Commons Sitting of 27 March 1974

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

SELECTION
Ordered,
That Mr. Ronald Brown, Mr. Hugh Delargy, Mr. Harold Gurden, Mr. Cledwyn Hughes, Mr. Adam Hunter, Mr. Bryant Godman Irvine, Mr. Ken Lewis, Mr. Martin McLaren, Miss Quennell, Mr. Albert Roberts and Mr. Frederick Willey, be members of the Committee.—[Mr. Walter Harrison.]

PRIVATE BUSINESS
  AYR COUNTY COUNCIL ORDER CONFIRMATION BILL
  Mr. William Ross presented a Bill to confirm a Provisional Order under Section 7 of the Private Legislation Procedure (Scotland) Act 1936, relating to Ayr County Council; and the same was read the First time; and ordered to be considered upon Tuesday next and to be printed. [Bill 10.]
  ST. ANDREWS LINKS ORDER CONFIRMATION BILL
  Mr. William Ross presented a Bill to confirm a Provisional Order under Section 7 of the Private Legislation Procedure (Scotland) Act 1936, relating to St. Andrews Links; and the same was read the First time; and ordered to be considered upon Tuesday next and to be printed. [Bill 11.]
ORAL ANSWERS TO QUESTIONS
  FOREIGN AND COMMONWEALTH AFFAIRS

    Falkland Islands
    Mr. Kershawasked the Secretary of State for Foreign and Commonwealth Affairs what steps he is taking to improve the economic development of the Falkland Islands; and if he will make a statement.
    The Under-Secretary of State for Foreign and Commonwealth Affairs (Miss Joan Lestor): A development plan for the period 1973–74 to 1977–78 has been approved by the Falkland Islands Govment. Over half the funds required for the plan's implementation will be met from United Kingdom development aid.
    Mr. Kershaw: I congratulate the hon. Lady on her first appearance at the Box at Question Time. Will she keep in mind the question of a fuel monopoly given to the Argentine State oil company, which appears to be commercially unnecessary and politically potentially undesirable, and which, if persisted with, is likely to frighten away British capital which might wish to go there privately?
    Miss Lestor: I thank the hon. Gentleman for his kind remarks. I shall bear his comments in mind should the situation arise.
    Mr. Luce: Does not the hon. Lady agree that one way of helping the economic development of the Falkland Islands would be to improve communications there? What progress is being made on the construction of the permanent airstrip on the Falkland Islands?
    Miss Lestor: Tenders are now being examined by the consultants. The airfield has been designed to the specifications required to enable aircraft to fly to other destinations in Latin America, besides Argentine airfields.

    South Africa
    Mr. Huckfieldasked the Secretary of State for Foreign and Commonwealth

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    Affairs whether he will make a statement about the United Kingdom's future relationship with the Government of the Republic of South Africa.
    The Secretary of State for Foreign and Commonwealth Affairs (Mr. James Callaghan): I refer my hon. Friend to my speech in the House on 19th March about South Africa.—[Vol. 870, c. 872–3.]
    Mr. Huckfield: I have read that speech. Will my right hon. Friend do his best to ensure that his staff in South Africa do their best to maintain contact with all strands of opinion, including bodies such as the Christian Institute and the National Union of South African Students? Will he do his best also to stress to everybody in this country, particularly the supporters of the proposed British Lions' tour, that the best way in which they can show their disapproval of apartheid and similar policies is to stop such tours taking place?
    Mr. Callaghan: As regards the first part of my hon. Friend's supplementary question, in view of our fundamental opposition to apartheid and our intention to play our full part in the international community in seeking to end discrimination throughout southern Africa, I feel that it would be right for Her Majesty's representative there, and all others, to keep closely in touch with all strands of opinion in southern Africa.
    As regards the British Lions' tour, I expressed my view on that when in Opposition. These sporting matches are ill-conceived when they are played against teams which are selected on the basis of race. I have no reason to change my view now that I am in Government.
    Mr. Wall: Whatever our personal opinions of the internal affairs of South Africa, will the Minister continue to bear in mind the important strategic position of South Africa and its importance as a trade partner—I believe our fourth best?
    Mr. Callaghan: Yes, Sir. I said in my speech originally that we often have to do business with people whose views we do not share and, indeed, may bitterly oppose.

    Chile
    Mr. Whiteheadasked the Secretary of State for Foreign and Commonwealth Affairs if he will recall Her
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    Majesty's Ambassador in Santiago, Chile.
    Mr. Newensasked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on future relations with the Chilean military junta.
    Mr. James Callaghan: Chile has a strong tradition of democratic government, and our policy towards the military junta will be governed by our desire to see democracy restored and human rights fully respected there. To this end, we shall take part in any future representations to be made by the United Nations on human rights in Chile, and our ambassador has been instructed to represent strongly to the military junta our concern at the treatment of prisoners. Aid will be suspended, and my right hon. Friend the Minister of Overseas Development will announce details in reply to a later Question. A projected naval training exercise has been cancelled. Existing contracts are being urgently reviewed, but we shall not grant new export licences for arms. I am glad to inform the House that the Home Secretary will consider applications from Chilean refugees sympathetically.
    Mr. Whitehead: I thank my right hon. Friend for that exhaustive statement. There was great disquiet on this side of the House about the behaviour of our accredited representatives in Santiago at the time of the coup and afterwards, particularly in their attitude towards refugees from the junta. Will my right hon. Friend say a further word about the stopping of all arms assistance to the junta? Has that been stopped from the date of the General Election onwards?
    Mr. Callaghan: As for the attitude of our ambassador, I am sure that he was carrying out the instructions of the administration at the time. It was proper that he should do so. New instructions have now been sent to him.
    As regards arms, I cannot go further this afternoon than I have already said. I have made clear that existing contracts are being urgently reviewed, but we shall not grant new export licences for arms.
    Mr. Evelyn King: If we are to trade discourtesies with countries of whose internal régimes we disapprove—a policy

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    that can be all too easily counter-productive—will the Foreign Secretary undertake to act similarly towards Left-wing as well as Right-wing dictatorships?
    Mr. Callaghan: There has never been any hesitation on the part of the Labour Party about making clear where we stood in relation to matters of human rights, no matter what Government were involved. My hon. Friends and I have made personal representations to ambassadors of countries where we thought that human rights were being suppressed, irrespective of the nature of the régime.
    Mr. Newens: Will my right hon. Friend refute the report that appeared in the Sunday Telegraph to the effect that warships now being constructed will be supplied?
    Will he make it clear that the position of the Governmment is the same as that expressed by the then Opposition in the debate on 28th November of last year? Will he bear in mind the murder, torture and imprisonment of thousands of people in Chile who were merely pursuing their democratic rights, and so uphold our world position and honour on this issue?
    Mr. Callaghan: I cannot give a clear undertaking on existing contracts, as I have said, because that matter is being reviewed. There are industrial and commercial considerations that have to be and will be taken into account. Contracts are involved here, but what I say now, for the third time, is that no new export licences will be granted.
    Mr. Amery: Has the right hon. Gentleman analysed the effects on employment in Chile of cutting back aid, particularly in the technical branch, and what the effect of employment in British shipyards will be if there are no future contracts?
    Mr. Callaghan: The first consideration will be dealt with by my right hon. Friend the Minister of Overseas Development when she answers a later Question. The second consideration is, of course, always in our minds and must be one of the matters taken into account.

  OVERSEAS DEVELOPMENT

    Chile
    Mr. Leeasked the Minister of Overseas Development whether she will stop the supply of overseas aid to Chile.
    The Minister of Overseas Development (Mrs. Judith Hart): Yes, Sir. There will be no new aid to Chile and I am stopping all present aid except that concerned with the support of Chilean students and graduates coming to Britain, which I am prepared to extend. I am allowing the completion of one or two minor technical assistance projects.
    Mr. Lee: Will my right hon. Friend bear in mind that her reply will give great satisfaction to the House, in view of the fact that the present Chilean Government, if it can be so called, indulge in the murder of their opponents on a scale unknown of any Government since that of Stalin?
    Mrs. Hart: I am grateful to my hon. Friend. That is also my understanding of the situation in Chile.
    Sir Frederic Bennett: The Minister will remember that when in opposition she said not only that when she got into office she would take immediate steps to stop aid to Chile but that she would bring effective pressure on the World Bank and the International Monetary Fund to stop all international aid to Chile. Will the right hon. Lady give an account of the pressures which she has so far exerted?
    Mrs. Hart: I fear not. I can tell the hon. Gentleman that I have had discussions with ministerial colleagues in Europe but I am afraid I cannot reveal the contents of those.
    Mr. Kerr: Will my right hon. Friend confirm that there is no question of the delivery of the naval frigates currently on order to Chile in the near future?
    Mrs. Hart: On that point I must refer my hon. Friend to the earlier answer of my right hon. Friend the Secretary of State.
    Mr. Wood: Is the right hon. Lady aware that, small as the British programme was in Chile, her decision is not only illogical but will do great damage to a country whose needs are very great? Will she finally confirm that she has now totally abandoned the view that she argued with passion when in opposition—that political considerations should be subordinate to development needs?
    Mrs. Hart: On the latter point, if the right hon. Gentleman refreshes his

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    memory correctly he will find that I argued somewhat differently. On his main point, as he will know, the three main areas of technical assistance in Chile were in industrial training, where in the whole of industry the trade unions have been suppressed and trade unionists have been imprisoned, persecuted and killed; in agriculture, where the present military régime is totally reversing the programme of land reform to which our aid is directed; and, thirdly, in education, where most of the educational institutions are now in the hands of generals, departments have been closed and there has been suppression and persecution of people engaged in education.
    Mr. Kinnock: I congratulate my right hon Friend and my other right hon. and hon. Friends in the Foreign Office on the approach that they have taken to refugees from, armaments to, and aid to the Fascist junta in Chile. In her current policy my right hon. Friend has the endorsement of a large proportion of the anti-Fascist world. Would it not have been illogical for my right hon. Friend to give aid to Chile which would have provided the generals with resources to buy armaments to suppress their people?
    Mrs. Hart: I am grateful to my hon. Friend for his endorsement of the policy. In Britain, as in Chile, there are two versions of the facts. I fear that most right hon. and hon. Members of the Opposition have completely accepted the propaganda version of the facts put out by the military régime.
    Mr. Amery: Is the right hon. Lady aware that we are all very understanding of the fact that she has to console the left wing of her party for the minority Government's inability to fulfil a truly Socialist manifesto?
    Mrs. Hart: The right hon. Gentleman should look back at the history of the Labour Party's reactions to the events in Chile from the moment at which they occurred.

  FOREIGN AND COMMONWEALTH AFFAIRS

    European Economic Community
    Mr. Martenasked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on re-
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    negotiating the terms of entry to the EEC.
    Mr. Moateasked the Secretary of State for Foreign and Commonwealth Affairs if he will make arrangements for the fundamental review of British membership of the EEC; and if he will make a statement.
    Mr. Laneasked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement about the stage reached in his preparation for the renegotiation of the EEC Treaty.
    Mr. Leeasked the Secretary of State for Foreign and Commonwealth Affairs what is Her Majesty's Government's policy towards renegotiating the terms of the Treaty of Rome.
    Mr. Blakerasked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement about the arrangements for renegotiating the terms of entry into the EEC.
    Mr. James Callaghan: I would refer the hon. Member to the statement which I made to the House on 19th March.—[Vol. 870, c. 859–70.]
    Mr. Marten: As renegotiation, it successful, will fundamentally alter the whole concept of the Common Market, or, if renegotiation is unsuccessful and the question is put for referendum, it will almost certainly mean that we shall withdraw, will the Government now begin to consider the creation of a wider free trade area?
    Mr. Callaghan: The first two parts of the hon. Gentleman's supplementary question are hypothetical. I do not wish to be drawn into that territory yet. As to the creation of wider areas, we have always argued that we need the widest area for trade and, indeed, that many of these monetary and trade questions can be solved satisfactorily for all countries only on a world-wide basis.
    Mr. Lee: Will my right hon. Friend find a new job for Mr. George Thomson, whose undoubted talents could be more usefully employed this side of the Channel than in Brussels, where he appears to be sabotaging my right hon. Friend's—[HON MEMBERS: "Oh!"]—suggestions.
    Mr Callaghan: There does not seem to be complete unanimity about the

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    whole of my hon. Friend's question, but I understand that there is unanimity on what he said about Mr. George Thomson's merits. I should like to see his merits deployed in any field that would serve best.
    I understand, although I was not aware that I was to be asked this question, that I do not have any power to remove him, even if I thought it right to do so. He is independent and, as long as he is independent, he expresses his own views.
    Mr. Lane: Is it not already clear that there is ample scope for continuing the last Government's programme for reshaping the Community from within? Will not the right hon. Gentleman now acknowledge that Labour's talk of renegotiating terms of entry has been phoney and will not impress either the British public or our fellow members of the Community?
    Mr. Callaghan: I am not sure which leg the hon. Gentleman is trying to stand on. Is it possible to renegotiate or is it not?
    Mr. Christopher Mayhew: While the Foreign Secretary is mobilising all possible influence to improve the terms of entry into the Common Market, is it logical for him to prevent his supporters from going to the European Parliament to support him on this matter?
    Mr. Callaghan: I have nothing to add to what the Lord President said on that subject in the recent debate.
    Mr. Blaker: The Government gave the impression in the foreign affairs debate last week that, pending the outcome of the renegotiation, no new commitments would be undertaken vis-à-vis the other eight members of the Community. Does that mean that the Government do not propose to try to bring to a conclusion the negotiations on the regional development fund, which were already far advanced under the previous administration and which, if concluded, would bring this country great benefits?
    Mr. Callaghan: We shall certainly need to reconsider that and other questions to see how far it is necessary to increase the size of the Community budget as an offset to an extremely large agricultural
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    expenditure by this country, or how far it would be more sensible to reduce the size of the total budget and thereby reduce the size of any regional fund. These considerations have obviously to be taken into account in our negotiating approach.
    Mr. Moate: In the fundamental renegotiations, will the right hon. Gentleman be seeking to restore the full powers of this Parliament over all Community enactments, including, particularly, Commission regulations, with which the Foster Committee did not deal specifically?
    Mr. Callaghan: In principle, yes. The method I am not clear about, but I think that what has been clear from the attitude of the Labour Party, both in Opposition and in Government, is that we wish this House to be in a position to give the final answer.
    Mr. Jay: While conducting these negotiations, will my right hon. Friend also have talks with countries such as New Zealand, Australia and Canada, in order to resume the previous close economic relations with those countries?
    Mr. Callaghan: With pleasure. Mr. Walding, the New Zealand Deputy Prime Minister, has already discussed these matters with Ministers here.
    I am bound to say that quite a lot of diversification by these countries has taken place during the last couple of years because they felt that they were being told to go elsewhere. Therefore, they have to be given assurances of long-term arrangements if they are to redivert their trade here.
    Mrs. Winifred Ewing: May I ask the right hon. Gentleman a much easier question? In the renegotiation, is there any exclusive responsibililty, either by staff or subject matter, for Scottish interests—agriculture, fishing, energy, and so on?
    Mr. Callaghan: It is being undertaken on a United Kingdom basis, but representing, as I do, one of the—shall I say?—"Trinity" inside Great Britain, I shall make absolutely certain that our interests, whichever side of the border they may happen to be, are fully looked after.
    Mr. Russell Johnston: Given the response that the Foreign Secretary gave

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    to the hon. Member for Faversham (Mr. Moate), do I gather from his approach that the fundamental renegotiations are not concerned solely with the financial terms negotiated by the previous Government but go to the very heart of the nature of the Community? Will the right hon. Gentleman therefore make clear whether he is in favour of our membership of the Community as it is in principle?
    Mr. Callaghan: I do not think that I want to go any further than the Labour Party manifesto, which I recommend the hon. Government to study.
    Mr. Milne: Will the Foreign Secretary have talks with our EFTA partners in order to learn from them how, without seeking Community membership, they got better agreements in many areas than we did with membership?
    Mr. Callaghan: If there had been a Labour Government three years ago, perhaps that would have been an appropriate question, but we are now part of the Community and it is important to observe how deeply embedded the institutions have become since we joined. Therefore, I think that it is better that we should start by seeing how we are to renegotiate—which was the basis of our agreement inside the party and at our own conference—than that we should try to start from the outside.
    Mr. Rippon: Will the Foreign Secretary say something in this context about his recent visit to Bonn? Did he reiterate the view he expressed in his speech last week—that he was broadly in agreement with the objectives of European unity? In particular, did he raise the question of new negotiations in the sphere not only of regional policy but of social, industrial and aid policy?
    Mr. Callaghan: Yes, Sir, we covered the whole field. I had very cordial conversations with both Chancellor Brandt and Herr Walter Scheel. We did not agree on everything, which was hardly surprising, but I think that they understood the reasons for our approach on many of these matters, and I hope to have further conversations with others in due course.
    Mr. Christopher Mayhewasked the Secretary of State for Foreign and Com-
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    monwealth Affairs if, during the period of renegotiating the terms of entry into the EEC he will also put forward proposals for strengthening the democratic institutions of the Community.
    Mr. James Callaghan: The need for greater democratic control over the work of the Community will be considered in the light of the results attained in the renegotiation of the terms of entry.
    Mr. Mayhew: May I ask my right hon. Friend again to give his reasons for insisting that the case for lower farm prices, a better regional policy, a smaller British contribution to the budget, and so on, should be put in the European Parliament only by Opposition Members of Parliament? Why does not he allow his own supporters, who can put the case a lot better, to go as well?
    Mr. Callaghan: I would not differ from the view expressed in the last part of that supplementary question, but my right hon. Friend the Prime Minister has made the position clear, and that is the position of the Government.
    Sir Douglas Dodds-Parker: Is the Foreign Secretary aware that in the last 15 months a number of proposals have been put forward by my hon. Friend the Member for Saffron Walden (Mr. Kirk) and sympathetically received, and particularly by Mr. Rafton Pounder, about budgetary control, which have largely been adopted and will come into effect next year?
    Mr. Callaghan: I am very glad to hear that.
    Mr. Arthur Lewis: Will my right hon. Friend correct my hon. Friend the Member for Woolwich, East (Mr. Mayhew) and the hon. Member for Cheltenham (Sir D. Dodds-Parker) by pointing out that we are not represented by Members of Parliament? They are men some of whom have either voluntarily decided not to stand for Parliament, or who were defeated at the polls. Is it not absolutely anti-democratic for people to be there—allegedly in Parliament—receiving tax-free fees, although they do not want to stand as Members of Parliament?
    Sir Derek Walker-Smith: As the institutions of the Community work on a somewhat paradoxical basis, in that the primarily legislative function is vested in

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    a mainly executive body, to wit, the Council of Ministers, will the right hon. Gentleman give his powerful support to the adoption of the suggestion—which I made more than once last year—that the legislative processes of the Council of Ministers be as far as possible conducted in public, as a contribution to the improvement to the democratic process?
    Mr. Callaghan: I think that is a very interesting suggestion, and in due course I shall want to consider it, without giving a final reply today.

    Middle East
    Mr. William Hamiltonasked the Secretary of State for Foreign and Commonwealth Affairs when he next intends to pay an official visit to the Middle East.
    Mr. McCrindleasked the Secretary of State for Foreign and Commonwealth Affairs what plans he has to pay an official visit to Jerusalem.
    The Minister of State for Foreign and Commonwealth Affairs (Mr. David Ennals): My right hon. Friend visited both Egypt and Israel shortly before the election was announced. He has no plans to visit the Middle East at present.
    Mr. Hamilton: Will the Minister give an assurance that he will pursue an even-handed policy in this extremely sensitive area, and try at the earliest opportunity to bring together the oil-importing and oil-exporting countries, with particular regard to the problems of the Third World and the underdeveloped countries generally?
    Mr. Ennals: To take the second part of my hon. Friend's supplementary question first, the answer is "Yes, indeed." That matter is being discussed at the Washington conference at present and will certainly be taken up at the special session of the United Nations Assembly in two weeks' time.
    As regards the first part of the supplementary question, we are anxious to do everything that we can to assist Dr. Kissinger in his delicate negotiations—so far with considerable success, but there are difficulties ahead.
    Mr. McCrindle: When the Foreign Secretary next visits Jerusalem, will he try to improve still further Anglo-Israeli
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    relations, which reached a very low point last October? Does the right hon. Gentleman not agree that, rather than achieve that improvement by resuming arms sales, he might do worse than consider the possibility of improved economic and trade relations, particularly with regard to citrus products?
    Mr. Ennals: My right hon. Friend is concerned with the whole question of trade relations with Israel and, of course, with the other Middle East countries, but he will bear in mind what the hon. Gentleman said.
    Mr. Sandelson: Has my right hon. Friend had an opportunity of considering the views expressed in the foreign affairs debate last Tuesday by my hon. Friend the Member for Sheffield, Heeley (Mr. Hooley), some of which caused offence to certain people? Will he now comment on what my hon. Friend said? I told my hon. Friend the Member for Heeley that I would raise this question.
    Mr. Ennals: Yes, Sir. At the time of my hon. Friend's statement I was asked whether I would comment on his remarks, and I replied that I preferred to see HANSARD before doing so. I have looked carefully at my hon. Friend's remarks, and I must say that Her Majesty's Government would in no way wish to be associated with the language used by him about Israel, or with his comparison between the situation there and that in South Africa. I am sure that it is neither right nor helpful to use such language.
    Mr. Fidler: I thank the right hon. Gentleman for his response to my intervention last week. However, I wonder whether he has seen two reports in The Times today. One indicates that the British Government have supported the European Declaration on the Middle East, made on 6th November. I hope that that is not so.
    Far worse, is there any truth in the other report, that the British Government have approved the appointment of General Shazly as the next Egyptian ambassador to the Court of St. James? Bearing in mind General Shazly's background of about 10 years ago, when he was closely associated with Fascist organisations in this country which were endeavouring to raise a large sum of money from him in order to engage in

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    anti-Semitic activities here, such an appointment is unacceptable and an offence not only to the Jewish community but to all freedom lovers in this country.
    Mr. Ennals: Let me deal first with the 6th November declaration. It was a restatement of the principles contained in the United Nations resolution. Her Majesty's Government accept the wording of that resolution which, in our view, in no way changes the position adopted by the Labour Party both in opposition and now in government.
    In answer to the second question, I confirm that agreement has been granted for General Shazly to become the ambassador. It is not right for me to discuss allegations about General Shazly which have appeared in the Press. He has been accepted as the ambassador of Egypt, with which it is our wish to have friendly relations.
    Mr. Jackson: Will my right hon. Friend give an assurance that the policy of Her Majesty's Government is that Arab Jerusalem should remain an integral part of Jordan?
    Mr. Ennals: I do not intend to be drawn into confirming statements of that nature. At a time when Dr. Kissinger is involved in very delicate negotiations, it is in no way helpful for Governments to line themselves up on one side or the other.
    Mr. Walters: Do the Government intend to continue to encourage schemes for industrial co-operation and partnership in Egypt and other Arab countries which are of great long-term economic and political value to this country?
    Mr. Ennals: Yes, Sir. In the article written by my right hon. Friend when he returned from his visit to both Israel and Egypt, he emphasised the value that we place on our economic relationship with those countries.

    French Nuclear Tests
    Mr. Dalyellasked the Secretary of State for Foreign and Commonwealth Affairs what representations he is making to the French Government on nuclear testing in the Pacific.
    Mr. James Callaghan: I am examining all aspects of this subject. Her Majesty's Government's general policy will be based
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    on the Commonwealth Prime Ministers' declaration at Ottawa, concerning the Partial Test Ban Treaty.
    Mr. Dalyell: Are we supporting the views put on behalf of New Zealand by Mr. Walding?
    Mr. Callaghan: My hon. Friend has a capacity for asking short, succinct and difficult questions. I do not want to go further than I have today until I have examined this matter. Then, no doubt, my hon. Friend will probe me again.

    Hong Kong
    Mr. Sillarsasked the Secretary of State for Foreign and Commonwealth Affairs if he will pay an early visit to Hong Kong.
    Mr. Ennals: My right hon. Friend has no present plans for a visit.
    Mr. Sillars: Is my right hon. Friend aware that a large number of ILO conventions which operate fully inside the United Kingdom are not applied fully inside Hong Kong? Is my hon. Friend further aware that we want him either to go personally or to send a commission of inquiry to Hong Kong to see how we can match that model economy's technological advance with similar measures in employment protection?
    Mr. Ennals: The statistics of human rights conventions show, at 31st December 1973, 20 ILO conventions which had been applied without modification to Hong Kong, and nine which had been applied with some modifications. That compares very well with other countries in the area. I understand my hon. Friend's question, and I can tell him that the overseas labour adviser recently paid a visit to the colony. I expect his report shortly. I think that it will throw new light on the situation. I shall bear in mind the points made by my hon. Friend.
    Mr. Royle: Is the right hon. Gentleman aware that there is severe concern in Hong Kong following the Budget speech yesterday of his right hon. Friend the Chancellor of the Exchequer? The statement indicated that Her Majesty's Government may be considering withdrawing from South-East Asia. Will the right hon. Gentleman confirm that Her Majesty's Government are determined to support Hong Kong, to stay in Hong

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    Kong and to maintain the garrison in that colony?
    Mr. Ennals: The hon. Gentleman will remember that my right hon. Friend referred in his Budget speech also to the defence review being carried out by my right hon. Friend the Secretary of State for Defence. Clearly, it is an all-embracing review. It would be unwise—I have no intention of doing so—either to trespass on his territory or to answer questions that relate to particular parts of the review. Before the hon. Gentleman leaps to his feet, I can assure him that no changes will be made affecting any part of the world without the fullest consultation with our allies and the occupants of the area.
    Mr. George Cunningham: Does my right hon. Friend recall the case of the British police officer in Hong Kong who committed a criminal offence there, came to this country and could not be returned to stand trial in Hong Kong? Are there any plans to avoid a repetition of that situation, so that people who commit an offence in a British colony cannot then seek refuge in the United Kingdom?
    Mr. Ennals: This is a difficult problem. The offence alleged against the gentleman in question, in respect of which a warrant has been issued in Hong Kong, concerns a matter which is not an offence in this country. It is an offence under Section 10 of the Hong Kong Prevention of Bribery Ordinance, but, since there is no corresponding offence in this country, the Hong Kong Government are not in a position to seek his return under the Fugitive Offenders Act. It would not be easy, therefore, to produce legislation that would enable this to take place in the case of a matter which is not an offence in the United Kingdom.
    Sir Alec Douglas-Home: Does the right hon. Gentleman recall that when his party, in earlier years, proposed to withdraw from east of Suez, it never proposed to withdraw from Hong Kong? Does he recognise, also, the absolute importance of maintaining confidence in Hong Kong?
    Mr. Ennals: I can give the right hon. Gentleman that assurance. There is no doubt that Her Majesty's Government's commitments to Hong Kong will remain, and there is no suggestion at all that
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    our presence in Hong Kong should be withdrawn.

    EEC and Greece
    Mr. Woodhouseasked the Secretary of State for Foreign and Commonwealth Affairs if he will terminate the negotiations for the adherence of the United Kingdom to the treaty of association between the European Economic Community and Greece.
    The Minister of State for Foreign and Commonwealth Affairs (Mr. Roy Hattersley): The negotiations on the protocol to adapt the association agreement between Greece and the EEC have made no progress for some months. The Community's relations with Greece will be considered as necessary in our continuing review of EEC policy.
    Mr. Woodhouse: Does the hon. Gentleman appreciate that these negotiations offer the Government a much more effective lever for persuading the Greek Government to restore democratic institutions than the mere cancellation of a naval visit? Will he at least agree to make any renewal of these negotiations conditional upon the release of Mr. George Mavros, the leader of one of the major political parties in Greece, whose only offence has been to support the Government's policy towards Greece?
    Mr. Hattersley: These negotiations are on a narrow commercial point concerning not membership but association. As to the attitude of the Government, I hope that hon. Gentlemen opposite have no doubt where we stand on the need for the restitution of democracy in Greece and our feelings about the imprisonment of those people who thought it right to express their support for the action which the Government took.
    Mr. Whitehead: Is my hon. Friend aware that the decision to cancel the naval visit to Greece was widely welcomed in all parts of the House? Will he convey to the Greek Government the fact that many of us believe that incidents such as the arrest of Mr. George Mavros make it less rather than more likely that the Treaty of Accession negotiations can be continued?
    Mr. Hattersley: I am in strong agreement with my hon. Friend's comment

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    about the necessity for democracy to be restored in Greece before proper negotiations can continue concerning the relationship between the Community and Greece. I hope that the Government of Greece will understand the strength and depth of feeling held not only by the Government, but in all parts of the United Kingdom, and will feel that it is in their own interests, as well as the interests of the restoration of freedom in general, that they should make substantial progress towards achieving in Greece the sort of democracy we expect in the Western world.
    Mr. Mather: Nevertheless, is not the hon. Gentleman aware that many people believe this to be a petty and spiteful attitude that may have an effect on our shipyards, which are to construct naval vessels for Greece?
    Mr. Hattersley: For 150 years, not least concerning the revolution in Hungary 150 years ago and the American Civil War, workers in Britain have been prepared to pay the commercial price for standing up for principles on freedom. Long may they continue.

    Gibraltar
    Mr. Greville Jannerasked the Secretary of State for Foreign and Commonwealth Affairs if he will pay an official visit to Gibraltar.
    Mr. Hattersley: My right hon. Friend has no plans to do so at present but would not wish to rule it out later if a suitable opportunity arose.
    Mr. Janner: Will my hon. Friend confirm that the Government have no intention of ditching the people of Gibraltar by changing its status in any way contrary to their wishes?
    Mr. Hattersley: My hon. and learned Friend will recall the Gibraltar Constitution Order of 1969, prepared and approved under the same Prime Minister in a different administration. That remains our policy and endorses exactly the point made by my hon. and learned Friend.
    Sir Frederic Bennett: Does not the Minister agree, too, that the problem in Gibraltar now is not so much economic as psychological, in the sense of the claustrophobia that is developing there?
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    Should not we look at all possibilities of making it easier both for Gibraltarians to come here on visits and for English people to go there at more reasonable cost than is possible today? Does not the hon. Gentleman agree that the Gibraltarians are locked up in a very small area and that in that context they need assistance?
    Mr. Hattersley: I share the hon. Gentleman's view in principle about the feeling of claustrophobia felt by the people in Gibraltar. I hope that that feeling may soon be overcome. But the initiative to overcome that feeling rests largely with the Spanish Government, who are in a position to make progress along those lines. I hope that the Spanish Government will learn what the hon. Gentleman has said, and the Government's attitude to the matter, and make a reduction in claustrophobia possible.

    Namibia
    Mr. Hooleyasked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on the policy of Her Majesty's Government on the question of Namibia.
    Miss Joan Lestor: We support the undoubted right of the people of Namibia freely to decide their own destiny, and we shall play our part in promoting a settlement based on full self-determination.
    Mr. Hooley: Is my hon. Friend aware that I am vigorously opposed to racialism wherever it appears, whether in South Africa or the Middle East? Will she initiate discussions with the United Nations High Commissioner for Namibia, Mr. Séan MacBride, to see what useful diplomatic or other action we can take to bring pressure on South Africa to relinquish her hold on that territory?
    Miss Lestor: I agree with my hon. Friend. We want to make a decision in the matter as quickly as possible. The Security Council has not yet resumed its debate, but we hope that it will soon do so in order that those matters may be fully discussed.
    Mr. Rifkind: In view of the international status of South-West Africa, will the Government consider making representations to the South African Government about some of the more barbaric

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    forms of punishment being carried out against those who are politically active against the present South African system?
    Miss Lestor: I agree with what the hon. Gentleman said and I shall certainly bear it in mind when the discussions are resumed.

    Personnel (Appointments)
    Mr. Luceasked the Secretary of State for Foreign and Commonwealth Affairs whether he has changed the basis upon which senior Foreign Office personnel are appointed.
    Mr. James Callaghan: No, Sir.
    Mr. Luce: Is the right hon. Gentleman quite sure about that? Although I am not in any way criticising the calibre of Mr. Ivor Richard as the new ambassador to the United Nations, is the right hon. Gentleman aware that many people feel it a great insult, not just to the Diplomatic Service but to the United Nations, that he should remove Sir Donald Maitland after only a few months in office and replace him by a man who in public has said that he plans to return to this country in a few months' time to fight the next General Election?
    Mr. Callaghan: A great many people may feel that, but I have not heard it until this afternoon.
    Mr. Greville Janner: Is my right hon. Friend aware that the appointment of Mr. Ivor Richard has given great satisfaction—[HON. MEMBERS: "No."] Oh, yes, and the better they know him, the more satisfaction it has given. They wish him well in this difficult job. Hon. Members should not make it more difficult, as the hon. Gentleman has.
    Mr. Callaghan: I expect that the appointment of Mr. Ivor Richard has given as much satisfaction—[An HON. MEMBER: "In Blyth?"]—perhaps to different people as did the appointment of Lord Cromer in his day and Sir Christopher Soames on an earlier occasion.

    Law of the Sea Conference
    Mr. McNamaraasked the Secretary of State for Foreign and Commonwealth Affairs whether he will publish a White Paper outlining the Government's
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    proposals for discussion at the Law of the Sea Conference.
    Mr. Ennals: I am not sure that a White Paper is appropriate, but I am considering how best hon. Members can be informed and consulted about the issues that will arise at the conference.
    Mr. McNamara: I am obliged to my right hon. Friend for that reply. Will he bear in mind that there is a great deal of confusion about what will be the policy of Her Majesty's Government on the extension of limits, ownership of the seabed, fishing and all the other matters? It would be most helpful not only to hon. Members but to the community as a whole if all the options, objections, discussions and possibilities were included in one document and fully discussed so that there was an informed public opinion before the conference.
    Mr. Ennals: I shall consider the point made by my hon. Friend. I agree that there are some extremely important issues to be taken up at the Law of the Sea Conference. I welcome and appreciate any representations that are made by organisations with a particular interest, and I shall seek to find a way in which we can have an informed discussion before the conference.
    Mr. Douglas Henderson: Is the hon. Gentleman aware that the United Kingdom is almost alone among the approximately 130 States represented at the conference in not announcing its position in advance? Is he aware that there have not been proper consultations with the fishing industry about the evidence put forward? Will he also take into account that Scottish inshore fishermen will not be satisfied with a United Kingdom delegation that does not represent their interests separately?
    Mr. Ennals: I do not for a moment accept that the United Kingdom delegation will not both represent and take into consideration the interests and the needs of all parts of the United Kingdom, including that part represented by the hon. Member. I assure him that there will be consultations and that any representations, from whatever part of the country and from whatever interests, will be taken very seriously indeed.
    Mr. James Johnson: This important conference, opening in Caracas on 20th

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    June, will be discussing the total affairs of 72 per cent. of the globe's surface—conservation, pollution, wealth of the seabed and the like. May I ask one question on the limited subject of fishing? Is my right hon. Friend aware that, unlike the unhappy days of the Icelandic dispute, when the House was divided about our policy, we come to this conference with everybody—vessel owners, unions, deck hands—wishing to make our fishing limits, like those of Iceland perhaps, 50 miles or even 200 miles? Will he bear in mind that it is a united team that wishes Her Majesty's Government to have our limits extended?
    Mr. Ennals: I shall not comment on every part of my hon. Friend's supplementary question. I am aware that there has been an encouraging change of opinion and that there is much more unity than previously. I shall be delighted to discuss these matters with my hon. Friend, who knows so much about them, before the conference takes place.
    Mr. Wall: Can the Minister confirm that discussions are taking place with our partners in the EEC about whether an EEC policy can be advanced at the Law of the Sea Conference?
    Mr. Ennals: I can confirm that wide consultations are taking place with the other members of the European Economic Community. Obviously some of them have different interests. Our task at the conference will be to represent the interests of the whole of the United Kingdom and we do not want to seek a watered-down approach which would mean that the interests of particular parts of the United Kingdom were not taken fully into consideration.
    Mrs. Winifred Ewing: The right hon. Gentleman has not answered the Question.
    Mr. Ennals: I did not hear the hon. Lady's intervention from her seated position.

    Anglo-American Relations
    Mr. Matherasked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on Anglo-American relations.
    Mr. James Callaghan: Her Majesty's Government attach very great impor-
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    tance to maintaining and improving the friendly relationship which exists between the United Kingdom and the United States.
    Mr. Mather: What are the right hon. Gentleman's views on the future of American military bases in this country? Does he not feel that these are important factors in cementing Anglo-American relations and for the future of NATO as a whole?
    Mr. Callaghan: They are important factors, and they would form part of any multilateral discussions that would take place on disarmament.
    Mr. Dalyell: Will my right hon. Friend exploit his 25 years' friendship with leading Americans to persuade the United States that, in its own interests, it is not sensible, against the wishes of Mrs. Gandhi, Mrs. Bandaranaike, President Suharto and many Africans, to have a nuclear zone and bases such as Diego Garcia in the Indian Ocean?
    Mr. Callaghan: I understand that there is more than one view in the United States on this matter. It is one of the problems to which I intend to give careful attention. However, I do not wish to take up a position on it this afternoon.
    Mr. Russell Johnston: Does the Foreign Secretary intend to have discussions with our EEC partners about a joint energy policy with the United States in view of the unsatisfactory outcome of the Washington conference?
    Mr. Callaghan: Yes, Sir, these discussions are taking place. Dr. Kissinger will be here tomorrow, and I hope to have further discussions with him about any differences that may have arisen.

    European Parliament
    Mr. Gryllsasked the Secretary of State for Foreign and Commonwealth Affairs what is his policy in regard to the appointment of a Labour Party delegation to the European Assembly.
    Mr. James Callaghan: I would refer the hon. Gentleman to the reply given by my right hon. Friend the Lord President of the Council on 18th March to a Question from the right hon. and learned Member for Hertfordshire, East (Sir D. Walker-Smith).—[Vol. 870, c. 664–5.]
    Mr. Grylls: The Foreign Secretary has tried to hide behind the Leader of the House and, this afternoon, the Prime Minister. Will the right hon. Gentleman now, once and for all, come clean and tell the country why the Socialist Government have used the institutions of the Community, such as the Council of Ministers, but still refuse to send a Socialist delegation to Strasbourg to swell the Socialist benches? If he still will not send a Labour Party delegation, will he recognise that this country is well represented by the Liberal and Conservative delegations?
    Mr. Callaghan: I think that the Prime Minister and the Lord President of the Council are ample figures behind which to shelter. They have stated the case, and I do not have to repeat it.
    Mr. Wellbeloved: Will my right hon. Friend refrain from wasting time considering whether the Government should send official representatives to the European Parliament? Will he concentrate, instead, on reviewing the allowances and travel arrangements of Members who attend at present?
    Mr. Callaghan: May I say that, on all these matters which excite so many hon. Members, our first priority is renegotiation. That is what we are going ahead with. The other questions can no doubt, be considered in due course.
    Sir Douglas Dodds-Parker: As the European Parliament is considering questions of renegotiation, does the Foreign Secretary appreciate the widespread dismay in the European Parliament at the continued emptiness of the 18 chairs, because of the great history of help to social democracy by Ernest Bevin, John Hynd and others in the years after the war?
    Mr. Callaghan: Yes, Sir. We have played our full part in various forums of this sort. We can consider this matter again in due course, but it is not a matter of first priority, bearing in mind the limited powers of that Assembly.
    Mr. Faulds: Would not my right hon. Friend be well advised to reconsider the question of sending a Labour delegation to the European Assembly? Does he not agree that such a delegation, particularly in view of our renegotiations, would
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    much better represent the interests of Britain than do the tattered remnants of a discredited Opposition?
    Mr. Callaghan: I find myself in agreement with parts of that supplementary question.
    Mr. Skinner: Would not the right answer be not to listen to my hon. Friend the Member for Smethwick and some hon. Gentlemen opposite, but to fetch back those who are already there and thus relieve us of part of the cost to the Community budget which arises from having to pay inflated expenses while those concerned use charter flights at £46 a time and put the difference in their pockets?
    Mr. Faulds: On a point of order, Mr. Speaker. As he so often is, my hon. Friend is out of touch with reality. I am the Member for Warley, East, not Smethwick.
    Mr. Kelley: On a point of order, Mr. Speaker. Would my right hon. Friend care to take the opportunity to define what authority the Foreign Secretary has over decisions—
    Mr. Speaker: Order. That is not a matter for the Chair.

  OVERSEAS DEVELOPMENT

    Dependent Territories (Investment Funds)
    Mr. George Cunninghamasked the Minister of Overseas Development what is the total value of funds placed with the Crown Agents for investment by Governments of British dependent territories.
    Mrs. Hart: The holdings of the British dependent territories amounted to approximately £309 million at the end of January.
    Mr. Cunningham: Will my right hon. Friend accept my congratulations, on the ground that she has just answered a Question in identical terms to one which I put to her predecessor some months ago which he categorically refused to answer? Does my right hon. Friend agree that there is deep resentment that British colonial funds are going into property

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    investment in this country through the medium of the Crown Agents? Does she further agree that it would be a good thing if the investigation of the activities of the Crown Agents by the Select Committee on Overseas Developments in the last Parliament were to be continued in this Parliament?
    Mrs. Hart: I am grateful to my hon. Friend for his congratulations. It would not be proper for me to comment on what the Select Committee might or might not in its wisdom choose to do. I assure my hon. Friend that I am taking further the inquiries which I originally initiated into the Crown Agents, but it will take some time to reach a conclusion, as my hon. Friend will no doubt understand.

    Sahelian Africa
    Mr. Hooleyasked the Minister of Overseas Development what is the total value of aid supplied by Her Majesty's Government for the relief of peoples affected by the drought in the Sahel region of Africa; and what further help is proposed in the immediate future.
    The Parliamentary Secretary to the Ministry of Overseas Development (Mr. William Price): Last year the amount was about £2 million. This year it will be in excess of £3½ million. In addition, in response to an appeal by the United Nations Secretary-General, my right hon. Friend proposes, subject to parliamentary approval, to contribute £500,000 to his Sahel disaster fund.
    Mr. Hooley: I greatly welcome the contributions which have been made by the United Kingdom. Is my hon. Friend aware that the Secretary-General of the United Nations has said that at least $30 million is needed to alleviate what has been one of the greatest natural disasters in the history of this century? Will my hon. Friend consider persuading his right hon. Friend the Chancellor of the Exchequer to be more generous than the further £500,000 promised?
    Mr. Price: We are doing all that we can, and we believe that we are one of the first nations to respond to the appeal. That is something. I met the voluntary organisations last week, and they tell me that a far bigger problem than money or food is transport. We are doing all
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    that we can to get the vehicles so that the food will go to the people.
    Sir Bernard Braine: Does the hon. Gentleman not agree that one of the most disturbing features of the situation in the Sahel region, particularly in Ethiopia, is that famine arising from persistent drought over a long period is largely predictable, and that if people are dying, as they did last year and are now, that is due largely to the failure of the international community and the governments concerned to co-ordinate aid effectively and in time? Are the Government prepared to take any initiative at international level to deal with this tragic situation?
    Mr. Price: Again, my right hon. Friend and I invited a number of people, including Jonathan Dimbleby, to the Ministry last week to discover precisely what was happening. We discovered that this was a major problem and that information was not getting through. We have asked for all the help and assistance that we can get, and shall then do whatever we can to mitigate what, as the right hon. Gentleman says, is one of the great tragedies of this century.
    Mr. James Johnson: May I congratulate my hon. Friend on his first excellent answer to my question in the House? I should like to ask him, at his leisure, to look into the question whether the Sahara is advancing into the coastal Littoral of West Africa, and whether it is not a short-term matter of too many mouths to feed, or, even more important, whether there are too many animals to feed upon the venegation in that belt.
    Mr. Price: This is a matter which our officials are studying very closely, but there are differences of opinion.
    Sir Douglas Dodds-Parker: In view of the excellent work done by the Royal Air Force during the past three or four years in this area, will the Service be asked to help again?
    Mr. Price: That is another matter which is being considered. There is a possibility that some of the Governments who have been helping will be withdrawing their assistance. We hope that that will not happen but if it does we shall have to consider the possibilities of replacing it.

    Developing Countries (Aid)
    Mr. Tebbitasked the Minister of Overseas Development if it is the policy of Her Majesty's Government to discriminate in the grant of aid to developing countries according to the political alignment of their Governments.
    Mrs. Hart: Political considerations can never be ignored in deciding on the allocation of aid resources; they have always been a factor and they will continue to be given due weight by Her Majesty's Government. But the major consideration is the developmental value of aid for the people of the country concerned.
    Mr. Tebbit: Is the right hon. Lady aware that her fondness for supporting Communist causes has given grave concern to Governments and people of developing countries that have suffered internal or external Communistic aggression? Will she state more clearly that she will suppress her worst prejudices and consider the interests of the people concerned, and not the left wing of her party?
    Mrs. Hart: Perhaps the hon. Gentleman will write to me and explain what on earth he means.
    Mr. Royle: Although I have some sympathy for the attitude of the right hon. Lady and her Government towards Greece, I think that there is considerable uncertainty among many business men about Her Majesty's Government's attitude to many countries overseas, ranging from Greece, Portugal and Spain to Chile. Will she therefore consider consulting her right hon. Friend the Foreign Secretary with a view to setting up a boycott office in order that British business men may be aware to which countries they may arrange to export with the certain knowledge that they will not, after completing a contract, be undermined by Her Majesty's Government?
    Mrs. Hart: The hon. Gentleman might do well to refresh his memory by reference to some of the courses which the Labour Party completely supported when his Government was taking action in relation to the suspension of aid to other countries. I assure him that I am in close consultation with my right hon. Friend the Foreign Secretary. I would
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    also add that we have to consider whether the very limited development aid budget is being correctly used.
    Mr. Boyle: In view of the unsatisfactory nature of that reply, I beg to give notice that I shall raise the matter on Adjournment.

    Overseas Civil Servants (Aden and Zanzibar)
    Mr. Allasonasked the Minister of Overseas Development if she will review the grants given in lieu of pension to former employees of the Aden and Zanzibar Governments, in the light of the rise in the cost of living since December 1971.
    Mr. William Price: British pensions increase arrangements already apply to certain overseas pensioners, and those former employees of the Aden and Zanzibar Governments who fulfil the criteria are beng paid the increases due to them. The arrangements do not, however, apply to former local officers of overseas Government services for whom the British Government had no special responsibility during their service or for their pensions.
    Mr. Allason: But these are the very people for whom I am seeking help, who in many cases have no other income and who have relied upon the generosity of the British Government. Now they have found that this aid extended to them has been reduced by at least one quarter, owing to the rise in the cost of living in, for example, India. Will not the Government help these unfortunate people?
    Mr. Price: We believe that we are, as did the previous Government, fulfilling our moral obligations. We know of the hon. Gentleman's interest in this matter. There are practical difficulties. If the hon. Member cares to discuss them with us, we shall explain in detail to him.

SOCIAL SECURITY
The Secretary of State for Social Services (Mrs. Barbara Castle): With permission, Mr. Speaker. I should like to make a statement about increases in social security benefits and contributions.
My right hon. Friend the Chancellor of the Exchequer yesterday announced the main proposals. The increases in

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benefits will take effect in the week beginning 22nd July. This means 17 weeks from now—and in the last three years the shortest timetable achieved has been 25 weeks The 17-week timetable can be met only at a risk that some beneficiaries may not receive their increases until shortly after the operative date We will do our best to avoid this happening but, given our overriding objective of introducing the increases at the earliest possible date, I am sure the House will agree that it is a risk we should be prepared to take
The standard rate of pensions—that is, of retirement pensions, invalidity pensions and widows' pensions—will go up by £2·25 for single persons Married couples will get an increase of £3·50 Thus our pledge to increase pensions to the levels of £10 for single persons and £16 for married couples will be honoured. Old persons' pensions will go up from £2·85 to £3·70 for wives and from £4·65 to £6 for other people.
Short-term benefits—namely, unemployment benefit and sickness benefit—will be increased by £1·25 for a single person and £2 for a married couple, making the single person's rate £8·60 and the married couple's £13·90 a week. Maternity allowance and injury benefit will go up by the same amounts.
We are thus giving the highest priority to the long-term beneficiaries—the pensioners, the chronic sick and the widows. Nevertheless the increase in short-term benefits will be more than sufficient to maintain their purchasing power, and I should remind the House that short-term beneficiaries can receive an earnings-related supplement which can itself bring their benefits up to levels in excess of £10 or £16.
Attendance allowance where attendance is required both by day and by night will go up from £6·20 to £8; and where attendance is required by day or by night the rate will go up from £4·15 to £5·35.
The 100 per cent. war and industrial injuries disablement pension will go up from £12·80 to £16·40. The standard war widow's pension will be increased from £10·10 to £13 and the industrial injuries widow's pension from £8·30 to £10·55.
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For the older war disabled and war widows we propose a further improvement in addition to the increases in the basic pensions themselves. The age allowances, which a war widow receives at the rates of 65p at the age of 65 and £1·30 at the age of 70, and which a disabled man with an assessment of 40 per cent. or more receives at the age of 65 at rates varying from 60p to £1·80, will all be doubled. Thus war widows will receive an age allowance of £1·30 at the age of 65 and £2·60 at the age of 70; and a disabled man with an assessment of 100 per cent. will get an allowance of £3·60 at the age of 65. Over 40,000 disablement pensioners and over 50,000 war widows will benefit from this special help. The net cost will be £4·5 million in a full year.
The earnings rule will be relaxed as part of the uprating so as to increase the amount at which the rule starts to operate from the present £9·50 to £13 a week.
I turn now to supplementary benefit. The increases in the main scale rates will be the same as, and will come into force at the same time as, the increases in the related national insurance benefits. The increase of £3·50 for a married couple—proposed for retirement pensioners—will also go to supplementary pensioners and other supplementary beneficiaries who qualify for the long-term rates. The increase of £2·25 proposed for single retirement pensioners will also go to supplementary pensioners and other supplementary beneficiaries who qualify for the long-term scale rates, where they live alone. Thus a supplementary pensioner living alone will become entitled to at least £10·40 a week plus rent and rates—£10·65 plus rent and rates if he is over 80. A supplementary pensioner couple will become entitled to at least £16·35 plus rent and rates, or £16·60 plus rent and rates if one of them is over 80.
The supplementary benefit ordinary rates—for persons who are neither of pension age nor qualify for the long-term rates—will go up by £2 for a married couple and £1·25 for a person living alone, to match the increases in the short-term national insurance benefits.
The prescribed amounts which govern title to family income supplement will also be increased.

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The cost of all these increases in social security benefits will be over £1,250 million in 1975–76. Over £1,100 million of this cost will fall on the National Insurance Funds.
Next I come to national insurance contributions. My right hon. Friend explained to the House yesterday how we are proposing to allocate the extra contribution burden so as to put most of it on the employer and, in particular, to help the lower paid.
The net effect of our proposals is that men earning £20 a week will pay 3p less than they do now and that, in general, no man earning less than £27 a week will have to pay more than he does at present, while the highest increases in contributions will fall on those earning £62 a week or more. These men will pay an extra 57p a week; and men earning £40 a week will pay an extra 7p a week. Women's contributions will be changed correspondingly. All the contribution changes are proposed to come into effect on 5th August. The Treasury contribution will continue at about 18 per cent. of the income from contributions.
For the convenience of the House I am circulating details of the new rates of benefits and contributions in the OFFICIAL REPORT. These, with copies of my statement, are available in the Vote Office. I should add that I shall shortly be presenting the necessary Bill, which will be accompanied by the Government Actuary's report.
Before I end I should say a word about financing after the end of the 1974–75 financial year. The proposed contribution rates, together with the associated Treasury supplement, will provide sufficient income to cover the cost of benefits at the new levels whilst the present national insurance scheme lasts. However, if the new structure and level of contributions provided by the Social Security Act 1973 were to come into force in April 1975, the income of the National Insurance Fund would not be sufficient to finance an uprating of the basic pension on the generous scale we propose. We have not yet decided precisely how we are going to deal with all the interim problems raised by the Social Security Act, but I can say now that we intend to introduce legislation later in the year to secure income to the National Insur-
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ance Fund which will still be adequate to the new levels of benefit after April 1975.
I conclude by reminding the House that we are pledged to work for a greater measure of social justice. The proposals I am putting before the House will take us along that road. The increases in pensions will be the largest ever within the national insurance scheme, both in money and in real terms. The Government intend to build on this foundation by ensuring that in future pensions will be increased annually in proportion to increases in average national earnings. This is a pledge never before given to the most vulnerable members of our society. It is a pledge long overdue.
Sir Geoffrey Howe: Hon. Members on both sides will welcome the increases announced by the right hon. Lady and will particularly congratulate her both on the speed with which she has been able to effect them and on the provision for war disability and war widows' pensions. We shall, however, want to look with more care at the changes which she may or may not have in mind for financing the higher pensions by changes in the provisions of the Social Security Act 1973.
We also welcome the fact that the right hon. Lady is continuing to distinguish, as did my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph), between the short-term and long-term benefits. We also welcome the relaxation of the earnings rule, but can she say whether the cost of relaxing this rule is included in the £1,250 million which she mentioned as being the total cost. Precisely how much will this particular change cost?
Mr. George Cunningham: The Tories refused to do it last year.
Sir G. Howe: We also welcome the increases in supplementary benefits. We welcome, too, the right hon. Lady's conversion to the prospect of continuing the family income supplement scheme. Can she confirm that by increases in supplementary benefits and family income supplementary benefits the numbers of beneficiaries on means-tested benefits will remain at least at the present level?
We notice that the right hon. Lady intends to increase pensions annually.

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Does this mean that she has rejected our proposal for a six-monthly review of pensions?
What is the total size of the sum being raised by increased contributions from employers, and what estimate has the right hon. Lady made of the impact on the retail price index—which affects pensioners' purchasing power—of the increased employers' contributions?
What estimate has the right hon. Lady made of the impact on the retail price index, particularly with reference to pensioners, of the higher taxes announced by the Chancellor of the Exchequer yesterday on tobacco, beer and other beverages, and certain food items?
Further, what estimate has the right hon. Lady made of the impact on the retail price index of the higher prices for coal, transport, electricity and postal services announced yesterday? Does she, in the light of those increases, have any proposals for considering the level of the heating allowances payable to pensioners? Why has the right hon. Lady done nothing to vary the disregard, an important element in the social security scheme, as a means of encouraging thrift?
Mrs. Castle: It might be an abuse of the procedure of the House if I were to attempt to answer in detail all of the right hon. and learned Gentleman's questions, particularly as we are to have a debate on these matters tomorrow, which will enable us to deal in fuller detail and at greater length with all the points involved. However, I shall try as briefly as I can to answer as many of the right hon. and learned Gentleman's questions as I can recall.
With regard to the six-monthly uprating, the right hon. and learned Gentleman asked whether this meant that we had turned our backs on the proposals which the Conservatives thought up rather at the last minute in the middle of the election campaign. [HON. MEMBERS: "No, no."]. I am entitled to say that, in view of the fact that the Conservative legislation of 1973 provided for annual reviews and never mentioned six-monthly reviews. If we had had the return of a Conservative Government pledged to six-monthly upratings, that Government would, presumably, have given the pen-
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sioners only half of what in any case would have been a lower uprating.
With regard to the family income supplement, I shall be giving, in due course, fuller details of the application of the increases to the prescribed amounts. I remind the House that the Government remain—as they have always been—opposed to the principle of means testing which underlies this scheme. We do not like it, and we intend to replace it with something better within the normal lifetime of a Parliament, but in the meantime we cannot allow the poorest in the land to be left relatively worse off.
The second question was about the earnings rule. The cost of the concession will be £9 million, and I think that I am correct in saying that that figure is included in the total that I gave, but I am subject to checking on that point. The right hon. and learned Gentleman referred to our retention of a different rate for short-term benefits, a proposal, of course, which was included in the Conservative legislation last year. On this occasion, we felt that the urgent priority was to give the maximum possible help to pensioners and other long-term beneficiaries.
However, our increase in the short-term benefits is one of 17 per cent. for the single person, introduced less than 10 months after the last uprating, whereas the Conservative Government gave them an increase of only 8·9 per cent. after a 12-month interval. So there again we have done substantially better than they did. I cannot remember the rest of the detail of the right hon. and learned Gentleman's questions, but I think that other hon. Members should be given a chance to get in a word.
Mr. Arthur Lewis: First, I congratulate my right hon. Friend both on an excellent statement, and, more particularly, on the speed and expedition with which she intends to pay these old-age pensioners in July. She will know that many of them may unfortunately be dead come October, the usual date for which they would have to wait. Since the right hon. and learned Member for Surrey, East (Sir G. Howe) said that he welcomed the statement, will the Secretary of State take an early opportunity to have a ministerial broadcast on this matter?

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Many old people and many of the sick and disabled would like to hear from her personally exactly what all this means.
Mrs. Castle: I am very grateful to my hon. Friend for appreciating that this was administratively the earliest possible date that we could put these huge increases into payment. The delay will be only 17 weeks, compared with the 29 weeks that elapsed between the last Conservative Government's announcement and the actual uprating.
I must point out that these proposals will mean putting the staff of my Department under considerable strain. I want to pay tribute to them. I want them and the House to realise that it means asking a great deal of them in the way of overtime and extra pressure, and I am sure that they will accept this burden on behalf of these weaker members of the community, whom we are trying to help as quickly as possible.
I will certainly bear in mind my hon. Friend's suggestion about a ministerial broadcast, because the details are complicated. It is essential to bring reassurance to the old people on all the detailed points about which they have been wondering.
Sir B. Rhys Williams: While the House is delighted that the pensioners will get their increase in 17 weeks, is the right hon. Lady aware that, on the Continent, machinery has been in use for a number of years which makes it possible to introduce changes of this kind in less than a fortnight?
Mr. Tuck: Why did you not do it?
Sir B. Rhys Williams: Will the right hon. Lady now see to it that the administration of this and her Department are modernised?
Mrs. Castle: The administrative methods that I inherited from my predecessor made it impossible to do it at any greater speed than I propose.
Dr. M. S. Miller: Will my right hon. Friend accept that her statement will be welcomed not only by the people who will benefit but by all sections of the community? Will she undertake a review in her Department of the attendance allowance, since it is to a great extent limited and does not go to many people who well deserve it?
Mrs. Castle: I am sure that my hon. Friend will appreciate that we have made a substantial increase in the rates. This will be of immediate considerable benefit to many disabled people. I have already told the House that I shall be reviewing the whole of the social security provisions for the disabled and will be reporting in the autumn. Of course, this will be one of the things that we shall be studying.
Dr. Winstanley: Is the right hon. Lady aware that we on this bench greatly welcome these proposals and assure her of our fullest and enthusiastic support for their implementation? But would it not have been administratively easier and even cheaper, considering all the factors involved, to abolish the earnings rule rather than merely fiddle about with the qualifying level? Is it not also regrettable that she has not seized this opportunity to change the £2 disregard for the part-time earnings of wives whose husbands are on supplementary benefit? This is very low in present circumstances. Could she not have raised it to bring the family income at least up to the family income supplement level? Finally, will she take active steps to see that these new proposals are brought to the notice of those whom they are intended to benefit?
Mrs. Castle: I am grateful for the spirit in which the hon. Gentleman has responded to my statement; I had hoped that the whole House would have welcomed it in the unqualified way that he has done. I agree, of course, that there are many points still remaining to be dealt with—among them, the disregards. I recognise that the purchasing power of the disregards has fallen considerably. My answer to the hon. Gentleman must be partly that I cannot do everything at once, but it is also an administrative answer. I was concerned to get the main increase into payment as early as possible, and, therefore, I had to say to my Department "There are many other detailed aspects that we could have dealt with and eventually must deal with, but let us streamline our attack on this point since this is the only way administratively that I can get it through by the end of July." The hon. Member is a little optimistic to say that there would be an administrative saving in abolishing

459
the earnings rule altogether. The cost of that abolition would be £160 million.
Mr. R. C. Mitchell: Would my right hon. Friend be prepared to have another look at the heating allowances?
Mrs. Castle: Yes, the Supplementary Benefits Commission already has them under review.
Mr. Ridsdale: May I congratulate the right hon. Lady on having followed the example of the previous Government in the proper care of the elderly, and also press her, as one of her back benchers did, about the attendance allowance? This is something which, with inflation, many people in my constituency who are

DETAILS OF NEW RATES OF BENEFIT AND CONTRIBUTIONS

MAIN INCREASED NATIONAL INSURANCE BENEFIT RATES:

Proposed Weekly Rate

Existing Rate

£

£

Standard rate of invalidity, widows' and retirement pensions and widowed mothers' allowances:

Single person

…

…

…

…

…

…

10·00

7·75

Wife or other adult dependant

…

…

…

…

…

…

6·00

4·75

Standard rate of unemployment and sickness benefits:

Single person

…

…

…

…

…

…

8·60

7·35

Wife or other adult dependant

…

…

…

…

…

…

5·30

4·55

Married woman (normal rate)

…

…

…

…

…

…

6·05

5·15

Persons under 18

…

…

…

…

…

…

4·75

4·05

Widow's allowance (first 26 weeks of widowhood)

…

…

…

…

…

…

14·00

10·85

Widow's basic pension

…

…

…

…

…

…

3·00

2·33

Maternity allowance

…

…

…

…

…

…

8·60

7·35

Invalidity allowance payable with invalidity pension, when incapacity began before age:

35

…

…

…

…

…

…

2·05

1·60

45

…

…

…

…

…

…

1·30

1·00

60 for men or 55 for women

…

…

…

…

…

…

0·65

0·50

Attendance allowance:

Higher rate

…

…

…

…

…

…

8·00

6·20

Lower rate

…

…

…

…

…

…

5·35

4·15

Old persons' pensions:

Wife

…

…

…

…

…

…

3·70

2·85

Any other person

…

…

…

…

…

…

6·00

4·65

Guardian's allowance

…

…

…

…

…

…

4·90

3·80

Child's special allowance and increases for children of widows, invalidity and retirement pensioners:

First child

…

…

…

…

…

…

4·90

3·80

Second child*

…

…

…

…

…

…

4·00

2·90

Any other child*

…

…

…

…

…

…

3·90

2·80

Increases for children of all other beneficiaries:

First child

…

…

…

…

…

…

2·70

2·30

Second child*

…

…

…

…

…

…

1·80

1·40

Any other child*

…

…

…

…

…

…

1·70

1·30

* Family allowances are payable for second and subsequent children.

looking after members of their families need examined very carefully. Will she do so as quickly as possible?
Mrs. Castle: I assume the hon. Member is referring to the criteria rather than the rates. I think that the House will agree that the increase in the rates is a good one and that that is what the House is concerned with, rather than the eligibility criteria. I repeat that we shall be looking at this as part of our comprehensive review of the provision for the disabled.
Several hon. Members rose—
Mr. Speaker: Order. As the right hon. Lady said, this is all debatable tomorrow.
The following is the information:

MAIN INCREASED INDUSTRIAL INJURIES BENEFIT RATES:

Proposed Weekly Rate

Existing Rate

£

£

Injury benefit*†

…

…

…

11·35

10·10

Disablement benefit (100 per cent assessment)*

…

…

…

16·40

12·80

Unemployability supplement‡

…

…

…

10·00

7·75

Special hardship allowance (maximum)

…

…

…

6·56

5·12

Constant attendance allowance (normal maximum)

…

…

…

6·60

5·15

Exceptionally severe disablement allowance

…

…

…

6·60

5·15

Industrial death benefit:

Widow's pension during first 26 weeks of widowhood

…

…

…

14·00

10·85

Widow's pension now payable at £8·30 rate

…

…

…

10·55

8·30

Widow's pension now payable at £2·33 rate

…

…

…

3·00

2·33

* Increases will also be made in the juvenile rates.

† Increases for adult dependants and children will be the same as those for unemployment and sickness benefit—see National Insurance table.

‡ Invalidity allowances and increases for adult dependants and children will be the same as thoss for invalidity pensions—see National Insurance table.

PART II: DEATH BENEFITS:

Proposed Weekly Rate

Existing Rate

£

£

Widow's pension—private's widow:

Standard rate

…

…

13·00

10·10

Childless widow under 40

…

…

3·00

2·33

Rent allowance

…

…

5·00

3·90

Age allowance for elderly widows:

Between age 65 and 70

…

…

1·30

0·65

Over age 70

…

…

2·60

1·30

Widower's pension

…

…

13·00

10·10

Widow's children:

Eldest child

…

…

5·10

4·00

Other children with family allowances

…

…

4·60

3·50

Other children without family allowances

…

…

4·95

3·85

Motherless and fatherless children aged:

Under 15

Eldest child or other children with no family allowances

…

5·10

4·00

Over 15

6·60

5·50

Under 15

Other children with family allowances

…

4·60

3·50

Over 15

6·10

5·00

Adult orphans

…

…

10·00

7·75

Proposed Weekly Rate

Existing Rate

£

£

Non-householder rent allowance

…

…

…

…

…

…

0·90

0·80

Attendance requirements:

Higher rate

…

…

…

…

…

…

8·00

6·20

Lower rate

…

…

…

…

…

…

5·35

4·15

* Where the claimant or a dependant is aged 80 or over a further 25p is to be added to these long-term rates.

PROPOSED NEW RATES OF CONTRIBUTION POR ADULTS:

CLASS 1—EMPLOYED PERSONS—EMPLOYER (including N.H.S. contributions but excluding Redundancy Fund contribution):

Class 2—SELF-EMPLOYED PERSONS (including N.H.S. contributions):

Present Rate

Increase

New Rate

£

£

£

Men over 18

…

…

…

1·99

0·42

2·41

Women over 18

…

…

…

1·67

0·34

2·01

CLASS 3—NON-EMPLOYED PERSONS (including N.H.S. contributions):

Present Rate

Increase

New Rate

£

£

£

Men over 18

…

…

…

1·56

0·34

1·90

Women over 18

…

…

…

1·23

0·26

1·49

BEAVERBROOK NEWSPAPERS (SCOTLAND)
The Secretary of State for Trade and President of the Board of Trade (Mr. Peter Shore): With permission. I should like to make a statement.
In my statement of 19th March, I promised to keep the House informed of the discussions I was having about Beaverbrook's Scottish newspapers. Since then, my colleagues and I have talked to the various interests concerned.
On the question of the transfer of Beaverbrook's Glasgow Citizen to the proprietors of the Glasgow Evening Times, my right hon. Friend the Secretary of State for Prices and Consumer Protection has satisfied herself under the terms of the Fair Trading Act that the Glasgow Citizen is not economic as a going concern, and as a separate newspaper. She has, therefore, today granted her consent, as under the Act she was bound to do, to the proposed acquisition.
The House will recall that it was when this application had been lodged with the then DTI on 19th February of this year that the larger problem of the future arrangements for the Scottish Daily Express and the Scottish Sunday Express became apparent. Labour Ministers met the Beaverbrook management on 13th March, and they impressed on us their view that the transfer of the arrangements for printing their two Scottish newspapers to Manchester had become essential to the financial viability of the group. We requested that the whole Beaverbrook group should look again urgently at its position, in the light of the number of jobs that would be lost, and against the background of the Government's development area policy and the special assistance available to firms in them.
That was the position when I made my last statement. Immediately afterwards,
468
the Prime Minister, together with the Secretary of State for Scotland and me, met the Scottish TUC at its request. My colleagues and I then met a strong deputation from the trade unions concerned. This was followed on the same day by a long and detailed discussion with the Beaverbrook management when we put to it the suggestions and criticisms that had arisen from our talks with the trade unions and our own concern about the implications of its decision. It became clear at that meeting that there was only a slim prospect of arrangements being agreed to safeguard employment for the Albion Street labour force. This was contingent upon a satisfactory agreement between Beaverbrooks and Sir Hugh Fraser under which the latter would, on contract, continue printing the Scottish Express papers in Glasgow.
We then met Sir Hugh and his management team to explore further the possibilities of these arrangements. From this it emerged that it was not physically possible for him to print the two Express papers in Albion Street and at the same time print there the two Glasgow papers for which he is responsible—a view with which the Beaverbrook group concurred.
We then looked at further possibilities, including that of the Fraser Group printing the two Scottish Express papers at Albion Street while retaining its own two papers at Buchanan Street and the proposal made by Sir Hugh to buy the two Scottish Express papers. Sir Hugh informed me that the latter proposal had been rejected by Beaverbrooks. So far as the first proposal was concerned, he expressed willingness to consider this carefully but doubted whether a contract could be made that would be economic for both parties.
We saw the Beaverbrook management again yesterday to press it further to consider both these possibilities. Late last

469
night, after further contact between the two groups, Sir Max Aitken informed me that neither of these possibilities was practical.
As the House will see, throughout these discussions we have been concerned with two objectives; first, to explore all possibilities of avoiding the grievous loss of jobs in hard-pressed Glasgow and, second, to try to find an alternative solution based upon a Scottish newspaper group. It is with profound regret that we have been forced to the conclusion that no solution could be found.
Many factors, over many years, have contributed to the situation. But it is clear to me that Beaverbrook's decision is based upon a serious concern about the future of its group as a whole and that the immediacy of its action, with all its deplorable consequences for unemployment, is greatly influenced by the financial need to defend the group as a whole and the need to find substantial funds to meet its redundancy commitments to the workers involved.
As to the future, I can only say this. First, a substantial printing capacity remains in being in Albion Street; and we shall certainly be ready to discuss any serious proposal that may still emerge. Second, the whole unhappy sequence of events re-emphasises the point made by my right hon. Friend the Prime Minister last Thursday when he said that he was urgently considering the possibility of some form of inquiry into the newspaper industry.
Mr. Buchanan-Smith: The right hon. Gentleman has made a sad statement which marks a black day for the Scottish Press. I appreciate the personal efforts that the right hon. Gentleman has made to try to seek a solution. The Opposition are sorry that nothing constructive has emerged from the discussions which he undertook. Will the right hon. Gentleman say precisely how many jobs are involved and how many Express staff are likely to be retained by the Express group in Scotland? How many staff are likely to be transferred to the Fraser group as a result of the merger?
The right hon. Gentleman referred to the economic and financial pressures that are involved. Does he realise that his right hon. Friend's Budget yesterday can only add to those pressures in Scotland?
Mr. Shore: The hon. Gentleman's last point is irrelevant to the situation in which the Express group found itself in Scotland we we came to power at the beginning of March, when it had already made the application for the merger.
I have little to say of comfort about jobs. The job loss situation is obviously a major factor. The extent of the need of the Fraser Group to take staff from the Albion works is minimal because the two papers are not merging in the sense that the old paper will continue to be printed. In fact, the Fraser Group's existing paper is to be expanded. That kind of operation clearly does not necessarily lead to any great increase of staff.
The Beaverbrook Press has clearly stated that it intends to maintain an editorial office in Glasgow which will employ between 40 and 50 journalists. I believe that there will be some increase in the number of journalistic staff who will be transferred to Manchester. These matters are subject to the more detailed arrangements that no doubt Beaverbrook Press will announce.
Mr. Harry Ewing: Is my right hon. Friend aware that during his statement he made an astonishing revelation—namely, that the Fraser Group had offered to buy the Scottish Daily Express and the Scottish Sunday Express? Does the fact that the Express Group refused to sell confirm the suspicion that many of us have held over the past weeks, that, come what may, the Daily Express was determined to close down its operations in Glasgow?
I must press my right hon. Friend on the alternatives which are available. I ask him to consider seriously the proposition which was put forward in last night's Adjournment debate—namely, the employee enterprise that was mentioned by my hon. Friend the Member for West Lothian (Mr. Dalyell). I urge that that enterprise should receive every encouragement so that it can get going. Does he accept the assurance that if that enterprise gets going the Scottish readers will decide whether they will buy a paper printed in Glasgow or one that is printed in Manchester?
Mr. Shore: I assure my hon. Friend that I shall consider any proposal that comes forward for establishing a new newspaper enterprise which will make use

471
of the facilities in Albion Street. I am later this afternoon, following what my hon. Friend the Under-Secretary of State for Trade said last night, meeting representatives of the Scottish trade unions. My hon. Friend referred to the decision of Beaverbrook's to refuse an offer of purchase by the Fraser Group of Beaver-brook's two Express newspapers. That was one of the matters that I discussed yesterday with Sir Max Aitken and his colleagues. They made the point that if they were to transfer these two important papers to another group the general effect on their combined advertising revenue and the printing of their Express newspapers would be serious and would have grievous consequences on the total operation of the Express Group.
Mr. Teddy Taylor: Are the Government washing their hands of this catastrophe? Is not this a let-down compared with the extraordinary efforts which we made to save Upper Clyde Shipbuilders, which is now a thriving organisation? I make the specific suggestion that if the Government were prepared to announce a general newsprint subsidy to all the Press, many parts of which are facing identical problems, that would transform the economic situation of Beaverbrook newspapers and make it possible for the Minister to refuse permission under the Fair Trading Act for the merger to take place?
Mr. Shore: I repudiate the hon. Gentleman's suggestion that I am washing my hands of this matter. The analogy that he drew with the UCS group does not stand up. In that case there was a substantial number of orders for that shipyard and there was the basis on which a reconstruction and a rescue operation could be made. The fact that the Beaver-brook Press retains the title, the wish and the intention to go on printing the two Scottish Express editions in Manchester is clearly a different situation and must be considered in the light of the real world with which we are dealing.
A newsprint subsidy is worth thinking about, although it does not easily square with the philosophy of the Opposition. The short-term problem of the newspaper industry is much more concerned with the tardiness of price adjustments, when it has gone to the Price Commission dur-
472
ing the past year and sought to obtain a price increase to cover newspaper costs.
Mr. Hugh D. Brown: Will my right hon. Friend not pay too much attention to the apologists for the Beaverbrook Press from Cathcart? I am sure that the majority of hon. Members will appreciate the efforts which have been made by my right hon. Friend and his colleagues since there has been a locus within which the Government could operate. We recognise that. Surely it should be obvious that it is the intransigence and stubborn indifference of the Beaverbrook management that is responsible for this situation? Will my right hon. Friend consider, even though it requires imaginative action and even legislation, giving the greatest sympathy to what seems to be the last remaining proposal which is likely to be put before us?
Mr. Shore: I have promised to study all proposals, and I reaffirm that promise. I am grateful for the first part of the comments that my hon. Friend made. The impression that I formed of the Beaverbrook Press in general was that perhaps the major factor here was that the management was seriously at fault in its judgment about the deterioration in the group's affairs. In other words, I do not think that the management realised until very recently just how grievous the situation was and how immediate and urgent it was that remedies were taken.
Mr. Steel: Does the right hon. Gentleman accept that we on this bench recognise what he and the Secretary of State for Scotland have tried to do in this impossible situation and that, though we do not consider this group of newspapers to have been exactly purveyors of Liberalism, it is a serious loss to the media and to lively journalism in Scotland?
Will the right hon. Gentleman say a little more about the Government's determination to set up an inquiry into the Press? Will it specifically look at the cost of newsprint and the nature of restrictive practices in the Press? Will the right hon. Gentleman confer with the Secretary of State for Employment to ensure that in the new Bill to replace the Industrial Relations Act there will be rights of consultation for employees as well as shareholders before decisions such as these are taken?
Mr. Shore: I absolutely welcome what the hon. Gentleman said about making it almost a statutory right for employees to be consulted before decisions of this kind are taken. For me the most intolerable feature of this whole affair was that the matter should have been dealt with so summarily.
I will consider further what the hon. Gentleman said about an inquiry into the Press. I am not in a position at the moment to go further than what my right hon. Friend the Prime Minister said only last week.
Mr. Stonehouse: May I add to the congratulations which have been offered to my right hon. Friend on what he has tried to do to save this situation, which has effects not only in Scotland but in the rest of the United Kingdom?
Is not one of the fundamental problems in the newspaper industry the very serious restrictive practices referred to in the supplementary question of the hon. Member for Roxburgh, Selkirk and Peebles (Mr. Steel)? What do the Government intend to do about these restrictive practices, about which we do not read very much in the Press, for obvious reasons?
Mr. Shore: Nobody who has studied or followed the affairs of the newspaper industry in the past 10 years can deny that there are major problems within the industry. I have a feeling that these are increasingly coming to be recognised by both management and unions. I wholly agree with the point made by my right hon. Friend and, indeed, by the right hon. Gentleman the former Leader of the Liberal Party, that, apart from anything that the Government might do in this matter, there is a need for a much more searching introspection into its own affairs by the newspaper industry.
Mr. MacArthur: In the light of this catastrophe, why are the Government putting further financial penalties on industry in Scotland, as the Budget will do; and how many more newspapers will be closed and how many more jobs will be lost in consequence?
Mr. Shore: That is a rather surprising statement following the announcement yesterday by my right hon. Friend the Chancellor of the Exchequer that the regional employment premium would be
474
continued with its particular benefit—£40 million a year—for Scotland.
Mr. Dalyell: Since there is now a serious head of steam behind the employees' enterprise, could my right hon. Friend look favourably on a proposed 50 per cent. bridging loan at a 10 per cent. interest rate, which is being asked for by representatives of the employees?
Mr. Shore: I promise my hon. Friend that I will look at proposals that are put forward, but all matters that might involve the use of the Industry Act I would have to deal with in consultation with my right hon. Friend the Secretary of State for Industry.
Mr. Reid: Will the Secretary of State say whether in his negotiations he gave serious consideration to a holding operation as called for from the Labour benches last night involving, possibly, a subvention on a short-term basis—say, three months—until matters could be seriously sorted out? Secondly, does the right hon. Gentleman appreciate the monopoly situation which may be created in the popular Press in Scotland? Lastly, will he state, given redundancy, what alternative employment is available for these 2,000 men and women?
Mr. Shore: I pressed very hard for precisely that breathing space which I thought would be helpful so that the Government and others concerned might look in a more leisurely way, and perhaps even more thoroughly than we have been able to, at possible alternatives, but I regret to say that it was the strong view of the management, in spite of all that we said, that it could not hold the position and that it had to come to a rapid decision.
Mr. Heath: We all greatly regret the change which the Secretary of State has had to announce, and we recognise what he has done to try to help solve the problem. The Prime Minister, in answer to my question last Thursday, to which the right hon. Gentleman has referred, said that the proposal was an inquiry into the ownership of the Press. If there is to be such an inquiry, will the right hon. Gentleman impress upon the Prime Minister the need for an inquiry into the aspects with which he himself has been dealing this afternoon, which are really the economics of the Press?

475
Will the right hon. Gentleman also resist the attempts made by some of his back benchers to get him to force a change of ownership upon the Press? After all, this runs entirely contrary to what the Labour Party has stood for in the past, that there should be a wider range of ownership of the Press and there should be no forcing of ownership of the Press into a smaller number of hands.
Lastly, it is the economics of the Press which are reducing the range of ownership of the Press. I therefore very much agree with what the right hon. Member for Wednesbury (Mr. Stonehouse) said. When will the industry and those who work in it recognise that at a comparatively fast rate they are putting their own industry out of business? Until that is recognised, we shall not be able to maintain the freedom of the Press in this country.
Mr. Shore: I do not agree with the right hon. Gentleman that my hon. Friends were pressing for changes in ownership per se. What they are concerned with, as I think that the whole House is, is that ownership does not lead to increasing concentration, because that is one aspect, quite apart from the economics of the Press, about which we must be deeply concerned, and that was a point which was made in a previous supplementary question—a point to which I did not reply.
On the question of the economics of the Press, it is absolutely clear that the industry is facing major changes. All parts of it are under pressure. Therefore, that must be at least the other half of any serious new inquiry into the Press.

BUDGET STATEMENT (PROCEDURE)
Mr. Emery: On a point of order, of which I gave you notice last night, Mr. Speaker. This concerns the rights of back benchers.
Yesterday Mr. Deputy Speaker gave this ruling:
"It is a long-standing convention that the Chancellor of the Exchequer is not interrupted during the Budget Statement."—[OFFICIAL REPORT, 26th March 1974; Vol. 871, c. 304.]
I am certain that everybody accepts that the Budget Statement is an often long,
476
usually arduous, and always gruelling occasion for a Chancellor of the Exchequer. I think that the whole House would wish to pay tribute to the Chancellor for the way in which he performed his task yesterday. I am certain that the Chancellor would want the Statement to come across clearly, and the House would not want the occasion to be a running debate.
May I refer you, Mr. Speaker, to a list of a number of precedents for Chancellors of the Exchequer giving way to interruptions in the past. Sir Stafford Cripps gave way on 18th April 1946—HANSARD, column 69. Mr. Hugh Dalton gave way on 12th April 1947—HANSARD, column 1085. I can bore the House with all the references if it wishes. They include references to Mr. Gaitskell, Mr. Butler, Mr. Macmillan, my right hon. Friend the Member for Barnet (Mr. Maudling), the right hon. Member for Cardiff, South-East (Mr. Callaghan), and the right hon. Member for Birmingham, Stechford (Mr. Jenkins).
The occasion of their giving way fell into two categories. The first was where the Chancellor gave way to the Opposition Front Bench. However, there are also instances—I refer to HANSARD, column 283, of 6th April 1965—where a Chancellor of the Exchequer gave way to Sir Douglas Glover and where the right hon. Member for Cardiff, South-East, gave way to Mr. Bellenger and Mr. Arthur Tiley—I refer to HANSARD, columns 1033 and 1041, of 11th April 1965.
There are other examples. Mr. Harold Davies, Sir Gerald Nabarro and even Sir Waldron Smithers—who can hardly be described as a Front Bench spokesman on economics—were all given way to by the Chancellor of the Exchequer. The last instance I will mention, bearing in mind the ruling given by the right hon. Member for Cardiff, West (Mr. George Thomas), is that of 17th April 1956 in column 885 where there is an interruption, which could not have been from a sedentary position, by the right hon. Member for Cardiff, West.
I ask you to rule, Mr. Speaker, that, irrespective of the occasion, it must be a matter for the hon. or right hon. Member himself whether he gives way. Secondly, there are several examples,

477
which I have listed, of successive Chancellors of the Exchequer having given way. Thirdy, there is no tradition—and traditions are not always listed but some times appear in footnotes in Erskine May—and there is no rule of the House that the Chancellor of the Exchequer be not interrupted during his Budget Statement.
I should be glad, Mr. Speaker, if you would clear up this point because it has been referred to in the Press. If it is not cleared up a precedent might be established which is not in accord with what has happened in the past.
Mr. Speaker: The hon. Member for Honiton (Mr. Emery) has made a perfectly legitimate point of order, of which he has given me notice. I congratulate him on his researches and on his erudition. I did discuss the matter with the Deputy Speaker. I fully support him and consider him to have been quite right.
The convention is not an absolute rule. It is not in the Standing Orders but in my view it is a custom. I can claim some personal experience. I made only two Budget speeches myself, owing to circumstances not altogether within my control, but I have listened to very many. The custom is only rarely to interrupt the Chancellor of the Exchequer. Interrup-
478
tions in the Chancellor's Budget Statement, which as I have said are customarily rare, are usually made only by the Leader of the Opposition or the spokesman on finance for the Opposition. The fact that the Deputy Speaker made an interruption a long time ago and that it was he who restrained the hon. Member yesterday seems to prove the advantage of a poacher turning gamekeeper.
There are three simple reasons for the custom. The Budget speech is a test of endurance for the Chancellor and also for the House. It should not, therefore, be unduly prolonged. Secondly, if the right hon. Gentleman gives way to one hon. Member, is he to give way to another? It would be intolerable to have hon. Members rising all over the place and other hon. Members shouting, "Give way, give way". Thirdly, there are three full days' debate on the Budget Statement which gives ample opportunity for asking questions, interrupting Ministers, seeking to make points and asking for information.
Therefore, the custom is not an order of the House. It is not a convention that occupants of the Chair always enforce. I nevertheless maintain that it is a custom of the House, and, until I am otherwise directed, I shall continue to support it as a custom of the House.

ORDERS OF THE DAY
  WAYS AND MEANS
  Order read for resuming adjourned debate on Question [26th March],
  WAYS AND MEANS

    AMENDMENT OF THE LAW
    Motion made, and Question proposed.
    That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance; but this Resolution does not extend to the making of amendment with respect to value added tax so as to provide—

    (a) for zero-rating or exempting any supply;

    (b) for refunding any amount of tax;

    (c) for varying the rate of that tax otherwise than in relation to all supplies and importations; or

    (d) for any relief other than relief applicable to goods of whatever description or services of whatever description.

    BUDGET RESOLUTIONS AND ECONOMIC SITUATION
    Question again proposed.
    4.23 p.m.
    Mr. Robert Carr: May I first add my personal congratulations to the Chancellor of the Exchequer to those that he has already received from both sides of the House on the way in which he presented his Budget yesterday? In any circumstances it is a daunting effort in terms of mental concentration and physical strain, and it is quite outstanding when achieved, as the Chancellor achieved it, after a bare three weeks' preparation. I hope that the right hon. Gentleman will feel that the congratulations he has received from all quarters are sincere and in no way just a matter of form.
    Having said that, and meaning it, I must also say to him that we may feel that he has so well proved his powers of sustained, clear and moderate exposition that there is no need for him to have to do so again on a second occasion this year or in any other year. We noticed, Mr. Speaker, your latter remarks and, although I am not referring in any way to your case, I hope that circumstances beyond the right hon. Gentleman's control will prevent him from having to sub-
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    ject himself and us to another occasion such as yesterday.
    I am afraid that I cannot be quite so complimentary about the substance of the right hon. Gentleman's Budget. Before coming to that, may I thank him for the nice remarks he made about me and the good wishes he expressed to me on my new occupation of the much less arduous shadow Chancellorship.
    I had better confess to the House before it becomes too painfully obvious that I am not an economist. I understand that the right hon. Gentleman went to Cambridge to learn economics and that the right hon. Gentleman the Foreign and Commonwealth Secretary went to Oxford. I am not sure where I had better go or whether I had better go anywhere. I want to be able to listen to and understand the conflicting views of various economists, but one of the main characteristics of economists is the extent to which their views conflict with each other. I certainly do not want my thinking to be dominated by any one economic school of thought, even from such an august place as Cambridge. It is important to listen just as closely to the voice of practical experience and common sense. There is often a great difference between what practical experience and common sense tell one and the views expressed by economists. When I look back over my 24 years in the House it is not altogether self-evident that the theoretical views of the economic pundits have always been right compared with common sense and practical experience.
    If there is a single lesson that I have learned from my experience in politics in the House and in industry at various levels which is more fundamental than any other, it is the absolute importance to this country of a steady, substantial rate of growth in our economy. I see no other way of overcoming Britain's economic problems, no other way of finding the resources to meet the social needs of our society as a whole and no other way of giving our people the chance to satisfy their legitimate expectations and ambitions for a higher standard and quality of life for themselves and their families.
    I cannot agree too strongly with my right hon. Friend the Leader of the Opposition when he said yesterday:
    "I believe that we cannot get a united nation and solve our social problems unless

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    there is an expanding economy from which people can benefit. That is the only way in which it can be done. In my political life many other ways have been tried. I have now come firmly to the conclusion that there is no other way of trying to solve social problems except by a reasonable increase in total output which can be shared amongst the people."—[OFFICIAL REPORT, 26th March 1974; Vol. 871, c. 337.]
    That was my right hon. Friend's immediate response to the Chancellor's speech, and I cannot agree with it too strongly.
    That is the attitude by which I judge the Budget and by which I hope that I shall always judge any future Budget from whichever side of the House it may come. That attitude towards the overriding importance of economic expansion does not mean that in every year we can drive our economy at an accelerating rate of growth. There will inevitably be some years—and perhaps this may be one of them—when we have to have a lower rate of growth than the average that we need and wish to sustain. But that attitude means that we should have growth as our main economic objective. Even in the years when we have to slow down, we should not take action that would damage our long-term growth prospects; and in a year when we may have to suffer relatively slow growth we should be positively and consciously trying to provide the basis for the earliest possible resumption of faster growth.
    It is when I apply these tests that I find that I have growing fears about the overall effect of the Chancellor's Budget. His judgment is that he had to bring in a Budget which, in demand terms, was neutral—or slightly on the deflationary side of neutral. My concern, and indeed my chief criticism, is that the methods chosen by the right hon. Gentleman to achieve that short-term effect of neutrality underestimate the danger of recession and rising unemployment in the medium and longer term and weaken, rather than strengthen, our capacity to resume growth at a higher rate at the earliest possible moment. That is the argument I wish to develop.
    Mr. William Baxter: In speaking of growth in the economy, does the right hon. Gentleman agree with my right hon. Friend the Chancellor of the Exchequer and his Conservative predecessor in that office
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    that the proper way to get growth in a business is to put the highest rates of corporation tax on retained profits against a lower amount of tax on distributed profits?
    Mr. Carr: The hon. Gentleman raises a technical matter on which I do not propose to enter this afternoon; it relates to a matter of balance. I draw on my own industrial experience in these matters, and I know that it is important to retain in business a high proportion of profits for reinvestment. But I also know that, particularly in the medium-sized and expanding companies of which I have personal experience, it is important to have an active capital market to which growing businesses can go for new money. To meet that second requirement it is important to distribute a fair amount of the profits. There is a difficult balance to strike between the need for retention and the need for distribution, but it is much too easy an assumption to make that it is always right to retain more and distribute less.
    Mr. Baxter: But it is extremely important to keep the fine balance correct if we are to have expansion in the economy, which is desired by my right hon. Friend the present Chancellor of the Exchequer and obviously also by the right hon. Member for Carshalton (Mr. Carr). Therefore, will the right hon. Gentleman elaborate on how he proposes to achieve that objective if he does not retain profits in a business for the purpose of expansion? If in a small business the profits are distributed, how is it possible for the business to expand?
    Mr. Carr: This is a separate argument into which one could be drawn, but it would tend to get away from yesterday's Budget. One of the problems that must be faced is that a particular policy must be in operation for some time without change before one can judge its effect, but in my view my right hon. Friend the Member for Altrincham and Sale (Mr. Barber) got the balance about right. I appreciate that some, people would not agree with that view, but in my view, based on my own past experience, I thought that my right hon. Friend got the balance about right.
    Before I come to my main criticism of the Budget—namely that whatever may

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    be the question of balance in the short run, I do not like the way in which the Chancellor of the Exchequer has sought to achieve it—I want to make two points about omissions from the right hon. Gentleman's proposals. Those omissions make it difficult to assess the rightness of his judgment as to the short-term effects, let alone the longer-term effects.
    My first complaint is that neither in his speech nor in the red book which was available as soon as the Chancellor had completed his Budget remarks has the Chancellor given any estimate of gross domestic product for the first half of 1975. Surely such an estimate is essential if we are to form any sound judgment or opinion about the targets which he has tried to achieve for the economy as a result of his Budget. The right hon. Gentleman knows that last year, the equivalent forecast for the first half of the following year was included, and indeed has now been included for some years past. This is a serious omission from the present Budget and is a strange and unwelcome backward step in an era, of open government to which the right hon. Gentleman and his colleagues have already said that they attach so much importance at present.
    The Chancellor of the Exchequer (Mr. Denis Healey): Will the right hon. Gentleman not agree that the estimate made by the Conservative Government last year was wildly and absurdly inaccurate because in the first quarter of this year, owing to the unnecessary three-day week, there has been a fall in manufactured products of over 20 per cent.?
    Mr. Carr: That is nonsense, if I may say so, with respect to the right hon. Gentleman. He keeps on going on about the unnecessary three-day week—so much so that one day we shall have to have this out with him in more detail than I intend to go into today. The National Union of Mineworkers could easily have obtained a settlement of the order they have now achieved without ever going on strike and putting the nation to the disastrous loss which it has suffered. That remains a fact and always will.
    Mr. Healey: Will the right hon. Gentleman agree that if the Government had been prepared to offer a settlement of
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    anything like that which emerged from the considerations of the relativities report, the whole dispute could have been settled last November and the nation could have been saved a loss of output amounting to more than £2,000 million, which is the heavy weight of inheritance handed over to me by the right hon. Gentleman and his right hon. Friends?
    Mr. Carr: No, I do not agree, because if we had done what the right hon. Gentleman suggests, 9 million other trade unionists would not have accepted pay settlements within the terms of stage Sand where would the economy have been then? The proper course was the one we proposed long before Christmas before the relativities proposals were known. We said to the NUM, "Come and discuss your future, including the need for a new pay structure and pay levels, to meet the needs of the coal industry for the future. We shall start those talks immediately." Then later, when the relativities report was available, we offered that as an alternative and gave an undertaking that that recommendation would be back-dated to 1st March, the date of their new pay negotiating year. Therefore, what the Chancellor said does not hold water.
    I return to my question, which the right hon. Gentleman has not attempted to answer. We all know—and presumably the right hon. Gentleman the present Home Secretary when he occupied the office of Chancellor of the Exchequer came to realise it to his discomfort—that, however hard one tries, forecasts may prove to be wrong. But the value of forecasts is that they at least show the target to which the Chancellor of the Exchequer is directing his policies and which he is seeking to achieve. It may be that a Chancellor does not achieve the targets because he has his policies wrong, or because in the course of the year external event; and all sorts of other things may intervene to prevent those targets being achieved. But at least what we need to know when we are examining a Budget statement is the target which the Chancellor believes the country should set itself and which his policies are seeking to achieve.
    The right hon. Gentleman has not told us that. It is true that 10 years ago we did not set a target, and this also applies

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    to a period of even five or six years ago, but when the present Home Secretary was Chancellor he took much credit for starting the practice of having targets. When we were in power we continued the practice, and now the right hon. Gentleman the present Chancellor of the Exchequer is going back on it at a most serious time in the affairs of the country. This amounts to a serious renegeing. I must press him either to ask one of his right hon. Friends who will be speaking later today, tomorrow or on Monday or, if it is not possible before, when he winds up the Budget debate on Monday evening, to put this omission right. That is essential if we are to form a proper judgment of what he is trying to do.
    My second complaint is that, as my right hon. Friend the Leader of the Opposition said yesterday, the Chancellor of the Exchequer gives us no indication of what he believes the scale and pattern of income increases ought to be over the coming year. This is vital to a judgment of the rate at which we can run the economy.
    As I stressed in the debate on the Address last week, to the extent that we have an effective incomes policy we can run our economy at a higher rate with a lower level of unemployment and a faster increase in national wealth and real wages. To the extent that we do not have an effective incomes policy we have to run our economy at a slower rate with higher unemployment and a slower rise in living standards.
    We all want such a policy to be a voluntary one if we can achieve it. But whether it be voluntary or statutory does not alter the importance of what I have said. Unless we have some idea about the scale and pattern of increases which the right hon. Gentleman believes that the country needs, we cannot form a judgment about his proposals. It is vital to the speed at which we can run our economy and, therefore, to the level of employment that we can have.
    Having made those two complaints, I return to my basic criticism about the likely medium and longer-term consequences of the way in which the right hon. Gentleman has sought to achieve a neutral balance in his Budget, which he tells us is what is required.
    Whatever else we had to do this year, we should be doing everything possible
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    to encourage further investment in industry and to strengthen the upsurge in industrial investment which was at last beginning to appear in 1973. Instead of encouraging it, the Chancellor has discouraged it.
    The main source of new industrial investment must be profits. It is right as part of an overall counter-inflationary policy to keep a restraint on profit margins and on the distribution of dividends. It is the present Government's declared intention to make those profit restraints more and not less intensive.
    As the right hon. Gentleman must realise, his Budget proposals have added a further substantial burden on industry's costs by way of the very large increase in the employer's contribution to national insurance. I do not complain about that in isolation, but the right hon. Gentleman must realise that that big increase in labour costs through this big increase in the employer's contribution will either provide an extra squeeze on profits or be passed on in prices. Presumably none of us wants the latter if we can help it. Therefore it is bound to result in an extra squeeze on profits.
    In these conditions, where profits are to be squeezed through that measure in the Budget and where they are to be squeezed by the counter-inflationary policy on prices, it is wholly damaging to the future of our economy to take away a higher proportion of those squeezed profits which individual companies are allowed to earn.
    In present conditions, if a company is to invest even as much as it has been doing, let alone more, it needs higher and not lower profits left in its hands—at least when expressed in money terms. It is not only our individual cost of living which has gone up. A company's cost of living has gone up, too. New machinery and new factories cost more than they did a few years ago. A company needs more profits left in order to buy the same amount of new machinery and plant. Stocks of raw materials have to be replaced at higher prices. The actual reported profits of companies are artificially inflated by the upward valuation of stocks which, although they produce a higher profit on paper, contribute nothing to the money which a firm has available to spend on new plant and machinery.

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    When we take account of the element in profits recently announced in terms of stock appreciation, real profits in 1973 did not increase at all and, as the right hon. Gentleman said, the three-day week has of course also put a very serious squeeze on companies' profits. There is no dispute about that, although there may be a dispute about the cause and rightness of it. But that strengthens my argument.
    If companies are to need more money profit to do more investment, or even to do the same, it makes no sense both to squeeze the profits and then to take from them a higher proportion of those squeezed profits. That can only lead in one direction, and it is to lower investment at a time when the country cries out for higher investment.
    This is one area where, since the war and probably for a long time before the war, British industry has not compared well with that of other countries, and it is one reason why our capacity for sustained growth is inferior to that of other countries.
    Whatever may be the need this year to have a neutral Budget or not to allow demand to be expanded, it is all the more important to do all that we can to get as much investment as we can of a modern kind in order to increase our productive capacity for the future and to allow the country to get back on to soundly based growth as soon as possible which will not be cut short by bottlenecks in capital capacity, skilled manpower and the like.
    Moreover, whatever may be the arguments in redistributive terms, it is only right to recognise that higher taxation on the rich will reduce savings. No one can dispute that. What is more, that sort of taxation, again whatever its merits in redistributive and social justice terms, is likely to have an effect on the capital market for some time which will make it more difficult for industry to raise new capital.
    If we add to that, although it has nothing to do with the Budget, the uncertainty that British industry has about our continued membership of the European Community we see without doubt that the policy of the Government, especially that contained in the Budget, is
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    bound to have a depressive effect on industrial investment in British industry which would be bad at any time but which is especially bad at a time when it is most important in the national interest to stimulate it and not to depress it.
    When we add to those disincentives to new investment the distinct possibility that the Chancellor of the Exchequer may have underestimated the deflationary pressures already at work on demand in the economy, it becomes clear that we could easily find ourselves sliding into a recession and a rising level of unemployment which the right hon. Gentleman says clearly that he does not want and which I do not believe that he intends. But I must warn him that I believe that his measures put us in risk of that.
    Mr. Frank Hooley: Does it not occur to the right hon. Gentleman that it ill becomes him to lecture my right hon. Friend the Chancellor of the Exchequer about investment since the record of his own administration in this respect was deplorable, despite the enormous profits made by some companies during that period? Does not he agree that the simple money equation—more profit equals more investment—has proved to be a non sequitur?
    Mr. Carr: That is nonsense. First, investment was depressed, and cycles of investment take a long time to reverse, as the hon. Gentleman will know. Investment was depressed at the end of six years of Labour Government from 1964–1970—nobody can deny that—partly because there had been continuing stagnation and lack of growth in our economy and partly because—this reflected itself a few years afterwards—the percentage of profit in terms of the national income had been substantially reduced by the last period of Labour rule. The effect of the last period of Labour rule on the availability of profit for new investment, coupled with economic stagnation, was one of the chief causes that led to the investment slump from which it was very difficult to rouse industry.
    When we were in power my right hon. Friend the Leader of the Opposition, then Prime Minister, was often getting into trouble with industry and the City because he said, "You are not responding quickly enough to the incentives that we are giving

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    you to start investment." We understood that, because of the state of inertia and depression into which they had got, they had no faith that growth would take place. But by last year there were at last strong concrete signs of a new boom in investment.
    This precious growing plant of new investment needs nurturing. It is that plant on which the Chancellor of the Exchequer is pouring weedkiller, not fertiliser. It is the weedkiller in his Budget as it affects investment that forms my first fundamental and serious criticism of the Budget.
    My second fundamental and serious criticism of the Budget is that, incredibly, its direct effect will be to increase the cost of living index. True, food subsidies will reduce it, but this reduction created by the food subsidies is more than offset by the increases in VAT and in excise duties on many things which, although not so absolutely the necessities of life as basic food, nevertheless form an integral part of the spending of lower income families—perhaps even more of lower income families than of some of the higher income families.
    Yesterday in his Budget Statement the Chancellor specifically admitted this point about the overall effect on the cost of living, because he said:
    "In terms of retail prices, the action we are taking on food subsidies will lower the index by about 1½ per cent., and this will largely offset the increases in the excise duties and the changes in VAT."—[OFFICIAL REPORT, 26th March 1974; Vol. 871, c. 327.]
    I ask the House to notice the word "largely".
    Mr. Healey: More than largely.
    Mr. Carr: If the right hon. Gentleman made a factual error in his Budget Statement yesterday no doubt he will correct it. But, according to his Budget Statement, he said, by implication, that the food subsidy reductions would largely but not completely offset the increases caused by VAT and excise duties.
    The increases in VAT and excise duties are not the whole story. On top of these increases in VAT and excise duties come the increases in prices of electricity, coal, fares, postal services, petrol, and some foods. I apologise. The latter are included in the VAT figure.
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    Are not these also part of the necessities of life in the 1970s? It may be said that it is sound and right to increase the prices for the products of the nationalised industries. That is a strong point and I take it. But, if it is right and sound to do that, it is folly and wrong at the same time to put up indirect taxes, VAT and excise duties, as the Chancellor has done.
    Mr. Healey: It would help the debate if the right hon. Gentleman would tell the House whether the Conservative Opposition approve the Government's decision to reduce by £900 million what would otherwise have been the nationalised industries' subsidy bill. It would be helpful to all of us if he would let us know whether the Opposition approve of that decision.
    Mr. Carr: I certainly accept that some action had to be taken in that area.
    Mr. Healey: Answer the question.
    Mr. Carr: I will in just one moment. In December last year my right hon. Friend the Member for Altrincham and Sale specifically said—if I remember correctly, he was criticised by the right hon. Gentleman for saying it—that something would have to be done in that area. I shall not take the responsibility for the particular quantum of change that has been made—I do not think that any Opposition could—but I accept that there was a case, which we admitted, for a movement upwards in these prices.
    Mr. Healey: The Conservative Government did not do it.
    Mr. Carr: We said that we were going to do it, and we would have done so. I do not know whether we would have done as much as the right hon. Gentleman. However, it is still folly at the same time to do what he has done in putting up the cost of living through indirect taxes—VAT and excise duties—because the two together are not tenable in our present situation.
    The strange thing is that at one stage in his speech yesterday the Chancellor actually grumbled that the Conservative Government's introduction of threshold agreements meant that he had had to approach indirect taxation with one hand tied behind his back. If he

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    managed to increase indirect taxation to the extent that he has with one hand tied behind his back, I dread to think what would have happened if he had had both hands free. Perhaps it is a pity that his right hon. Friend the Chancellor of the Duchy of Lancaster in Downing Street had not got a long enough arm to take hold of the one free hand that the Chancellor evidently had, because we might all have been better off today.
    Could anyone voting Labour last month—this is a political point, but one that I think the Chancellor must take—have imagined for a moment from what the right hon. Gentleman and his colleagues had been saying before and during the election that only four weeks later a Labour Government would introduce a Budget which, far from reducing prices, would, by direct action, increase the cost of living for every ordinary family in this country?
    As reported in the BBC's news bulletin at lunchtime today, the Treasury has, I understand, admitted that the direct effect of the Chancellor's measures announced in his Budget yesterday on their own will add 2½ per cent. to the retail price index by Christmas. If those are not the right figures, will the right hon. Gentleman please see that the correct figures are given, and will he please inquire how it was that the BBC news was quoting them as correct? If the right hon. Gentleman knows that they are wrong, presumably he knows what are the right figures. Will he, therefore, give us the right figures? I will willingly give way to him to allow him to do so.
    It is clear that the House and the country must assume that the BBC report at lunchtime was correct. Certainly there has been no denial. It is clear, too, that, although the Chancellor may say that they are wrong, he does not know what is right.
    Mr. Healey: I do.
    Mr. Carr: The Chancellor says that he does. Let him tell the House. Is it more than 2½ per cent.?
    Mr. Healey: I shall tell the House.
    Mr. Carr: Let us know now. What about open government?
    Mr. Healey: The right hon. Gentleman will recall that "open government" was the slogan of the Government that deceived the House about the cost of the Concorde project.
    Mr. Carr: That may sound a "smartie" sort of remark, but it is wholly irrelevant to the question about which we are talking.
    Who, for that matter, deceived the House about other costs from 1964–70? We could go back to our previous incarnations, when I was shadow Minister for Aviation and the right hon. Gentleman was Secretary of State for Defence. We might have some interesting debates on that. I do not believe, however, that the House or the country wants us to get into that sort of argument.
    Mr. Healey: The right hon. Gentleman started it.
    Mr. Carr: No, I did not. What I asked for was information, which the Chancellor admits he has, about the effect of his Budget proposals yesterday. That is what he is refusing to give the House. Why cannot we have that information now? I am willing to give way to the right hon. Gentleman. It is intolerable that he does not tell us.
    The right hon. Gentleman and his party fought the last election on prices, prices, prices all the way. They said that that was the most important topic. He is putting them up "at a stroke", all right. Prices were the great issue. Now the right hon. Gentleman brings in a Budget that has an effect on prices, some of it, admittedly, a downwards effect.
    He has told us what the "down" side is, namely, 1½ per cent. because of his food subsidies. But there is a big "up" side. He says that he knows what the "up" side is, but he will not tell us. How do we proceed in a responsible manner if that is the attitude of the right hon. Gentleman? The country will draw only one conclusion: it is that the 2½ per cent. mentioned by the BBC today as being the Treasury view is an understatement and not an overstatement. All I can say, therefore, is that it is bound to have an extremely bad effect on what we have agreed to be the most important issue before the country.
    I should have thought that the right hon. Gentleman would have known that this increase in the cost of living would

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    hasten the day when those threshold agreements to which he apparently objected yesterday will be triggered, and that will not make easier the problems of wage bargaining in the near future. If that is so, that will be the direct effect of the totality of the Chancellor's proposals for the prices of goods and services which are bought not just by the rich, but by every family of this country, including those with the lowest incomes.
    Finally, I want to spend a few moments talking about who in personal terms will get the benefits of the Budget and who will bear its burdens. First, the benefits. We have the substantial increases in pensions and related benefits, which are good and universally welcomed. I am sure that most people are only too prepared to pay what has to be paid in order to bring them about.
    Good, too, is the Chancellor's decision to raise the level at which families start to pay income tax. That change removes 1½ million people, temporarily at least, from having to pay income tax at all, and reduces the amount that many others have to pay at the lower end of the income scale.
    My right hon. Friend the Member for Altrincham and Sale made a similar move two years ago, and it needed doing again this year. The trouble is that this time the benefits in income tax terms for the lower-paid families will be more than wiped out by the Budget's effects on the cost of living.
    The Chancellor gave examples yesterday. It is not easy to be accurate, even with all the Treasury facilities available to one, but, as far as I can work out from the Family Expenditure Survey figures, a family, with two children, earning £38 a week—that is less than average industrial earnings—will save £40 a year on income tax and national insurance contribution, while savings because of subsidies will be about £9 a year, making a total saving of £49 a year.
    On the other hand, on the basis of the latest edition of the Family Expenditure Survey, the increase in indirect taxes for such a family will be about £34 a year, while the increase in prices of the nationalised industries and postal services will add £20 a year, making a total extra cost of £54 a year. Therefore, that family will be £5 net worse off a year—not better
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    off—and that is assuming there is no inflation during this period. If there is, it will make matters worse.
    Thus, the benefits spoken of by the Chancellor are mythical. What the right hon. Gentleman was saying to the country—maybe it had to be said, but if so it should have been said more openly and honestly—was that we all have to accept a reduction in our standard of living in the current year. I believe that that will happen. It certainly will in the case that I have taken on the basis of the Budget proposals.
    It is no use encouraging people to believe that they will have a real improvement in their standard of living, if, in fact, they will have to suffer a loss. To mislead on that subject, as I am sure the Chancellor realises, is to increase expectations and frustrations, and does not promote the unity for which the right hon. Gentleman made an appeal both in the House and on television last night.
    Mr. Tom King: How does my right hon. Friend think that family feels if, on top of those increases, they face an enormous increase in rates—as much as 80 per cent. for many of my constituents and others in the country?
    Mr. Carr: Very strongly indeed, I guess.
    After discussing who is receiving the benefits, and admitting that pensioners and others are indeed receiving them, at least for the moment, provided we can keep inflation under control, and having, I am afraid, rather poured cold water on the other benefits which people are supposed to be receiving, other than pensioners, I ask the next question: who is supposed to be bearing the main burden? Who are the people whom the Chancellor sees as having the broadest backs? I think that that is the present Government's current terminology.
    The Chancellor has fulfilled his promise to tax the rich, but he has also demonstrated how little is obtained by doing so. The great weight of the burden will fall—the Chancellor will probably say that there is no alternative, but it is a pity that he did not say so earlier—on the middle income groups. It will fall on the middle level of executives and technicians, on professional men and women, on the

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    higher-paid productive workers in industry, including the miners and many workers in the building, printing and other industries.
    Many of those people have already had to accept less than average percentage pay increases for the last 18 months or so under an incomes policy biased deliberately in favour of the lower paid, and many are those younger house purchasers, either actual or prospective, who are most heavily hit by the present mortgage interest rates.
    During and before the election campaign, the Chancellor and his colleagues had plenty to say about the hardship of the house purchaser, actual and prospective, yet in a Budget speech of more than two hours yesterday the right hon. Gentleman devoted less than 30 seconds to their problems, and then not to offer help, only to say that there was no short cut to the solution of them. It is a pity that he did not admit that when he was in opposition and during the election.
    Mr. Healey: I said it in every speech during the election.
    Mr. Carr: The right hon. Gentleman was remarkably successful in not getting that part of his speeches reported.
    Later in the debate my right hon. and hon. Friends will deal with the Chancellor's proposals on such matters as the taxation of capital, the hard effects of the surtax levy and the increased taxes on unearned incomes of minority groins such as widows on fixed-investment incomes. They are important matters, but I do not want to detain the House too long and they can be discussed later.
    All that I say about capital taxes is that while there may be a case in principle for an annual wealth tax and a gift tax, if the Chancellor is determined to bring them in he should take the utmost care—and it will be difficult—to make sure that, in practice, serious damage is not done to small businesses in manufacturing industry, commerce, retailing and agriculture. These small businesses make a substantial contribution to our economy and national wealth, and, incidentally, to our overall level of employment. One sometimes forgets that about one-third of workers in industry are employed by companies which are not quoted on the Stock Exchange. In other words, they are basically small companies. We
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    ignore at our peril the danger to our level of employment and national wealth if we take taxation measures which damage the small company, very often the privately-owned company.
    To sum up, it seems to the Opposition that the Budget runs true to Labour form. Labour Governments put up taxes, Conservative Governments reduce them. It is not just the rich who suffer from the increases or benefit from the decreases; it is all our people. This is one of the fundamental choices which have to be made in political decisions.
    If I had to give a name to this Budget, I should call it the "high-rise Budget"; a high rise in taxes; a high rise in prices and, I fear, eventually a high rise in unemployment, because it will discourage the investment that is needed if we are to increase our productive capacity and thus ensure that we maintain a high employment level.
    Finally, the people in this country should not imagine that our economic difficulties made any other sort of Budget impossible, because they did not. It may be true that the economic conditions of this country—and, indeed, of the world as a whole—meant that this year's Budget had to be neutral—if the Chancellor is right—thus making it impossible for him or any other Chancellor to make great tax concessions. But if we had forgone large expenditures on general subsidies and, in their place, had brought in smaller but more selective expenditure to meet the most urgent social needs, and if we had had a firm and fair incomes policy, we could still have had our pension increases and avoided the increases in indirect taxation which, by their effect on the cost of living, will wipe out for many of the lower-paid families the benefit of expensive general subsidies.
    That would—or could—have been a neutral Budget, too. I believe that it would have been a much better Budget. It would have met our immediate needs fully and fairly, and it would have avoided the damage which the Chancellor is doing to the future level of productive capacity and employment in this country.
    5.15 p.m.
    The Secretary of State for Trade and President of the Board of Trade (Mr. Peter Shore): The House will have heard the right hon. Member for Carshalton (Mr. Carr) make his debut as

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    Shadow Chancellor with considerable interest and, perhaps, even with pleasure. The House will probably have listened with some sympathy, not because he confessed that he was not an economist—I assure him that there are many right hon. and hon. Members on both sides who talk good sense on economic affairs and who are not encumbered with the specialist knowledge of the economist—but because, now that he has taken on the rôle of Shadow Chancellor, he has to cast his shield around the vulnerable bodies of his right hon. Friends, the ex-Chancellor of the Exchequer, the ex-Secretary of State for Trade and Industry and the ex-Prime Minister, who brought this country to the brink of, probably, the worst economic misfortune which any of us can remember or, indeed, of which we have record.
    The right hon. Gentleman showed persistence in questioning and considerable talent in debating skill, but I thought the quality of the arguments he put forward a little thin. First, he overstressed the possible damage to industrial investment this year. He ought to take a little encouragement from and a little pride in the investment incentives which his right hon. Friend took such pains to construct, at enormous cost to the Treasury, during the past three years. We had a system of investment incentives extremely difficult to rival.
    In addition, as the right hon. Gentleman well knows, this past year has been one in which there has been a high level of profits. My right hon. Friend the Chancellor of the Exchequer stressed yesterday that he will continue to keep a close watch on the whole economy, and there is no reason at this stage to draw gloomy conclusions about the outlook for investment in this country this year.
    Second, I found the right hon. Gentleman's remarks about the cost of living and the increase in charges by the nationalised industries rather surprising. Unless charges were raised the revenue cost to the Exchequer this year would be £1,400 million. My right hon. Friend intends to save £900 million of that. If the Shadow Chancellor accepts that, where would he have raised the extra £900 million? The right hon. Gentleman said that he would not put it on indirect taxes because that would have an adverse affect on the cost of living. We are
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    driven back, therefore, to the logical, inevitable conclusion that the right hon. Gentleman would have imposed the largest increases on direct taxation to have taken place for the past 10 years. He may disagree with that—there are, of course, many variables—but he cannot escape the conclusion that the consequences of what he proposed would have had to have been borne on direct taxes.
    Mr. Carr: In my closing sentences I said something about our having to forgo the large extra expenditure on general subsidies. The right hon. Gentleman cannot accuse me of dishonesty on that point.
    Mr. Shore: No, but if the right hon. Gentleman had done nothing about food subsidies the rise in the cost of living would have been considerably greater. We shall have an opportunity to discuss these matters during this Budget debate. If I fail to answer any of the right hon. Gentleman's comments, I have no doubt that my right hon. Friend the Paymaster-General will say something when he winds up today's debate. There will be a further opportunity to deal with comments on the final day of the debate on Monday. As Secretary of State and President of the Board of Trade, I think it right to turn my attention to the whole question of trade and to fulfil my first duty by putting to the House and the country the facts about our present trading situation.
    To those who have followed developments closely in recent months, the totals that I shall cite will come as no surprise, although their impact on the public has in the past been muffled both by competing events and to some extent by past ministerial pronouncements.
    Our total trade deficit for last year was £2,375 million. Of this, probably £300 million was due to increased oil prices. To put the 1973 total in perspective I should remind the House that in the previous three years our trade balance was: in 1970, a deficit of £9 million; in 1971, a surplus of £285 million; in 1972, a deficit of £677 million.
    It will be seen how massive and rapid the change over from surplus to deficit has been. This is not all. The total figure for 1973, the £2,375 million, itself conceals rather than reveals the trend in our trading position. In the first quarter

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    of 1973 we were running a trade deficit at the rate of £1,400 million per annum; in the second quarter, we were running a deficit at the rate of £1,600 million a year; in the third quarter of 1973 the trade deficit had reached £2,400 million a year; and in the last quarter of 1973 it rose to a truly horrific figure of over £4,000 million a year.
    The House will be aware from the announcement yesterday that the latest trade figures show little improvement in our non-oil trade deficit and—a major new factor—an increase in last month alone of no less than £84 million in the cost of our oil imports in a single month.
    Of course, along with the trade deficit figures we have to take account of our position on invisible earnings. It is only when we take together visible and invisible trade that we get the current account of the United Kingdom. As the House well knows, invisibles have contributed positively to our current account for many years, and in the last few years there has been a particularly helpful increase, reflecting a wide variety of factors, in which the improvement in our insurance and tourist earnings deserves particular mention. When we set the invisible surplus against the visible balance or non-balance, the current account last year was reduced to £1,468 million. However, when we take account of the accelerating deterioration of our visible trade during the second half of 1973 in particular, and the fairly modest increases in our invisible earnings, no one is entitled to draw any satisfaction about the size of our current deficit in the period ahead.
    As Secretary of State for Trade and President of the Board of Trade I can safely affirm that no incoming trade Minister in the whole history of these islands has ever been bequeathed so massive a deficit on the external account.
    Mr. Julian Ridsdale: I am interested in the pattern given by the right hon. Gentleman, but will he not admit that in similar trading nations, such as Japan, the trend he has described has taken place, too?
    Mr. Shore: It is always dangerous to cite external experience in these matters. What I want to do for the moment—I
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    shall develop my argument—is to present this country's position. I have not yet dealt with the oil deficit as such. I shall not mention it until later. Naturally, the oil deficit is among the factors, apart from the swing round in their own trade, which has particularly affected Japan and other countries.
    I noted what the right hon. Member for Worcester (Mr. Walker) said during the debate on the Queen's Speech about the new organisation of Government Departments, and in particular his regrets at the dismembering of the DTI and the re-emergence of the Board of Trade as a separate major Department of State. I have always felt that a certain agnosticism in the matter of deciding "who does what" among Government Departments is the only sensible stance to adopt—at least, in the light of the experience of departmental changes in the last 10 years.
    However, it will not have escaped the attention of the House that the almost unbelievable deterioration in our current trade account, the transformation in a matter of less than three years from a record surplus to a still larger record deficit, involving a turnround of some £2,500 million, has taken place during the only period in our history when no separate trade Ministry has been allowed to exist. It is clear to me that, whatever else may be said about the advantages of a combined industry and trade Ministry—and I am not sure what else can be said the trade balance and trade policy generally have not been given anything like the priority that they needed in the unlamented DTI.
    It is right at this moment not only to rehearse the facts of our present trade situation, but to look at the factors that have contributed to the present position. I shall say something later about oil, but I must stress that the vast and unwelcome increase in oil prices has played only a small part in the trade deterioration up to the end of 1973 which I have just described.
    What, then, have been the main factors? It is here that I must take issue with the analysis and explanation repeatedly offered by the Leader of the Opposition and former Ministers on the many occasions when we have debated these matters during the past two years. It is, of course, true as they repeatedly

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    affirmed, that world prices, particularly in the last year, have placed a heavy burden on our import bill.
    Since the beginning of 1972, just before the sterling float, there has been a 50 per cent. increase in our import prices, and about two thirds is the result of the escalation of commodity prices per se. But the rest—and that is about a third—is the result of the depreciation of the floating pound. We know by how much. Since June 1972, when the pound began to float, the depreciation against other currencies has reached some 19 per cent. So the average cost of our imports has had to reflect a price increase broadly equal to the extent of our currency depreciation. This has given not only a most unwelcome further boost to price inflation in the United Kingdom but has contributed greatly to our trade deficit.
    This fact has scarcely been alluded to in the speeches made by Ministers of the last Government. They have sought instead to stress first the real increase in world prices, and second to justify the deterioration in our trade balance as a necessary corollary of the growth policy to which they were suddenly converted in the autumn of 1971 when unemployment was heading fast towards the million mark. So throughout the second half of 1972 and 1973 our growing trade deficit has been again and again summarily dismissed as no more than the necessary stocking up of materials and the necessary importation of capital goods which were destined to precede a great and counterbalancing export boom.
    Once again the explanation that we have been given is only a partial one and omits factors which must also be taken into account. I do not deny that there has been a very considerable increase in imported capital goods. Indeed, they rose in value by some £1,000 million between 1971 and 1973. But this in turn reflects on the appalling failure of the last administration to avoid an investment slump, and in particular the expansion of our own capital goods industries that marked the conduct of affairs in recent years. The House will hear the figures again.
    Investment by manufacturing industry in real terms in Britain amounted in 1970 to £2,129 million. It fell to £1,968 million in 1971. It slumped still further to £1,775 million in 1972, and it rose
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    only marginally in 1973 to £1,881 million. It stands at £247 million below the levels attained in 1970. No wonder the growth programme embarked upon 18 months to two years ago involved so heavy an increase in imported capital goods.
    But what about consumer goods? These were hardly mentioned by Ministers in our debates last year. But the truth is that the consumer boom which the budgets of 1972 and 1973 unleashed led to a vast and unchecked increase in imports of consumer goods of all kinds. Of the trade deterioration in the past two years, no less than £1,000 million was contributed by the increase in consumer goods. As the House will well remember, every conceivable restraint on consumer expenditure was flung away, all controls over borrowing were abolished and the whole policy of the then Government was summed up in the credit card slogan "Access takes the waiting out of wanting". It was not until December of last year that the then Chancellor of the Exchequer decided to bring consumer credit and hire purchase under direct control.
    Mr. Christopher Tugendhat: Would the right hon. Gentleman tell us which measures in the Budget will increase the level of industrial investment beyond the depressed levels which he described, and which measures will decrease the level of imports for consumer spending?
    Mr. Shore: I am not in this part of my speech dealing with the question of investment. I dealt with that at the beginning of my speech in answer to the right hon. Gentleman. On the question of imports, my understanding is that the general tailing off now of consumer demand—that is reflected towards the end of last year—together with the measures announced, in my view far too late, in December by the previous Chancellor, and the combined effect of my right hon. Friend's measures will have an effect on checking the import of consumer goods which has been an unwelcome feature in such quantities in the past two years. After all, £1,000 million of our deterioration is due to imported consumer goods. The House and the country will want to face the fact that this cannot continue, certainly not unless there are counterbalancing exports in the other direction

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    It is against this background that the House can judge the assertion of the right hon. Member for Worcester in his speech on 13th March. He said that
    "the true reality of the deficit on our trade"
    results
    "from a massive increase in the importation of new machinery, vital raw materials and, the biggest factor, the enormous increase in world prices."—[OFFICIAL REPORT, 13th March 1974; Vol. 870, c. 206.]
    That is what he said—not a word about consumer goods, not a word about depreciation of the pound.
    Mr. Nicholas Ridley: Since the right hon. Gentleman has not answered my hon. Friend's question when he asked what the right hon. Gentleman intends to do about reducing consumer imports, is he now suggesting that the separation of the Department into Departments for trade and industry is what the Government are relying upon?
    Mr. Shore: The hon. Gentleman knows better than that. He knows that the combined effect of the measures taken in my right hon. Friend's Budget and the December measures, particularly as they affect consumer goods and hire purchase, are expected to have, and will almost certainly have, a significant effect on imported consumer goods.
    Mr. Norman Lamont rose—
    Mr. Shore: I will not give way again.
    Before I leave this part of my speech, I want to say something about our trade with the Common Market, which the right hon. Member for Worcester singled out in his speech as a special cause for satisfaction. He remarked that our exports to the Common Market had risen from £2,355 million in 1970 to over £4,000 million last year. He said that they comprised nearly a third of our total exports and that our exports there were rising more sharply than to other markets in the world. What he omitted then to point out was what our imports from the Common Market had been. I will tell him. Whereas our imports in 1970 from the Common Market were £2,440 million, last year they amounted to £5,197 million. As the House will see, our trade balance with the countries of the Common Market has deteriorated by
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    no less than £1,100 million in the past three years.
    This is particularly worrying for a number of reasons. First, our main purchases from the Common Market countries are not of raw materials, which have been particularly rapid in their price movement in the last two years. Secondly, we have imported large quantities of consumer durable goods—far more than we ourselves have been able to export to them. Indeed, it was in our first year of membership of the EEC that we became for the first time in our history a net importer of motor cars—and much of that has come from EEC countries.
    Now our trade performance with the EEC matters very much indeed, because the economic case of the former Government for joining the EEC was that the benefits of a large domestic market of 250 million consumers, as they then put it, would be so great that they would outweigh or at least cancel out the known and heavy disadvantages that would follow from higher imported food prices, the growing weight of our contribution to the EEC budget, and the expected net outflow of capital from Britain to Europe.
    In fact what has happened is this. We have had higher food prices—although from the world even more than EEC; we have started to make our budgetary contributions; we have seen a growing outflow of capital; and on top of it all we have a very heavy trade deficit.
    My right hon. Friend announced yesterday some proposals for curtailing British investment in the EEC. It should surprise no one. The truth is that, as the former Government so quickly discovered, the realities of our economic situation and the obligations entered into with the EEC do not easily co-exist. The last Chancellor discovered this himself when, having so lightly agreed to the "snake in the tunnel" arrangements in May 1972, he was forced ten weeks later and at the cost of £1,000 million to abandon the agreement and to let the pound float. The former Government discovered it again when in seeking to freeze prices in the first stage of their counter-inflation policy, they could not exempt the steel industry whose prices affect so widely costs throughout the engineering industries. They had, therefore, to write embarrassed letters to the Brussels Commission and to retain, at

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    least for a few months, the power of price control which under the treaty they had already abandoned.
    Now, as my right hon. Friend the Chancellor announced yesterday, the arrangements made in the Budget Statement of 1972, relating to Article 124 of the Treaty of Accession, which allowed up to £1 million per project per year for direct investment by British firms in other EEC countries, has had to be suspended. Up to the end of September 1973, 3,178 applications for permission to use official exchange by British firms for direct investment in the EEC were given exchange control consent. £154 million of official exchange had to be so utilised.
    Following the Budget, most new investment will have to be financed with foreign currency borrowings and, as my right hon. Friend made clear, he hoped to produce a saving of £150 million to £200 million in a full year from this change alone. As the House will recall, my right hon. Friend announced other measures tightening up the rules for financing both direct and portfolio investment on a world-wide basis. These he expects will yield £50 million from direct investment in the overseas sterling area and some $400 million from portfolio investments as well.
    Mr. J. Bruce-Gardyne: Now that the right hon. Gentleman has got that bit of EEC off his bile, could he tell us—now that he has re-established the Board of Trade to look after the trade statistics—to what extent the attempt to hold down the level of steel prices in this country, way below those prevailing in other European centres within the Community, has contributed directly to the trade deficit by leading to the export of steel which then subsequently has to be reimported?
    Mr. Shore: I do not intend to answer for the previous Government's steel pricing policy, but if he presses this point on my right hon. Friend the Secretary of State for Industry, I have no doubt that the hon. Gentleman will get a satisfactory reply.
    What the country has lacked in the past three years is a coherent and consistent economic policy. What the Budget's strategy has set out to do is to ensure that there will be a progressive shift of productive resources into the
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    balance of payments and a continued increase in the volume of our exports.
    The important and overriding first priority is to deal with the part of our balance of payments problem which does not arise directly from the oil price increases. We cannot expect to achieve that overnight for the orders of magnitude are much too large. The scale of the problem is such as to demand a reasonable and orderly approach to the necesary shift in resources from domestic consumption into exports and against the background, of course, of a changing international trading environment. It is not simply a question of making room available within the economy at the macro-economic level, although that is essential. Industrialists and Government together have also to re-analyse and identify the new and growing trade opportunities abroad, and sell the goods against sharpening export competition.
    In this, of course, we have to take account of the aftermath of three-day working and the process of industrial recovery from the recent miners' strike. Throughout the strike, industrial output was maintained at about 75 to 80 per cent. and steel deliveries by the British Steel Corporation averaged some 87 per cent. of normal. Moreover, the dangers of serious liquidity problems and bankruptcies did not materialise. This is a considerable tribute to the skill and cooperation of both sides of industry. I should also like to thank all those companies and organisations whose efforts helped us so much in the monitoring of industrial performance during the emergency, notably the CBI, ABCC, the trade associations and, indeed, the banking system.
    As far as the recovery is concerned, all reports indicate a swift return to normal. Coal production is, of course, over 90 per cent. what it was; full power to industry has been restored; the number of workers laid off has fallen dramatically; and the banks still appear to be coping with firms' liquidity problems. Of course, the running down of stocks will have helped to mask underlying shortages and unbalanced output. Problems could therefore arise if stocks are exhausted before output is fully restored. In any event, the industrial pipeline will have to be refilled. The

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    recovery situation will thus need continued watching.
    But an encouraging feature on the external side is that most firms appear to have given priority to their export markets in view of the higher prices prevailing and the fact that export customers lost may not easily be regained. Our export performance may not, therefore, be badly affected. Indeed, last month's exports—as I think the House will have noticed in the figures released yesterday—were surprisingly good, and the CBI reports that export orders are still coming forward at a satisfactory rate.
    I wish to say a further word about export orders. One example is the mechanical engineering sector, though this is true of virtually all the separate indices for the engineering industries. The volume of orders on hand at the end of November last year—on an index base of 100 at December 1963—stood at 251, having climbed from 145 in the course of the year, and that is an increase of 78 per cent. That is indicative and significant of the demand at present for our exports from our engineering industries.
    Our exports are very competitive today. This, as it were, is the one counterbalancing advantage that we have against the serious disadvantages that we suffered because of the fall in the sterling rate during the past two years. There are reasons to believe that in many markets our goods are significantly under-priced and that, with advantage to ourselves, we could raise our export prices, gaining larger foreign currency returns and still be effectively competitive. I hope, therefore, that all companies will pay close attention to their export pricing policy in the period ahead.
    Mr. Baxter: My right hon. Friend has mentioned a theme that I was most anxious to elaborate. I think that our export prices have been far too low, keeping in mind the basic price of the raw materials that we have to buy.
    Mr. Shore: I think that there is a good deal of evidence for that assertion, and I hope that what I have to say on this point will be widely disseminated in industry. Certainly it is the same point that the British Overseas Trade Board has been
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    making to the organisations with which it is in touch.
    It is against that background that I urge all our exporting industries to take full advantage of the wide range of export promotional facilities available from my Department, whether it is to identify market opportunities abroad or to exploit them by the use of ECGD credit facilities.
    The British Overseas Trade Board, working closely with British diplomatic missions, is at the very moment reviewing its choice of major markets and looking again to see which product sectors within them offer most opportunity for British exporters. The suggestions from overseas are being widely distributed to British firms.
    We shall be looking closely at the oil-rich developing countries which have a substantial capacity to absorb goods of all kinds. That does not mean all of the oil States, because many have only a small or, indeed, a tiny population. We must maximise our opportunities in these markets. Our ability to improve our export performance must be set in the international context. I want to comment on that and, in particular, on the world trade prospect.
    The year 1973 saw a world-wide upswing in economic activity from the generally depressed levels of 1971–72. In real terms the aggregate gross domestic product of the developed world increased by nearly 7 per cent., as against an annual average of only 5 per cent, over the previous decade. There was a still sharper increase in the volume of world trade, which rose by over 12 per cent. as against an annual average of under 9 per cent. over the previous decade. But also associated with this recovery has been a world-wide acceleration of price inflation; and within the general picture of the price increases, a violent swing in the terms of trade in favour of primary products vis-à-vis manufactures—most recently and extremely, of course, in favour of oil.
    By the latter part of 1973—and this is a very serious point—the pace of expansion in industrial countries was beginning to slacken off. A number of major countries had already adopted restrictive fiscal and financial policies to restrain price inflation; and these

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    measures, coupled with the effect of higher oil prices, seem likely to restrain the growth of industrial countries' output well below normal during 1974 and the early part of 1975.
    In global terms the market for manufactured exports in developed countries is thus not likely to expand as fast as before. The great increase last year in the purchasing power of many primary producing countries leas been largely wiped out by the rise of oil prices over the last six months.
    All in all, it seems unlikely that the growth of world trade in manufactures will average more than 7 per cent. or 7½ per cent. per annum over the next two years, which is well down on the 10 per cent. which we have had in recent years, and all exporters of manufactures face a continuation of terms of trade significantly worse than we have had since the Korean War.
    This is the world trade background against which we have to solve our balance of payments problems, bearing in mind that the steep increase in oil prices can be expected in itself to impose an additional burden of at least £2,000 million on the United Kingdom balance of payments in 1974. This is on top of the current account deficit to which I have already referred.
    Of course, the oil problem in our balance of payments is not peculiar to the United Kingdom, and we have undertaken with our major international partners that we will co-operate in trying to handle the potentially disruptive consequences of the oil problem for international trade and payments. This means that we shall expect to deal with our oil deficit by international borrowing rather than beggar-my-neighbour policies.
    Looking further ahead, I see no cause for despondency. By the 1980s the development of North Sea gas and oil resources could well revolutionise our balance of payments and create a strong and secure energy base for our industry. In the period up to then we clearly have a long haul, both in financing the oil deficit and in rectifying the serious disequilibrium in our present non-oil balance of payments. But I have no doubt that the resources of the nation are equal to the task if they can be harnessed in an orderly and progressive way. In the inter-
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    national arena this means full cooperation with our trading partners to seek reasoned solutions to joint problems and within a framework of multilateral and increasing liberalisation of trade which has been at the heart of our prosperity in the past and will best serve our requirements in the future.
    5.50 p.m.
    Mr. Jeremy Thorpe: I begin by adding my congratulations to the right hon. Gentleman the Chancellor of the Exchequer on the speed with which he prepared his Budget and the stamina with which he delivered it I hope that if electoral timing and his continued tenure of office allow him to introduce another one he will have longer to prepare it and a shorter period in which to introduce it. I am certain that if he was more exhausted than his interested and intent listeners he must have been a very tired man indeed last night. It was a formidable performance.
    As the right hon. Member for Carshalton (Mr. Carr), the Shadow Chancellor, has likewise been making what for him was a Treasury maiden, may I congratulate him? Both speeches put me in mind of the dictum of Sir Winston Churchill who after hearing a maiden speech, turned to his colleagues and said, "That was no maiden. It was a brazen hussy of a speech".
    It is very odd when the Secretary of State talks about the necessity for the liberalisation of trade and then complains that the liberalisation of trade, which is precisely what has happened as a result of joining the European Economic Community, happens to undercut it and cause competition in this country. No one assumed that there would be an automatic benefit by joining the EEC. Everyone knew—indeed, the present Prime Minister was careful to say so—that it gave opportunities—if we took them up. It is true that there are far more cars imported into this country than we export to Europe. We must face the fact that on price, delivery and service it so happens that British consumers appear to be giving increasing preference to cars from Europe rather than to those from our home market. I regret that, but I hope that we can learn a lesson. Certainly we cannot revert to a form of protectionism, which I am sure

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    that the right hon Gentleman would not like to see in this country.
    The four criteria which the right hon. Gentleman set himself in his Budget are, I think, correct criteria. In fairness to him one can try to judge the Budget on the basis of the criteria which he set himself.
    The first was that we must make the fullest use of manpower and resources in this country—with which I wholeheartedly agree. We on the Liberal bench welcome the retention of the regional employment premium—which is an important decision—but if the Chancellor is to get that degree of growth in the regions which he wants, I think that in the next few months he will find that he will need to do more than retain the REP. I hope that, rather in the same way in which the Secretary of State wound up his speech, the Chancellor will keep a very close eye on investment, on production and on employment in those regions.
    The Chancellor of the Exchequer indicated his intention to raise the upper limits on a graduated national insurance contribution basis, and with that degree of flexibility I find myself fully in favour. I hope that we may be able to go further still and have a graduated social security tax which can be varied regionally to replace the present national insurance contribution system. This is one way in which we could give a real incentive for growth in our regions, if we have a variable payroll tax or a variable national insurance contribution. I hope that the Government will be flexible enough to consider that.
    The unemployment figure for March was about 590,000. The National Institute for Economic and Social Research has made a qualified prophesy—and there are others—that even with a neutral Budget we could find the figure of unemployed rising to 750,000 or to 1 million. Therefore, it is desperately important that every aspect of the Budget should be examined to see what effect it will have on employment.
    There is no doubt that the Budget imposes new and increased costs, some of which are unavoidable, on small and medium-sized firms in particular. There is little or nothing to encourage those
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    firms to invest or to step up exports. The Chancellor's only suggestion in this regard was that the costing of many of our exports was too low. He may be right in certain cases, but this is not exactly the clarion call to be expected from a new Government trying to boost exports, and something more is needed.
    I agree with the Chancellor that we must make the fullest use of, and stop wasting, our resources. I hope to hear what proposals the Government have in mind on this point.
    The manpower situation is a dangerous one. Unless the Government can get growth in the regions there will be falling investment, particularly in the remoter regions, and unemployment will be the consequence. I represent a constituency which has had an unemployment rate of between 9 per cent. and 12 per cent. in the winter months—admittedly this is seasonal—and therefore I have some experience of the different techniques of different Governments regarding unemployment. Unfortunately none of these techniques has yet met with success.
    The second criterion in the Chancellor's statement related to the balance of payments. I concede that the Government have inherited an appalling situation. The deficit of £429 million in February was the worst on record. Unfortunately, in this respect, far from encouraging investment the Budget has certain positive disincentives to investment. There is the surcharge on investment income of £1,000 and over, which will affect a fair amount of small investment in industry. I am all in favour of high tax on inherited wealth and on investment income from inherited wealth, but we do not want this impost on those people who in their working lives try to save to provide themselves with an investment income at the end of the day. The Chancellor's proposals make no difference between these two categories. I appreciate that a differential can be extremely difficult to define, but I hope that the Government will consider making a differential. I also regret the proposal regarding the Save-as-You-Earn scheme.
    I welcome the proposals regarding overdrafts in precisely the same way as I welcomed those made in 1969. I do not believe that the Chancellor should subsidise overdrafts for the private citizen. I speak from the experience of having an overdraft and so I do so in a

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    totally disinterested way. However, it must be realised that many small businesses depend on overdraft facilities to carry on business. This is particularly the case in the farming community. In the South-West, 90 per cent. of farmers have overdrafts at present. Therefore, overdrafts are, in a sense, a form of investment. When the Chancellor draws up the qualifying factors for cases in which it will be possible to continue to write off overdraft interest payments I hope he will include those people whose overdrafts have been incurred exclusively for the purpose of running businesses. I appreciate that to do this may be difficult, but I hope that the Chancellor will be able to take this action.
    Perhaps the most dangerous aspect of the Budget is that it contains little or nothing for industry. The Secretary of State spoke of the gloom and horror which he had inherited, and I thought that we were back in the time of the General Election. Indeed, it seemed that the right hon. Gentleman thought that we were in the pre-28th February period, not the pre-28th March period.
    I appreciate the argument that British industry is now facing the results of the three-day week. It was totally unnecessary, as, I believe, the Tory Front Bench, in retrospect, must think that the last General Election was unnecessary. We are now faced with increases in prices of steel, coal, electricity, oil, the postal services, and most imported raw materials, as well as increases in national insurance contributions, corporation tax—some of it to be paid in advance—and there is the certainty of a major pay claim by the engineers. Against this pattern there is the necessity to return to normal and to get growth and investment, but there is not much in the Budget to achieve these objectives. The right hon. Gentleman was questioned on these points and I hope that in the concluding speech there will be more detailed replies.
    The third criterion concerns confidence. I appreciate that the Chancellor probably had in mind the value of people's incomes internally—which they do not wish to see depreciated—but there is also the matter of foreign confidence. I congratulate the Government on negotiating the $2,500 million loan. This is a considerable achievement. I do not wish to
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    be too controversial, but the negotiating of this loan blows sky high the argument sometimes heard from the Tory benches that any Government other than a Conservative Government will face a total lack of confidence abroad and therefore it is the divine right of one party to rule because that party alone can maintain confidence.
    However, I should like to know more about the cost of the loan which, I understand, is to be for 10 years with a rate of interest alleged to be about 9 per cent. I understand that it is to be repayable in dollars and that the rate of interest may be variable. This information comes from the newspapers and may be wholly inaccurate, but we should like to know the position, because this is an important factor in the balance of payments. Do the Government consider that this loan is a sufficient standby credit, or is it the first move before turning to the IMF for a further tranche?
    The fourth and final criterion relates to whether the Budget will produce a measure of social unity. The Chancellor was probably right in thinking that this point was fundamental to the entire success of the Budget. I do not believe that we shall have a successful prices and incomes policy, statutory or voluntary, unless people believe that the economy is being run fairly. I believe that the £500 million food subsidy is a blanket subsidy which will help many people who do not have any need of it. Because of the expense of the food subsidy those large families who are below the tax threshold will, apart from the benefit of food subsidies, get nothing out of the Budget. Much more could have been done to help those people. Family allowances could have been put up and an allowance paid for the first child.
    I would have liked to have seen guaranteed minimum earnings and I hope that the Government will get round to this. I was pleased that the Chancellor was not wholly hostile to the concept of credit income tax. I know that he is in favour of the Minority Report of the Select Committee on Tax-Credit and at least there is something to be said for that. I hope that he will realise that the credit income tax system can be used as a means of providing a guaranteed minimum income for every household. That

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    is the way in which I would attack poverty, rather than by blanket food subsidies.
    I welcome enormously the increase in pensions, although it is not without significance that the present figures for a married couple and a single person have been put forward by the Labour Party for some time.
    Mr. Neville Sandelson: The right hon. Gentleman criticised the indiscriminate nature of food subsidies, but then went on to talk in terms of his own preference for a family allowance for the first child. Would that not be a much greater and more widespread feature of indiscriminately giving away a public subsidy?
    Mr. Thorpe: I do not think so—for this reason, that food subsidies are indiscriminate in that they are for every man, woman and child in the country. The family allowance, by very definition, is paid to the family with one child, if it is for the first child; and, of course, there is the element of clawback in the tax recovery which one does not get from food subsidies.
    What I hope that the Government will consider doing, which will be enormously valuable, is linking pensions clearly and openly to a percentage of average industrial earnings—
    Mr. Russell Kerr: That is what the Secretary of State said.
    Mr. Thorpe: It is at the moment about 24 to 25 per cent. I am not certain whether that was being put forward by the right hon. Lady as the present percentage, which is a factual statement, or as a commitment that they will remain at that figure as a permanent feature in the economy. If I have misunderstood, and it is to be a permanent feature of the economy, then I warmly welcome it, because it is a real economic linkage which the pensioners will have for the first time. If that is the case, I say no more: I am delighted.
    I welcome the Chancellor's conversion to VAT. He has rightly put VAT on luxury goods. There are others that I could suggest, starting with advertising, and with some of the glossy magazines;
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    no doubt he will want to raise more money on another occasion.
    I am worried about VAT on fuel, not because I am not delighted that we are using the VAT fiscal weapon to prevent the costs from being passed on to industry, nor because I do not think it right that we should pay the fuller economic costs of petrol, but because I think that it will have a particularly hard effect in rural areas, where little public transport is available. We shall have to consider this matter.
    I welcome the gifts tax, but if the objective of such a tax and of death duties is to spread wealth—that, after all, is why a Liberal Government originally introduced death duties—surely it is not only the rate but the extent to which the money in question is distributed and diffused which should be considered. I am not certain why it should always be thought right that the donor or the testator, whichever it is, should pay the tax and not the recipient. If the recipient pays the tax, and if one starts from the proposition that the higher the sum that the recipient receives, either by gift or by inheritance, the higher the rate of tax, the greater is the incentive for the donor or testator to spread it more widely among more hands. We shall want to come back to that.
    I turn, finally, to housing. The local authorities will have a great responsibility placed on them if they are to buy up privately-owned houses. If they are to have to develop the development land which has been acquired, a great burden will be placed on their rates. The subsidy of £50 million will be totally inadequate, and I should have liked some measure of site value taxation instead, to return to the community the value which it has created, and also to persuade people to release land by financial means.
    I hope that we shall hear more about these 30,000 houses. My information is that many of them are not up to Parker Morris standards, and I think that we shall find ourselves using a great deal of public money to buy a lot of sub-standard private houses and to turn them into council houses. If it is merely to get people to buy them and get the market moving, psychologically it may work, but it seems an expensive way of doing it.
    If the Government really wanted to tackle the problem of housing, as I

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    believe they do, they might have considered a reduction in the interest rate on the existing loans from the Public Works Loan Board to local authorities. I am told that, for example, in the city of Leeds, if there were a reduction in the interest charges of only 1 per cent., that would pump about £2·4 million into the kitty there.
    I hope that the Government will carry on inquiries to see whether the banks and pension funds might not be persuaded to put a percentage of their holdings, of their profts, into the building societies. In some countries I believe that the proportion is as high as 8 per cent. and I hope that this will be investigated.
    The Government's main difficulties, apart from those that they have inherited—but no Government have failed to complain that they have inherited the most appalling problems from their predecessors—arise from the fact that they are prepared to subsidise prices but are hoping that wage inflation will be contained by purely voluntary means. They are doing so in a situation in which little is done for exports, savings or investment. If the Government overcome that problem, they will have produced the economic miracle, and I shall be the first to congratulate them. But we shall test it not by paper agreements which the Prime Minister can wave on the steps of Downing Street but by the actual settlements that we see, and those settlements will likewise be affected by the success or failure of the Government in holding down prices.
    The Government have probably satisfied their supporters by waving all the totem poles of taxing the rich, clawback, hitting the companies and the rest, and they have concentrated on these things so much that my main criticism is that they have not done enough for the people who are really at the bottom of the scale, like those on wages below the national average. Those are the people who should be looked after.
    The right hon. Gentleman described this as a high-rise Budget. I would call it a sprinkler Budget. It has aimed a few well-directed economic jets in the right direction, like the increase in pensions about which I am delighted, but it has not squirted enough water to put out the fire which at the moment is about to burst into flame again, nor to nourish
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    some of the roots which will have to be watered if the economy is to flourish. If anyone can mix more metaphors than I have in the last 30 seconds, I will salute him, but at least I hope that I have made known what I am trying to say.
    6.13 p.m.
    Mr. Robert Kilroy-Silk: It gives me great pleasure in making my maiden speech to follow the three distinguished previous speakers. I feel honoured to represent a constituency, Ormskirk, which has unfortunately been unrepresented by a Labour Member for the last 24 years. I must pay tribute to my predecessor in a large chunk of what is now my constituency—the present Prime Minister. Unfortunately, in the conscientious way in which he conducted his constituency matters and held his surgeries, as Prime Minister in the last Labour Government and as Leader of the Opposition, he has left me with a great burden as an example to emulate.
    My constituency has a large number of problems, of unemployment and high rents. I know from my experience in the last two weeks that my constituents in Kirby have warmly welcomed the fulfilment of the Government's pledge on the freezing of council house rents. The pensioners too in the rest of the constituency are greatly heartened by my right hon. Friend the Secretary of State's fulfilment of the Government's pledge on pensions.
    The major problem—it is a problem that has bedevilled the constituency and the new town of Kirkby for the past five years—has been the high level of unemployment. It is an area that is bedevilled especially by juvenile unemployment. My constituents expect from this Government the fulfilment of their public ownership programme.
    It is an intolerable disgrace that the jobs of men can be destroyed by the caprice, the whim or the irresponsible decision of one man and that the lives of men, and the livelihoods of their families, can be sacrificed on the altar of private profit. That a factory can close down for no other reason than that higher profits are to be sought elsewhere, and often beyond the borders of the United Kingdom, is a matter which we cannot and will not tolerate. We expect to see the Government fulfilling their public ownership

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    programme to ensure that work is directed to where people need it, so that industry serves people and people are not made to serve industry.
    There are many problems within the constituency, but it has much to commend to the rest of the country. In the new West Lancashire District Council, which encompasses a large part of the northern end of my constituency, a series of policies have been implemented which show what Socialism in practice can achieve. We already have as a fact free television licences for old-age pensioners. We already have free school milk for the 7 to 11-year-olds. We have a 24-hour warden-operated system of sheltered housing for the elderly that is the envy of the rest of the country. These are not theories or ideas but facts which we shall extend to the rest of the constituency and which we commend to the country.
    I ask the indulgence of the House to raise a matter that is only tangential to the debate but which raises important questions on priorities and resources. My right hon. Friend the Chancellor of the Exchequer made great play about an attack upon waste. I bring the attention of the House to the enormous waste of human lives, of lives that are blighted because of the gross and intolerable inadequacies of the services for children with congenital heart disorders. The deficiencies are most marked in the large conurbations such as Liverpool, Manchester and Birmingham. The deficiencies arise primarily from the fact that, although there has been rapid development in surgery techniques for the correction of the malformations of the heart in the past 10 years, central and local authorities have not been willing to provide the financial resources to back up the services that are now available to benefit the lives and the health of the children concerned.
    This debate is about priorities and the allocation of resources. I believe that when people are made aware of the facts there will be no one, in the House or in the country, who will not support a demand for a massive injection of cash into the treatment of children with congenital heart disorders.
    The facts tell their own story. The incidence of congenital heart disorders is estimated to be approximately six chil-
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    dren per thousand live births a year. For example in 1972 when there were 685,000 live births, there were approximately 4,500 children born with congenital heart disorders. Some people estimate that the number is as high as 8,000. How many there are as an accumulated total is difficult to tell. They can be divided into three categories. One-third are so seriously affected that they died within several days of birth. Another one-third need an operation as soon as is practicable. If it is done quickly they can lead normal and healthy lives. The final third have far less serious defects and, therefore, there is more flexibility in the timing of the operation.
    There are thousands of children who stand in a long queue for surgery. Recent inquiries have shown that in at least 12 centres providing services for children with congenital heart disorders the services are regarded by the cardiologists or paediatricians in charge as being seriously inadequate. For example, in Liverpool there are now 170 children waiting for cardiac catheterisation. Those children can wait for up to two years. There are a further 100-plus children who have already had that exploratory operation who are awaiting major surgery and will have to wait for up to a year. A child with a serious and important heart defect can wait in Liverpool up to three years before it is corrected by surgery.
    In Birmingham there are approximately 250 children who are waiting for major surgery. Unfortunately more are being added to the waiting list than are being operated upon each week. The waiting list is growing rather than diminishing. If the problem is acute now, as I believe it to be, I hesitate to think what it will be like in a few years' time if immediate and effective action is not taken. The longer the children have to wait for operations the more dangerous such operations become, the more likelihood there is of there being irreversible changes in their heart or in their lungs and the less likely they are to be able to lead a normal life. As a result they will be more likely to suffer permanent disability.
    Even more scandalous is that on the authority of Professor Hay, professor of child health at Liverpool University and consultant paeditrician to the Royal Liverpool Children's Hospital, occasionally patients die while on the waiting list.

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    They die for no other reason than that services are not available in sufficient quantity to enable operations to be performed in time. Others are not put on the waiting list for the reason that the surgeons know that they will never be reached and they do not wish to arouse far more anxiety and anguish amongst the parents.
    For those on the waiting list who do not die while waiting, the situation is paradoxically worsened by the fact that the advance of surgical technology and techniques in general makes treatment available for new-born babies, who are naturally treated immediately. The result is that those who are already on the waiting list get left even further back. That is a terrible problem that causes great distress and anxiety to the thousands of parents of children with congenital heart disorders. It is a problem that should not be allowed to continue.
    I hope that my right hon. Friend the Secretary of State for Social Services will seriously consider allocating far more funds to this specialty. We need a boost now. Further plans for future investment, however necessary they may be and however grandiose their conception, will do nothing to alleviate the problems of those who are now on the waiting list, which grows longer every day. Each day that a child is on that list the more likely it is to suffer permanent disability.
    We need an immediate injection of cash into this service. There is a need for more cardiologists and for more surgical time to be allocated in theatres. There is a need for far more trained nurses. The shortage of nurses appears to be the major bottleneck in the Birmingham area. The problem is not necessarily the lack of cardiologists or of theatre time but a lack of nurses who are trained in heart surgery. There need to be more posts for medical and surgical trainees.
    I should also like to ask my right hon. Friend the Secretary of State for Social Services to consider the setting up of larger heart units. At present the tendency—frequently for very good reasons—is to try to locate hospitals and various services near to where the children live. This is counter-productive in this service. What is needed is a concentration of re-
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    sources at a few large centres where the staff can specialise completely on this aspect of medical care.
    As I said at the beginning, it is a question of priorities. I believe that this should be a top priority. We know that our resources are severely limited and that there is not much room for either manoeuvre or flexibility in the allocation of resources. However, this is an overriding problem the solution of which is of paramount importance and should be accorded the priority that it deserves.
    What I do not want, however, is for there to be competition between the sick for available resources. I am not suggesting, nor would I support anyone who suggested, that resources should be redirected or reallocated from the disabled or the elderly to help the children with congenital heart disorders. I do not want, and I do not expect to see, a competition for resources between the sick.
    A larger slice of the defence budget than the derisory sum which was offered yesterday would perhaps be far more appropriate and desirable. A greater rate of tax on the wealthy than that which was suggested by my right hon. Friend the Chancellor of the Exchequer yesterday would be yet another means of raising the very necessary and crucial funds and resources for this service.
    Perhaps even more important in many ways is a much more vigorous and dynamic attack upon private practice in the hospital service. We are talking about priorities and a situation in which the lives of these children are being lost or, if they remain alive, they are obliged to compete for resources. We should not allow a situation to exist where private practice within the National Health Service can slough off the resources which are necessary for this area.
    The previous administration said that this problem was not of national importance. It is a problem of national importance and, as a start, perhaps the Secretary of State could help Liverpool by giving the £25,000 that was refused by the previous administration. The Governors of the Royal Liverpool Children's Hospital have already allocated £100,000 to provide facilities. What is needed now from the Exchequer is direct financial support to maintain the services that those facilities will require.
    6.23 p.m.
    Mr. Giles Shaw: May I thank you, Mr. Speaker, for allowing me to catch your eye and to make my maiden speech in the debate on the Budget Statement.
    I want next, even if it is not a tradition of the House, to congratulate the hon. Member for Ormskirk (Mr. Kilroy-Silk) on his maiden speech. I will endeavour to follow the eloquence and deep sincerity with which he made his case.
    May I also—through you, Mr. Speaker—not just for myself but probably for all new Members, thank other Members of the House and the staff of the House for their kindness and courtesy. To anyone coming here from outside this is a baffling and somewhat difficult place, but the friendliness, courtesy and help which I and other new Members have received have been deeply appreciated.
    I represent the constituency of Pudsey. I have to confess that this is not high on the list of major tourist attractions in Britain. We have, regrettably, no Pudsey plage. It is not a holiday centre where the sun-worshipper could find real solace on the Costa de Guiseley. It is a constituency on the lower but somewhat polluted waters of the River Aire between the two massive conurbations of Leeds and Bradford. It contains upward of 65.000 people who are engaged in a wide variety of employments.
    The interesting thing about it is that Pudsey is an area which has a great history, a great pride and a great independence of mind. It is composed of the borough of Pudsey at one end. I am told that this was the last creation as a borough of the great Queen Victoria. The effort was clearly too much. It also includes the urban districts of Horsforth and Aireborough.
    I regard it as a tragedy, as I am sure many hon. Members do, that so many boroughs and other local authority units are disappearing with the reorganisation of local government. I should at this very time be attending the obsequies for one of the local authorities which is going out of existence. However, I fancy that it is somehow typical and appropriate that a Member of Parliament for an area like mine should be here making a maiden speech to emphasise that the area continues, that life goes on and that there
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    is a future, however sad it is to see many of the traditions disappear.
    The previous Member for the constituency of Pudsey was Mr. Joe Hiley who, I know, was extremely well liked and popular here during the 15 years for which he represented the constituency. There are many tales told about Joe Hiley, who used to call himself "the yarn spinner from Yeadon," and all of them bear witness to the fact that he was a most kindly and lovable man who is now enjoying a well-earned retirement in the constituency. He will be sadly missed by hon. Members.
    It is traditional that the virtues of the West Riding of Yorkshire lie in the people. Although they may be people who would call a spade a spade or a bag of coal "a beg of coil", they are people who have a strong sense of community spirit and who, indeed, are in a sense interdependent. There are many mills in my constituency and in others around the conurbations of Leeds and Bradford where workers still live near their place of employment and where the relationship between management and men is very close indeed. It was proved in the period of the three-day working week that there was a tremendous resurgence of effort and spirit in many factories in my constituency, and this produced enormous results in terms of very high levels of production. I should like to think that this resourcefulness and capacity for effort is a tradition of the West Riding which will be maintained.
    I suspect that this spirit of interdependence was, at least in part, at the back of the Chancellor's mind when he appealed on television for national unity. Nowadays it is all too easy for people to try to divide employer from employee. It is high time that we recognised just how important it is that a spirit of interdependence should be cultivated. But in his Budget provisions the Chancellor of the Exchequer has made it extremely difficult for all those, as many of my constituents are, employed in small companies to bear the loads which they have to carry. They have the load of maintaining investment, full production and. above all, full employment. In addition they have to bear the recent massive increases in rates, described by the Secretary of State for the Environment as "rough justice".

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    Now employers must bear the massive problems of the increase in employers' contributions—the 44p on the stamp—the increased electricity, coal and oil charges and the increased telephone and postal charges. With corporation tax now to be at a higher level of 52 per cent. and with provision for advance payment of the tax, the problem of the smaller companies which are so typical of the Pudsey constituency is serious indeed. All these moves affect the liquidity and livelihood not only of management but of the community as a whole.
    There is little chance from what we read in the Budget speech of much solace for the future. There is little chance of reductions in interest rates. There is little chance that mortgage rates might come down for the many people who are thinking of buying their own homes. Indeed, the opposite may occur as National Savings compete more effectively with building societies, once more putting pressure on the availability of funds. All these are pressures with which communities must endeavour to grapple. Those pressures are onerous upon the smaller companies and smaller businesses in constituencies such as mine.
    The Chancellor proposes to tax food to the tune of £125 million per annum. Here I am proud to disclose a special interest. For 19 years I have been employed in Rowntree Mackintosh, one of the most successful major confectionery companies in the country. My knowledge, interest and livelihood have been involved with the products of the industry. I regard the imposition of VAT on confectionery as extremely bad both in principle and in practice. I find the decision odd, especially when an assurance to the contrary was given as recently as last Thursday by the Paymaster-General in reply to a supplementary question asked by the hon. Member for Wolverhampton, North-East (Mrs. Short) with reference to VAT. The hon. Lady said:
    "I hope my hon. Friend will give an undertaking that it will not be introduced on food",
    to which the Paymaster-General replied:
    "I do not think that my hon. Friend need have any doubt about that."—[OFFICIAL REPORT, 21st March 1974; Vol. 870, c. 1315.]
    I am therefore surprised that, despite that assurance, a tax is to be imposed not
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    only on products of the confectionary industry but also on other products which are part of the nation's food consumption.
    It is also odd that the Chancellor should seek to differentiate between one kind of food and another, "the essentials", as he called them, and the less essential. It is even odder that tinned caviare should be exempt when a block of chocolate should be taxed. That is an interesting description by the Labour Party of what is essential and what is less essential.
    The main criterion of what is essential and what is less essential should surely be what the public consume. It is the widespread and frequent consumption by the public of products of this kind that leads them to be classified, correctly, as part of the total food budget of the average household. The lower income groups account for about half of the total expenditure on such products. Confectionery is the fourth largest contributor to the food price index. The tax on confectionery and on the other products that the Chancellor has seen fit to tax will add about 1·5 per cent. to the food price index at a time when the Government are anxious to reduce the price of food and to seek subsidies for that purpose.
    We have the interesting situation where the lovable potato is essential and may even justify protection, but if it is made edible in the form of potato crisps it becomes less essential and must be taxed. We have the humble bag of sugar, clearly essential, possibly deserving of subsidy, and we have the boiled sweet, clearly inessential and taxable. We have the lovely groundnut in its shell from the developing countries which Government supporters wish to develop further. That of course is acceptable, but the nut, according to the Financial Statement,
    "when packaged for human consumption"
    is inessential and must be taxed. On behalf of many millions of unfranchised consumers I wish to register my protest.
    I thank the House for its patience in listening to me. I know that the Budget has been introduced, as the Chancellor said, at a time of great difficulty when life is far from easy. It may be that life will become more in line with the words of the seventeenth century philosopher Thomas Hobbes and that it will be "nasty, brutish, and short". It

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    is just possible that that might be the epitaph of the Government opposite.
    6.40 p.m.
    Mr. John Stonehouse: We have just listened to two attractive and fluent maiden speeches, and I am sure that the House will wish to congratulate both speakers. The hon. Member for Pudsey (Mr. Shaw) spoke forcefully and attractively, and his constituents, particularly the children, will welcome what he said. We hope that he will bring to the House in future more controversy than he gave us today. Perhaps we shall hear about commodity dealing in cocoa futures, as he comes from a company that has, regrettably, had great experience of this.
    Mr. Giles Shaw: The record might also contain a reference to its massive success in recovering its position.
    Mr. Stonehouse: Yes, indeed. Those who enjoy a bar of Rowntree's chocolate will be glad that that is so. We look forward to hearing from the hon. Gentleman in future.
    My hon. Friend the Member for Ormskirk (Mr. Kilroy-Silk) brought an interesting case to the House's attention. I congratulate him on the amount of research he has done, and I hope that my right hon. Friend the Secretary of State for Social Services will read his speech carefully before she makes her speech tomorrow. We look forward to hearing also from my hon. Friend in future debates.
    My right hon. Friend the Chancellor of the Exchequer deserves to be congratulated for concentrating on the essential priorities with which the Government have to deal following their accession to power. First, the Government have halted the frightening rise in the cost of food and rents, and have been able to put forward measures to halt the inflationary spiral. I hope that the Government will be able to prevent further price rises reaching the threshold, thus bringing automatic wage increases which will add to the inflationary spiral. My right hon. Friend may have acted fast enough to prevent that.
    Secondly, the Chancellor has raised pensions to £10 for a single person and £16 for a married couple, and that I welcome. In a debate some time ago
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    on television licence concessions I recommended those figures, and I am glad that they have been accepted. Incidentally, I am glad that the pensioners are to have a fair pension rather than payment in kind, which tends to relegate pensioners to second-class citizenship and to distort demand. It is much better for pensioners to get a fair pension which they can decide for themselves how to spend.
    Thirdly, the Chancellor of the Exchequer, by exempting 1½ million taxpayers from paying tax and spreading the tax burden fairly, has reduced the demand factor in the domestic economy by placing the tax burden on those who can best bear it. Reduction in demand is essential to reduce inflationary pressure and to reduce demand for luxury imports and make more home-produced goods available for export. It is on that export performance that we shall partly depend in meeting the enormous deficit of £4,000 million on our balance of payments this year.
    Half this gap is due to increased oil prices and will be covered by a recycling of oil countries' funds which they are not yet in a position to spend, but we must make efforts to reduce the other half of the deficit, otherwise we shall slip further into international debt, with all that that implies. It stands to reason that with those burdens the country cannot enjoy higher real standards this year, and I am glad that my right hon. Friend the Chancellor, both in his speech and by his actions, recognised that point—however unpopular it may be in the country.
    Fourthly, the Chancellor has begun the painful process of bringing sense to public sector pricing policy. It has long been nonsense that public industries have been subsidised by the taxpayer to provide cheap services and cheap products for the private sector. United Kingdom firms have had the advantage over their competitors of cheaper fuel, cheaper steel, cheaper transport and cheaper Post Office services—all at the expense of the taxpayer. These subsidies have tended to distort demand, and also have led to a grotesque waste of scarce resources. They have also made it more difficult for public industry to pay realistic wages, since the industry always had to go cap in hand to the Treasury rather than rely on its own ability to secure the means to pay the wages required.

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    The recent problems over miners' wages is a case in point, but so are the deplorably low wage rates in the postal services. The postal service is so badly remunerated that many postmen have to undertake two or even three jobs to make ends meet. In many areas, such as the West Midlands, it is impossible to recruit men to the postal service, which is now seriously undermanned, so much so that in the recent election many election addresses in the West Midlands area were not delivered until polling day. The postal service is continuing to deteriorate because of the complete failure of the Post Office to recruit the men it requires. The only way in which this can be done is by paying a decent wage for this essential job.
    The continuation of public subsidy makes it extremely difficult to achieve rationalisation and greater efficiency in these industries. For some boards the subsidy at the end of the financial period is a soft option, and if workers are underpaid they are unlikely to co-operate in removing the restrictive practices which undoubtedly exist in many undertakings, including the Post Office.
    Mr. Arthur Lewis: When my right hon. Friend was responsible for the Post Office did he not do away with that organisation as we once knew it and remove from hon. Members an opportunity to ask Questions on the Post Office? Has this not now been replaced by a reactionary board?
    Mr. Stonehouse: No. I do not agree with my hon. Friend that it is a reactionary board. The Post Office Corporation can be a vehicle for greater efficiency, which would not have been possible if the Post Office had continued to be run as a Department of State. When I was responsible for the Post Office I argued strongly for the business of the Post Office to be put on a rational basis, and I am glad that we made considerable progress in that direction. I believe that if the Labour Government can continue this process we shall be able to maintain a proper service in the Post Office and also afford to pay the men who work in it the sort of wages they are entitled to receive.
    Mr. Lewis: Will my right hon. Friend allow me to follow up that point? Does he not remember my arguing with him in this House that if the Post Office were
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    made independent hon. Members would lose day-to-day control on Post Office matters and any opportunity to argue their case in this House? Does he not agree that this is exactly what has happened—in other words, that we cannot argue on day-to-day matters affecting the Post Office?
    Mr. Stonehouse: No, but we can encourage the Chancellor in the direction in which he is going—namely, removing subsidies and enabling these corporations to stand on their own feet. However, I note that the subsidies in public authorities, despite the great reductions which have been achieved, will still stand at the high figure of £470 million for 1974–75. I hope that action will be possible in future years to reduce that figure.
    Having congratulated my right hon. Friend the Chancellor of the Exchequer on his excellent performance, I should like now to make two points of criticism. First, I wish to stress that no action has yet been taken to reduce the crippling interest rates for house purchase and to keep the building societies supplied with funds. Today we have seen a disturbing report that the Building Societies Association may increase the rate for house mortgages tomorrow to 13 per cent. This must not be allowed to happen, for its effect on hundreds of thousands of owner-occupiers would be disastrous. It would strike a severe blow at the hopes of young married couples who want to buy their own homes. For many mortgagees this new rate would mean an increase of about 3 per cent. On a £5,000 mortgage this would amount to an extra £3 per week. In some parts of the country it is impossibile to buy a house at under £10,000 and a mortgage at that rate would cost an additional £6 per week. What ordinary family can afford that amount?
    Action should be taken urgently to recycle the funds in the joint stock banks to building societies and municipalities. Banks for many years have given preferential rates of interest to exporters. In the special circumstances of high domestic interest rates caused by the need to attract funds from the international market these high rates provide windfall profits to the joint stock banks, and there is no reason why the banks should not give preferential rates of interest to house purchasers through the

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    building societies. It would be relatively simple for the Chancellor of the Exchequer to direct that a proportion of bank funds be transferred to building societies and municipalities at, say, 8 per cent. during this exceptional period of excessive interest rates.
    Finally, I regret that my right hon. Friend has not yet fixed a rate for sterling and has continued the floating of the pound. The Financial Statement contains disturbing figures which confirm what my right hon. Friend the Secretary of State for Trade outlined this afternoon about the floating downwards of the pound. This matter is set out in paragraph 23 on page 6 of the Financial Statement, and shows that the rate of devaluation in the first half of last year was fairly static at a range of 10 to 12 per cent., but that in June and July last there was a rapid fall and since July the effect of depreciation has remained in the range of 17 to 20 per cent. This rate of depreciation of the value of the pound in international markets is extremely frightening as it continues to increase the price of the raw materials that we must buy from abroad, including half our food.
    The $2,500 million that my right hon. Friend has borrowed—and I congratulate him on the way in which this has been arranged—plus the $3,500 million already borrowed by the municipalities and public authorities since the last Budget, and the other vast sums that we must borrow to bridge the deficit that we shall suffer this year and possibly next year, must all be repaid in foreign currencies. If the pound continues to float downwards because we have failed to take effective action to protect its value, and if it devalues by another 10 per cent. in the next year, this will greatly increase the burden that we shall bear as a country in repaying those loans, in addition to the interest that we have to pay on them.
    I believe that we are in a stronger position than we realise. My right hon. Friend the Secretary of State for Trade made the point that our export prices are too low. He is recommending to exporters that they should increase their prices. It would be much easier if we up-valued the pound. That would be a way of increasing our prices.
    Therefore we have the first point, if our prices are competitive. Second, we
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    have the point that the rate of inflation in other countries is as high as ours and might possibly be higher during the next year. Third, we can recognise as other countries do that the devaluation of the pound has gone too far and that the pound is now under-valued. Fourth, there is the point that in a few years' time the pound will be strengthened by the value of North Sea Oil which will begin to flow into our economy. For all those reasons, I think that it would be appropriate for my right hon. Friend the Chancellor of the Exchequer to take action to up-value the pound and to fix its parity, and so prevent the appalling drift that we have all seen in the past two years.
    Yesterday, my right hon. Friend made some reference to the Concorde. It is a subject which obviously will be returned to in debates in this House. But before we can return to it again we are to have my right hon. Friend the Secretary of State for Industry conducting very serious negotiations with French Ministers on Friday. For that reason, it might be appropriate if I were to say a word or two about it now.
    My right hon. Friend the Chancellor said that expenditure on the Concorde was now to be frozen. I welcome that statement. It must be recognised by the industry that there is not a bottomless purse. There is no possibility of infinite expenditure. But I hope that we shall not cancel the Concorde before it has gone into airline service. It must be possible without too much expenditure to put this great aircraft into supersonic civil service at least across the North Atlantic and to give it a fair chance of being evaluated before it is cancelled.
    The economics of the Concorde are a mystery. It is all very well for us to say that it will not pay its way. No one knows yet whether it will not be so attractive to travellers, especially those on long routes and possibly on the North Atlantic route, that they will not be prepared to pay an additional premium on the first-class fare and thus make it economic for airlines, despite their increased fuel costs, to pay an extra price for Concorde so enabling us at least to get back the production cost if not the development cost.
    Before we can make a judgment about the long-term value of the Concorde, it

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    is necessary for it to be in airline service for at least six or nine months. I hope that, without necessarily incurring a great deal of additional expenditure to that which has been permitted already, it may be possible for the Concorde to be put into airline service by BOAC and Air France so that we can see whether all the predictions of the aviation experts are correct. They have argued from within the companies concerned that when the air time on the North Atlantic is cut by half as against existing subsonic aircraft, there will be a tremendous additional demand for seats on supersonic aircraft which will be paid for in higher fares. If those predictions prove to be correct, there could still be a chance for the Concorde to be an economic project for France and for this country.
    7.0 p.m.
    Mr. Christopher Tugendhat: One of the pleasures of being in one's second Parliament is that it gives one the opportunity to hear maiden speakers and to compliment them on their contributions to our debates. I join the right hon. Member for Walsall, North (Mr. Stone-house) in complimenting sincerely the two maiden speakers who have spoken today. I thought that my hon. Friend the Member for Pudsey (Mr. Shaw) spoke with the elegance of that most distinguished son of his borough, Sir Leonard Hutton, when batting for England. The hon. Member for Ormskirk (Mr. Kilroy-Silk) introduced to our debate a subject with which many of us were unfamiliar but the importance of which none of us can doubt after listening to him. I am sure that the House will look forward to hearing both hon. Members on many future occasions.
    I shall not deal in any detailed way with the speech of the right hon. Member for Walsall, North, although I shall touch on a number of his points during my brief remarks.
    I want first to add my congratulations to those of many other hon. Members to the Chancellor of the Exchequer on his formidable speech yesterday, though I think that he was a trifle modest. He said at the beginning that he faced unusual difficulties, having been in office for only three weeks and with the economy in such a difficult state. I understand the right hon. Gentleman's position on both
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    counts. However, he faces other difficulties. One is the problem of his own Left wing and of others of his supporters in the Labour Party. Another is the problem of the TUC.
    Since coming to office, the Government have been clear and open about the TUC. Basically, what the TUC says, this Government do. We have seen that with its plans for the Industrial Relations Act, the Housing Finance Act, the subsidies, the tax changes and so forth. The Government have been very open, and we understand the position.
    What we are beginning to ask, however, is what the country is to get in return. By that I do not just mean what the leaders of the TUC will give—and I understand that they have been in Downing Street today. I mean also what the members of trade unions will provide. The Government have fulfilled massively all their pledges towards the social con tract. The time is rapidly approaching when the country will want to see what the trade unions will provide in return, and here a difficulty may arise.
    The Government have fulfilled to the letter, or are in the process of fulfilling, their side of the social contract. But all is not what it seems to be. When the TUC put forward its suggestions for food subsidies and so on, naturally it expected the Government to reduce the cost of living. In its recommendations to the Chancellor of the Exchequer, I do not believe that the TUC envisaged that one of the main results of the first Labour Budget would be to push up the retail price index.
    It is regrettable that the Chancellor of the Exchequer was not able to be a little more frank on the subject yesterday. It is a pity that the fact that the Budget will push prices up by some 2½ per cent. should have come out only on the second day of the Budget debate and without the explanation of the whys and wherefores which the right hon. Gentleman could have given when making his speech. I have no doubt that he will provide them and explain that the impact of the subsidies to reduce prices will take effect before the impact of the other measures to increase prices, although that may lead some suspicious people to suppose that in the interval between the depressing effect on the retail

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    price index of the subsidies and the upward effect on prices of the other measures, a General Election may intervene.
    Be that as it may, the country will not be fooled by glossing over the salient facts in the situation. I hope that the Government, when they have bad as well as good news, will make an effort to take the country into their confidence from the outset so that facts of the kind that have come to light today come out not after a Minister has made his speech but at the time that he makes it.
    There are a number of other factors on which the House will want more information. My right hon. Friend the Member for Carshalton (Mr. Carr), the Shadow Chancellor of the Exchequer, referred to the lack of information about the Government's forecasts for both economic growth and earnings. There are also some other points.
    Yesterday the Chancellor told us about the loan, but we have not heard much, as yet, about the terms and conditions and, above all, the cost. Nor have we been told about the precise purpose of the loan. It is a substantial loan. Presumably, given the level of our balance of payments deficit, the loan will not cover everything up until the time that the North Sea begins to yield its riches. No doubt the Government will seek further financial assistance during the year by turning to the International Monetary Fund, the Euro-markets and ultimately the Arabs. All this is vital and germane to the way that the economy is managed. Therefore, the House is entitled to ask what the implications will be for interest rates and, of course, for the exchange rate.
    The comments made by the right hon. Member for Walsall, North about the exchange rate were most interesting. I do not know whether they reflect the Government's views. Given the enormous weight of borrowing that the Government will have to undertake, it is important that the House be given rather more information than it has yet received on how the Government see interest rates moving and on their intentions towards the exchange rate.
    I want to deal with only one other aspect of the Chancellor's speech—
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    namely, the impact of the Budget on the corporate sector. I cannot stress too strongly that there are grave grounds for concern about the level of investment in British industry and the future prospects of employment.
    It is no answer for Ministers, when these matters are raised, to pour scorn on the last Government's record. The figures are there for all to see. I agree that the previous Government's record on industrial investment was far from good. Now that the new Ministers are in their places perhaps they will tell us what they propose to do to get investment up. What they have started doing is most unlikely to achieve the result that we all desire. They have already increased taxes on the corporate sector, they are accelerating the rate at which companies must pay their taxes, and they have imposed on companies the additional burden of higher national insurance contributions.
    Yesterday the Chancellor seemed to suggest that the corporate sector was doing very well, that companies had very high profits, and that they could afford to give up a bit for the general good. But, looking at the Financial Statement and Budget Report produced yesterday by the Financial Secretary to the Treasury, whom I congratulate on assuming his great office, we see that the position of the corporate sector is by no means as strikingly good as the Chancellor would have us believe. The Financial Statement shows that, deducting stock appreciation, the rate of increase in profits during the last calendar year was about the same as wages. Although the rate of increase in wages was quite high in terms of percentages, hon. Members on both sides of the House will know that high percentage figures at a time of rapid inflation do not necessarily mean that we are better off. What is true for wage earners is also true for companies.
    Since the end of the last calendar year the corporate sector has suffered two major blows—the three-day week, of which we have heard a great deal, and the very tight price control that the Government have introduced.
    Without going into the particular merits of either the three-day week or the very tight price control, I believe that hon. Members on both sides of the House will agree that the combination of those two factors must have a depressing effect

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    on corporate profits. Indeed, during the last calendar year we see that profits, as a share of the GNP, fell from 11·5 per cent. in the first quarter to 9·2 per cent. in the final quarter. Therefore, before these two hammer blows to which I have referred, the rate of increase in profits was falling, and profits, as a share of the gross national product, were also falling. The danger, even before the Chancellor's statement yesterday, was not of industrial profits rising too much, not of investment outstripping our expectations, but of the private sector running into a liquidity crisis.
    I think it would be agreed by hon. Members on both sides of the House and by all Governments that have been in power since the war that it is vital for the British economy to achieve a more rapid rate of growth and for British industry to achieve a greater degree of investment. This is important if we are to secure all the various political and social objectives that we all wish to see. It is also necessary if we are to get Britain's economy back on to a sound footing and to ensure that we have full employment. When investment falls, in the end employment is damaged. There is no escape from that situation, and there is no easy answer either.
    The Government have made it clear that they will pursue a tight credit policy and will not allow the money supply to run riot. They propose to adopt a reasonably stringent credit policy so that there will be no chance of the corporate sector going to the banks to be bailed out or going to the Government for financial assistance. Therefore, I hope that the Government will make clear what precise measures they believe are necessary to keep industrial investment up and to get a better rate of industrial investment in the next few years than we have had in the past. If they believe that no measures are necessary, I should like Ministers to explain how the measures introduced in this Budget will prevent the kind of decline in industrial development which could ruin the Government's plans in other areas.
    7.14 p.m.
    Mr. William Baxter: I get the impression from listening to the debate, reading the newspapers, listening to the wireless or watching tele-
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    vision, that there is not the sense of urgency or seriousness that should be given to the general public concerning our economic situation. An impression is created that this is just another Budget in the scheme of things, fundamentally changing very little—a Budget typical of Budgets in the past, without much in the way of ideas or new concepts of where this country will go, not in the far distant future but in the near future.
    We have heard two ex-Ministers, the previous Chancellor of the Exchequer and his Shadow from the opposite Front Bench. The Chancellor of the Exchequer spoke at great length. When one boils down the content of his speech, however, it can be summarised as "cald Kale het again". That, to use a Scottish phrase, is something that has been done before and is being boiled up again. The Shadow Chancellor made much the same type of speech that one would have expected had he and my right hon. Friend reversed positions.
    My right hon. Friend's Budget has been described in various ways, but I say categorically that I look upon this as a Budget of lost opportunities at a time when we cannot afford to lose any honest opportunities that present themselves. A concession has been given to old-age pensioners, and everybody welcomes this. But, as I have said on previous occasions in this House, it is a calamity that old-age pensions and old-age pensioners should be the playthings of party politics. I should have thought that we could at least have had common agreement on both sides of the House that a scheme should be devised whereby old-age pensions would be based on a different concept from that of the past, upon factors mentioned by the Leader of the Liberal Party earlier this evening, and attached either to the cost of living or to a new basic wage concept.
    Unfortunately, we have not done this. We have to review the old-age pension every year. The Conservative Government said that they would review it every six months. I do not know whether they would have given more or less, but I think it is a shame that we cannot get this simple question out of the ambit of party politics. If we were to adopt the scheme which I am submitting for consideration, whereby proper pensions became the right of the individual, based

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    upon either a basic minimum wage or a cost-of-living basis, we should be making progress.
    Mr. Arthur Lewis: I agree entirely with what my hon. Friend is saying. Unfortunately, it is the Treasury and the Treasury knights who dictate terms, Irrespective of who occupies the Government Front Bench. He should know as well as anyone, because he, with all Members of Parliament, is very shabbily treated with respect to pensions because both Front Benches are scared to stand up to the Treasury knights.
    Mr. Baxter: I do not know the workings of the Treasury. I have never been given the opportunity to stand up to the Treasury knights, and it is unlikely that I shall get the opportunity to do so in the immediate future. But I agree with my hon. Friend in that respect, because I believe that no greater opportunity presents itself to a politician than to be a Minister of the Crown and make his mark upon the future well-being of his country. No greater honour can befall a man.
    I regret, however, that the past achievements of the Chancellor of the Exchequer and of the hon. Member for Carshalton (Mr. Carr) are not very inspiring and do not cause me to feel that they are well able to devise a proper Budget for this country in the future. The mistakes they have made in the past are many and varied. But I will not rake over the dead past tonight in that respect.
    I come now to the idea of subsidies. This seems to be a popular craze in this country. Everything should be subsidised. This is the cure-all of our diseases. I think it is the worst method that can be adopted to try to solve our problems. I say that quite categorically. If we were sensible, we should endeavour to devise a new scheme, a new approach, that would obviate the necessity for those able to pay a high and competitive price to obtain any subsidy.
    The Chancellor should have considered arranging for the subsidy to go to the people who need it, not also to those who do not require it. I can think of only one method, and I respectfully suggest it for consideration.
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    There must be a minimum income based on research into the requirements of each man, woman and child and having regard to all subsidies now being paid. That minimum wage, irrespective of the amount, should be paid to individuals at their places of their employment—at the factories and workshops. That is where any necessary subsidy should be paid.
    If an industry had to pay higher wages to meet current requirements without a subsidy, because of circumstances out-with the employer's control, the Government might have to pay a temporary subsidy until the employer was able to adjust prices and profit margins. A minimum wage would wipe out once and for all the need for subsidy, whether on bread, milk, rents for council houses, or anything else. All those items should be catered for in the minimum wage, and thence we could progress.
    How are we to overcome the extra tax that has been imposed upon industry—corporation tax at the new rate of 52 per cent.? I interjected this afternoon to point out that the previous Chancellor of the Exchequer in his first Budget made a fundamental mistake. I do not know the details of the Finance Bill, but it appears that the present Chancellor will perpetuate that mistake. Anyone in business, as I am, knows that it is fundamentally wrong to impose a lower tax on distributed profits than on retained profits. That is exactly the position now.
    If one retains profits in one's business for the purpose of re-equipping it, rebuilding or expansion, more tax is paid than if the profits are passed to the shareholders. That is wrong. We need to reequip our industries, so that we may compete with Germany, France, Italy, Japan and America where there is a different concept of industrial activity and a different basis for equipping industry. This is due to the circumstances following the destruction during the last war.
    Many of our industries have been left behind, because they do not have the best possible machine tools that are required to produce goods to compete against those countries. There are other factors, too, which militate against our competing with those countries—for instance, the different trade union set-up in Germany, and the different family concept of business activities in Japan. We should bear

    541
    that in mind, and also the fact that many of our businesses are ill equipped to meet present-day requirements.
    The Chancellor of the Exchequer yesterday introduced another measure which will be detrimental to the expansion of business in this country, namely, the increase of rail freight charges by 15 per cent. This is a State-owned enterprise. It is the only enterprise that I know of that was subsidised after the General Agreement on Tariffs and Trade came into force, although that agreement prohibits the subsidisation of industries that had not been subsidised before its introduction.
    If the Government want to help British industry, instead of increasing freight charges by 15 per cent. they should reduce them almost to nil. In that way they would not violate the terms of the General Agreement on Tariffs and Trade. The previous Labour Government, thinking that they could evade the terms of the General Agreement on Tariffs and Trade, introduced selective employment tax. It was not a success, and now the Government are adding to the already considerable problems of industry by increasing freight charges.
    So far as Scotland is concerned, the Government are doing another rather foolish thing by increasing the tax on whisky. The tax burden on the whisky industry is already extremely high. By further increasing this tax, whisky will be put at a disadvantage in competing with other beverages such as brandy, vodka, rum and so on, in world markets in the not-too-far-distant future. Let us not underestimate the value of our whisky exports. Without them, we should be in considerable difficulty.
    I have argued that when speaking in the House one has a duty to make suggestions. I have tried to make one or two, but there is another suggestion that is worthy of consideration. The Chancellor should have stated quite clearly that he will set up a Royal Commission, composed principally of Members of Parliament from either side, together with representatives of the trade union movement and the Confederation of British Industries, in order to try to get general agreement on the vexed question of prices and incomes. It could be asked to produce a plan of differentials in trades and professions on a broad basis. Considera-
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    tion should be given to ways whereby management and directors could be placed into various categories depending upon the size and turnover of their businesses. The commission could be asked to find ways and means of encouraging investment on a broader basis of share ownership.
    It is imperative—not a popular thing to be said from this side of the House—that every business, be it private or nationalised, should maximise profits as a first duty. It is from those profits that the social services to which we all pay lip service flow. There is no doubt about that, and if we do not realise that the goose that lays the golden egg is industry we shall head for a complete breakdown.
    The Royal Commission should consider not only the matters that I have suggested, but four others. First, it should consider how the profits of industry should be shared out. It is not sufficient to leave it to the directors of businesses to decide. The first share of any profit should go to industry itself, to enable it to expand or provide more jobs, and to help the export industry. The next portion of profits should go to the Government, to meet the requirement of the social services and other such matters.
    The third part should go to the employees, not only the men on the shop floor, but management and directors. All should receive a share of the profits. The fourth part should go to the investor. He is an important factor in industry. People must be encouraged to save and, if at all possible, to put their savings into industry.
    Many of my hon. Friends believe that industry is owned solely by small or large private investors. In fact, they are the least of the investors in industry. Insurance companies, pension funds and various other organisations are the major shareholders in industry, and if we do not recognise that we shall make a fundamental mistake. We shall not progress, but shall speedily go down the hill as a great industrial nation.
    We talk about the control of prices in the shops. I do not believe that we have the right method for controlling prices. The hon. Member for Pudsey (Mr. Shaw), who made his maiden speech a few minutes ago, struck the nail on the

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    head when he talked about the commodity market with regard to cocoa. The Government should this week have declared that their first aim and object was to try to bring about a greater degree of control in the commodity markets of this country.
    I believe that the present arrangement is very much a gambler's paradise. Rowntree's is a good example of where one can lose, but there are other examples of where one can win. One only has to look at the price of copper, lead, tin, cocoa, wheat and various other items to appreciate the fluctuations in the commodity markets. Many fortunes are being made there.
    As an example of how to proceed, one could look at Russia or America—the two extremes. What did Russia do last year? Last year the Russians had a commodity buying commission that went to America and bought the surplus wheat there at a very low price. That had a considerable indirect effect on the increased price of bread in this country. If we had had a commodity buying commission, we could have done exactly the same thing.
    In their metal market, the American Government keep considerable stocks of copper and other commodities. They release those on to the market as and when they find it suitable to their own requirements to do so. It is my opinion that the way to control prices in the shops or factories in this country is by having more control through a commission or several commissions looking after the whole commodity market. I should have thought that the Government might at least have looked at this matter and introduced a scheme in the not-far-distant future.
    We do not fertilise or cull a tree by clipping off the branches: we get at the root. The control of prices does not lie in the branches, that is, the shops, but at the roots, namely, in our commodity markets. I suggest that that matter needs looking into, because commodity market activities have been going on in the same way for, I believe, the past 200 years, or so. I submit that the method that I have suggested would be a way of controlling prices.
    Over the years, we have spent a considerable sum of money in various ways
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    to help industry to expand. But the great calamity of that is that as a Parliament we have not asked for any balance sheet covering that expenditure. We have spent millions upon millions of pounds subdising Scotland, the North-East, Wales and other parts of the country, but never once has Parliament asked for a balance sheet. Was that money well spent in the industries concerned?
    I make bold to say that if the Government were doing their job properly, irrespective of their political complexion, they would have asked for a three-year production of each factory to see whether a factory was profitable. If the factories were not profitable after the money that Parliament had spent on them, it would be our responsibility to ask why. If the reasons were not satisfactory, after so much public money had been put into them, we should take action to see that new management was installed to bring them up to profitability.
    The future does not look bright to me, because there have been no fundamental suggestions about how we are to get over our balance of payments deficit, excluding oil. We can forget about oil for the time being. No suggestions have been put before us to rectify this wrong. All that has been done is that a greater problem and a greater responsibility have been placed upon industry, and industry will find it difficult to carry. That may have a detrimental effect on the country's future well being.
    I know that the Chancellor said that once the oil that will flow from the North Sea starts coming in, everything in the garden will be more or less lovely.
    The Financial Secretary to the Treasury (Dr. John Gilbert): Where did he say that?
    Mr. Baxter: I quote what he said:
    "We have at least one advantage to look forward to. Before too long, we shall have our own oil supplies from the North and Celtic Seas. We must not imagine that this oil will be the answer to all our problems."—[OFFICIAL REPORT, 26th March 1974; Vol. 871, c. 288–9.]
    But my right hon. Friend seems to imply that he can depend upon it considerably to help solve our problems. I should not have looked at it in that light at all. It should be a bonus to any Government or any country, not a way to

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    bolster up maladministration or bad husbandry. That is what has been going on since the end of the last war, and unless it is rectified in the not far distant future, we shall leave a terrible heritage to our people.
    The oil found in the North Sea was put there not by a Scotsman or an Englishman. It was put there millions of years ago, and I presume to suggest that a Labour Government ought not to advocate that that oil should be used entirely for the benefit of Scotland, England or Great Britain. It should be regarded as the responsibility of the United Nations, along with other minerals throughout the world, to be used not for the benefit of one nation or group but for the benefit of the human race as a whole.
    What I condemn the Chancellor for in this Budget is that there is no imagination or plan in it that will give to this country hope that in the future we shall become what we should be able to become if only we had the will to do it—one of the great industrial nations of the world.
    7.42 p.m.
    Mr. Nick Budgen: I am most grateful to you, Mr. Deputy Speaker, for giving me this opportunity to catch your eye, and I appreciate that it is, most of all, a compliment to my distinguished predecessor at Wolverhampton, South-West, Mr. Enoch Powell. It is, indeed, appropriate that I should be able to pay tribute to him on the occasion of the Budget debate.
    I have had a unique relationship with Mr. Enoch Powell. I start by being the grandson of the person who baptised John Enoch Powell. I began my political career, and underwent my most formative experiences, as the Conservative candidate at Birmingham, Small Heath, in the period before the 1970 General Election. I am sure that hon. Members will remember that the party of which I am proud to be a member was somewhat divided in its views about immigration and race relations, and Mr. Powell put forward views which were certainly extremely popular in the West Midlands in those years before the 1970 General Election.
    I adhered to the views of the majority of my party. I believed those views to be
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    right, honourable and civilised, and I spent a great deal of my time over two and a half years in trying to persuade the people of Birmingham, Small Heath that the views of the majority of my party should be preferred to those of Mr. Powell.
    Again, I had a unique relationship with Mr. Powell at the recent General Election. There was I, a Tory, taking over from a Tory in what I had understood was a safe Tory seat, and I naturally assumed that he would give me his support. But no; he voted for my Labour opponent and, indeed, invited his former constituents to do the same.
    But now is not the moment for me to comment upon Mr. Powell's recent actions. Let me say that nothing gives me greater pleasure than to pay a tribute to Mr. Enoch Powell in the House that he loved, and still loves, so passionately. When historians write about the 1960s and 1970s, I am sure they will point to Mr. Powell as one of the great Tory philosophers of our time. I am sure all hon. Members will agree with me that his going is a real loss to the whole House, and I know that he will be recognised as one of the great parliamentarians of our time.
    Hon. Members will recognise Mr. Powell also as a man of compassion. They will remember his great speech on the Hola camp. They will remember his practical compassion when, as Minister of Health, he struggled to make the National Health Service more responsive to the needs and the wishes of the people as a whole. We remember his great courage in resigning in 1958. Let it never be forgotten that that was not an easy resignation, and it brought great sacrifices upon him.
    But most of all, I suppose, we shall remember him as the great back bencher. Many of us who come into this House for the first time look round and see the great machines. Partly we regard them as machines to help us, but we regard them also as machines which may envelop us. We wonder what contribution we can make to this great Parliament. The example of Mr. Enoch Powell must be an inspiration to us all. By his courage, passion, industry and eloquence he was so often the David who took on the Goliaths of the great machines and won.

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    It did not stop there. Everybody I have met in Wolverhampton has told me of the work that Mr. Powell did as a constituency Member. He brought industry, compassion and understanding to ordinary people's problems. Perhaps I can best illustrate what a splendid constituency Member he was by referring to the way in which his tiny majority was built up to bigger and bigger majorities with each successive General Election throughout the 24 years in which he represented Wolverhampton, South-West.
    I turn now to my constituency of Wolverhampton, South-West. Wolverhampton is not a large town, and it is fortunate in that there are no great areas of monotonous one-class housing. It is an area of small businesses. It is an area which has enjoyed considerable prosperity, and for me the most exciting characteristic of Wolverhampton is that the Tories draw their support from no one section of the community. To go to Wolverhampton, South-West is to be constantly reminded that the Tory Party is a national party or it is nothing.
    The great characteristic of the people of Wolverhampton, South-West is their independence. They do not expect to agree with their Member of Parliament in everything. Indeed, sometimes they hardly expect to agree with him at all. They ask only that he should say what he believes, and that he should say it as well as he can. Wolverhampton, South-West is a constituency of which Burke would have been proud.
    I turn now to the Budget. In general, I am grateful that the Chancellor has reduced the Budget deficit. I wish that he had reduced it more. The vast Budget deficits of 1972 and 1973 were at least a major cause, if not the only cause, of the inflation which has occurred in recent years and which, so unhappily, cost us the last General Election.
    I was disappointed by some of the Chancellor's statements in his Budget speech. When I looked at some of the statements that he made before the General Election, I believed that he had rejected the theory that one could make yet another dash for growth. But when I look at what he describes as the four crucial principles upon which he relies,
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    it is with real disappointment that I see that the first is described—this is col. 290 of the OFFICIAL REPORT—as the need to make the fullest possible use of all resources available.
    I accept that such a principle is an important objective in the management of the economy, but I do not agree that it should be the primary objective in the management of the economy. The lesson of the 1970 General Election, when the Tories obtained power by complaining against a 5 per cent. inflation, and the lesson of the 1974 General Election, when the Tories lost power because of a 10 per cent. inflation, is that above all else this country, this nation, is saying "Do nothing else but contain inflation".
    That is the crucial issue today, and almost nothing else matters so much. I reject making that the primary principle, most of all because I believe that, stated in a moderate way, that was the principle behind the dash for growth which, as I indicated earlier, I believed was so disastrous to the former administration.
    Why do I have this obsession about inflation? I have it because I regard it as the very canker that is not merely killing our economy but crushing our way of life. Inflation is not merely an economic disaster; it is a social disaster. The tragedy of inflation is that it redistributes wealth, not as Labour Members would wish to redistribute wealth, in a democratic way by taxation, which can be constantly argued against, but in an arbitrary way. Inflation redistributes wealth in favour of the rich and against the poor. It redistributes wealth in favour of those who are well organised in their work and against those who are ill organised. It does it most of all against the poor and the underprivileged.
    It is my firm belief that the message which came out of the General Elections of 1970 and 1974 was not that this nation rejected capitalism, although I accept that the capitalist system may be marginally unfair. What the nation did in 1970 and 1974 was to reject inflation as being the thing that is most grossly unfair above all else in our community.
    If the Labour Party does not have the courage to become the party of sound money, it will lose a great opportunity and a great advantage. I hope that that opportunity will eventually be taken up

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    by my party and I believe that when we return to our traditional role as the party of sound money a great electoral prize will be ours.
    In the meantime I criticise the Chancellor's speech because he said so little about his view of inflation. What does he believe to be the cause of inflation? What rôle does he believe that a prices and incomes policy has? What are his plans for public expenditure? How much does lie believe that the supply of money should rise? None of these questions has been fully or properly answered. The nation, which has voted against inflation more than anything else, is entitled to know.
    I believe that already the nation knows that it is inflation which will kill not merely our economy but, most of all, our national characteristics. We already have almost Latin-American rates of inflation. If these rates of inflation accelerate into Weimar rates of inflation, our whole national character will be at risk. Our character will change as the German character changed. Where there was once compassion and cohesion, there will be wild desperation and there will be horrible envy.
    7.55 p.m.
    Mr. John Lee: It is a particular pleasure, for two reasons, to follow the hon. Member for Wolverhampton, South-West (Mr. Budgen). The first is that I am now a fellow Midland Member, my constituency being only a few miles away from his. The second is that he is a professional colleague of mine. I have known him over a number of years when we have been against each other, or, let us say, sometimes in the same court in the performance of other duties. If the hon. Member felt any qualms about stepping into the capacious shoes of his illustrious predecessor, he certainly showed a measure of eloquence of which his predecessor would undoubtedly have approved.
    The hon. Member also expressed a number of sentiments about the right hon. Gentleman who has since departed the House—perhaps temporarily—with some of which, I think, we on this side would also agree. Certainly Mr. Enoch Powell must be rated as one of the ablest parliamentarians of this century.
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    To do what he did—I know that it is easy for people on this side to say so—took a remarkable measure of courage. Perhaps I may, more tendentiously, say that what he did in the General Election was to make some of his supporters make a choice between greed and patriotism. What they chose is a matter, perhaps, on which I will not further comment. It would be surprising, however, if it did not have some effect upon the outcome of the General Election.
    Most hon. Members have poured praise upon my right hon. Friend the Chancellor of the Exchequer for the intellectual stamina of the action he has taken. Those praises are none the less appropriate for being repetitive. Indeed my right hon. Friend has a formidable task to undertake, and if he had been told on 1st February that he would find himself coping with this situation on 26th March he probably would not have believed it, such was the speed at which events took place. If, therefore, I make any criticisms of the Budget, and I shall make some, they will not be in a churlish spirit but in a spirit of no more than gentle admonition.
    There are, of course, a number of admirable aspects of the Budget. We have already had references to the pension increase. There has been no reference, surprisingly, to the relaxation of the earnings rule—a minor attribute of social justice long overdue—or to the fact that mortgage interest relief is to be confined to one house only, thereby stopping a particular type of racket. I remember hearing the Plaid Cymru hon. Member for Caernarvon (Mr. Wigley) whooping with joy yesterday. I think that his pleasure was echoed on this side of the House. The fact that there is a relief of a very large number of taxpayers also commends itself to this side too.
    I take issue with my hon. Friend the Member for West Stirlingshire (Mr. Baxter) on his reference to the subsidies. I should have thought there was a case for a much larger measure of subsidies, even at the cost of a much tougher rate of taxation.
    At the opposite end of the spectrum from myself, Mr. Enoch Powell, with his usual robustness, referred to the need for heavy taxation. There is a strong,

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    arguable case for that, certainly if that were needed to provide subsidies on a scale that could make a dramatic reversal in the inflationary situation, to which the hon. Member for Wolverhampton, South-West has referred.
    In a minor key the Chancellor is to be commended for conceding that sometimes the Inland Revenue gets its sums wrong and over-claims, and he is providing for some measure of compensation for people who find themselves the victims of over-assessment. It is a minor matter, but I was in the House a few years ago and some of us have had to take up the cudgels from time to time on behalf of rightly outraged taxpayers who found that their local inspectors had gone wrong at their expense.
    Having said a number of things in praise, I turn now to one or two criticisms. The right hon. Member for Devon, North (Mr. Thorpe) referred to the borrowing situation. I am afraid that the prospect of a very large borrowing disturbs me. With disagreeable memories of some of the things which happened attendant upon borrowings in the period 1966–70, some of us would like to know what strings are attached. The last time it was deemed necessary that there should be a large measure of borrowing, certainly the bankers demanded their price in deflation. I hope that that will not be repeated this time.
    I heard no reference in the Chancellor's speech to the second- and third-line reserves. I hope that it will strengthen the hand of Treasury Ministers if they are reminded that, in spite of all the difficulties through which the country has gone over the last few years—indeed, all the years since the war—the overseas assets of this country are very considerable, that the overseas portfolio investrnents, for example, still stand at £7,800 million, and that the total identifiable assets, according to the latest figures which I have computed, run to a grand total of £27,000 million, which is a very considerable measure indeed.
    I hope, therefore, that when Ministers have been negotiating on the terms of loans they have not approached their bankers in too abject a spirit, because our assets are still considerable and our bargaining power is not as bad as it may
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    sometimes be supposed. If it should transpire that the terms of the loans are to be oppressive in any way, there will be some rumbles of discontent from the Left of the party, just as there were between 1966 and 1970, and I shall be among those who will do some of the rumbling.
    Another aspect is that the defence economies are minimal. It is no good anyone saying that defence is an overriding consideration and that ordinary economic rules must be waived because defence is important. If that argument were ever tenable—it has not been so for many years—it had already been conceded in any event by the concessions made by the Conservative Party. I find it ironical that the economies made by the outgoing administration in this matter despite their military lobby, exceed considerably the economies that are now proposed. I should like to see a total figure of not less than £500 million and not £228 million plus £50 million, which is what we have at present.
    The right hon. Member for Devon, North thought that the property tax proposals were inadequate. Indeed they are, and I wish to see something much more drastic. Perhaps my hon. Friend the Chief Secretary will tell me whether I have got it wrong but, as I understand it, taking the notorious case of Centre Point, if only a few lettings were made of some of that very large structure—that monument to the unacceptable face of capitalism, if ever there was one—that would be sufficient in itself to exempt that property from the taxes which are proposed. If I am right about that, clearly they are not adequate. If it is so, in this instance I would gladly adopt the Liberal Party's proposal of a site value tax, at any rate as a holding measure before we can get down to the real job of nationalising land.
    My right hon. Friend the Chancellor referred to the anomalies that had existed with regard to the portfolio investment and the payment of 25 per cent., and he saw no justification for distinguishing between sterling and non-sterling areas. That was right. But what I cannot understand is why the figure of 25 per cent. is considered to be immutable. It has stood for a number of years. I should have thought that there was a case for increasing the amount which has to

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    be paid in as a result of disinvestment. One would have thought that 33⅓ per cent. would be appropriate and that possibly there might be a case for increasing it to as much as 50 per cent.
    I want to refer to something else of a rather technical nature. Referring to the now notorious Lonrho business, the Chancellor made a number of proposals to change the basis of the taxation of income arising from abroad. He was right to do so. As I understand it—I hope I have got it right—90 per cent. of income arising from overseas employment becomes liable to be taxed, in the case of persons who are resident in this country. Is there to be a tightening up of the concept of residence? As the law stands, it seems, the Treasury has considerable discretion, which it is not loth to exercise, to waive the conditions of residence.
    As a normal rule, the situation is that if one is physically present in this country for a period of six months in any one fiscal year, prima facie one is resident for the purposes of taxation. But the Treasury grants concessions of one kind or another. Are those concessions to be more carefully examined? It would certainly stultify the change in some measure if that were not to be done.
    As a concomitant factor, Section 181 of the Finance Act 1970 as I understand it does not empower Ministers to inquire into income gained from employment wholly carried out abroad by a United Kingdom resident. If that is still the situation, it will not be very easy for the tax inspectors to find out exactly how much income is available and, therefore, how much is the total from which a 90 per cent. assessment ought to be made. Perhaps this is a fairly simple matter which can be put right, and it may be that my right hon. Friend has that in mind for an appropriate amendment to the Finance Bill when this is produced. It is certainly something that he should bear in mind.
    My final question with regard to this aspect of the Budget is this. Have we really dealt with the Cayman Islands situation anyway? As I understand it, the sort of payments made wholly abroad to some tax haven in respect of United Kingdom residents are in themselves illegal in any case. One of the things
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    which I can never understand about the whole Lonhro scandal is why no one was ever prosecuted in this matter.
    Mr. Arthur Lewis: They were probably Tories.
    Mr. Lee: The Inland Revenue has its own legal department. What was it doing when this matter blew up? I hope that such a situation will not be repeated. If necessary, the law should be changed to prevent such scandals.
    I regret that the emergency powers have been rescinded. One advantage which the Government acquired—in contrast with the situation in October 1964 but in parallel with what happened in 1945, when the wartime Supplies and Services Acts were in force and a system of non-convertibility of sterling was extant—was that we could use the emergency powers. I appreciate that they were brought in for other reasons, because the previous Government had made a terrible mess of the industrial situation and were unable to govern without emergency powers. But the fact that the powers were being used for other purposes does not mean that we should not have taken advantage of the situation and applied the powers for our own use.
    Since the Government took office, the City has so far behaved quite well. This is in contrast with the disgraceful happenings of November 1964, when the City went bear on sterling. We wondered whether the Government of the fourteenth Earl of Home had been taken over by the third Earl of Cromer. This time there has so far been no repetition of that. However, one cannot be sure that, if the going becomes hard, there will not be a repetition. If there is, I hope that the Government will not hesitate to use emergency powers to block convertibility of sterling.
    I turn to another matter which has not so far been referred to in the debate. It is probably the view of both sides of the House that there has been a lamentable growth in corruption in public life, mainly in local government and principally confined to the North of England. Some of the matters involved are awaiting the outcome of criminal trials and therefore it would not be right to refer to them in detail. I hope, however, that we shall have much greater stringency regarding

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    financial transactions in that curious twilight situation in which Government Departments and contractors meet. One tended to assume in the past—perhaps a little too complacently—that the British Civil Service was above corruption. Unhappily, in one or two instances at least, that has not proved to be so and in local government it has proved to be a long way from being so. I hope that there will be a tightening up of standards.
    The Guardian, which is not notorious for complete accuracy in all matters, has reported that there has been a loss through tax evasion—another facet of the declining standards in public life—of something like £1,000 million. I believe that that is an over-estimate. Indeed, I suspect it is a considerable over-estimate. But I suspect that the total figure, if it could be assessed—by the nature of the matter one cannot easily, if at all, establish it—is considerable.
    I do not want the Inland Revenue to behave like a pack of McCarthyites, but I want to see a tightening up in these matters. It is not only a question of the recovery of much-needed revenue, but, as my right hon. Friend the Chancellor said in another context yesterday, nothing can be more offensive to people who are taxed on the pay-as-you-earn basis—with no chance of evasion or even negotiation or delay in payment of tax—to suspect, possibly with good foundation, that there are other people, not always necessarily better off, though in many instances that would be so, who are able to get away with it on, possibly, a considerable scale. If that situation were put right it would help promote a better industrial climate, because unless we can redeem the appalling industrial situation inherited by the Government, no economic policy can hope to succeed.
    8.16 p.m.
    Mr. Ian Stewart: I am grateful for being called to speak in the debate. I come to the House as the first Conservative Member for the Hitchin division for 10 years. I have a considerable sense of responsibility, for two principal reasons. The first is that my immediate predecessor set such a high standard of service to her constituency. She is now the right hon. Member for Hertford and
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    Stevenage (Mrs. Williams), but over the previous 10 years she achieved a great reputation, quite rightly, for the attention she gave to the affairs of her constituency and the problems of individual constituents.
    I shall do my best to maintain the high standard which she set and which had, in turn, been set before her by the late Member for Hove who previously represented my division.
    Secondly, I am concerned with the great diversity of my constituency. As well as the town of Hitchin, which gives the name, for historical reasons, to the division, it includes two other market towns, Baldock and Royston, the first garden city in the world, Letchworth, and 150 square miles of beautiful agricultural land in the north of Hertfordshire.
    I thought for a few days after 1st March, on the evidence of my postbag, that the towns of North Hertfordshire were populated solely by Government scientists and that the population of the rural areas consisted entirely of pig farmers and horticulturists. I know from other experience that this is not completely so.
    However, it would have been difficult for the Chancellor of the Exchequer, in framing the Budget, not to have profoundly affected at least some of my constituents, because of the diversity of my constituency. Yet it is not the fiscal aspects of the Budget over which my constituents have most anxiety. The Chancellor said—as had already been announced by his right hon. Friend the Secretary of State for Trade—that the future of the Maplin project was under review and that no financial provision would be made in the public expenditure plans for further work on this project during the period of the review.
    It is a matter for great anxiety that with, on one side. the adjacent airport of Luton and, on the other side, the massively expanded new town of Stevenage, the possibility of cancellation of a project of Maplin's magnitude would both raise serious problems in planning the extension of regional airports, including Luton, and also create a need for a large amount of further housing land in this part of the South-East, from which I doubt whether Harlow or Stevenage could escape. On this point, therefore, my

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    services on behalf of my constituents may be needed sooner than on any of the fisal aspects in the Budget.
    One matter that I should mention with the greatest possible approval, however, is the proposal that essential aids for the disabled, including invalid chairs, should be zero-rated for VAT. This is a measure which will have widespread approval in the House and the country and I warmly congratulate the Chancellor on having introduced it. I have in my postbag a letter written before the Budget relating to this point but also extending it. If I had sufficient knowledge already to master the procedures of asking parliamentary Questions of the right Minister on the right occasion, I should probably have saved it, but since it is a matter of urgency, I hope that the House will give me its indulgence if I raise this ancillary point now.
    The point is that, because many invalid aids, particularly chairs, are necessarily complicated contraptions, the cost of repairs can sometimes be very great. I have not had time, I regret, since the Budget speech, to do sufficient research to establish whether it is administratively possible to zero-rate or exempt the repair costs of invalid chairs and similar articles, but if so, this would be a further step in a direction which would also have the universal approval of the House.
    The main contents of the Budget have been fully debated by previous speakers. I should like to comment on two points that have been raised today while I have been in the Chamber. The hon. Member for West Stirlingshire (Mr. Baxter) mentioned the provisions of the present tax system for companies, whereby distributions to shareholders were encouraged as against retentions by the companies for investment. He could perhaps have given the Chancellor some credit for having made it somewhat more expensive for companies which wished to make distributions in that they will now have to pay an extra 50 per cent. of the advance corporation tax at the time of making the dividend distribution. Although this is not an increase in the tax bill, it is an extra cost on the company in that it has to part with its money sooner than it would otherwise have to do.
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    I am not clear—other hon. Members may be clearer—about the prospects for the continuation of statutory control of incomes, including dividends, but when the counter-inflation policy was introduced, it was right and proper for the previous Chancellor and his right hon. Friends—this was supported by my hon. Friends—to say that dividends should be included in the restraint of incomes. They have in fact been included and controlled at a rate lower than that permitted for the general increase in incomes over the last two or three years.
    Should the Government decide that statutory controls on incomes are needed for a longer rather than a shorter period, there is a case for removing a restraint at a time when it is no longer needed. The point is that companies, as we have heard in the last two days in this Chamber, will be facing considerable problems of cash flow and liquidity in the coming year. It is likely that they will pay much greater attention to preserving their liquidity than to distributing dividends. But over a period, if there is to be any differentiation between successful and unsuccessful companies, and if we are to have a capital market on which progressive and growing companies can raise new money, then at some stage the universal limitation on dividends will have to be relieved.
    I therefore ask that, should the Government find that limitation of incomes is to be maintained, they should consider some adjustment of the restraints, if not their complete abandonment, so as to allow the relative situation of one company against another to be redressed. This point has particular importance at this time, because many of the more successful companies in the years ahead will be those concentrating on exports and overseas markets. If they are not allowed to raise the necessary capital for expansion in the coming years, it will do undoubted damage to our economy and to employment.
    As to a point raised by the right hon. Member for Walsall, North (Mr. Stonehouse), I am in considerable sympathy with Government spokesmen for not having made an early statement about their intentions over the exchange rate. In the last 18 months, all the rules of foreign

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    exchange have been turned upside down. I speak with some professional knowledge of this market. Although the rate of exchange between sterling and the dollar is now—or was this morning—about $2.37 to the pound, it is only a few years since it was fixed at $2.40, and there have been considerable changes between one currency and another. Before the Government made any decision about re-fixing the parity of sterling, they would have to decide to what they would fix it.
    With the Swiss franc, the French franc, the Italian lira and sterling all floating, and the dollar now no longer the automatic international currency and measure of value that it was in the 'sixties, we shall have collectively in international monetary matters to rethink the basis on which relative exchange rates are fixed when they are fixed. There will undoubtedly be times when exchange rates cannot be fixed. The cost of supporting a rate which might for the time being be unrealistic would prevent this.
    The Government would be well advised, although I realise that a serious undervaluation of sterling for a long period may bring its disadvantages, to accept nevertheless that in today's highly unstable conditions we should be putting an unnecessary constraint on ourselves if we were to fix the value of our currency to that of any other one currency in the world.
    The point is strengthened in that since the autumn of last year and the advent of the energy crisis the economic prospects of all the countries whose currencies form part of the major trading medium in the world have changed in their internal and external relationships. The markets of the world have hardly begun to make an effective reassessment of the relative prospects of the economies of those countries or to form any lasting view of the underlying value as opposed to the daily rate at which their currencies should be quoted. It would be wrong for the United Kingdom, which is a country living above all else upon its international trade, to inhibit its freedom of action by making an early choice when the uncertainties are so great.
    I apologise for keeping the House so long on this first occasion, especially as it has given me the special indulgence of
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    not interrupting me. But I feel that the points which have arisen this afternoon should be given some attention.
    8.29 p.m.
    Mr. John Roper: It is a great pleasure to congratulate the hon. Member for Hitchin (Mr. Stewart) on his eloquent and effective maiden speech. He will not expect me to take up all the points he made, and certainly not those on the future of airports in the South-East or in other regions.
    I hope that my right hon. and hon. Friends on the Treasury Bench will give a good deal of sympathy to his appeal for the zero-rating of repairs to vehicles and other aids for the disabled. That seems a most useful extension of the proposals which were made yesterday by my right hon. Friend in his Budget Statement.
    I am sure that we all appreciate the expert knowledge which the hon. Gentleman brings to the House on currency matters. We look forward to his further contributions on that extremely difficult and complex subject. It is a subject on which there are not necessarily strict party lines. For example, my right hon. Friend the Chancellor of the Duchy of Lancaster has been known to hold different views from his ministerial colleagues when in Opposition, if not in Government.
    I welcome in broad terms the Budget which my right hon. Friend has introduced. If I have to question some of the details of what he has done, or what he proposes to do, I do so only on matters of detail. I do not question the broad strategy which he has announced. As that strategy implements many of the policies on which we fought the election only four weeks ago tomorrow, it would be difficult for us to object to his proposals. We are delighted to see the speedy way in which he is implementing so many of them.
    I understand, in the current economic situation, the agnosticism which my right hon. Friend has applied to the Budget judgment. It is the case that it has never been so difficult to assess the future outlook for the economy. The whole of the Press comment has supported my right hon. Friend in his announce that he will return with a second Budget when things are a good deal

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    clearer. I suspect that he will find that he has been a little too cautious and that he will need to do more to expand demand. The statistics will indicate whether that is right.
    I regret that as a result of the general uncertainty my right hon. Friend has had to restrict to only nine months ahead the economic forecast which has appeared in the Financial Statement.
    That is an unfortunate restriction in the information which is provided for the House. It cannot be called a medium-term economic assessment if we have information for only nine months ahead. I hope that when my right hon. Friend comes to the House with his second Budget and his second Finance Bill in the autumn he will bring with him a second Financial Statement so that we can have some indication of the Treasury's economic assessment for a longer period.
    At first sight one of the most alarming figures in the economic outlook is that for private investment, which is shown to fall by 1 per cent. between the second half of 1973 and the second half of 1974. To some extent that is the alarming inheritance of the present Government from their predecessors, in that almost all of the investment decisions which will be put into effect in the second half of 1974 were made in the period in office of the previous Government. It is true that the text which accompanies the figures on page 10 of the Financial Statement makes it clear that investment in manufacturing industry, unlike investment as a whole, is likely to rise during the second half of 1974, thus compensating for the falls in house building and in other forms of private investment which lead to a 1 per cent. fall in the figures. None the less, I believe that further action should be taken to stimulate investment. I hope that my right hon. Friend will consider what action he could take to increase investment in the second half of 1974.
    I believe that the announcement that the regional employment premium is to be continued will assist investment in the regions. For that reason, apart from any others, I welcome the decision. There is still some uncertainty hanging over REP because, although we have been told that it will be continued, we have not as yet been given any indication of for how long it will be continued. In the
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    case of REP, as in the case of almost any other instrument to encourage economic activity in the regions, it is important not only to say that it will exist, it is also important to give certainty to manufacturing industry about the period of time into the future that REP will continue. I hope that the Minister tonight, or the Chancellor when he winds up on Monday, will be able to give some indication of how far into the future he intends to continue with REP.
    The Budget as a whole will play a central part in developing a sound basis for rebuilding our economy. The talks which my right hon. Friends have been having today with the Trades Union Congress will be one of the tests of the Budget and will show the strength of the social contract on which Britain's economic future will be based.
    I wish to comment on three aspects of the proposals which my right hon. Friend laid before the House yesterday. First, in the area of capital taxation, I welcome the immediate imposition of a gifts tax; because, although we do not yet know the details of the gifts tax the Chancellor made it quite clear that it would take effect from yesterday. I hope that tomorrow night my hon. Friend the Chief Secretary will be able to give us a good deal of detail of this tax, because a tax which is de facto in effect should be known to the country as soon as posible.
    I am, however, sorry that in the long list of my right hon. Friend's proposals he failed to mention the reintroduction of capital gains tax on transfers at death and on discretionary trusts. Presumably, transfers in the form of gifts will still be subject to capital gains tax as well as the new gifts tax and there will, therefore, be an asymmetry if my right hon. Friend fails to restore the capital gains tax on transfers at the time of death. I therefore trust that, even though it is not implemented in this coming Finance Bill, my right hon. Friend will remember the pledges which were given by the then Opposition on 20th May 1971 that we would reintroduce the capital gains tax on transfers at time of death and will, if not in this coming Finance Bill then in his next, ensure that this important part of capital tax is restored.
    Turning from the gifts tax I look forward to the Green Paper on the wealth tax. This is going to be a document, not

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    about whether we should have a tax, but about how we should implement that tax. I believe that, because of the central importance and the long life of such a tax, it is important that there should be the fullest discussion and that we should get the tax right when it is introduced. I hope that my right hon. and hon. Friends will consider it appropriate that a Select Committee should consider the Green Paper when it is introduced, following the precedent set by the Conservative Government in the case of the reform of corporation tax some time ago.
    Turning to the income taxes, I was heartened by my right hon. Friend's remarks on the tax credit scheme. I am aware of the reservations of my right hon. Friend the Secretary of State for Social Services and my hon. Friends the Chief Secretary and the Minister of State, Civil Service Department, who signed Minority Reports of the Select Committee on the Conservative Government's tax credit scheme. I trust that careful consideration will be given to modifications to that scheme and to the eventual introduction of some form of tax credit scheme. As my right hon. Friend knows, I have examined ways in which the scheme could be developed and used as a sophisticated instrument for social policy, in particular in identifying those on whom we should concentrate extra help.
    I noticed with some pleasure and a certain amusement that the increase in the single person's allowance to £625 has a value, taxed at the new rate of 33 per cent., of only 3p a week lower, at £3·97 a week, than the £4 proposed in the tax credit Green Paper. That similarity will be convenient if and when my right hon. Friends bring forward proposals for a tax credit scheme.
    Before commenting on the Chancellor's insurance proposals I should declare a non-financial interest in that I am a director of the Co-operative Insurance Society. I am glad that the Chancellor has taken action to deal with the exploitation of certain tax avoidance opportunities with life assurance. The misuse of life assurance in that way does the insurance industry as a whole no good, and the removal of those opportunities is in the interests not only of the mass of taxpayers but of the mass of assur-
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    ance policy holders. I was glad to hear from my right hon. Friend that there had been close co-operation between the Inland Revenue and the Life Offices' Association on this matter.
    The patching-up operation we had yesterday, and which we have every two or three years to deal with insurance abuses, is not the right way of dealing with them. It does not go to the root of the problem, and I hope that in a subsequent Budget my right hon. Friend will consider a more radical attack on the problem.
    The central point of the major problem remaining is that the higher rate taxpayer is subject to income tax on investment income at rates up to 98 per cent. if he invests directly. On the other hand, if he invests through a life assurance policy, through a life fund, whether or not it is a qualifying policy, his investment income, instead of being taxed at 98 per cent., is taxed only at the composite rate of 37½ per cent. That, of course, is a considerable advantage to him. That sort of tax avoidance and the problem as a whole could in part be dealt with if my right hon. Friend did for the life assurance relief what he did yesterday for mortgage interest relief and set an upper limit to the premium payments above which payments would no longer rank for tax relief. That would not completely solve the problem but would go a long way towards dealing with it.
    Unlike Opposition Members I have no ideological objection to subsidies, but we need to examine with care their incidence and whom they will benefit. I am not convinced, for example, that reducing coal subsidies and increasing milk subsidies is necessarily, in the technical sense, a progressive move, given the relative expenditure of the poor and rich on those two commodities. When my right hon. Friends are considering future candidates for subsidy I hope that they will look carefully at the evidence from the Family Expenditure Survey before deciding what commodities it is appropriate to subsidise.
    Referring particularly to the question of the coal subsidy which has been removed and which will lead to substantial increases in the cost of coal. I hope that my right hon Friend the Secretary

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    of State for Social Services will consider the possibility of increasing the heating supplement on supplementary benefit and supplementary pensions now that the cost of fuel to pensioners will be significantly increased by the Government's decision on nationalised industry fuel prices.
    This has been a good Budget, particularly when we bear in mind the circumstances in which it was prepared. I support it with enthusiasm and look forward to hearing many other Budgets presented by my right hon. Friend the Chancellor of the Exchequer.
    8.45 p.m.
    Mr. Julian Ridsdale: It is a little frustrating for older hon. Members to be scattered among so many maiden speakers. Nevertheless, it is a great pleasure for me to congratulate, first, my hon. Friend the Member for Hitchin (Mr. Stewart) on an excellent maiden speech, made confidently and without notes. However, as a Member of Parliament for an Essex constituency, I must say that since, unlike my hon. Friend, I am opposed to the Maplin project, I was delighted to hear the Government's views on that subject.
    Secondly, it is a great pleasure for me to congratulate the new Member for Wolverhampton, South-West (Mr. Budgen). Like my hon. Friend, I have a unique relationship with the former Member for Wolverhampton, South-West, Mr. Enoch Powell, through the Church. The former Member of that constituency is godfather to one of my grandsons—who, incidentally, this morning slapped the Chancellor's photograph and said "Naughty man! He has put up the price of sweets." I respect the ex-Member for Wolverhampton, South-West, particularly as a catalyst for thought. I have disagreed with him on major policies in relation both to Europe and to prices and incomes, but I repeat that as a catalyst for thought and in underlining the soundness of money he has no equal. It is good to know that Enoch Powell is to be followed by somebody who obviously will match his eloquence and remind the Conservative Front Bench that they should not go for growth at any price. The soundness of the currency is a matter which many Conservatives put before growth at any price.
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    I wish to congratulate the right hon. Gentleman the Chief Secretary on his appointment, since I sat with him on the Public Accounts Committee.
    The Paymaster-General (Mr. Edmund Dell): I am grateful for what the hon. Gentleman said, but I would point out that he has given my designation incorrectly. I am Paymaster-General.
    Mr. Ridsdale: I apologise to the right hon. Gentleman.
    I also wish to pay a slight compliment to the right hon. Gentleman the Chancellor of the Exchequer for taking out of the economy £700 million. This at least errs in the right direction, especially in the present inflationary situation. However, I feel that this was a Budget of lost opportunities since it did not face up to one of the most serious problems that faces the country—namely, the investment situation.
    The Chancellor of the Exchequer has appealed for national unity and for the wartime spirit of national co-operation to return, and I fully support that sentiment. However, it did not help the situation when the right hon. Gentleman appeared on television last night and said that the economy was like a coach out of control. Let us be honest and realistic about the present situation. The chief danger is an outside one affecting just as seriously other countries as well as our own—for example, Japan, the United States and many European nations.
    It is vital to find the correct solution in terms of international co-operation as well as to make sure that we have national unity. For that reason I congratulate the Government on having negotiated successfully the present international loan, although I am most anxious to hear the terms upon which it has been secured.
    The national danger facing us is obvious to us all. It is what to do on the wages front and how to deal with the TUC. Already I am receiving complaints about relativities on the wages front from constituents of mine who crew the pilot boats for Trinity House, from hospital orderlies who feel that their pay relativity is not right with that of the nurses, from plain clothes detectives who think that their relativity is not right with uniformed constables, and from members of ASLEF. All these matters are causes for anxiety,

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    and we shall watch the Government closely to see how they deal with them.
    That is why this is so much a TUC Budget and why, according to the headlines in tonight's Evening Standard, the Prime Minister said today, "Now is the time for the TUC to stand and deliver." For the country's sake, I hope that he succeeds. But, bearing in mind the record of successive Governments in the past, I have my doubts.
    If the Government's policies do not succeed, the only course before the country will be to have a broadly based Government made up of those right hon. and hon. Members who support a prices and incomes policy. For that reason, any policy trying to make party political capital out of our present difficulties is doomed to failure. A number of times, listening to the debate today, I have felt that we were back in the last Parliament. Successive speakers have made party political points at a time when the country is sick and tired of party politics and wants to hear us address our minds to the national problems.
    Given the seriousness of the prospects facing us, I think that in time a national Government will arise out of necessity. But the time is not now. It was not two weeks ago, and it was not directly after the election, either. But this must be the basis of our approach to the serious problems facing us. We must choose the time right and address our minds nationally to the problems and not think and speak in a party political way.
    I welcome the increase in pensions, but I ask the Paymaster-General when the next review is to take place in view of the anxiety which the pensioners have about the increasing rate of inflation. Will it be in April 1975 or in October 1975?
    My fear is that the Government are giving with the left hand and taking back very skilfully with the right hand. That applies especially to certain aspects of this Budget. I have in mind especially the retirement pensioner who lives on investment income. If such a person has an income of £2,000 a year, is it right in a time of inflation, when already £150 a year has been lost to him, for the Government to claw back £100? I hope that the Chancellor of the Exchequer will look again at this situation. I think that it is unfair and unjust. The obvious
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    illustrations of the claw-back effect of the Budget can be seen in the increases in coal costs, electricity charges, rail fares, postal charges and so on. It is essential to realise their importance to pensioners.
    Is it right to freeze the rents of small landlords? Last weekend, three constituents of mine in this position came to my advice bureau. One of them has to live on a frozen rent of 57p a week. That is not right. It is a matter into which the Chancellor should look. Is it right that a small landlord, who has just had to spend £595 on repairs to his house, should bear the expense of his tenant living in a boarding house at £17 a week so that he can comply with the law?
    Is it right that another small landlord in my constituency, who owes £4,000 in income tax and cannot raise the money other than by selling a not very valuable second house, should be unable to obtain possession of and to sell it? That is the kind of injustice into which I am sure the Chancellor and the Paymaster-General will look. Such things are unfair.
    Another unfairness, which I am disappointed the Conservative Government did not tackle, concerns rates. I have been pressing for a long time that education should be taken off the rates and be made a national charge. I had hoped that the Secretary of State for the Environment would make a statement on what is to be done about rates. Alas, nothing very much came out in his speech, but there is an injustice in this matter.
    I have had letters on this subject from all over the country, because I have been tackling the problem on a national basis. Is it right that a householder who 10 years ago paid a rates bill for £50 should now face a rates bill for £307? This is creating unfairness and making people feel very strongly about the situation. Indeed, I am greatly disappointed that the previous Government did not tackle the problem.
    The danger is that the Government will take with the left hand without giving back with the right. The present system is expensive not only for individuals, but for the country. I should like to know how much debt we as a country have incurred through local government borrowing abroad in the last two years. It should be an interesting figure.

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    We must get away from the subsidy element in the rate support grant, because it is not giving us value for money. This subsidy element in the Budget is wrong, too. We must ensure that the money goes to those who need and deserve it. We cannot do that by a subsidy, because some of the money will go to those who can well afford to do without it.
    I underline again a matter which I have raised time and again during the last 10 or 12 years—namely, investment in industry. What disturbs me about the record of the previous Government is that they did not tackle the investment problem nearly as well as they should have done. I am particularly disturbed, because during the last 15 years I have seen the kind of investment that the Japanese have been putting into their industry through personal and national saving.
    As a country we must get rid of the spirit of envy. We must get back to a spirit of harmony, of believing in this country, and getting away from the kind of party politics that we have been throwing at each other across the Floor of the House during the last 10 or 15 years. This is the cause of our trouble. This is the cause of the lack of confidence in our industry today, and until this Parliament can give the country the kind of confidence that it needs we shall not get the investment in industry that this country deserves.
    It is for those reasons that I wish to see people levelling up, and not levelling down. I believe that if we can have that spirit, if we can believe in capital but attack monopoly, we can again solve the serious problems in this country.
    9.0 p.m.
    Mr. Maurice Macmillan: I add my congratulations to those of my right hon. Friend the Leader of the Opposition and other hon. and right hon. Members on both sides on the way in which the Chancellor presented his Budget Statement. I hope that he will not take it amiss if, as an ex-Treasury Minister, I add a word of appreciation, because I know the extremely heavy burden of work which must have fallen upon the whole Treasury team, both Ministers and officials, in presenting such a far-reaching Budget Statement. However, credit for staying power and delivery is the Chan-
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    cellor's alone, and I congratulate him on it.
    It is my happy duty to congratulate and welcome no fewer than four maiden speakers in this debate. The first was the hon. Member for Ormskirk (Mr. Kilroy-Silk). I confess that I do not know his constituency very well. I am aware from a previous incarnation, however, of its employment problem. He will not expect me to agree that nationalisation is necessarily the solution to it, any more than I should expect him to agree that consultation under the Code of Practice and the Industrial Relations Act is quite a good solution, too. The hon. Gentleman may share my regret that we have not yet heard very much from any occupant of the Treasury Bench on ideas for employee participation, profit sharing and so on. But I congratulate him on his speech, and on his extremely moving plea for help for children with congenital heart disease.
    I hope, as an ex-Member of Parliament for the West Riding of Yorkshire, that I may be allowed to congratulate my hon. Friend the Member for Pudsey (Mr. Shaw). I know his constituency a great deal better. It may no longer be a borough, but, if I know the West Riding at all, it certainly will not lose its identity. My hon. Friend's special plea that some kinds of food be not subject to value added tax was put with great wit and skill.
    Knowing the independent nature of the people in the West Riding, I am glad that my hon. Friend stressed the need for interdependence between management and employee, especially in small businesses. I am glad, too, that he made the point that for the smaller businesses in his constituency the change in the rating system made by the Government results in very rough justice.
    I must apologise to my hon. Friend the Member for Wolverhampton, South-West (Mr. Bugden) for not having been present during his speech. I understand that he referred to the borrowing requirement and money supply—perhaps following the tradition of his predecessor. The Chancellor said that in maintaining the competitive credit system he would keep a close watch on the money supply situation, and I hope that my hon. Friend will keep a close watch on the Chancellor, as well as on the Shadow Chancellor.

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    My hon. Friend the Member for Hitchin (Mr. Stewart), in referring to Maplin, showed that there are problems in not saving as well as in saving, as any ex-Chief Secretary knows. The speech of my hon. Friend the Member for Harwich (Mr. Risdale) also showed that one cannot please all the people all the time, whatever one does, particularly in matters as complex and difficult as Maplin.
    I hope that my hon Friend the Member for Harwich will allow me to correct him on one small matter. He referred to the reduction in demand of £700 million in the Budget. I think that the figures are £200 million in demand terms and a £700 million reduction in borrowing requirement—and it is the borrowing requirement to which I should expect my hon. Friend, with his deep interest in a sound currency, to refer.
    I congratulate my hon. Friend the Member for Hitchin on an expert speech, not least because, as a maiden speaker, he made a true debating speech, taking up issues raised in the debate. That is all the maiden speakers whom I have to congratulate—quite a number.
    In general terms, the Chancellor has attempted a fairly skilful balancing act in producing a Budget that is, broadly speaking, neutral. There are inflationary pressures, as my right hon. Friend the Leader of the Opposition pointed out yesterday, to work through into the price structure, including provision for wage costs, and including the £2,000 million extra on oil prices.
    On the other hand, as my right hon. Friend the Member for Carshalton (Mr. Carr) pointed out, there are considerable deflationary dangers as well. Paradoxically, they, too, come from the £2,000 million of extra oil costs which, in demand terms, are deflationary, however inflationary they may be in price terms. This does not make the task of Treasury Ministers any easier, as I am sure the right hon. Gentleman will agree.
    The heavy burden of taxation being placed on industry can represent a threat to growth and full employment. If that threat develops and if there is too much deflation, even for a short time, that will be difficult to correct because of the time lag that occurs in all these matters.
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    That is especially true in the kind of situation described by the right hon. Gentleman the Secretary of State for Trade, when there are deflationary problems in all industrialised countries. There is a danger implicit in our present situation not so much of "stagflation"—to use the old-fashioned term—but of what the right hon. Gentleman the Chancellor of the Duchy of Lancaster the other day called "slumpflation".
    I turn to the speech of the right hon. Gentleman the Secretary of State for Trade. Much as I should enjoy a rehash of some of the election issues with him, I agree with my hon. Friend the Member for Harwich that this is not the time or the place for that. It is not so much the submergence of the Board of Trade in the Department of Trade and Industry that caused balance of payments problems as world commodity prices. Whatever the right hon. Gentleman may say, that is what he himself stressed at the end of his speech when he described the turn-round in the terms of trade as being in favour of the primary producers and against the manufacturing countries.
    I am glad that the right hon. Gentleman stressed the need for co-operation with our trading partners in dealing with the problems caused by the high cost of energy and the surpluses that would be earned by the oil-producing countries. I hope that the Government do not intend to co-operate with others in acting against the oil-producing countries but will, instead, work with those countries. It would be extremely dangerous if it were thought that we were joining in an attempt to do down the oil producers, of whom in due course we shall be one, rather than working with them in their best interests as well as in the interests of the oil-consuming countries which are manufacturing industrial goods.
    The Secretary of State for Trade referred to the oil-rich countries which can absorb goods and services and said that we should seek to develop our trade with them—no one could quarrel with that—but he did not refer to those oil-producing countries—and there are a number of them—which, through no fault of their own—because of a shortage of population, geographical features, or for other reasons—cannot absorb goods and services. Their profits from the sale of oil are inevitably chalked up on one slate

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    or another. They represent a demand on future goods and services, and it is on this point that I should like some further explanation from the Government. Do the Government intend to encourage investment by those countries which at present cannot absorb goods and services?
    I should like an assurance from the Government that they will take positive action to encourage these countries to embark on projects which could lead to their building profit-making industries within their own boundaries after their oil is exhausted—because it is not inexhaustible. For example, a great deal could be done with British expertise and the export of British goods to help, say, Saudi Arabia, with such projects as desalination plants and agronomics which could help develop the resources in that country.
    Secondly, it is to be hoped that the House will hear about the Government's plans for encouraging the investment of Arab oil surpluses in the developed countries—not only in lending to them, but in investing in industry as I understand they are now doing in property. That needs careful consideration, and it is not a matter to be handled easily or alone. Despite the right hon. Gentleman's prejudices, it is something that I hope he will discuss with our European partners.
    Third, I hope that we shall discuss with our European partners, as well as with Japan and the United States, how best we can use the oil surpluses to help the underdeveloped countries. As the right hon. Gentleman rightly pointed out, most of the aid given to the under-developed nations is being absorbed in higher, oil prices. Again, when the Minister described the fall in world trade among manufacturing countries, he implied that no great surplus exists to develop aid on the scale that we should all like to see. Therefore, the industrialised countries should help the oil-producing countries to channel their funds in a way which would be of ultimate benefit to us all—to developed countries in their manufacturing outlets, to the oil-producing countries themselves and most of all, to the developing countries.
    The right hon. Gentleman referred to the need to co-operate to avoid the move-
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    ment of the surpluses of the oil producers across the exchanges in a disruptive way. I hope that this implied that we would not indulge in any competitive deflationary tactics or in attempts to have special incentives to move money from one place to another. In the present state of our economy I believe that we would be unlikely to win out if we undertook such action.
    My fourth main question is: have the Government any evidence of any other form of producer cartels being developed in primary products? The combination of the oil-producing countries is a fairly recent phenomenon. However, it occurred to me that it might be an encouragement to the producers of other raw materials to work together in a similar way. That could present serious problems to the rest of the world. If the terms of trade are already turning against the industrialised countries, any combination such as that organised by the oil producers would need serious attention by the Government.
    Finally and more generally, how do the Government propose to deal with the £2,500 million extra in oil prices, in view of the reduction of world trade, the difficulties of the developing countries and the critical importance of this extra burden for our balance of payments until such time as we no longer have to import any, and for most of Europe and Japan for a long time ahead? Because of its importance for Europe, Japan and our other markets, this is not only of medium-term but of long-term importance to us.
    I rather agree with the hon. Member for West Stirlingshire (Mr. Baxter). I am not sure that the Government have yet made sufficiently clear in this context just how grave the situation is, not only for the United Kingdom but for the Western World generally. The right hon. Gentleman described the worsening balance of payments position, and the Leader of the Liberal Party corrected the impression that the fall-off in our trade with Europe was entirely due to our membership of the Common Market. We are failing to sell our cars in the United States and Canada for the reasons given—because we are not competitive in price, delivery or service.
    But the Secretary of State gave only one half of the picture. He did not refer

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    to what was happening, regardless of the measures taken in the Budget, to the non-oil balance. Am I not correct in thinking that the greater part—possibly as much as two-thirds—of the projected deficit for 1974 is due to come in the first half of the year? This is due not to any measures taken by the present Government but to a trend already established before the General Election.
    The Budget does little to help the balance of payments. The right hon. Gentleman quite rightly talked about export prices and the possibility that we could increase export prices; this is the other side of the element of increased import costs due to the fall in the value of sterling. Export prices were very competitive in 1973. I think I am right in saying that a 10 per cent. increase would have wiped out the whole deficit, including the oil deficit.
    I agree with the right hon. Member for Walsall, North (Mr. Stonehouse) and my hon. Friend the Member for Hitchin that we have to approach the problem of fixing parities with great caution. But there is an implication here that sterling has been slightly undervalued in purely economic terms. Comparing, for example, the last nine months of 1972 with the last nine months of 1973 and the performance of United Kingdom exporters and United States exporters: United States export prices rose after devaluation of the dollar by about 13 per cent.—8 per cent. more than its rate of domestic inflation; United Kingdom export prices in the same period rose only by about 6 per cent., although domestic inflation was running at nearly 9 per cent. though we had a price advantage of anything between 10 per cent. and 20 per cent. Again I ask whether there is any intention of doing anything other than exhortation to take advantage of this situation.
    Of course the Government are right to borrow to cover the deficit. But I share the view of the right hon. Gentleman the Leader of the Liberal Party and that of the hon. Member for Birmingham, Handsworth (Mr. Lee), that we should know a little more about the conditions of the $2,500 million loan which the banks have so successfully negotiated under the guidance of the Chancellor and the Governor of the Bank of England.
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    I should also like to know what intentions, if any, the Government have in regard to the IMF tranche which is open to them of another $3,500 million. In view of what I said about export prices, I should like to know whether the Government have any idea of letting us know anything more about their policies for supporting sterling, which could be critical in trying to establish a greater level of exports at prices which are still competitive, but which get a price advantage, while at the same time helping to reduce our import bill.
    Apart from all this, my main criticism of the Budget is that it does nothing to create new wealth. If anything, it does the reverse. It adds to the problems of investment, and does not in any way help the saver. It does nothing to spread the ownership of wealth more widely, whether in home ownership or in income-producing assets. It does nothing in itself to keep down prices. As far as I can see, the effect of the 1½ per cent. or 1 per cent.—whichever it is—on the RPI of the £500 million food subsidies is more than offset by the increased tax on drink and tobacco, value added tax on petrol, sweets, and so on. The Chancellor's argument that he has avoided triggering the threshold does not hold water, and the Budget does not in any way help investment, savings or developing companies.
    I do not need to add to the arguments that, although I did not hear him, I have no doubt my hon. Friend the Member for The City of London and Westminster, South (Mr. Tugendhat) put with great skill on the problems of smaller companies and companies generally. It is worth remembering that they will have a cash flow problem quite soon. It appears to me silly to increase that cash flow problem by making them pay their corporation tax earlier and to rely, as the Chancellor said, on helping them borrow to cover temporary liquidity problems. Some of their liquidity problems may be more than temporary. This is especially true of unquoted companies and the smaller businesses generally.
    It is worth reminding the Chancellor that of our total employment, leaving aside the approximately one-third of employees who work directly or indirectly for the State, more than half are employed by unquoted companies—the 300,000 active unquoted companies, excluding

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    finance companies—and slightly under half are employed by the 9,000 companies whose shares are quoted on the Stock Exchange. The state of these companies is therefore of concern not only to their proprietors but to their employees.
    I add one word of warning to the Chancellor—given a long time ago by his right hon. Friend the Chancellor of the Duchy of Lancaster—not to kill the goose that lays the golden eggs. His right hon. Friend put it rather more elegantly. He said:
    "There is no fruitful source of revenue…from those who add to their capital by developing industrial and business enterprises. These latter are a tempting target but the temptation must be firmly resisted"—
    I am afraid that the Chancellor has not resisted it—
    "because of the seriously damaging effects of reducing significantly the incentive to invest in and develop enterprises."
    That is more elegant than "kill the goose that lays the golden egg", but it expresses my view exactly.
    The same applies to industry generally. I agree with hon. Gentlemen who suggest that reducing the level of investment income which attracts the lower rate of tax to £1,000 is a little mean. The Chancellor has to accept that there are two things that can be done to a cow—it can be killed, or it can be milked. What cannot be done is to continue killing and eating it.
    Again the Chancellor of the Duchy of Lancaster put it a little more elegantly when he said:
    "There are limits to the amount of redistribution you can achieve by your tax system compatible with a successful mixed economy and a parliamentary democracy. You cannot leave capital in private hands, and deprive its owners of substantial incentives to deploy it wisely. This is a recipe for getting the worst of all worlds. You cannot spur on the owner of capital to enterprise by offering profits from which your tax system prevents him benefiting."
    This is what the Chancellor is doing—not only on the industrial sector, but on a personal sector. He is doing the reverse some of his hon. Friends did long ago, and many Members of the Liberal Party supported me in my efforts in what was called the wider share ownership movement.
    Mr. Arthur Lewis: Where are they?
    Mr. Macmillan: He has done nothing to help co-partnership or profit sharing. He has disallowed interest as a charge against income for tax purposes. I am not necessarily quarrelling with that, but did he have to include stock options? If he had to include stock options for executives, did he have to include the employees' own-as-you-earn scheme? Did he have to deprive all work people of the opportunity of a tax-assisted purchasing of the shares of their company?
    I hope that he will pay great heed to those of my hon. and right hon. Friends and those from the Liberal benches who have appealed on behalf of those people who have overdrafts for purely business purposes, whether they be small businesses, small shopkeepers or farmers. Many people in that position have a considerable amount of investment, which is of no value to them for taxation purposes unless they disinvest. They cannot carry a heavy burden of taxation without selling out, but the nature of their businesses is such that they cannot sell part of it. One cannot sell part of a farm without destroying the whole farming operation. A small company or small shop has no shares which it can put on the market. I think, therefore, that the Chancellor must take great care in this matter.
    The Chancellor is to be congratulated on recognising that soaking the rich may be attractive for other reasons but that it does not produce any money to help payment for the plans and the developments which he would wish to see. In order to get the money that he requires to reduce the borrowing requirement and for increased public expenditure, he is relying on two major aids. First, there is the £1,300 million which my right hon. Friend the Member for Altrincham and Sale (Mr. Barber) removed from public expenditure against strong opposition and criticism from the then Opposition in December last. The Chancellor is getting it, secondly, from soaking those people—be they wage-earners or salary-earners—who in the old days, when he was in Opposition, he used to call the meritocracy.
    This may be right and it may be necessary, but it does not itself deal with inflation, nor will it in any way affect the nature of wage claims coming forward. The whole of the Chancellor's policy to

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    contain inflation is relying on what he calls the social contract that he has made with the unions, and which the unions call a compact rather than a contract. It is in that difference of wording that I fear that his plans may come unstuck. We have seen the extent to which ASLEF has paid attention to it. Many of us heard Mr. Scanlon saying on television that he would proceed with the claim for the engineers, which dates back to August 1973, on the same basis as before. He said,
    "What we have said to previous Governments we are saying to this Government."
    He said that he wanted a settlement by 15th April or else the overtime embargo would start. For future claims he made it clear that he must feel free to act, as he should, in protection of his members, taking into account what the Budget and other legislation does.
    I hope that my fears are unfounded and that the Chancellor's incomes policy will stick. But if my fears are not unfounded and if they come about, the Government are in for a very difficult time and, much worse, so is the country.
    9.30 p.m.
    The Paymaster-General (Mr. Edmund Dell): In making my maiden speech as a Treasury Minister, may I congratulate four hon. Members who have today made their maiden speeches? First my hon. Friend the Member for Ormskirk (Mr. Kilroy-Silk), a fellow Merseyside Member, in a very eloquent and moving speech referred to the deplorable deficiency in assistance to children with congenital heart disorders. My hon. Friend was a little afraid that this might not be relevant to a Budget debate, but I assure him that almost everything has relevance to a Budget debate, especially when it involves public expenditure.
    I should like to join with the hon. Member for Pudsey (Mr. Shaw) in paying a well-deserved tribute to the staff of the House for the help they give to new Members. He made a witty speech, which the House enjoyed. He also quoted Thomas Hobbes. I like quoting Thomas Hobbes. I recently published a book on the relationships of Government and industry, and I found that the most appropriate way of ending it was to quote Thomas Hobbes.
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    Unfortunately I missed the speech of the hon. Member for Wolverhampton, South-West (Mr. Budgen), but I am told that he spoke of the way that inflation can redistribute wealth in favour of the rich. I agree with him. I hope that that is a point which all members of the community will bear in mind.
    Then there was the hon. Member for Hitchin (Mr. Stewart). I heard only part of his speech but I understand that again it was a very fine maiden speech and that the House will certainly be looking forward to hearing him again.
    With one exception, I shall leave tax matters to be dealt with tomorrow night by my hon. Friend the Chief Secretary to the Treasury. He will deal with such matters more expertly than I can.
    My right hon. Friend the Chancellor said in his Budget Statement that he received a variety of advice before his Budget, and he has received a variety of criticism since. The Budget is the beginning of a change of direction for the United Kingdom. It is three weeks' worth of beginning, and it has been a productive three weeks. I hope that the Opposition will forgive us if, during our period of office, we are not guided exclusively by their advice.
    Much has been made of the uncertainties of the present economic situation, but there are some certainties too. The hon. Member for Harwich (Mr. Ridsdale) referred to some of them, and I hope he will not think I am taking the party political battle too far by mentioning some of the certainties in the present situation. For example, there is the fact that, despite the previous Government's policy, there has not been an increase in the underlying rate of growth of the British economy over the past three and a half years. There is also the fact that we have a serious balance of payments deficit which, as my right hon. Friend the Secretary of State for Trade explained, is not simply because of the oil situation—nor is it simply because of growth.
    I am frequently mystified by the emphasis which the Leader of the Opposition always places on the proposition that no economy can grow unless it runs into deficit. What about the export-led growth which has been the objective—admittedly' not a successful one—of successive Governments?

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    There are also the low level of investment which we have inherited, the rate of inflation and the rate of expansion of money supply, which has interested many Opposition Members. There is also the fact that as we take over the government of the country we find ourselves in a far more vulnerable position than our competitors in the face of the new crisis confronting the industrial world as a result of the oil price increases.
    To meet this crisis situation it is necessary that burdens should be borne. My right hon. Friend the Chancellor of the Exchequer repeatedly emphasised this during the election campaign. Price rises must affect the standard of living of the British people, and the question is how the resultant burdens can most fairly be borne. This is one of the objectives to which the Budget is devoted. It is a point which the previous Government did not understand and, judging from the attack on food subsidies by the Shadow Chancellor, they still do not understand it.
    Despite the assistance which this Government wishes to give to the less-well-off, and primarily to the less-well-off, the Shadow Chancellor evidently feels that food subsidies should not have been introduced. He said that the Budget was true to Labour form and that Labour Governments increase taxes whereas Conservative Governments reduce them. I believe, however, that Conservative Governments leave the country with serious balance of payments deficits, which are worse each time they leave office, and Labour Governments have to rescue the country from the consequences of those deficits.
    If the first step often has to be an increase in taxes, it is an inevitable result of the situation which we inherit on taking office. It would have been interesting to have heard from the right hon. Gentleman whether a Conservative Government, if still in power, would have reduced taxes or would have taken no action on taxes in the existing situation. If the answer had been that they would have taken no tax action I do not think the country would have believed it, because one of the reasons for the result of the General Election was that it was widely thought that it was being held prior to the next Conservative Budget.
    The determining factors in our Budget have been the uncertainty as to the pres-
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    ent balance of demand in the economy and the uncertainty as to present forecasts. Therefore, there is my right hon. Friend's decision to have a planned review at "half term" or whenever it is necessary. The previous Chancellor, whenever he made one of his Budget Statements, said that he would not hesitate to take whatever action was necessary. I think that my right hon. Friend might be prepared to use the same words, except that he has planned an occasion on which he will take any actions that are necessary.
    The second point was my right hon. Friend's decision to introduce a broadly neutral Budget. The third was the decision to move steadily, not violently, to a better balance of payments and to finance the deficit by borrowing—in other words, to avoid deflation—and the fourth was the decision substantially to cut the public sector borrowing requirement. Finally, the most fundamental decision in the Budget was the decision to begin the process of redistribution of wealth and income.
    The hon. Member for Pudsey and my right hon. Friend the Member for Walsall North (Mr. Stonehouse) discussed the problem of the building societies. The hon. Member for Pudsey particularly regretted the competition which National Savings might represent to income to the building societies in the present situation. Even now, after the increases, the terms which my right hon. Friend announced yesterday are only broadly comparable with building society rates. The hon. Gentleman should also remember that one has to have one's money in National Savings for some time before one achieves those rates. We do not therefore believe that this improvement in the terms of National Savings will have the serious effects that the hon. Member expects.
    However, my right hon. Friend listed various ways in which the Budget would help the building societies. He confessed that the total of this might well fall short of what it is now necessary to do to assist them. This is a matter which, as the House knows, we are considering at the moment.
    I should like to add one comment to what my right hon. Friend said on the subject of guaranteed income bonds. According to one unofficial estimate, funds amounting to as much as £1,000 million

    583
    have been attracted into these bonds over the past year. Much of this money would probably have been invested, or remained invested, with the building societies. The building societies, in their discussions with me before the Budget, certainly attached great importance to closing this loophole. My right hon. Friend has now done this. As the House knows, my right hon. Friend the Secretary of State for the Environment will be seeing the Building Societies Association tomorrow and I should like to express here the hope that the societies will study carefully what my right hon. Friend has already done in the Budget to assist them.
    I should like to refer to some remarks of the Leader of the Opposition yesterday about the North Sea oil situation.
    Mr. Arthur Lewis: Before he leaves the subject of the building societies, does not my right hon. Friend intend to give us some information about the dangerous situation which might arise in regard to the probable increase of the mortgage rate? He will recollect that I have written and spoken to him about a suggestion which might help in this situation. Will the Government do something on these lines?
    Mr. Dell: I express my gratitude to my hon. Friend for his proposal. My right hon. Friend the Secretary of State for the Environment will be seeing the building societies' representatives tomorrow morning. We are considering what the Government should do.
    The Leader of the Opposition imagined—admittedly just after hearing what my right hon. Friend said about North Sea oil—that we had accepted the decisions made by the previous Government about what it was appropriate to do. We are in some difficulty because we do not know what the decisions made by the then Government were. The normal processes of secrecy concealed that from us.
    Before the election I wrote to the former Chancellor of the Exchequer and the then Minister for Energy to ask what their decisions were on North Sea oil so that the country should have the opportunity of considering them. Their replies were that after the election a Conservative Government would do whatever was necessary. I remain in ignorance of the decisions that were made by the previous
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    Government. I suspect that they had not made very many. Therefore, it is not open to us to accept them.
    It is our firm intention to get a proper return for the United Kingdom from North Sea oil. There are two main aspects to the problem, and both were reported on by the now famous report of the Public Accounts Committee. The first is the tax loss situation arising from current and accumulated tax losses and capital allowances which might arise as a claim against North Sea oil profits from activities that might be irrelevant to the North Sea. I should be altogether fair and remind the House that the Financial Secretary of the previous Government gave one Government decision last December in the debate on the Public Accounts Committee's report. When dealing with tax losses the Public Accounts Committee pointed out that it did not suffice to cover the existing situation, and even since that report there has been a vast increase in oil prices.
    The second aspect is of much wider significance than the problem of dealing with tax losses—namely, how to rectify the situation created by past licensing policy, especially the licensing decisions of 1971. The result of those decisions is that enormous profits could be made at current oil prices. We believe that we should not rush forward with proposals on tax losses, which is only one aspect of the situation, before we have given consideration to the wider questions.
    I understand that the Opposition will require decisions on these matters before too long. However, we intend to review the whole problem of the Government's take from the North Sea in all its aspects, including future licences and existing licences. We shall engage in the consultations that are necessary to do that. We shall ensure that nothing is lost by our taking a little time to get the matter right once and for all.
    I now turn to the problem of investment and the fall in investment, which was the main part of the attack today by the right hon. Member for Carshalton (Mr. Carr). It is always difficult to forecast what the level of investment is likely to be. The right hon. Gentleman will know that paragraph 35 of the Financial Statement says:
    "Private sector fixed investment may be a little lower this year than it was in 1973.

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    Within the total, investment by manufacturing industry is forecast to rise though not to the full extent suggested by intentions enquiries taken at the end of last year".
    Our investment level has long been unsatisfactory. It is no use producing oversimplified answers to the problem. It was never so unsatisfactory as under the previous Government. That fact in itself shows the difficulties. After all, what greater encouragement, so the Opposition may think, could exist for investment than the existence of a Conservative Government together with the massive incentives which were introduced by that Government, with which my right hon. Friend has not interfered? Despite that, the level of investment under the previous Government continued to be poor and, indeed, fell. Under a private enterprise system a Government cannot guarantee the level of investment.
    The CBI issued a statement last night in which it said that the Budget was all right in its effect on demand as the Chancellor had taken the advice of the CBI—actually in that respect it was not the advice of the CBI alone—but that the Budget discouraged investment. If the Budget is all right on demand, why should it discourage investment? The steady growth of demand, especially export demand—it is a very profitable demand at present—should encourage investment. The 2½ per cent. rate of growth which is forecast in the Financial Statement is, after all, well up to the post-war average.
    There seem to be two possible answers to the question "Why in a state of adequate demand, according to the CBI, should the CBI and the right hon. Gentleman consider that this Budget will harm investment?" One possible reason is the lack of profit and the other might be the lack of liquidity.
    First, a squeeze on profits is an inevitable result of a counter-inflationary policy, but it was agreed by Tory right hon. Members that that was necessary, just as it is agreed by my right hon. Friend that it is necessary. It could well turn out, though the information is not yet available, that the greatest squeeze on profits that has occurred is the squeeze on profits due to the three-day working week; and that was an unnecessary squeeze on profits.
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    I do not believe that the difference between a rate of corporation tax of 52 per cent. as compared with the 50 per cent. which was expected will make much difference when account is taken of the massive incentive to investment that exists in this country, far greater than exists in any other country. If there are profitable projects, investment should be forthcoming.
    The second argument is that of lack of liquidity. There is reference to lack of liquidity created, perhaps, by the employers' contribution to the national insurance fund and by the advance corporation tax surcharge. The advance corporation tax surcharge does not increase tax liability. Indeed it may encourage retentions, as indeed does dividend restraint, and it may therefore make available more money for investment if there are profitable projects. I wonder how many chairmen of companies over the last year have said that but for the fact of dividend restraint their distribution would have been greater. They now have an alternative if they wish to avoid the surcharge on advance corporation tax. Surely there is still money available for good profitable projects.
    If one effect of a decline in liquidity is that the replacement of stocks will be kept to an efficient minimum, that would be a good result. The value of stocks in the economy is about half a year's output, and this stock-to-output ratio is higher here than it is abroad.
    Mr. Stonehouse: Before my right hon. Friend leaves the point about investment, will he acknowledge that the third reason is that the high rate of interest payable to banks—17 per cent. or more—is a grave disincentive to companies to invest in development, because it is not easy for a new investment to produce a higher return than that?
    Mr. Dell: I agree with my right hon. Friend that that certainly can be a disincentive to investment. On the other hand, what I am discussing is the effect of the Budget on the prospects for investment. The rate of interest was, unfortunately, a pre-existing fact with which we have to deal. Further, company liquidity was very high at the end of 1973 and so far it seems to be holding up very well. It is, therefore, not

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    at all clear that companies will find earlier payment of taxes a real problem.
    In any case, what other proposals would the Opposition have for dealing with the public sector borrowing requirement? I accept that we will have to watch company liquidity, because the general high level does not mean that all companies are in the same position. That is a fact to which my right hon. Friend referred in his Budget Statement. We shall have to watch the effect on investment, but I emphasise that industry has a home market sustained by a neutral demand effect Budget and it has an export market that should be profitable. If I may say so in passing, the CBI might be ill advised to encourage the Government too far in the direction of intervention to sustain investment.
    Mr. Cyril Smith: Does the right hon. Gentleman understand the difference between the liquidity of big business and the liquidity of small business in terms of having to pay corporation tax in advance?
    Mr. Dell: Yes. If the hon. Gentleman had been listening to me while he was preparing his intervention, he would have noticed that I was making exactly that point. Because I was making that point, I said that it was an aspect of the question which the Government would certainly have to consider.
    The right hon. Member for Carshalton asked about the effect of the Budget on the retail price index. He asked specific questions and made his own calculations. I will tell him about our calculations of the overall effect of the Budget on the retail price index. Changes in indirect taxes will raise the retail price index by an estimated 1¾ per cent. but this will be largely offset by food subsidies which will reduce the index by an estimated 1½ per cent. Taking account of non-budgetary matters, nationalised industry price rises, which are largely needed to cover cost increases which have already occurred, will eventually cause the index to rise by an estimated 2 per cent. The rent freeze will reduce the index by ¾ per cent. All these are approximate figures.
    On that basis the net effect would eventually be a rise in the index of an estimated 1½ per cent. There will also be
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    some effect on prices due to the increase in employers' national insurance contributions. The net increase, however, can be ascribed to the increase in price of less essential products—alcoholic drinks, tobacco, confectionery and petrol for private motoring.
    The nationalised industries' price increases take effect over a period, and by the end of the year we estimate that the effect on the retail price index might be in the region of 2 per cent. Even with these price increases the Government will be subsidising those industries to the tune of £500 million a year. Without these price increases the deficits of the industries would not have been reduced by £900 million as they have been. That would have had an effect on the public sector borrowing requirement, which has its own inflationary effect which would have had to be offset by other methods.
    I think that on reflection the right hon. Gentleman will confess that the overall effect of the Budget on the retail price index is as favourable as it could be.
    Mr. Carr: I think I now understand the figures aright. The right hon. Gentleman must surely still be admitting that the net effect of the Budget is to increase the retail price index to a significant extent. I do not understand why, if the Chancellor knew those figures, he did not tell us. In that event nobody would have misled the House.
    Mr. Dell: I do not think that anyone misled the House.
    The question is how to deal with an inflationary position. It is an absurdity for the Opposition to say to the Government that it is in any sense counterinflationary to allow nationalised industries to accumulate vast deficits and take no action. That is a policy that would have been bitterly criticised by the Opposition had we adopted it. What we have done is the only thing we could do. We have allowed the price increases to take place over a period so that the effect of them can be absorbed while we maintain the sort of subsidy on nationalised industry prices which the Opposition were contemplating when they were in office.
    The Budget has the characteristic of dealing with the inflationary effects of past policies by means of subsidies on

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    food prices, a rent freeze and a reduction in the public sector borrowing requirement. But ultimately inflation, which is not entirely or perhaps even mainly an economic fact but is a political fact, will have to be dealt with by political means in the light of a Budget dedicated to creating a fairer society.
    The Budget has two main aspects, one social and the other economic. It seeks to be both just and economically relevant. In terms of social justice—and hon. Members in various parts of the House may take different views about what the phrase means but we have a definite view about it—we have made a significant contribution by means of this Budget. We have concentrated in the Budget on the three priorities that we announced in the General Election: pensions, housing and food. In addition, we have removed 1,500,000 people from income tax.
    I believe that it is about time something radical was done about inequalities to bring about fairness in our community. Too many people are living in our society with too many privileges—privileges of leisure, wealth and position. There is too little evidence that industry, which complains greatly about egalitarian Budgets, provides a career open to the talented. And there is too little evidence that the system of private ownership, as it operates in this country, can open a career to the talented. We are a society that is too divided by class. Class is too great a determinant in respect of social privilege and personal as well as economic prospects. That is what this Budget is dedicated to rectify. It is a beginning, but it is a valid beginning which the great majority of people in this country will willingly support.
    Debate adjourned.—[Mr. James Hamilton.]
    Debate to be resumed tomorrow.

    STATUTORY INSTRUMENTS
    Ordered,
    That Mr Ronald Bell, Mr Denzil Davies, and Mr. Paul B. Rose be discharged from the Committee appointed to join with a Committee of the Lords on Statutory Instruments; and that Mr. John Lee, Mr. Robert Redmond, and Mr. Peter Snape be added.—[Mr. James Hamilton.]

    ADJOURNMENT
    Motion made, and Question proposed, That this House do now adjourn.—[Mr. James Hamilton.]

    POULTRY (EEC DIRECTIVE)
    10.0 p.m.
    Mr. Bryant Godman Irvine: I am glad that the House has this opportunity to consider EEC directive 71/118 which deals with the future of the trade in fresh, processed, uneviscerated poultry. I had not given very great consideration to this matter until I began to receive communications on the subject from my constituents. Some of these communications were written in their own handwriting, but others came to me on small printed forms. If I receive a small printed form torn from another document, I do not tend to pay as much attention to it as I do to a letter that is handwritten by a constituent. I selected one of the letters I received from a constituent, written in his own handwriting, to send to the Minister when asking for the Department's views about the EEC directive—a directive agreed by the EEC before we joined the Community, to come into force in February 1976. I received a reply which I forwarded to my constituent, and I should like to put his reactions to the Minister.
    To put the matter in perspective, I should like to quote from the explanation which I was given by the Department:
    The Directive, which had already been accepted by the Community when we joined … requires poultry to be slaughtered on approved premises and to be subject to ante-and post-mortem inspection by inspectors working under the supervision of an official veterinarian. Each bird must he eviscerated immediately after slaughter so that post-mortem inspection can include examination of the viscera for disease conditions which would indicate that the meat was unfit for human consumption. This requirement, as it stands at present, means that fresh uneviscerated poultry should not be sold after February 1976, apart from sales made direct from a farm to a consumer. It will not, however, deprive the housewife of her freedom of choice between fresh and frozen birds as it will not mean an end to fresh poultry sales. Several big multiples sell fresh eviscerated poultry at the moment and there is no reason why this trade should not be carried on by any retailer who is able to hold the birds under chilled (not frozen) conditions until sale".
    That was contained in the information which I passed on to one of my constituents who wrote to me about the letter which I had received from the Ministry. He said:
    "In your covering note of 17th January you say you hope it will be reassuring and

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    that it will appear to be quite reasonable. To the comparatively small producer of fresh poultry (we sold some 46,000 to local shops in this way last year), and I believe to the small shop retailer also, it is so far from being either that it is difficult to see how anyone without an interest in ending this sort of trade can believe it to be so … To begin with, inspection—the benefits of which are in any case highly dubious—the mere mechanics of 100 per cent. pre- and post-mortem inspection would drive us out of business. To achieve our constant supply of fresh killed birds to our customers we normally pluck on three mornings a week but when demand is high do so at other times at short notice. It is certain that no inspector would be available for this length of time for our small production unless permanently attached to our staff: no doubt the industry will be expected to bear the cost which would be prohibitive. As to immediate evisceration, I have always supposed it to be incontrovertible that (a) a drawn bird does not keep as well as a whole one and (b) that this practice detracts considerably from the flavour. It seems that officialdom is only now, reluctantly, recognising the truth of the former and is, I suppose quite uninterested in the latter."
    I have taken up these points with the best expert I know in these matters, who is my wife. She tells me that both points are absolutely valid and that if a chicken is dealt with in both those ways precisely the results that my constituent has alleged follow.
    That is one reason why I want to put the matter directly to the Minister so that we may have a considered view from him.
    Mr. Robert Redmond: I had this same problem brought to my notice by a constituent some months ago, and I was not satisfied with the reply that I. received from the Ministry of Agriculture. I took it up with my hon. Friend the Member for Derbyshire. West (Mr. Scott-Hopkins), who is a member of the European Parliament. He sent me a very satisfactory answer saying that we had won that one and that the whole thing had been put back seven years.
    Mr. Bryant Godman Irvine: I hope that I receive as satisfactory an answer tonight. Until now, I had approached only the Ministry, and I have been quoting the advice that I received. If we have won it, the sooner that the Minister says so the better it will be for us all.
    I have also made a point of discussing the matter with the national organisations and with various other members of
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    the trade in my constituency, and they take a similar view.
    My constituent continues, in his letter:
    "That local butchers are certain of this is evident from those who have come to us for fresh birds since the largest local producer took to supplying only ready-drawn ones. Those who have done so have told me that far too many of these birds are slightly 'off' when they get them and most of my customers say that if this directive is enforced they will deal only in frozen poultry.
    It is also quite certain that in this neighbourhood the housewives are not going to accept willingly the story that these birds are comparable with those they can buy now. The suggestion that genuine fresh birds will still be obtainable at the farm gate is ludicrous. A producer will not remain in business for this trade only and the average town housewife would not be able to get there if he did.
    It seems unlikely that many small shops will or could install the capacity to chill perhaps 250 turkeys at Christmas as it would be idle for most of the year.
    To those with a commonsense (perhaps you would say old-fashioned) attitude to health problems, the whole exercise stinks of the bureaucrat's lust for interference and addiction to empire building, his allies no doubt being those who look forward to a profitable monopoly in the trade.
    Both I and my customers are perfectly capable of recognising a bird which should not be sold; the exception to this, of course, is the million-to-one-against chance of salmonella."
    He goes on to say that that requires looking into in a laboratory. He also says that, although he is a supporter of the European Community, if this interference goes on he will not be able to continue with that view.
    In view of the advice that I have received from the two sources I have mentioned, I thought it prudent to obtain the Minister's view on this matter. I should be obliged if he would confirm or deny whether what my hon. Friend the Member for Bolton, West (Mr. Redmond) has put forward is the position in the Community.
    Mr. David Mitchell rose—
    Mr. Speaker: Order. I should like to restate what I said the other day about Adjournment debates. These are debates in which an hon. Member must have adequate time to raise a particular matter and the Minister must have adequate time to reply. If any other hon. Member wishes to intervene, he must arrange with

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    the hon. Member raising the subject and the Minister, and, indeed, the Chair, that there will be time for him. Because I saw the hon. Member for Basingstoke (Mr. Mitchell) taking notes and looking as though he was about to make a speech, I ascertained from the Minister that he wants only ten minutes in which to reply. Therefore, I will call the hon. Member. However, this is a matter which should be arranged not by the Chair but by hon. Members concerned. Mr. David Mitchell.
    Mr. Bryant Godman Irvine: On a point of order, Mr. Speaker. It might be of assistance if I mention that my hon. Friend the Member for Basingstoke (Mr. Mitchell) asked me whether he could have about half a minute.
    Mr. Speaker: I shall be very surprised if the hon. Member confines himself to half a minute. He did not say anything to the Minister or to me about it. I am not trying to be difficult, but it is much easier if we know beforehand who wishes to speak and for how long and whether there will be time for the Minister to reply.
    10.10 p.m.
    Mr. David Mitchell: I am grateful to you, Mr. Speaker, for your advice. I apologise if I accidentally, but wholly unintentionally, trespass across the traditions in this respect.
    I am a supporter of our membership of the Common Market. I have always viewed it as a means of expanding our trade in a broad way and not one in which there was in any sense any detailed bureaucratic interference.
    My hon. Friend the Member for Rye (Mr. Irvine) has done a service to the House tonight in drawing attention to this matter. I hope that the Minister will be able to give the assurance we are seeking.
    The kind of detailed bureaucratic interference which I should think would be wholly repugnant to you, Mr. Speaker, and to hon. Members generally is when the Common Market interferes in patterns of national taste and traditional methods of choosing types of food or the slaughter of animals or fowls for food, or whatever it may be of that nature, which are specific to this country and have traditionally belonged to us for many centuries.
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    The suggestion in the proposed Common Market regulations for ante and post-mortem inspection, including inspection of the guts of the bird by a veterinary inspector, seems to me to be just the sort of detailed interference which will bring to an end the fresh poultry trade as we know it in this country, unless the Minister goes to Brussels to speak up for the poultry producers—because they have drawn it to our attention—and, much more, for the consumers of this type of product in this country.
    It would be extremely unfortunate if fresh-killed poultry—one thinks particularly of the Christmas turkey—were to become a thing of the past and we all had to eat frozen birds and the like. I, therefore, join with my hon. Friend in thanking you, Mr. Speaker, for allowing me to intervene briefly in this debate to impress upon the Minister the need for him either to give the assurances which have been asked for tonight or to go to Brussels and to make representations which enable him to come back within a relatively short time and give those assurances to the House.
    10.13 p.m.
    The Parliamentary Secretary to the Minister of Agriculture, Fisheries and Food (Mr. Roland Moyle): I join the hon. Member for Basingstoke (Mr. Mitchell) in thanking the hon. Member for Rye (Mr. Irvine) for the service that he has done the House in raising this matter tonight, because it is of concern to a number of people in this country as, indeed, the forays of the bureaucracy in Brussels often are these days.
    I should like to say to the hon. Member for Bolton, West (Mr. Redmond), that the enthusiasm of the hon. Member for Derbyshire, West (Mr. Scott-Hopkins) for the European Parliament or for his own oratory carried him away to some extent. Nothing is ever decided at the European Parliament, and the issue raised by the hon. Member for Rye remains open for consideration and decision. To that extent, I take the hon. Gentleman immediately out of his state of suspense by saying that I am unable to resolve the matter here tonight, other than as the hon. Member for Basingstoke suggested, namely, that I, or someone in my Department, should go to Brussels to discuss the problem with the Commission.

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    I should like to give some of the background and history to the problem and some factors on both sides which are likely to affect a decision, so that those concerned will have an idea of what is happening. First, for example in the case of red meat in this country, we have had 100 per cent. post-mortem inspection for a long time. The inspections are operated by local authorities under a system in which all red meat has had to be produced in slaughterhouses for which detailed standards of construction and hygiene are prescribed. In addition, the meat then slaughtered is inspected by qualified inspectors.
    I need hardly say that this inspection involves examination of the viscera—"innards" would perhaps be a more readily understood description. There is no such thing as "New York dressed" or "clean plucked beef", terms often applied to uneviscerated poultry of various kinds. All these requirements are covered by the Food and Drugs Act.
    At present there are no such detailed requirements for poultry meat in this country. There are requirements in general food hygiene regulations, but there is no specific requirement for inspection and evisceration in respect of poultry as there is in respect of red meat. Over recent years the poultry industry has grown considerably. The present situation was totally defensible when the poultry trade was a luxury trade. Now, however, chicken in particular and most poultry are a common form of diet in Britain. As the industry has grown, some people have increasingly held the view that more detailed controls are needed during slaughter of the birds.
    This was the position at the time we joined the Common Market a year ago last January. When we joined, most of the six countries had developed a system of poultry meat hygiene and inspection. Therefore, it is not particularly surprising that when we joined the European Community it already had in operation a directive which was created in 1971—Directive 71/118 for those who like to collect these bureaucratic details. The directive came into operation for trade between Community countries from February 1973—for the original Six, not for Great Britain—and it is due to apply to the domestic trade within the boun-
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    daries of each country from February 1976. The hon. Gentleman was right in his timing.
    I wish to make two points without prejudice to the question of the application of the directive in this country. I am seeking to clarify the issues involved, not to create controversy. First—it is becoming a well-recognised feature of Community life—the Community's reason for applying the directive to the home market as well as to the market in the various countries of the European Community is the hope that, once universal standards operate throughout the Community, it should be possible for poultry meat to move freely about and for birds bred in this country to be sold in France and vice versa, and, of course, in other parts of the Community. That is the point to which I think the hon. Member for Basingstoke alluded at one stage in his brief intervention.
    The second point is that, whatever we may think about the possible effects of the directive, its basic objective is consumer protection. It is a public health measure designed to ensure that poultry meat is produced and inspected under proper hygienic conditions.
    The difficulty arises in trying to apply this policy. The directive requires that all poultry should be eviscerated immediately after slaughter. Unless the viscera can be examined, an inspector cannot be sure of the health of the bird. That is a reasonable proposition. At least the inspector can be more sure of the health of the bird if he has examined the viscera than if he has not. As the viscera can be a potent source of contamination, it is best on the whole that evisceration should take place under controlled hygienic conditions—not, for example, in a variety of hotel kitchens.
    That brings me to the point of tonight's debate, because if we are to apply this directive fully, and if all poultry are to be eviscerated immediately after slaughter, we cannot continue to market what is known in the trade as "clean-plucked" or "New York dressed" poultry, which are left with the viscera inside.
    There are arguments relating to this matter. First, it has been suggested that the full application of the directive would deprive the housewife of fresh poultry. This is not strictly speaking correct. It

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    would certainly deprive the consumer of fresh uneviscerated poultry. But fresh eviscerated poultry is often sold frozen. There are some firms which market fresh eviscerated poultry and, with modern techniques by which the birds can be held in chilled conditions, this form of marketing will probably grow.
    Mr. David Mitchell: Is the Minister saying that a frozen bird is the same as a fresh bird if it has only recently been frozen? I do not think that a housewife would recognise that similarity.
    Mr. Moyle: No, I am not saying that they are the same, but they have characteristics in common. It would be incorrect to say specifically that the consumer will be deprived of fresh uneviscerated poultry, as has sometimes been said, for the reasons I have given.
    Second, it has been said that a fresh bird with the viscera left in it can be less of a health hazard than a frozen bird. That is a second argument often advanced. If there is contamination and the bird is not completely thawed out before cooking, the argument is that any contamination introduced at the time of slaughter, or before, may persist. There is not sufficient statistical information available about outbreaks of food poisoning induced by eviscerated and uneviscerated birds for one to be able to refute that argument. However, as I said earlier, in order fully to inspect poultry it seems to me that an inspector needs to examine the viscera—he would have a much better idea of the health of the bird if he did so—and second, it is better for poultry to be eviscerated under controlled hygienic conditions.
    Third, it has been argued that the apparatus of control which the directive proposes to set up is ineffective because one of the bigger risks at present is from salmonellosis which cannot be detected by visual inspection in a slaughterhouse. I am not a vet, but I am advised that there are conditions of salmonellosis which can be detected by examination of the viscera—there are lesions on the viscera which can be detected by a medically-qualified person.
    It is true, however, that the ideal method of controlling salmonellosis is, as it were, at source on the farm, and the attainment of this ideal is still a long way off. None the less, the fact that
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    salmonellosis cannot always be detected in slaughterhouses is not a reason for not seeking a high standard of hygiene and poultry meat inspection in those slaughterhouses.
    I have attempted to deal with some of the arguments both for and against the directive which the Common Market has adopted. I now turn to the main issue, that is, the continuation in this country of the trade in "New York dressed" or "clean-plucked" poultry, about which the hon. Member for Rye is concerned.
    Basically, the problem is simple enough. As members of the European Community, we are required to conform in due course to Directive 71/118, which requires the establishment of a veterinary supervised poultry meat inspection service. Indeed, as the poultry meat industry has expanded it has become increasingly clear that there may be a need for more detailed regulation of it.
    If we impose the full conditions set out in the directive, the ultimate result will be that we shall have to ban the production and sale of poultry with the viscera left in them. The clean plucked poultry trade as we know it will come to an end, and this will have two consequences. First, as has already been pointed out, there will be some denial of consumer choice for those who like their poultry prepared and hung in this way. This is particularly true, at Christmas time, of the turkey trade.
    Secondly, a number of producers and traders, particularly small traders, who deal in this kind of poultry will either have to go out of business or, if they can, transfer to the production and sale of oven-ready poultry. Here I confirm what the hon. Gentleman said, that sales of uneviscerated poultry directly at the farm gate to the consumer by the farmer will continue unaffected.
    The issue really comes to this: how far should we go in applying the directive if in so doing we shall have to abolish the production of a particular product and deny some consumers the kind of poultry to which they have become accustomed? There are arguments for and against the issue, as hon. Members will realise.
    The previous Government had already made representations to Brussels about

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    this matter. It may be this to which the hon. Member for Bolton, West was referring when he mentioned the intervention of his hon. Friend the Member for Derbyshire, West. However, I dealt with that while the hon. Gentleman was discussing certain matters through the Chair.
    They were seeking a derogation from the requirements of the directive, in so far as clean plucked poultry are concerned, for a period of years beyond February 1976. Hon. Members will, I am sure, understand when I say that in the short period in which we have been in office we have not had time fully to examine the issue, or to open discussions on it.
    Before finally deciding his policy, my right hon. Friend the Minister of Agriculture, Fisheries and Food will consider the problem in detail and discuss it with the industry concerned, so that he will be fully briefed on all the various issues and views of the industry. I hope that will be some encouragement to hon. Members who have their constituents interests so much at heart. It is not a simple matter.
    In the meantime, officials of the Ministry will continue the representations that they have been making in Brussels. The debate here tonight has been helpful in
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    illuminating the various facets of the problem.
    Mr. Bryant Godman Irvine: The Minister has dealt with a number of aspects of the matter, but one on which he has not touched is the fact that a comparatively small producer, such as the one I have been speaking about, who is plucking birds on only three mornings a week, will not be able to have an inspector on those three mornings, so he will be put out of business. Will the Minister bear that in mind when these representations are made?
    Mr. Moyle: Yes, indeed, Those considerations most certainly will be borne in mind, and it is because we expect to receive representations of that sort that my right hon. Friend is making arrangements to see the trade. I can assure the hon. Member that that sort of problem will be seriously borne in mind before any decision seriously affecting the future of the people in this country is reached.
    I thank the hon. Member for Rye for raising the matter and assure him that the points that he raised will be fully and seriously considered by the Government before any decision is reached.
    Question put and agreed to.
    Adjourned accordingly at twenty-eight minutes past Ten o'clock.