in his speech tonight?
  I welcome the suggestion by the hon. Member for Thornaby (Mr. Wriggles-worth) that we get too much Government intervention. I admit that that rings a loud bell with me, but it leads me to my third question. I want to know how much of the borrowing which the Minister is seeking could be used, or is planned to be used, for the purchase of private sector contractors to the Post Office. There

  1299
  are two questions. First, could the money be used, for example, in the way that ASTMS has suggested, encouraged, I believe, by the right hon. Gentleman the Secretary of State for Industry; that is, for the purchase of contractors in the private sector? Plessey has been named. Can the money being voted tonight be used by the Post Office for the purchase of private sector contractors? Are there any plans that it should be so used?
  My next point was drawn to my attention by the Book Development Council. I have a personal interest to declare in the matter in that I have a publishing concern, and, although it is not a book publishing concern, it is related to the general issues I wish to raise. Since the matter has been widely circulated it is forgivable that I should do so.
  The problem is that the industry may be faced with substantial increases in the cost of postage for books overseas. The industry is a major foreign exchange earner and has a substantial record internationally for the sale of books, particularly books which have an academic interest. The whole concept of Britain's influence abroad cannot be dissociated from the part that the industry has played.
  Governments, through the UPU and associated post offices, have agreed that a balancing charge should be imposed where there is an imbalance between two countries in the weight of postage received and the weight of postage delivered in return. The effect of this will be greatly to increase the cost of posting books to countries with which we may hold an unfavourable balance simply because of the success of our book publishing industry. As a result, the publishers may be invoiced with the charge the Post Office will have to pay to cover the differential, and this will put the industry at a disadvantage compared with less successful publishing industries in other countries.
  Since these regulations have a quasi-governmental nature, is there not a case for this charge not being passed on to the industry in view of the adverse effect that the charge could have on the industry's competitive position?
  My next point concerns recruitment to the Post Office. With the wave of terrorism in this country, few people can
  1300
  ignore the fear that arises from postal deliveries, the sorting of mail and so on stemming from this appalling phenomenon of modern society. Recruitment is never easy in the Post Office, but it will not be helped by the additional risks and fears that these gallant men have to face.
  How are the negotiations progressing to try to persuade the union that there is now a need to move to a greater degree of mechanisation and to introduce part-time working and the employment of women? Will the Minister give more detail about the precise date of the negotiations? Can he say whether the current review he is undertaking will seek to achieve a genuine agreement which will lead to the sort of productivity the industry needs as opposed to increasing wages without increasing productivity?
  My concern for the industry is general. I doubt whether the House will feel satisfied that the time allocated for this debate has been sufficient to permit a detailed probe of the dilemmas facing the Post Office. The general conclusion that must be drawn is that if we seek to understand the difficulties of running British industry we should learn the moral from this situation, that we have not the time or the skill in Britain to extend the areas of Government ownership and control over industry. No better example can be found than in tonight's debate.
  12.10 a.m.
  Mr. John Golding: I hope that this debate will not be followed, as was the last debate, by Opposition Members trying to put the pay and superannuation of Post Office employees at risk. [HON. MEMBERS: "Rubbish."] That was a disgraceful vote. To try to deny the possibilities of pay and financial stability to the Post Office Superannuation Fund was one of the most disgraceful things I have heard in a debate in the House for many years.
  Mr. John Stanley: Will not the hon. Gentleman accept that the sole reason for the Division at the end of the last debate was the Minister's failure to reply to the question of whether £98 million of taxpayers' money was within the statutory provision of the 1974 Act? That was a legitimate question, which in no way jeopardised the

  1301
  superannuation entitlement of members of the Post Office.
  Mr. Golding: The argument in the last debate was that the Post Office staff should not have been included. A year ago those staff were troubled about the stability of their pension fund, and it took a great deal of effort on our part to persuade them that there was no reason for that fear. They will look askance at the Opposition's arguments tonight, followed by that vote. I regard the Opposition's actions as despicable and irresponsible.
  I must tell the Shadow Minister, the hon. Member for Henley (Mr. Heseltine), who has demonstrated tonight that he has come new to Post Office affairs, that we have not been restricted over the past four to six years to debates every two years on the matter of Post Office finance. The order that we discussed in the previous debate arose from a Bill debated in December last year and January this year. We then had long debates on the subject of Post Office finance and prospects. It is not true that these matters are discussed at the intervals which the hon. Gentleman suggested.
  I expressed disappointment earlier that the two orders had not been taken together, because the subject is indivisible. If it has been the too stringent restriction on tariff increases that has led the Post Office to be entitled to compensation, and has led to the borrowing powers order, I would prefer to have neither order. I would prefer to see a greater degree of self-financing in the Post Office, avoiding the necessity for the compensation order and for borrowing such large amounts.
  We welcomed the statement of my right hon. Friend the Chancellor of the Exchequer that there would be a return to commercial pricing in the public sector. I wish that we could have had that statement from the Treasury last December and January. Had the Treasury at that time adopted that policy there would have been no nit-picking now at the amounts that will be involved in the years to come.
  Mr. Mike Noble: Is my hon. Friend aware that in the sixth paragraph of page 113 of the Conservative Campaign Guide for the February
  1302
  General Election the Conservative Party boasted that it used the publicly-owned industries to hold down prices?
  Mr. Golding: I cannot say that I have read the Conservative Campaign Guide. It is not necessary in my constituency to respond to such literature. I can only commiserate with my hon. Friend for having to resort to such reading. Perhaps his electoral situation is more difficult than mine.
  For too long the Post Office has been providing postal and telecommunications services too cheaply to commerce, industry and the community. Both services and staff have suffered because the Post Office has been forced to subsidise private industry and commerce. The extent of the difference in price rises is not generally appreciated. We are often slow to realise that while oil prices over the past 10 years have risen by 907 per cent. the increase in telecommunication tariffs has been 25 per cent. Conservative hon. Members should note that fact. They should acknowledge it even if they do not applaud it. That relatively small tariff increase is due not only to Government policy but to the massive increase in labour productivity—namely, 60 per cent. over the past 10 years, an average annual increase of 6 per cent. I should be pleased if the hon. Member for Henley would tell me in which private industry there has been that sort of increase in labour productivity.
  Mr. Heseltine: The first that comes to mind is agriculture.
  Mr. Golding: I am pleased to hear that agriculture has done so well. Perhaps agriculture is not an industry. I rephrase my question. Which manufacturing industry has achieved such impressive labour productivity? Which employer of technical labour has achieved that sort of increase in productivity? I think that the Opposition would be forced to think first of other nationalised industries. They would be hard put to it to find an industry within the private sector which could match the increase in productivity of the telecommunications services.
  It would be better for the hon. Member for Henley openly to acknowledge the achievement of the telecommunications services rather than to sneer. He

  1303
  must acknowledge that that labour productivity has been achieved as a result of the acceptance of changes in practices on the part of the staff and of productivity bargains.
  There have been much lower price increases. In the past 10 years price increases in private industry have been approximately 90 per cent., but in telecommunications they have been about 25 per cent. The two characteristics of lower charges and higher productivity have been the hallmark of telecommunications for the past decade. It is not surprising that both staff and management get upset when they are attacked by private enterprise, which they subsidise, because the Post Office has lost money or because it is supposed to be inefficient. This is the irony of the publicity war. Private industry, subsidised by the Post Office, increasing its prices more rapidly and having a much lower level of productivity, then attacks the Post Office workers for inefficiency. It is ironic that we on this side of the House should have to put up with this state of affairs. When low prices lead to losses and when attacks are made from hon. Members opposite and from the CBI because of these losses, staff morale slumps. Morale is affected, and that is one of the incalculables when one tries to calculate the financial loss of any Government pegging of nationalised industry prices. Staff shortage can also be a consequence of low pay, which can stem from the building up of these deficits. That is a fact which the hon. Member for Henley must acknowledge.
  Of course, there are problems in the postal service. I have received from Mr. Tom Jackson, the General Secretary of the Union of Post Office Workers, a note which says:
  "The Union of Post Office Workers has recently issued a pamphlet on the future of the postal service. It is hoped that this will receive the welcome from the Corporation that it has from business and commerce. The danger is that if these proposals are not accepted the postal service will continue to deteriorate to become increasingly erratic and haphazard to the detriment of British industry and the community at large."
  I should like the Minister to comment on these proposals of the Union of Post Office Workers, because the union is very concerned that we should restore to
  1304
  Britain the very fine postal service that we once had.
  The situation in the telecommunications business is, however, somewhat different, and it is about telecommunications mainly that I want to speak tonight. The hon. Member for Henley declared an interest in books. I declare an interest in telecommunications. As the Minister knows, I am an Assistant Secretary of the Post Office Engineering Union, and so I have an interest in the well-being of telecommunications. The union believes strongly, with the Select Committee on Nationalised Industries, that to have firm planning is essential, and this implies a greater freedom over tariffs than it has enjoyed for some time. It is absolutely essential for growth that we plan, and abandon the stop-start policies.
  We welcome the statement in the Chancellor's speech on nationalised industry prices. We are not so keen to hear proposals to restrict public expenditure if that means that there will be restrictions once more on the development of telecommunications. One reason why we have not got the telecommunications service that we deserve in this country is the infliction of the cuts upon us by Ernest Marples in the 1950s and by others in the early 1960s.
  I believe that there is a great need for massive investment in telecommunications both for modernisation and for expansion. The size of the system must be increased, and, more important, we must improve its quality. It is desirable that the massive investment be self-financed as much as possible. The Post Office should not be forced to borrow at such high rates of interest. But whether the money for investment be raised from the customer or borrowed from the taxpayer, it must be wisely spent. That means that the Government must concern themselves rather more with certain aspects of Post Office policy.
  I am very disappointed with the Government in one respect. Were it not for the esteem in which I hold my hon. Friend the Under-Secretary, I should be expressing myself more forcibly. We do not seem to have made any progress towards a national telecommunications policy. The reply which I received from the Minister recently fell short of perfection, but let us not hold an inquest on that particular reply.

  1305
  Let me state simply once again that we need a national telecommunications policy formulated and backed by the Government. It is no more the responsibility of the Post Office to draw up a national telecommunications policy than it is the responsibility of the British Gas Corporation to draw up energy policy. If it is important for us to have energy, transport and food policies, it is equally important for Britain, particularly in the 1980s, to have a national telecommunications policy, as the Select Committee on Nationalised Industries recommended, a policy which will work towards an integrated telecommunications system embracing telephony, data transmission and broadcasting. I warn the Minister that if we do not get a response from the Department very soon on this point we shall have to start speaking about it rather more often than we have done recently.
  It is most important that we develop data transmission under public control. I went recently to a conference which was opened by the Minister and organised by the "Little Neddy" for data transmission, a valuable body which it is most important that we continue to support. The Post Office speaker put up a vigorous defence of the development of all data transmission under the control of the Post Office. Unfortunately, the enthusiasm that he generated was dissipated by the main speaker from the Department of Industry, whose attitude towards this subject was disappointing. I hope that the Minister will watch the situation very closely.
  We do not want the haphazard development of private circuits, nor do we want development except under public ownership and control. That is true also of the cable network. I appreciate that this matter is being studied by the Annan Committee. It is important, however, on grounds of social and economic cost, that cable be developed by the Post Office and that we do everything to see that that development takes place.
  I appreciate that I must move on as quickly as possible, but I have been urged by some of my hon. Friends to explain these subjects to them.
  One subject which the hon. Member for Henley raised which I cannot avoid is the question of Plessey. It is my
  1306
  understanding that private manufacturing industry—including, one could almost say, Plessey in particular—has failed the nation. One failure has to be given special mention, and, if necessary, the hon. Member for Henley can go to his friends in the City for advice on the subject. It is the failure to provide international exchanges capable of satisfying the needs of customers. At present, it is understood that much needed relief could be provided to customers of international services by the installation of the Swedish Ericsson equipment. It is less costly to run. It is more reliable than British equipment. It consumes half the power. It takes up half the space, thereby saving capital and buildings compared with British equipment.
  If the hon. Member for Henley visited Stag Lane, talked to the people who have worked in one building installing Plessey equipment, and compared that with the Ericsson equipment, he would know that in this respect Plessey had failed the nation. In my view, the only reason why Plessey is getting contracts is that it is a British company and the Electrical and Plumbing Trade Union rightly wants to safeguard the work of its members.
  We have to be careful in acknowledging that Plessey is failing the nation. It would be better from the Post Office point of view and from the consumer point of view if Ericsson equipment was installed and if Ericsson was invited to this country to make that equipment.
  The real answer, of course, if for the Post Office to manufacture its own equipment—
  Mr. Bob Cryer: Does my hon. Friend accept that it is not the fault of the ordinary employee at Plessey that the firm is failing the nation, as he put it? It is Plessey's failure to invest sufficient money in research, design and development.
  Mr. Golding: Were I to respond to that question, Mr. Deputy Speaker, you would become very anxious—
  Mr. Deputy Speaker (Mr. George Thomas): Order. Since the hon. Member for Newcastle-under-Lyme (Mr. Golding) has referred to me, let me remind him that the debate lasts one and a half hours.
  Mr. Golding: I am glad to know that I have still some time left.
  As I have said, the real answer is to take the telecommunications equipment manufacturing industry into public ownership, because it has failed the nation. If we cannot take it into public ownership in its entirety, we should make certain that the Post Office is responsible for the production of a substantial proportion of its own equipment.
  I have spoken mostly about commercial developments. I add a few words about the attitude of the Post Office to its social responsibility. I have been very disappointed that the Post Office has not supported the voluntary scheme whereby Post Office engineers fitted telephones for the disabled in their own time. At present, people engaged in the voluntary scheme are talking about withdrawing from it because the Post Office refuses to increase its contribution of £12.50, which was fixed when the scheme was first established. I hope that the Minister will do his best to persuade the Post Office to take a different line.
  I believe strongly that what is good for telecommunications is good for Britain. Telecommunications are as vital to Britain's growth as investment directly in manufacturing and in roads. They are a vital part of the infrastructure. If we hope to grow, there has to be sufficient investment. I hope that levels of investment will grow. But, as I have argued, I feel that that investment will come from self-financing rather than from compensation orders or increased borrowing powers.
  12.35 a.m.
  Mr. Tom King: I think that I must start by emphasising what my hon. Friend the Member for Henley (Mr. Heseltine) said about the importance of this debate and the rare chances that we get to discuss such an important issue as the whole sphere of the Post Office.
  Having said that, I point out to the hon. Member for Newcastle-under-Lyme (Mr. Golding) that many back-bench Members on both sides of the House regard his performance as extremely selfish, in view of the short time available to hon. Members who have sat here for the last two and a half hours, by taking 25 minutes for his speech. The
  1308
  hon. Gentleman must live with his conscience in that respect.
  The hon. Gentleman's opening remarks about my hon. Friend the Member for Tonbridge and Mailing (Mr. Stanley) were disgraceful. I respect the hon. Gentleman as a person. We have taken part in debates on Post Office matters on many occasions, and I know of his keen interest. I prefer to attribute what he said to the lateness of the hour and perhaps to the fact that he did not follow my hon. Friend's argument. However, it was a disgraceful slur to imply that my hon. Friend was trying to do Post Office employees out of their pension entitlements.
  I have seen the hon. Gentleman stand up for the rights of Parliament and insist that orders should be properly presented. I submit that my hon. Friend was drawing attention to pensions contributions, not merely to the pensions of this year. That was the point. With respect to the Deputy Chief Whip, he got the Division because the Minister totally failed to answer what many of us as Members of Parliament—not as Conservative or Labour Members—felt was a faulty order that had been brought before the House.
  If the Minister had answered the question that was put to him—he still has not answered it—we would not be pressing him so hard. I hope that the Minister also takes the House of Commons seriously and respects his responsibilities in this matter. The hon. Gentleman must deal with this point.
  This order and the previous one are in a sense interlinked, because borrowing requirements necessarily follow from deficits that have been previously incurred. The Minister has not dealt with the point about how previous years' pensions contributions, which neither side is disputing should be made up, can be slipped into an order which is
  "in consequence of its compliance with the national policy relating to limitation of prices."
  It is nonsense. I hope that the hon. Member for Newcastle-under-Lyme will concede that point, because it was a disgraceful slur to imply that my hon. Friend was trying to deprive people of their pensions benefits. I suggest that my hon. Friend was merely saying for the good name of Parliament that such benefits be properly accounted for and reported and that they should not be sloughed and

  1309
  mixed up in some slovenly way as though they were involved in the limitation of prices.
  Mr. Wrigglesworth Mr. Wrigglesworth rose—
  Mr. King: I intend to be brief. The hon. Gentleman has already spoken for quarter of an hour in this debate. When the hon. Member for Newcastle-under-Lyme has a chance to see my hon. Friend's speech I suggest that he may care to write apologising to him about the allusion that he made.
  There are two issues interlinked here. The Minister, in his second speech on the first order, made the point that I was seeking to make: that the longer the tariff increases are delayed, the greater the deficit and the greater the need for borrowing power. Therefore, I make no apology for referring to the intervention that I made earlier: that it is a matter of urgency to adjust the tariffs. The longer a tariff is delayed, the greater that tariff increase will have to be. It is, therefore, vital that the matter is dealt with promptly.
  Mr. Gregor Mackenzie: It is a great pity that the hon. Gentleman's right hon. Friend did not do something about it in November last year instead of leaving us to do it in March this year.
  Mr. King: With respect, we are now in December. This is an on-going problem. The pace of inflation is quickening and the need to take action to prevent deficits is mounting.
  I am sorry that the hon. Gentleman has brought up that matter again. The order relates to a deficit of £123 million. The hon. Gentleman has admitted that under his stewardship he has managed almost to triple that figure to £300 million. That makes the urgency of action all the greater. I hope that by our agency or by the Government's we can have an opportunity of returning to the whole question of the Post Office, because there is not time in this debate tonight.
  Those who make some attempt to study the matter must be very worried about what is happening. We know that on the telecommunications side there is opportunity for mechanisation and that there are possibilities to counteract increases in labour, but there must be acute worry on
  1310
  both sides of the House about what is happening on the postal side.
  Charges are mounting steadily, and the quality of service is lower than it was. This is the standard complaint from the public. They say that they have to pay more and they get less for it, and we know that this is true. The situation must be reached where postal services will suffer and the cost of the product will make it uncompetitive with an alternative service. The traffic will fall off and deficits will increase.
  We have not had a serious discussion tonight, and there has been no recent debate in the House, on what the future strategy of the postal service should be. At the moment, it is on a one-way street to disaster. This must worry the Minister more than anybody else, and I think that this problem of growing deficits is appalling.
  May I make one constructive point in the light of the criticism that the Minister has had to put up with? The Post Office is hard done by in one respect. It is underpaid by other Government Departments. I have always thought so, and. as the Minister knows, I was a little involved in this. The distribution of petrol coupons was left to the Post Office. The Department concerned said, "The Post Office will distribute them. Get them from the Post Office".
  Then the Treasury comes along and argues about how much the Post Office will get paid for doing that. Nobody else can provide the service. The Post Office is in a unique position, and it ought to be able to strike a better bargain.
  As my hon. Friend said, all we have been told is that the Post Office needs another £1,000 million. All we are told is that money is needed. That is about the depth of the argument that we have had on the case for this massive investment programme. It is five times the size of the ICI programme, yet it gets the minimum scrutiny. I hope that what has been said tonight will be reported in the right quarters and that we shall have a chance to debate these matters in full.
  12.43 a.m.
  Mr. Gregor Mackenzie: I listened with considerable interest and more patience to the speech of the hon. Member for Henley (Mr. Heseltine) on this order than I did on the previous one. He made

  1311
  some important comments and talked about the control that Parliament has over the Post Office. I recall, as I have no doubt the hon. Member for Bridgwater (Mr. King) does, that the last time we had a debate of this kind when we approved aid I said that I hoped the House of Commons would spend a little more time on Post Office affairs than it normally does.
  I know that there are ample opportunities to put down Parliamentary Questions, hear evidence in Select Committees, and so on, but I still hope that we can have a Supply Day from the Opposition so that we can have a full discussion on the Post Office at a more sensible hour of the day. We can then go into the whole question of the accounts of the Post Office and talk about its strategy.
  The Post Office is the largest employer of labour in the country, and one of the largest spenders of money. Without trying in any way to interfere with the normal everyday running of the Post Office, Members of Parliament should be prepared to discuss its activities at some length. That is something to which I would look forward, because I believe that the relationship between the Post Office and the Government is always a good one. Nevertheless, it is right that a Department which is always in the public eye should get much more attention in Parliament than it gets at present.
  The hon. Member for Henley suggested that I had, perhaps, over-stressed the comments of my right hon. Friend the Chancellor of the Exchequer. The hon. Member for Bridgwater made a similar suggestion, as did one of my hon. Friends. But I feel strongly about this. I am anxious, as I said in the previous debate, that the Post Office should no longer be put into the sort of financial straitjacket that it has been put in during the past four years. Regardless of how unpopular it was to increase the price of stamps and regardless of how difficult it was to increase telecommunications charges, the Government acted swiftly, with a degree of courage, in putting up those prices and charges within a short time of our taking office.
  My only regret, I must say to the hon. Member for Henley, who tonight has been boisterous on the subject of Post Office finances, is that if our predecessors
  1312
  in office had had a little more guts and had faced up to the problem of increasing postage stamp prices and telecommunications charges—as they should have done, in my view, last November—we would not have had to take up the sort of bill in March, and tonight, that we have had to take up.
  Mr. Tom King: Who printed the stamps in 1970?
  Mr. Mackenzie: I do not think that that has much to do with it, but perhaps it indicates that when the Opposition were in power nothing happened on this front and that there was a lack of courage by the Opposition. I realise that these are difficult decisions to take, but someone has to take them—and we took them. That action is an earnest of our intention as to how we propose to handle Post Office finances, which is in marked contrast to what happened when the Opposition were in power.
  The hon. Member for Henley also asked about the report which came to the right hon. Member for Bournemouth, West (Sir J. Eden) last November. The right hon. Gentleman did not choose to publish the report. Therefore, the hon. Member for Henley should address his question on this to his right hon. Friend. I did not commission the report. I do not have any obligation to publish a report which was not commissioned by me. We shall handle the Post Office affairs in the way we want to handle them, and I do not see that I need apologise for not publishing a report which was called for by someone else and which has nothing to do with me—
  Mr. Heseltine: It is not a question of merely publishing the report. It was a survey in depth of the options, and it was completed in January. I believe that it has been under discussion and under continued consideration since the present Government came to power, and it is in these circumstances that I ask what has happened to the report. Has it been put on one side and forgotten for ever, or is it still under consideration?
  Mr. Mackenzie: The document to which the hon. Gentleman refers was commissioned by the Conservative Government and was brought to the attention of the then Minister at the end of last year. He did not chose to publish

  1313
  it. When we were elected in February we indicated to the Post Office our attitude on a whole range of problems, and we have put forward our policies. I do not feel under any obligation to give an account of what was done by my predecessor when he was in office.
  The hon. Member for Henley also asked about manufacturing in the Post Office and whether any of this money would be used to take over any of the major telecommunications companies. The answer is "No." There is no provision for that. I would not want to be dishonest with the House. I have always believed that the Post Office should have manufacturing capacity of its own. Conservative Members find this concept offensive, but I have held this view for a long time. We have asked the Post Office to look at this question; we are currently thinking about whether this should be done. The Post Office should have its own manufacturing capacity, either by increasing its factory capacity or by acquiring one of the companies which operate in the United Kingdom.
  As for overseas postage rates, the UPU Congress decided, against our vote, that the imbalance charges should be sharply increased, mainly to help the developing countries. This will result in a doubling of these charges to the Post Office, largely in respect of books and periodicals. The taxpayers or users of other postal services should not be asked to pay for the Book Development Council in that way.
  I join the hon. Member in expressing gratitude to the postmen and postmasters, who have been going through a difficult period recently. It does not help recruitment, but the dedicated people in the Post Office have shown that they have the nation's interests at heart.
  Mr. Cryer: In this context, would my hon. Friend comment on the notion that in the Post Office, as in other nationalised industries, we should be considering developing decision making down, so that, in addition to the fine service, there is some involvement in decision making, with a consequent increase in productivity, and so that people doing ordinary jobs feel that they have some degree of workers' control?
  Mr. McKenzie: I take the point. This is something that we have raised with the Post Office Corporation. Worker par-
  1314
  ticipation cannot be imposed from the top: it has to come from the grass roots. We have told the Post Office that there should be greater participation by the workers who play such a valuable part. We have asked the trade unions concerned to present their findings to us and to the Post Office so that we can have the fullest discussion about how workers feel that they can contribute. The Post Office Engineering Union has contributed greatly through its skill and talents. We are talking not just about wages and conditions but about the valuable contribution that they can make, technically and otherwise.
  I come to the problem of recruitment, to which the hon. Member for Henley referred. He will know that throughout the country there is a shortage of about 8 per cent. to 9 per cent. of Post Office workers. In some areas such as London and the Midlands this figure is as high as 27 per cent. It never surprises me that the figure should be so high. Over the years we have paid these people abysmally low wages. I see my postman delivering letters in all sorts of weather conditions, at all hours, and I can well understand the problems of attracting people to the service.
  My hon. Friend the Member for Newcastle-under-Lyme (Mr. Golding) mentioned the pamphlet published by the UPW. I do not think that he would wish me to comment in too much detail upon it because it is no part of my business to interfere in negotiations taking place about pay and conditions of service. My strongly-held view is that there should be a slackening of Government involvement in pay and conditions of service negotiations. We ought to let the Post Office and the unions concerned get on with the job. We hope that they will reach a solution that is in the best interests of the country as a whole.
  It is a little too early to say how valuable the increase of about £3 we have made will be in affecting Post Office recruitment. It is helping marginally, and I hope that as a result of negotiations now taking place it will assist further. It will be a difficult task to increase numbers in the Post Office.
  My hon. Friend the Member for Newcastle-under-Lyme also raised the question of whether we should have an

  1315
  integrated national telecommunications policy. I have heard my hon. Friend speak on this subject with some eloquence. He will recall our debates during the passage of the Post Office (Borrowing) Bill in 1972. He will also concede that he was not the only one who then made eloquent pleas for an integrated national telecommunications policy. They were very good speeches. It is absurd that services with so much in common as telephony, telex, data distributions, facsimile reproduction, video are planned without regard for one another.
  Mr. Tim Renton (Mid-Sussex): We are talking about the Post Office (Borrowing Powers) Order, not about a national telecommunications system. Will the Minister give us a schedule of drawdowns on the loan and the rate of interest payable, and will he tell us whether any part of the additional loan will be used to make up deficiencies in the pension fund?
  Mr. Mackenzie: I appreciate that the hon. Gentleman is new to our deliberations, but it is normal practice in debating borrowing powers orders for hon. Members to discus the whole strategy of the Post Office and to ask questions on a wide range of subjects. I am answering questions which have been put to me, and that is normal practice. I trust that the hon. Member will read some of our previous borowing powers debates. He will see that we discussed everything, from telecommunications—
  Mr. Tim Renton: In an intervention in the debate on the Compensation for Limitation of Prices (Post Office) Order the Minister promised to deal with the question of pension fund deficiencies in his speech on the borrowing powers order. So far he has not done so. Time is running out, and we should like to hear what he has to say on that subject before the debate ends.
  Mr. Mackenzie: I shall proceed more quickly if the hon. Gentleman allows me to make my speech in my own way.
  I take the point made by my hon. Friend the Member for Newcastle-under-Lyme. It is a matter for the Post Office, and the Post Office is considering it. My hon. Friend will not expect me to say too much about a national cable network.
  1316
  That is for the Annan Committee, and my right hon. Friend the Home Secretary has responsibility for it.
  My hon. Friend the Member for Newcastle-under-Lyme mentioned Ericsson and Plessey. That matter is exercising the mind of my right hon. Friend the Secretary of State. There are many difficult considerations here. On the one hand, we must be certain that we get the right type of equipment at the right time at the right price. On the other hand, there must be a balance between that requirement and the number of jobs to be provided. All those factors will be taken into account in reaching a decision. I appreciate that AGDT has done a lot of valuable work, and in one form or another it will have to be continued for some time.
  The hon. Member for Bridgwater referred to pensions in a rather alarming way. He may not have meant it to be alarming, but it was. I emphasise that there is no cause for concern among Post Office workers. They are entitled to a pension, and they will get it. I know that the deficit is considerable, but it is not my responsibility. I feel a little hurt at having to defend what was done in days gone by, but that is what I have been constantly asked to do tonight. I did not create the deficit in the Post Office Pension Fund, and to be constantly attacked as though I were responsible is offensive to me—especially when it has been done in such a giggling way.
  The hon. Gentleman has read the accounts with care and appreciates how they are framed. Each part of Post Office business has to bear its share of the deficit in the Post Office Superannuation Fund. The point I have made constantly is that had the Post Office been allowed to increase its tariffs to an economic level, to a reasonable and just level, that matter would have been taken care of.
  Mr. Ian Gow: The point the hon. Gentleman is now discussing is one of very far-reaching constitutional and legal importance. If my hon. Friend the Member for Tonbridge and Mailing (Mr. Stanley) is right, as I believe he is, that it is not proper for the Secretary of State to have made the compensation order we passed earlier, it seems to me that the right hon. Gentleman may well himself be liable for the sum of

  1317
  £123,567,000. The Under-Secretary of State has not yet answered the point. I believe that this may well be challenged in the courts and that the Secretary of State may be liable for that sum.
  Mr. Mackenzie: My right hon. Friend tells me that he does not have the money.
  Mr. Heseltine: That has never stopped the right hon. Gentleman from spending it.
  Mr. Mackenzie: One thing that the hon. Member for Henley did not do as a Minister was to try to raise very much, otherwise we would not be in our present difficulties. As I have said, had the Post Office been allowed a greater measure of freedom by the Conservative Government, we would not have been in the present difficulties. We raised this matter in Opposition last year on numerous occasions, and were brushed off time and again when we forecast what the consequences would be.
  A number of hon. Members referred to tariff increases. I was taken aback by the approach of the hon. Member for Bridgwater. He asked whether I was going to spell out tonight in precise terms what we were going to do about increasing tariffs. Surely he does not expect me to say that the cost of stamps will be increased by so much, the cost of telecommunications by so much, and all the other services by so much. If he does, then his days as Parliamentary Private Secretary at the old Ministry of Posts and Telecommunications were wasted.
  It is not part of my function, as the hon. Gentleman knows, to direct the Post Office on matters of that sort. He will not expect me, in the course of a borrowing powers debate, and without consultation with the Post Office or the Price Commission or the Post Office Users' Consultative Council, to make specific announcements of that kind any more than our predecessors did. The only assurance I can give to the Post Office, to its users, to the House and to those who work for the Post Office is that the Post Office, in accordance with what my right hon. Friend the Chancellor of the Exchequer has said in two Budget Statements, will be given—and I am glad by hon. Friend the Member for Thornaby (Mr. Wrigglesworth) mentioned this—a much greater measure of freedom than it was
  1318
  allowed by the Conservative Government. We intend to do that and it will be to the benefit of the Post Office, its users and those who work for it.
  1.9 a.m.
  Mr. Ian Gow: I wish to refer to the way in which the Undersecretary of State announced to the House at about 20 minutes past 10 o'clock that Sir William Ryland had agreed to serve for another three years as Chairman of the Post Office Corporation. It seems to me that that was a discourteous way to make the announcement, at that time of night—
  It being one and a half hours after the commencement of proceedings on the Motion, Mr. Deputy Speaker put the Question, pursuant to Standing Order No. 3 (Exempted Business).
  Question agreed to.
  Resolved.
  That the Post Office (Borrowing Powers) Order 1974, a draft of which was laid before this House on 11th November, be approved.

  POST OFFICE (BORROWING POWERS)
    ADJOURNMENT
    Motion made, and Question proposed, That this House do now adjourn.—[Mr. Dormand.]

  IPSWICH (BYPASS)
  1.10 a.m.
  Mr. Ken Weetch: I count myself exceedingly fortunate to have secured this short debate on the time scale for the Ipswich bypass. I have been particularly anxious to press for such a debate after the totally unsatisfactory reply which my hon. Friend the Under-Secretary of State gave in a Written Answer to me on 14th November. That reply hit my constituency like a thunderbolt. All sections of the community received with utter disappointment and dismay the reply that the construction of the bypass might begin in about six years.
  My constituents have been given two estimates of completion dates for the bypass. The earlier estimate of completion was 1979, and the second was 1981. The latest announcement by my hon. Friend means that the project will not now start until perhaps 1981. This is degenerating into a long saga of frustration and delay, and Ipswich residents are beginning to

  1319
  wonder whether the project is now falling into the "This year, next year, some time, never" category.
  The case for the construction of the Ipswich bypass to be given urgent and immediate priority in the national roads programme is overwhelming on economic grounds. This part of East Anglia, which the bypass is intended to serve, is one of the most swiftly expanding areas of Britain in economic and commercial terms. The bypass is intended to accommodate commercial traffic to and from Ipswich, Felixstowe and Harwich, which together provide the fastest developing docks complex in this country.
  In terms of expanding trade, these ports are of enormous and increasing national importance. In terms of exports, the bypass would serve as a crucial link with roads connecting the area with the industrial Midlands, notably the line of the A45. In terms of imports, one has to remember that heavy freight from Felixstowe, a growing proportion of which is container traffic, at present goes by the A45 to the Midlands and by the A12 to London. The import trade through Harwich and Ipswich, especially now that the new west bank extension will increase the trade of the port by over 20 per cent. is of rapidly developing importance, too.
  Yet what road structure serves the Ipswich area at present? Heavy commercial traffic from the areas I have mentioned, which must converge on Ipswich, now experiences a massive and rapidly worsening bottleneck. Literally tens of thousands of pounds are lost in sheer delay and damage to the environment. The problem is urgent because, as our trade with Europe expands month by month through the Haven ports, so the chaos and delay multiplies, and our trading prospects will become further damaged.
  The situation now is that the road system of Ipswich and the immediate area which it serves is chronically overloaded. This heavy traffic converging upon Ipswich can do one of two things. It can go by the north route using the ring road which runs through a built-up residential area, and the delay, vibration, dirt and noise are appalling and have to be seen and heard to be believed. Some of the traffic goes by the southern
  1320
  route, which goes through roads in which are located terraced houses with front doors which open directly on to the road. In those houses the china rattles on the shelves, cracks appear in the plaster, and women taking their children to school go in fear of injury. The chaos on these roads has to be seen to be believed, and yet they must serve as a jugular vein for our exports and imports through the area.
  The situation is getting worse because ironically, the roads in the immediate area are slowly being improved. There have been major constructional improvements on the A12 and the A45 but this means the bottleneck in Ipswich becomes worse. The net result so far of these improvements is that the heavy traffic in this nightmare reaches that point sooner than before, and it is for these reasons that delay is serious. Urgent priority for the construction of the bypass is vital.
  I am arguing the case tonight on national economic grounds because of the enormously important economic and commercial future which this region can have for the prosperity of Britain. The early construction of the bypass will provide an investment return which in national terms will be considerable. There is an environmental case to be met which is no less serious because the effects of delay in this construction are becoming quite socially lethal. But it is the economic case that I am largely arguing, and I emphasise that I am not solely engaged here at this late hour on special regional economic pleading.
  When my hon. Friend the Minister replies I hope that he will revise his earlier answer to me and restore the firmly established priority of this bypass. He can then strike a blow both for economic advance and for environmental improvement in this critical area of East Anglia.
  1.18 a.m.
  The Under-Secretary of State for the Environment (Mr. Neil Carmichael): I am grateful to my hon. Friend the Member for Ipswich (Mr. Weetch) for giving me the opportunity of explaining more fully the answer I gave him in the Question to which he referred, and the opportunity to clarify the position on the timing of the bypass for Ipswich. I con-

  1321
  gratulate him on the able manner in which he presented the case on behalf of his constituents and the tenacity with which he has kept at me and my Department on this question.
  I am fully aware, and if I had not been my hon. Friend would have made me so, of the urgency of providing a new bypass for Ipswich and of the growing concern about heavy traffic through the town, which is aggravated by the container and freight traffic from Felixstowe and local industrial areas. We are also very concious of the fact that the ports are growing in that part of the world and that they have an important contribution to make to the national export drive.
  Perhaps I can give my hon. Friend some of the background to the case, although I know he is probably well aware of it. If I may go through the problem step by step as the Department sees it, it will at least reassure my hon. Friend that no time is being wasted.
  When the new bypass was first included in the trunk road preparation pool in 1972, it was announced that construction could possibly begin in 1977. This did not take account, however, of the changes announced last year in the consultation procedures prior to the publication of the proposals. The additional process of consulting the public on alternative routes has added another 12 months to the preparation stage. As my hon. Friend will know, the public consultation originally planned for February this year was further delayed by four months by the General Election. The whole question of public participation is one of great difficulty. In a democracy we try to give people the opportunity to see the alternative routes for a road which is quite a major intrusion in the vicinity of their homes and places of recreation, and to make a choice of the route that is preferable to them. This is a good democratic process, but we must accept that it causes delay.
  It has taken some time to analyse the completed questionnaires and letters received following the consultation and public exhibition of plans and models of our alternative routes and crossings. A great deal of expense and trouble and the time of highly-skilled people in the Department is put into the exhibitions. It is a credit to the Department that it goes to such trouble and takes such an active
  1322
  part in trying to inform the public of the possible alternatives, and even why the road should be built.
  It has also been necessary to carry out investigations into a number of extra alternative routes suggested by the public. This is another cause of delay, which is legitimate and which happens with every major road that the Department plans. My right hon. Friend the Secretary of State expects to receive the report of the consultations and to announce the preferred route early in the new year.
  Another point which has added to the complications of the scheme, and of which my hon. Friend is no doubt aware, is the River Orwell crossing. This could be either by submersible tunnel or by bridge. For a submersible tunnel a channel is cut in the river bed and a tunnel is laid in the channel. The matter must be studied. Either method is extremely costly. Whichever is ultimately selected for further study must be the subject of discussions with the harbour and water authorities, which are responsible for maintaining the shipping lanes into the port.
  As explained in the public consultation document, the detailed design of the alternative routes is by no means complete. After a preferred route has been established it will be necessary to continue the design of this route in order to prepare draft proposals for publication. In view of the difficult soil conditions in the area, the Department will have to carry out detailed soil and topographical surveys. This was shown up in work on earlier bypasses in exactly the same type of terrain.
  If everything goes smoothly, the earliest date by which the orders can be published is early 1977. Passage through the various statutory processes, particularly on a scheme of this size, inevitably takes time. Following publication of the draft orders for the line and side roads, a minimum period of six weeks must follow for the public to lodge objections. If, as seems likely, a large number of objections to the proposals are received, a public inquiry will be held before an independent inspector.
  Naturally, the greater the number of objections received, the longer the ensuing inquiry. From experience we find that it takes up to 12 months for the inspector

  1323
  to make his report and recommendations and for these to be cleared by the Secretary of State before he can announce whether the orders should be confirmed. I am sure that my hon. Friend would not wish him to override any objections and representations received against the orders without first weighing them carefully. If my right hon. Friend confirms the draft orders, the Department will prepare and publish a compulsory purchase order to acquire the land. That, too, will undoubtedly be subject to public inquiry proceedings. It might be possible to save a few months by publishing the compulsory purchase order at about the same time as the line and side roads orders. There are risks, and we are considering whether that would be practicable.
  I am saying that a large part of the time scale of six years that I mentioned in my earlier reply is unavoidable in view of the efforts that are made to consult the public—in this case the people of Ipswich—on the route the road will take. After they have been consulted they are given the right to make objections. If we are taking over a man's house, cutting off his garden or going right through the centre of his house, he must have some rights to object or to lodge some form of protest. People throughout the country legitimately raise these matters, and they undoubtedly take time. The construction of the bypass cannot begin until all the statutory processes have been completed satisfactorily.
  In reply to my hon. Friend on 14th November I said that, subject to availability of funds, I hoped that work on the bypass might start in about six years. I regret that there is little chance of work starting before 1980 unless we find that there is less opposition than is expected to the Department's proposals when they are published. Apart from that, I see little scope for improvement in the timing.
  My right hon. Friend has not yet decided whether the River Orwell should
  1324
  be crossed by tunnel or bridge. Either would take longer to complete than the remainder of the road, and we would be prepared to see whether it would be practicable to start the crossing in advance of the road works. Failing that, it might be possible to open the western section and part of the southern section of the bypass in advance of the remainder whilst the bridge or the tunnel is being completed.
  I hope that I have made the position clear and that my hon. Friend appreciates that, whilst I am as anxious as he is to provide relief to the residents of Ipswich, the speed at which we can proceed is governed largely by statute. All those who are affected by our proposals must be given an opportunity to object, and the objections must all be carefully considered. The question also arises of adequate finance at the appropriate time to pay for these costly improvements to our road networks. However desirable the objective, therefore, it is not always possible to achieve it as rapidly as one would wish.
  I am sorry if I have not given my hon. Friend exactly what he wanted— namely, a starting date in the near future. I hope that I have been able to explain the difficulties involved and that I have been able to hold out one or two grains of comfort. The Department is, of course, anxious to go ahead with the project. Once we are on the beginnings of the project, when we have overcome the statutory problems, we shall do everything possible to try to speed up the purely engineering problems that are presented by the road. I must point out that at the end of the day, after going through all the necessary processes, the project must compete with other schemes in other parts of the county, which are fought for just as hard by the Members representing those areas.
  Question put and agreed to.
  Adjourned accordingly at twenty-nine minutes past One o'clock a.m.