Commons Sitting of 10 February 1975

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

    Sugar (Conditional Sales)
    Mr. Whiteheadasked the Secretary of State for Prices and Consumer Protection how many complaints of sugar purchases being restricted to those who buy a minimum of £1 worth of other goods have been received by her Department and if she will make a statement.
    Mr. McCrindleasked the Secretary of State for Prices and Consumer Protection what representations she has received on the subject of supermarkets only being prepared to supply goods in short supply, subject to the purchase of a minimum amount or value of other goods.
    The Minister of State, Department of Prices and Consumer Protection (Mr. Alan Williams): The 680 complaints about conditional sales which have been received since last July have all concerned sugar. About half quoted £1 as the minimum sum to be spent on other goods in order to obtain sugar. This practice is not illegal but I again urge that it should be applied with care to avoid unnecessary hardship.
    Mr. Whitehead: I thank my hon. Friend for that reply. Does he feel that he is speaking strongly enough to the stores concerned about this practice, bearing in mind the fact that the new sugar agreement which the Government have negotiated makes it less likely that supplies have to be restricted in this way? Is he aware that old-age pensioners especially are suffering from this restriction levied on them by the stores?
    Mr. Alan Williams: As my hon. Friend has said, it is less likely that this sort of practice will be needed in the future. I notice that many stores seem to have stopped the practice now. My right hon. Friend the Secretary of State for Prices and Consumer Protection, in advice to the trade, indicated that it was essential that it should take account of the needs of pensioners, those on low incomes and, where possible, regular customers. However, with mass supermarkets it is not always possible to identify the regular customer.
    Mr. Teddy Taylor: Does the Minister agree that, although restriction is clumsy and unfair, there is nothing wrong with a shop trying to ensure that regular customers receive supplies of sugar which are short?
    Mr. Alan Williams: This is the practical quandary. I am sure most hon. Members will recognise that shops wanting to be fair find themselves faced with individuals sometimes shopping around buying as much sugar as they can, and going back to the same store again and again. Perhaps it is a great pity that the practice of hoarding has been given the stamp of approval by the Conservative Party.

    European Economic Community
    Mr. Mike Thomasasked the Secretary of State for Prices and Consumer Protection what effect her Department estimates Great Britain's membership of the EEC has had on prices and on the other consumer matters for which her Department is responsible.
    The Secretary of State for Prices and Consumer Protection (Mrs. Shirley Williams): While it is difficult to estimate the total effect of EEC membership on prices, prices of imported industrial goods from both the EEC and other parts of the world will be less because of reductions in tariffs; food prides are also at present slightly below what they would have been had we not been members. Community work on consumer protection is at an early stage, but I very much welcome the Commission's recent Programme for Consumer Protection and Information.
    Mr. Thomas: Will my right hon. Friend state her view whether the flexibility shown by our European partners in these matters will enable us to meet the manifesto commitment on them?
    Mrs. Shirley Williams: My hon. Friend will appreciate that there are still outstanding matters being negotiated and that we are anxious to see the common agricultural policy more flexible on such matters as direct national payments for agriculture and the variable beef premium. It is encouraging that in such matters as sugar and beef the EEC shows a degree of flexibility which I do not think it showed a year ago.
    Mr. Hurd: Will the Secretary of State give us an up-to-date indication of the main foodstuffs which are now cheaper because we are in the EEC than they would be if we kicked ourselves out?
    Mrs. Shirley Williams: I ask the hon. Gentleman to await a further Question on the Order Paper which deals precisely with that point.

    Retail Price Index
    Mr. Rostasked the Secretary of State for Prices and Consumer Protection what is the current rate of price increases, based upon the last three months of the retail price index grossed up to an annual rate.
    Mr. Tebbitasked the Secretary of State for Prices and Consumer Protection what she estimates the annual rate of increase in the detail price index now to be.
    Mr. Macfarlaneasked the Secretary of State for Prices and Consumer Protection what has been the increase in the cost of living since February 1974
    Mr. Tim Rentonasked the Secretary of State for Prices and Consumer Protection what is her latest estimate for the rise in the cost of living during the past 12 months.
    Mrs. Shirley Williams: The retail price index rose by 19·1 per cent. in the 12 months to December 1974 and the increase over the three months to December, expressed at an annual rate, was 25·2 per cent. Since February 1974 the actual increase was 14·9 per cent.
    Mr. Rost: Are the Government trying to fool the country by pretending they can stem the tide of inflation by indiscriminate food subsidies when this additional Government spending is simply adding to the pressures of inflation?
    Mrs. Shirley Williams: The Government are not trying to fool anybody. From the beginning we pointed out what subsidies could do and what they could not do. Nevertheless it is true that subsidies have reduced the food index by six points, and in consequence the food index in the whole of this year has not yet reached the levels that it reached when the

    5
    last Conservative administration left office.
    Mr. MacFarlane: Is not the right hon. Lady disappointed by the figures which she has quoted in view of what was promised to the electorate before the 1974 election?
    Mrs. Shirley Williams: The promises which we made have been carried out. They include such matters as maximum price orders, food subsidies and display requirements. All are being introduced on to the statute book. I am, however, disappointed by a rate of inflation which is as high as 20 per cent. a year. The factors involved in that, as the hon. Gentleman will know, include such matters as the level of the value of sterling, the recent very sharp increase in some food raw materials, especially sugar, and, as my right hon. Friends the Secretary of State for Employment and the Chancellor of the Exchequer have made clear, our considerable concern about the level of at least a minority of the income and wage settlements being made. But this is not entirely due to those who are within the social contract. Some of the highest settlements are being proposed by professional groups and others outside it.
    Mr. Gow: On the basis of the figure of 25·2 per cent. being the rate of inflation over the past three months, will the right hon. Lady say what the rate of inflation would have been had there been no food subsidies?
    Mrs. Shirley Williams: I have said already that the rate of inflation over the RPI generally would have been between 1½ and 2 per cent. higher. The food index would have been 6·.8 per cent. higher. The 25·2 per cent. figure is misleading because it is based on a 13-week and not a 12-week period, which is the normal period.
    Mr. George Rodgers: Is my right hon. Friend aware that there is considerable confusion amongst housewives about what are genuine prices? Is there a problem in recruiting qualified staff in the weights and measures departments of the responsible authority?
    Mrs. Shirley Williams: There is a problem here, and my hon. Friend will agree, I am sure, that this is one reason why the Government want to make as widely available as possible both comparisons
    6
    of prices and full display of maximum prices where these apply. We are anxious to involve the housewife in supporting trading standards officers in bringing this about.
    Mr. Mike Thomas: Is my right hon. Friend aware that an important component in the retail prices index, especially for pensioners, is the price of fuel? Although my right hon. Friend's Department appears to have the food situation under control, there is considerable doubt whether the price of fuel is to be controlled properly.
    Mrs. Shirley Williams: My hon. Friend will be aware of the efforts being made by the Government to try to restructure tariffs so as to assist the small and less-well-off consumer. Incidentally, this is the first time that that has been undertaken by a Government in respect of the nationalised industries.
    Mrs. Sally Oppenheim: As the right hon. Lady's prognostications about the rate of inflation have been somewhat variable, volatile and subject to seasonal fluctuations, will she now say what she expects the rate of inflation to be over the coming 12 months, what the main contributing factors are likely to be and how long it will be before a packet of crisps costs £10 if claim settlements at the rate of the present miners' settlement are allowed?
    Mrs. Shirley Williams: If I were unwise enough to enter the hypothetical stakes suggested by the hon. Lady, I might have to put in for the leadership of a party different from my own.
    Mr. Powell: Has not the rate of inflation something to do with the borrowing requirement in respect of State expenditure in this and previous years?
    Mrs. Shirley Williams: The right hon. Gentleman is right in saying that one of the inflationary factors is the public sector borrowing requirement. However, I have always made it clear that food subsidies are offset almost entirely by the increased taxation introduced in the April 1974 Budget.

    Sugar Prices
    Mrs. Millie Millerasked the Secretary of State for Prices and Consumer Protection if she will take steps to ensure that the Price Commission takes into

    7
    account the increased profits of the sugar industry in determining the price of sugar to the housewife.
    Mrs. Wiseasked the Secretary of State for Prices and Consumer Protection if she will ask the Price Commission to take into account the increased profits of the sugar industry when considering retail sugar prices.
    Mr. Alan Williams: This happens already. The net profit margins of the sugar refiners on their operations in the United Kingdom, though not their overseas operations, are limited by the Price Code in the same way as those of other enterprises. They are always taken into account by the Price Commission when an increase in the price of sugar is notified. Both the cane-refining companies have recently reported substantially reduced profits on their United Kingdom refining interests.
    Mrs. Miller: Will my hon Friend bear in mind that, although home profits have reduced because of the sugar shortage last year, the advertisement of the record profits that Mr. Cube made last year list those who benefit as including the Government, the economy, investors and the industry's employees and partners? Bearing in mind the level of these profits, would not it be a good idea if the consumers benefited also?
    Mr. Alan Williams: I understand my hen. Friend's reaction to the advertisement. Frankly, I thought that in the present context, whatever its managerial justification, it lacked a certain sensitivity. But we must be fair and make it clear that the sugar refiners have co-operated fully with the Government during this period of shortage and have been very careful not to exploit the situation.
    Mr. Giles Shaw: Is the hon. Gentleman aware that, when the Minister of Agriculture, Fisheries and Food made his statement on his return from Brussels, he said that there would be no retail price rise as a result of his sugar agreement? Is he aware, further, that the 48 per cent. of raw sugar which is used in food manufacturing and drinks will find its way into retail prices, and can he indicate what will be the rise in the food index as a result of the sugar agreement?
    Mr. Alan Williams: The ultimate price of sugar will depend on the mix of sources of supply and the balance of supply between the various sources. Until we have a clearer picture of the proportions in which the sugar will come from the different sources, it is impossible to predict whether the price will be stable or variable.
    Mr. Jim Spicer: Can the hon. Gentleman add a little to what he said about the price factor on sugar? The Minister of Agriculture said that there would be an equalising factor coming in from the sugar purchased through the EEC and subsidised by the EEC. What will that be in terms of a price saving to the housewife on a 2-lb bag?
    Mr. Alan Williams: It is not possible to quantify in that way. The equalisation scheme is operating at the moment because sugar is obtained from different sources at widely differing prices. To avoid vast increases in price on shop shelves, with the co-operation of the industry we introduced the equalisation scheme. The exact level at which the equalisation figure pitches depends on the ultimate proportions of supplies from the different suppliers.

    Price Increases
    Sir A. Meyerasked the Secretary of State for Prices and Consumer Protection by how much food prices have increased in the United Kingdom since 1st January 1973; and what proportion of this figure can be attributed to membership of the EEC.
    Mrs. Shirley Williams: The food price index rose by 37·4 per cent. between January 1973 and December 1974. Latest official estimates indicate that food prices are, on balance, very slightly lower than they would have been were we not members of the Community. But the further we get from the date of entry into the Community, the harder it is to calculate what food prices would have been if we had stayed out.
    Sir A. Meyer: Will the right hon. Lady say whether any items of food which are imported from the EEC have been subjected to the kind of almost extortionate increases to which certain imports of food from other quarters have been subject?
    Mrs. Shirley Williams: The most dramatic increases in prices have been in fuel and sugar, and there are no such dramatic increases which can be associated with the EEC countries. Nevertheless, broadly speaking, it is still true that butter, cheese and Iamb from New Zealand are cheaper than they are from EEC sources whereas, largely because of the monetary compensatory amounts, wheat, beef and sugar are now less expensive from EEC sources than from outside.
    Mr. Teddy Taylor: Although that answer is very encouraging, does the right hon. Lady agree that world prices come down easier than Common Market prices?
    Mrs. Shirley Williams: It is difficult to predict what will be the pattern of world prices in the next year or so. Obviously there is more volatility in world prices, upwards and downwards, because they are not subject to the kind of regime that the common agricultural policy involves.

    Food Prices
    Mr. Blakerasked the Secretary of State for Prices and Consumer Protection whether, further to the answer on 27th November 1974 [col. 190], she is able to give examples in terms of items bought by the average housewife of the specific saving involved in the costs of cereals, beef, butter and sugar as a result of British Membership of the EEC.
    Mr. George Gardinerasked the Secretary of State for Prices and Consumer Protection whether she can now give examples, in terms of items bought by the average housewife, of the specific saving in the cost of cereals, beef, butter and sugar as a result of British membership of the EEC.
    The Under-Secretary of State for Prices and Consumer Protection (Mr. Robert Maclennan): The commodities mentioned benefit from EEC measures such as monetary compensatory amounts on imports and Community-financed subsidies. As a number of qualifications have to be made about the calculation, I will, with permission, circulate the information in the Official Report.
    Mr. Blaker: Is the Minister aware of the forecast made at the recent World
    10
    Food Conference, by the Secretary-General of the United Nations and by the Food and Agriculture Organisation, of a continuing shortage of world food? If those forecasts are justified, does not this mean that there will be continuing advantages to us both in terms of supply and in terms of price from membership of the Community?
    Mr. Maclennan: My right hon. Friends have made plain that changes in the pattern of production and demand in the world market make it more important for us to be self-sufficient in the production of food.
    Mr. Spriggs: Is my hon. Friend aware that Britain's entry into the Common Market has affected most of our Commonwealth markets? Will he give his mind to the increased prices which have resulted from our leaving the Commonwealth market and joining the EEC?
    Mr. Maclennan: We are aware of that. My hon. Friend will also be aware that New Zealand has not been able to make full provision for our cheese requirements which we negotiated with the EEC, and that some of our difficulties with sugar stem from the attractiveness of the world market to the African, Caribbean and Pacific countries.
    Mr. Hurd: Will not the hon. Gentleman assure his hon. Friend the Member for St. Helens (Mr. Spriggs) that our problem with sugar and other commodities in recent months has often been the inability of our former Commonwealth suppliers to supply us, and that we should have been in a very poor position if sugar had not been made available to us under the Lardinois plan?
    Mr. Maclennan: That is the point which I have just made to my hon. Friend.
    Following is the information:
    Possible United Kingdom consumer benefits on certain foodstuffs from monetary compensatory amounts on imports and from community financed subsidies during the week 3rd-9th February 1975.
    1. Bread

    (a) MCAs are paid on imports of wheat from the EEC and third countries (mainly USA and Canada) and are currently worth £6·93 per ton. Assuming that the UK bread grist is now about 55 per cent. imported wheat the mca subsidy is

    11
    equivalent to about 0·3 per large loaf (28 ounces).

    (b) Until recently, levies on EEC wheat exports to third countries have meant that the UK was able to import EEC wheat cheaper than if she were outside the EEC Export levies are not at this point in time being charged and so no consumer benefit is now assumed.

    2. Beef

    (a) A social beef subsidy is now payable to virtually all pensioners in the form of a token, worth 20p a week, which can be redeemed for beef and veal. The precise value of this subsidy in terms of beef prices therefore depends upon the quality and quantity of beef purchased.

    (b) MCAs are now payable on imports from the EEC and on imports under the GATT levy free quota. The amount varies considerably according to the form in which it is imported. But for imports of fresh or chilled carcase beef (and other bone-in cuts), which is a typical form of imports at present, the mca amounts to f125·02 per ton or about 5p per lb on imported beef only. It would be misleading to spread this benefit over all beef sold in the shops, including home produced.

    3. Butter

    (a) The general consumer subsidy on butter is paid in part by FEOGA, and this portion is worth £25·33 per ton, equivalent to about 1p per lb.

    (b) The mca which is paid on imports is now worth between f8885 per ton (80 per cent. fat) and 01·08 per ton (82 per cent. fat) This is equivalent to about 4p per lb.

    4. Sugar

    (a) The United Kingdom is benefiting from an EEC scheme to import sugar from world markets with the aid of a FEOGA subsidy. In the first tranche of 200,000 metric tons of raw sugar the United Kingdom is expected to receive 155,500 metric tons, and the subsidy on this to average £224·9 per ton (white). This is equivalent to a saving of about 20p per 2 lb bag on just over 3 weeks' total United Kingdom supplies. Total EEC imports of a further 300,000 metric tons have been agreed in princple, but tenders have not yet been accepted by the EEC and therefore the benefits cannot be assessed.

    (b) MCAs are payable on our imports from EEC countries. These now amount to £18·78 per ton for raw sugar and £22·14 per ton for white sugar. This subsidy is equivalent to about 2p per 2 lb bag.

    Mr. Martenasked the Secretary of State for Prices and Consumer Protection if she will list the items of food which are cheaper outside the EEC than inside.
    Mr. Alan Williams: I would refer the hon. Member to the reply given by my
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    right hon. Friend the Secretary of State for Trade on 23rd January 1975 to my right hon. Friend the Member for Battersea, North (Mr. Jay).—[Vol. 884, c. 484]
    Mr. Marten: Is it not true that since then grain prices have dropped and are dropping seriously? May we have the hon. Gentleman's views on that matter?
    Mr. Alan Williams: I congratulate the hon. Gentleman on his keen sense of timing in getting here to ask his Question.
    Mr. Marten: I have been dealing with the leadership election.
    Mr. Alan Williams: I am surprised that the hon. Gentleman does not think he has been deciding it. He should also take into account in his estimate monetary compensatory amounts.
    Mr. William Hamilton: In terms of food prices has any calculation been made of whether we would be better off outside or inside the Common Market?
    Mr. Alan Williams: I refer my hon. Friend to the earlier reply to which I referred because it gives a considerable amount of detail on the breakdown of prices. He will, however, appreciate that prices vary considerably according to quality and grading and harvest factors.
    Mr. Grimond: I understand the dangers of doing what is proposed and the difficulties of timing, but is it the Government's intention, nearer the time of the referendum, to give the public any information about prices inside and outside the Common Market?
    Mr. Alan Williams: I should have thought that the Government's intention was to give the maximum possible information so that the discussions and deliberations could be as well informed as possible.

    Cosmetics
    Mrs. Joyce Butlerasked the Secretary of State for Prices and Consumer Protection if she will make a study of the Bill which the French Health Minister is proposing to introduce to tighten controls on cosmetics, including a declaration of ingredients, with a view to introducing similar legislation; and if she will make a statement.
    Mr. Alan Williams: I am aware of the proposed French legislation. It is my intention to make regulations relating to the safety of cosmetic products on sale in this country, and their preparation will begin as soon as the proposed EEC directive on cosmetics, now under consideration by the Council of Ministers, is adopted.
    Mrs. Butler: Will my hon. Friend say whether the French proposals come within the scope of the EEC cosmetics directive or go beyond it? Will his proposed regulations include a declaration of ingredients, as consumers here are anxious to have that information?
    Mr. Alan Williams: The directive is not yet finalised. My understanding is that the French legislation is intended to implement the general purposes of the directive. I am looking at the possibility of requiring notification of ingredients even if we do not go as far as requiring the full ingredients to be listed on the label.
    Miss Fookes: I welcome the Minister's pronouncements on ingredients, but will he also take the opportunity of investigating the quantities in which cosmetics are sold, as that is a vexed and long-standing problem?
    Mr. Alan Williams: Yes.

    Inflation
    Mr. Alleyasked the Secretary of State for Prices and Consumer Protection what is the annual rate of inflation based on the Price Commission's index for the last three months.
    Mr. Neubertasked the Secretary of State for Prices and Consumer Protection what have been the main factors responsible for the increase in the Price Corn-mission's index since October.
    Mrs. Shirley Williams: The Price Commission's index for the latest available period, which is 1st September to 30th November 1974, showed an annual rate of 191 per cent. The upward swing reflects, as the Price Commission said in its report, increases throughout the energy sector, especially for oil, and rising costs of wages and salaries in all sectors. Revision of these prices is comparatively in frequent and the combined effect of these
    14
    increases may have exaggerated the upward movement.
    Mr. Adley: May I remind the right hon. Lady of the remark of her right hon. Friend the Chancellor of the Exchequer during the election that the rate of inflation as a result of his splendid achievements had been brought down to 8·4 per cent.? Was the Chancellor fabricating that statement, or is the right hon. Lady now saying that, in spite of the achievements by the Chancellor of the Exchequer and his colleagues, since then the situation has got totally out of control under the guidance of the Government?
    Mrs. Shirley Williams: The hon. Gentleman would be unwise to follow that path too far. In the winter of 1973–74 the rate of increase in inflation according to the Price Commission's index was not the 19½ per cent. of today but 23 per cent. It fell to 16 per cent. in the spring and to 9½ per cent. in the summer, which is the period to which my right hon. Friend was referring. There is no doubt that the fall had taken place by the summer and that my right hon. Friend was basing what he said directly on the statistics available to the Price Commission.
    Mr. Neubert: Does the right hon. Lady agree with the Price Commission that any hope of avoiding massive price increases has been swept away by the rising tide of higher wages? Does not this underline the ultimate futility of maintaining price control while abolishing the Pay Board? Does not the right hon. Lady agree that unless she can persuade her colleagues to control the massive explosion in wages she and her Department might just as well pack up and go home?
    Mrs. Shirley Williams: The Price Commission did not say what the hon. Gentleman has attributed to it. First, the commission said that inflation was increasingly coming within our control and it asked us to draw lessons from that. Secondly, the Secretary of the Trades Union Congress, Mr. Murray, has specifically urged upon his fellow trade unionists and those who are not trade unionists the need to follow very closely the guidance given under the social contract. Thirdly, as the hon. Gentleman will be aware, about three-quarters of trade unionists are settling within the social contract and not

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    all the pressure for breaking it comes from trade unions.
    Mr. Whitehead: Would it not be easier for the Government to continue their persuasive efforts to contain inflation if over the Christmas period they had not sanctioned increases in top salaries.
    Mrs. Shirley Williams: That is a matter primarily for my right hon. Friend the Secretary of State for Employment.
    Mr. Tebbit: The right hon. Lady scouted around the Chancellor's statement at the General Election about the 8·4 per cent., but the Chancellor also said that he thought we could contain inflation and get it down to a level of 10 per cent. per anum by the end of this year. The right hon. Lady will not give an estimate. How can those who are trying to stick to the social contract pitch their wage claims to take account of forthcoming inflation, as they are allowed to do, unless she makes an estimate of what it will be?
    Mrs. Shirley Williams: The hon. Gentleman has got himself into a tangle. First, I repeated exactly the figures that were available to the Price Commission and the Government, which are close to those quoted by my right hon. Friend after the summer when he made his statement. Secondly, the TUC's guidelines ask those who settle to have regard to the previous rate of increase and not to a prospective rate of increase. That was once again underlined by Mr. Murray in his advice to the trade unions only a few days ago. If that were done, we should be in a fairly strong position to achieve a decline in the rate of inflation.
    Mr. Tomlinson: Does my right hon. Friend agree that many of us are getting fed up with Opposition Members who, while apparently concerned about inflation, are taking every opportunity to knock the social contract, particularly when in the week before last, those hon. Members went through the Lobby to take a decision which will force up the public borrowing requirement and thereby stimulate the inflation about which they are allegedly concerned?
    Mrs. Shirley Williams: I support what my hon. Friend says. It is not notable that the Opposition condemn the pressure for settlement far outside the social con
    16
    tract from the professions and others whom they obviously do not regard as being bound by the battle against inflation.
    Mr. Tom King: Is the right hon. Lady aware that she seems to be in conflict not only with the Chancellor of the Exchequer but with the Prime Minister? What did she mean by saying that some wage claims were being made by people who were outside the social contract? The Prime Minister said that all useful people were within the social contract.
    Mrs. Shirley Williams: With respect. I said that this did not apply only to those trade unionists who regarded themselves as bound by the social contract. It applies to professionals and others outside the original TUC settlement.
    Mr. Ronald Atkins: Will my right hon. Friend consider the formulation of a specialised price index based on the cost of living of the lower income group?
    Mrs. Shirley Williams: My hon. Friend will be aware that there is already an index which deals with pensioners' expenditure, and we are exploring whether there should be further indices of this kind.
    Mr. Raison: Will the right hon. Lady acknowledge that the rate of inflation during the period she has covered is over twice the figure in the previous year? Will she indicate what rate of inflation she expects next year? The Government have just published their public expenditure figures for the February subsidy and they show that the Government must have thought hard about the inflation rate. What does the Secretary of State expect it to be?
    Mrs. Shirley Williams: I find the hon. Gentleman's remark most extraordinary, because last January the food index was running at 19·5 per cent., in February it was 20 per cent., and according to the Price Commission's own commentary it was running at 23 per cent. last winter. Therefore, I do not follow the hon. Gentleman's point.

    Food Mixer Demonstration Company
    Mr. David Watkinsasked the Secretary of State for Prices and Consumer

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    Protection if she will refer to the Director of Public Prosecutions the activities of a company, whose name has been supplied to her, in demonstrating food mixers, taking customers' money and not delivering.
    Mr. Alan Williams: I understand that the company is now in voluntary liquidation. Under the provisions of Section 334 of the Companies Act 1948, the liquidator is required to report to the Director of Public Prosecutions if it appears to him that criminal offences have occurred in relation to the company. My right hon. Friend the Secretary of State for Trade also proposes to make certain inquiries under the provisions of the Companies Act.
    Mr. Watkins: I am grateful to my hon. Friend for that answer. Is he aware that over the last year a large number of people have lost a lot of money as a result of the activities of this company? Is he also aware that there is evidence to suggest that the company's representatives have continued their activities in seeking to obtain money after the company was known to be failing?
    Mr. Alan Williams: I am aware that a great many people have lost money or are in danger of losing money as a result of the activities of this company. However, in view of the nature of the inquiries which are now taking place I believe that it would be inappropriate for me to say more.

    Prices (Voluntary Agreement)
    Mrs. Sally Oppenheimasked the Secretary of State for Prices and Consumer Protection by how much the items in the voluntary agreement taken both collectively and individually, have risen since the agreement was made.
    Mr. Maclennan: The collective price of the goods in the voluntary agreement increased by 4·9 per cent. between May and December 1974, the latest month for which figures are available. This compares with a rise in the retail price index of 8·6 per cent. With permission, I will provide detailed information on individual commodities in the Official Report.
    Mrs. Oppenheim: Will the Minister say how widespread is the departmental monitoring of these figures and why his answer conflicts so sharply with the
    18
    evidence in the Grocer in January—namely, that promotional offers in relation to the items on the right hon. Lady's list of goods which may be on continuous offer at all times were curtailed by 30 per cent. and that 15 items advertised by the Co-op the day after the announcement of "Shirley's special price offers" were found to be on sale in a Co-op during the weekend at 28 per cent. more?
    Mr. Maclennan: The hon. Lady should be satisfied that the voluntary agreement is being monitored most carefully by my Department. We are basing the matter on a calculation of price indices and the monitoring of the promotional material that is available to us. The hon. Lady should also realise that resources for the agreement were provided largely by the 10 per cent. cut in gross margin reference levels. While we are not endeavouring to seek price stability over the entire front, we are endeavouring to concentrate on cutting reference levels for items of particular importance. We believe that this is effectively being achieved.
    Mr. Mike Thomas: Is the Minister aware that those of us who are involved in the co-operative movement condemn the sort of instance purported to be put forward by the hon. Member for Gloucester (Mrs. Oppenheim) as the true state of affairs? The hon. Lady cannot have the argument both ways. She cannot on the one hand claim that her friends in the distributive trades are maintaining the agreement and on the other hand attack the Government for the failure of the agreement.
    Mr. Maclennan: It is curious that the Opposition have never given full-hearted support to the voluntary agreement—an agreement which the trade has been anxious to support.
    Mr. Giles Shaw: Will the Minister agree that since there has been a 4·6 per cent. price increase through the voluntary agreement against an increase of 8·6 per cent. in the Price Code, the Government should abandon the Price Code and stick by the voluntary agreement?
    Mr. Maclennan: I suggest that the hon. Gentleman can have put forward that view only in a spirit of levity. However, the voluntary agreement comes to an end at the end of March, and we shall be

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    considering whether it is the most appropriate method of seeking to concentrate benefits on the shopping baskets of housewives. [HON. MEMBERS: "Oh."] If the Opposition have other methods in mind, I have no doubt that we shall consider them very carefully.
    Mr. Michael Morris: Is the Minister honestly saying that the statement in the Grocer to which my hon. Friend the Member for Gloucester (Mrs. Oppenheim) drew attention was totally erroneous?
    Mr. Maclennan: I made no such suggestion.
    Mr. Gow: Is the Minister aware that no charge of levity could ever be raised against him?
    Following is the information:
    VOLUNTARY AGREEMENT
    Pecenrage changes in Price Indices

    A RETAILERS' LIST

    ITEM—COVERAGE MAY DIFFER FROM AGREEMENT ITEMS IN SOME MINOR RESPECTS

    Percentage increase May-Dec. 1974

    Bread (per loaf) large white small white

    0·5

    Cheese (cheddar type)

    10·1

    Butter (NZ)

    8·8

    Milk-based infant food (full cream) (per 16 oz. tin)

    14·8

    Self-raising flour (per 3 lb.)

    -2·1

    Apples (dessert)

    7·4

    Bananas

    3·1

    Oranges

    17·4

    Potatoes

    0·1

    Tomatoes

    0·4

    Cabbage

    -35·1

    Cauliflower

    4·0

    Carrots

    8·8

    Onions

    -23·1

    Beef (all cuts home and imported)

    -0·4

    Lamb (cheap cuts home and imported)

    -10·1

    Chicken*

    9·6

    Chicken portions*

    10·5

    Biscuits (sweet lower priced)

    24·9

    Electric light bulbs

    3·8

    Matches

    16·5

    Toilet soap

    15·9

    Toothpaste

    -9·4

    2·4

    INDEX ALL RETAILERS' ITEMS
    *Chickens—Frozen 3 lb. and fresh and chilled 4 lb.
    Chicken portions—using index for frozen 3 lb. chickens.

    B MANUFACTURERS' LIST

    Percentage increase May-Dec. 1974

    Sausages (pork and beef)

    5·6

    Cooking fat and lard (lard price only)

    16·5

    Margarine

    30·8

    Tea (lower and medium priced) (per ¼ lb.)

    -2·8

    Breakfast cereals

    20·5

    Fish fingers

    -0·2

    Frozen peas and beans

    10·8

    Instant coffee (per 4 oz.)

    15·2

    Baby (infant) foods (per jar)

    30·0

    Canned beans in tomato sauce

    10·5

    Canned soup

    26·2

    Food Subsidies
    Mr. Michael Lathamasked the Secretary of State for Prices and Consumer Protection whether she intends to increase expenditure on food subsidies.
    Mrs. Shirley Williams: As I told the House on 30th January, the Government intend to continue the food subsidies programme during the coming year at broadly its present level.
    Mr. Latham: Does the Secretary of State draw any conclusion from an answer given to me last Thursday by the Minister of State, Department of Health and Social Security that even on the most favourable assumption to the Government it would be cheaper to increase pensions, supplementary benefits, family income supplement and family allowances by the exact financial weekly benefit of the food subsidy than to continue with this wasteful subsidy?
    Mrs. Shirley Williams: I wish that the hon. Gentleman had paid us the courtesy of being present for the Second Reading of the Prices Bill, when this matter was discussed at great length.
    Mr. Latham: Oh, yes, I was.
    Mrs. Shirley Williams: If so, he will know that one of the points made was that while the Government have introduced food subsidies they have also increased pensions and supplementary benefits and intend to increase family allowances to boot. In other words, we are doing both these things.
    Mr. Fry: Is the right hon. Lady aware that one of my constituents is very fond of cats, orders 14 pints of milk a week to feed them and is unwillingly being heavily subsidised by the taxpayer? Does not this show how ludicrous the food subsidy is?
    Mrs. Shirley Williams: Perhaps the hon. Gentleman should also tell his constituent that the Conservative Government introduced the subsidy on milk and, therefore, helped her cats long ago.
    Sir B. Rhys Williams: Is the right hon. Lady happy that the Government have abandoned the family endowment programme? Does she not agree that it would have been better to accept the proposal for family allowances for the first child?
    Mrs. Shirley Williams: The hon. Gentleman will be aware that I made clear during the Second Reading of the new Prices Bill that the Government intend to extend family allowances to the first child but that this is a matter which requires a good deal of fresh administration. We see the subsidy programme as being linked to the phasing-in of this new benefit.
    Mrs. Dunwoody: Does my right hon. Friend agree that the Conservatives are displaying a magnificent example of their unawareness of the circumstances of life since they do not realise that it is only by subsidising the staple foods that one helps the families who could be categorised as poor?
    Mrs. Shirley Williams: My hon. Friend will be aware that the take-up of means-tested benefits has not been anything like the entitlement of those whom it is intended to benefit.
    Mr. Raison: Will the right hon. Lady make a start in reducing food subsidies by doing away with the interim bread subsidy which was brought in to pay for a wage settlement?
    Mrs. Shirley Williams: The hon. Gentleman knows that we are awaiting from the Price Commission a full report on various applications made to it, including that based on recent increases in the price of world wheat.
    Mr. Rost: How much of the extra costs of the food subsidy will be printed by the Government, and how much will come out of Government taxation?
    Mrs. Shirley Williams: I hope that we can rely on the hon. Gentleman's support in taking it out of taxation.
    Mr. Gwilym Roberts: Although most Members on the Labour benches readily support the fact that Conservative Members are now calling for allowances for the first child, does not this show that a system of food subsidies is an essential part of the redistributive process in the foreseeable future?
    Mrs. Shirley Williams: My hon. Friend will also recall that over a long period of time the Conservative Government did nothing to increase family allowances and nothing to extend them to the first child.
    Mr. Jim Spicer: Does the right hon. Lady recall that when the Home Secretary recently made a statement about the increase in television licence fees there was a strong request from the Labour benches that old-age pensioners should be subsidised the full amount of that increase? Does she remember that her right hon. Friend made it clear that in the Government's view it was wrong to subsidise people in that blanket fashion and that he proposed that it should be done by increasing old-age pensions and not by acting indirectly? Does not this contradict the argument which is always being advanced about food subsidies?
    Mrs. Shirley Williams: There seems to be some dispute about whether my right hon. Friend the Home Secretary has been directly and correctly reported, but I must point out that the increase in the black-and-white television licence fee is far less than that in the colour television licence fee because most low-income families have access to black-and-white television and not to colour television.
    Mr. Ronald Atkins: Is my right hon. Friend aware of the high indirect subsidies paid on expensive foodstuffs to business men who live on expense accounts?
    Mrs. Shirley Williams: My hon. Friend has raised a very fair point, and I hope that very shortly my right hon. Friend will stop up this food loophole, too.
    Mr. Michael Latham: In view of the unsatisfactory nature of the reply, I beg to give notice that I shall raise the matter on the Adjournment.
    Miss Fookesasked the Secretary of State for Prices and Consumer Protection whether she intends to subsidise any further foodstuffs.
    Mrs. Shirley Williams: I have no plans at present for introducing new subsidy schemes.
    Miss Fookes: Does the right hon. Lady have any programme for reducing the amount of subsidies in view of the burden on the public purse?
    Mrs. Shirley Williams: It has been indicated that under the present subsidy arrangements there will be a slight diminution in the level of subsidies in 1975–76.
    Mr. Gwilym Roberts: Will my right hon. Friend accept with what deep sorrow I heard what she has just said? Does she realise that many of us feel that it is time to consider the extension of subsidies not only to essential foodstuffs but to other essential consumer goods?
    Mrs. Shirley Williams: I have some sympathy with my hon. Friend's remarks, but I can assure him that the diminution will be small.
    Mr. Giles Shaw: Will the right hon. Lady go a little further? I appreciate that in the Prices Bill there is a limit on the amount of money she is seeking, but does she agree that as there has been a reduction in the subsidy element in nationalised industries' prices there should be a comparable reduction in the subsidy element in food prices?
    Mrs. Shirley Williams: It might be argued that the opposite is the case. However, the crucial point about nationalised industries' subsidies is to try to protect the less well off, and that it what the Government are trying to do.
    Mr. Adley: Following the supplementary question asked by the hon. Member for Cannock (Mr. Roberts) about increase
    24
    ing the indiscriminate use of subsidies, may I inform the right hon. Lady that in Lymington there is a tremendous shortage of wide-necked bottles of Heinz tomato ketchup? When will she start to subsidise them?
    Mrs. Shirley Williams: I shall leave it to the Conservative Party, when it comes to office, to do that in the indiscriminate way in which it subsidised all nationalised industry prices.
    Mr. Tom King: The right hon. Lady has said that food subsidies will be met by increases in taxation. Since it is clear that there will be a deficit on the Government's borrowing requirement, how is it that only her subsidies are met by taxation and the increased expenditure of all other Departments is met by the printing of money?
    Mrs. Shirley Williams: The hon. Gentleman would lead me down a long path if I were to pursue that matter too far. However, the nationalised industries' subsidy level, as the Government have made clear, is subject to gradual narrowing as we begin to bring prices up to commercial viability. Secondly, the great bulk of the food subsidy expenditure has been met—not "will be", but "has been"—by the additional income taxation and value added taxation raised in the April 1974 Budget.
    Mr. Raison: If there is a diminution in the amount of food subsidies in 1975–76, why is the Secretary of State asking for a sum of money which will enable her to increase them?
    Mrs. Shirley Williams: The hon. Gentleman will be aware, as he was told during the Second Reading of the Prices Bill, that there will be a slight decline in our proposed expenditure in 1975–76.
    Mr. Gowasked the Secretary of State for Prices and Consumer Protection what is the latest estimate of the cost of food subsidies during the current financial year; and what is the estimated cost for the financial year ending 5th April 1976.
    Mrs. Shirley Williams: The estimated cost in the current financial year is about £510 million. The cost in 1975–76 is expected to be of the order of £550 million—that is in real terms, of course

    25
    —and detailed Estimates will be presented to the House in due course.
    Mr. Gow: Will the right hon. Lady tell the House how she reconciles her previous statement that she hopes to phase out food subsidies with her statement today that she proposes to increase them during the forthcoming financial year?
    Mrs. Shirley Williams: The hon. Gentleman has got it very badly wrong. He should remember that a number of schemes for subsidies were introduced late in the financial year 1974–75. Therefore, we are not talking about a full year when I give him the estimated cost of £510 million. For example, tea was brought in very late in the financial year. The cost of the subsidies in a full year is estimated at £550 million. That does not allow for what changes may be made in the year. Therefore, the hon. Gentleman has based the wrong conclusion on the wrong premises.
    Mr. Edwin Wainwright: Will my right hon. Friend continue to subsidise the staple foods to ensure that the benefit goes to people on low incomes? However, will she bear in mind that the large companies—wholesalers and some retailers—should not be allowed to take advantage of subsidies to the extent that some of them do?
    Mrs. Shirley Williams: It is my intention to do what my hon. Friend suggests in the first part of his supplementary question until there is full compensation through social benefit. I have said that to the House before. Secondly, we have no evidence that any subsidy is going to the benefit of manufacturers or retailers. However, if my hon. Friend has any evidence to the contrary I shall be grateful if he will let us have it and we will then pursue the matter with the utmost determination.

    Maximum Price Notices
    Mr. Sainsburyasked the Secretary of State for Prices and Consumer Protection how many traders have been prosecuted for failure to display notices of maximum prices.
    Mr. Maclennan: I have not been notified of any by the prosecution authorities in the 63 days since the only display
    26
    requirements now in force—those for bread—came into operation.
    Mr. Sainsbury: Is the hon. Gentleman aware that it has been widely held that these notices are confusing to such consumers as read them? Even weights and measures inspectors have found them to be confusing. Therefore, would it not be wise to postpone the introduction into the shops of yet further maximum price orders—butter and cheese orders are due on 17th February—until the matter can be considered during the Committee stage of the Prices Bill?
    Mr. Maclennan: Consumers are entitled to have available to them in every shop complete information about the maximum prices for subsidised foods. Under the present powers this has not been achieved by the public display notices. However, the Prices Bill contains other proposals which will, I think, provide for greater flexibility.
    Mr. Costain: Does the hon. Gentleman appreciate how the regulation is confusing small shopkeepers? Surely he can make a concession to stop them having to exhibit printed notices like marriage banns on the church door.
    Mr. Maclennan: The hon. Gentleman appears to be under a misapprehension. The design of the notices has been subject to discussion with the trade and we have modified greatly the original requirements to allow the sort of informality which I know he would welcome.
    Mr. Stallard: Does my hon. Friend accept that the present situation—in other words, the absence of display notices—is even more confusing to thousands of my constituents who do not know the prices of various goods in shops, and particularly in public houses?
    Mr. Maclennan: My hon. Friend is quite right to express the view that many people would welcome the provision of information of this kind, and the Government are committed by the February manifesto to providing it.
    Mrs. Sally Oppenheim: As the proposed Prices Bill amendment would exempt some shopkeepers from displaying these notices, will the hon. Gentleman give an undertaking that the Government will reimburse small shopkeepers who

    27
    have already been involved in considerable and unnecessary expense?
    Mr. Maclennan: That matter seems appropriate for discussion during the Committee stage of the Prices Bill.

    Firework Casualties
    Mr. James Johnsonasked the Secretary of State for Prices and Consumer Protection if she is now able to issue the firework casualty figures for November 1974; and if she will make a statement.
    Mr. Alan Williams: Statistics based on information provided by hospitals in England and Wales relating to persons who received hospital treatment for injuries caused by fireworks during the period 13th October to 9th November 1974 have just become available. I will, with permission circulate them in the Official Report, with the figures for the comparable periods in the four preceding years.
    Mr. Johnson: While not expecting an answer today, may I have an assurance that as soon as these figures are published the Minister will forthwith have consultative studies and then call a conference of all the bodies and organisations interested, particularly those concerned with the campaign for firework reform?
    Mr. Alan Williams: I have indicated that I am publishing the figures in the Official Report. I am sure that my hon. Friend, whose deep interest in this matter

    FIREWORK INJURIES IN ENGLAND AND WALES (4-week period in October/November)

    Year

    1974

    1973

    1972

    1971

    1970

    TOTAL

    …

    …

    …

    …

    883

    1,186

    1,260

    1,059

    1,164

    PLACE OF ACCIDENT

    1. Family or private party

    …

    267

    385

    441

    382

    433

    2. Public or semi-public party

    137

    153

    166

    139

    155

    3. Casual incident in street etc

    …

    …

    …

    272

    422

    422

    349

    399

    4. Other place

    …

    …

    89

    119

    95

    88

    87

    5. Do not know

    …

    …

    118

    107

    136

    101

    90

    TYPE OF FIREWORK

    1. Banger

    …

    …

    …

    228

    356

    369

    316

    359

    2. Rocket

    …

    …

    …

    70

    118

    129

    126

    160

    3. Jumping Cracker

    …

    42

    58

    51

    47

    46

    4. Other flyabout (flying saucer, helicopter, whirlibird etc.)

    …

    52

    Included in 7

    5. Display Firework (e.g. Roman Candle or Coloured Fires etc.)

    …

    151

    280

    262

    223

    250

    6. Home made or extracted powder

    …

    …

    …

    29

    38

    54

    57

    48

    7. Other

    …

    …

    …

    60

    79

    83

    82

    95

    8. Do not know

    …

    …

    251

    257

    312

    208

    206

    I well understand, will welcome the fact that the injuries figure for last year, the lowest ever, represents a 25 per cent. fall compared with the previous year.
    I have already given a commitment to the House that I will issue a consultative document. I hope to get it out by the end of March. Every group with a special interest and information will have the right to participate in the discussion. I doubt whether a conference as such would be the most appropriate way of dealing with this matter. This is the kind of issue in which the individual details need to be argued in depth.
    Mr. Gwilym Roberts: We greatly welcome the steps being taken by my hon. Friend. However, when this was a matter for the Home Office many of us had hoped to see legislation before another 5th November. I would earnestly point out that my hon. Friend must get cracking if something is to be done before then.
    Mr. Alan Williams: Having the generosity to interpret that as an unintentional pun, I should point out that when my hon. Friend looks at the figures he will find that we were justified in waiting to see them as they may upset certain preconceived positions taken by some individuals. For example, the accident trend with organised firework displays is not as encouraging as the figures generally. Important matters of public interest are involved which merit full public discussion.

    SEVERITY OF INJURY

    1. Died

    …

    …

    …

    0

    0

    0

    1

    0

    2. Detained more than one night

    …

    …

    …

    70

    80

    91

    69

    74

    3. Sufficient to cause absence from work or equivalent

    121

    178

    143

    88

    104

    4. Minor injury

    …

    …

    654

    892

    1,009

    879

    965

    5. Do not know

    …

    …

    38

    36

    17

    22

    21

    AGE GROUP OF INJURED PERSONS

    Over 21

    …

    …

    …

    131

    195

    167

    145

    184

    16–20

    …

    …

    …

    …

    58

    74

    68

    56

    96

    13–15

    …

    …

    …

    …

    184

    248

    257

    210

    226

    Under 13

    …

    …

    …

    510

    669

    768

    648

    658

    SEX OF CASUALTIES

    Male

    …

    …

    …

    …

    713

    966

    1,022

    851

    913

    Female

    …

    …

    …

    170

    219

    235

    203

    251

    Not recorded

    …

    …

    …

    —

    1

    3

    5

    0

    EYE INJURIES

    …

    …

    …

    372

    448

    449

    386

    418

    Agriculture (Price Margins)
    Mr. Grimondasked the Secretary of State for prices and Consumer Protection what progress she has made in her inquiries into the causes of the gap between the retail price of agricultural products such as beef and leather and the prices the farmer receives for cattle and hides.
    Mr. Maclennan: There is no special inquiry concerning agricultural products generally, but the Price Commission's study of the meat industry is continuing. My right hon. Friend has asked that it be given the highest priority.
    Mr. Grimond: I am grateful to the Minister for indicating that the study is continuing. Could it be broadened into a general inquiry into why everything that the farmer has to sell has fallen in price whereas everything that he has to buy has risen in price? Surely this shows the fault in the whole marketing system which farmers' organisations and other would like to see put right, but first we must know why this is so.
    Mr. Maclennan: The Government are consulting the agriculture industry about the current price review. Some of the considerations to which the right hon. Gentleman has given expression will be borne in mind.
    Mr. Jim Spicer: Will the Minister assure the House that he will bring all possible influence on the Minister of Agriculture, Fisheries and Food to support the National Farmers' Union in its drive for marketing boards?
    Mr. Maclennan: I understand that the National Farmers' Union is consulting its membership on a county-by-county basis about its reactions. We shall be interested in the outcome of the inquiries.

  TRADE

    Airline Passengers (Infectious Diseases)
    Mr. Shersbyasked the Secretary of State for Trade if he will set up a departmental inquiry into the circumstances whereby a Sabena airline's passenger reported to have been suffering from Lassa fever was carried from Nigeria to London Airport via Brussels in unrestricted contact with other passengers and to examine what international guidelines exist covering the transportation by commercial airlines of passengers known to be suffering from infectious diseases; and if he will make a statement.
    The Under-Secretary of State for Trade (Mr. Clinton Davis): On 30th January my hon. Friend the Minister of State, Department of Health and Social Security stated that the circumstances of this case had been fully investigated, and indicated that his chief medical officer was examining the issues with a view to minimising any risk.
    The International Air Transport Association has recommended practices in connection with the carriage of sick or infectious persons, and many airlines—including British Airways and British Caledonian Airways—have special internal instructions. The World Health Organisation has recently issued specific

    31
    guidance about the handling of Lassa fever victims and suspects and their transport, where assential. If an airline captain has doubts about a passenger's health, he would normally require medical clearance before accepting him, as I understand was done in the recent case. I shall examine with my hon. Friend the possible scope for further safeguards in this matter, but the real problem seems to lie in diagnosing the infection prior to embarkation.
    Mr. Shersby: Is the Minister aware that the House will be grateful for his reply? Is he also aware that his hon. Friend the Minister of State in his answer to me on 30th January said:
    "To refuse admission to this country to any British person who was unwell and who wished to return to the United Kingdom for treatment from a tropical area would raise very serious issues of principle and practicability."—[Official Report, 30th January 1975; Vol. 885, c. 302.]
    Will he, therefore, consider what steps can be taken to reach international agreement on substantially improved arrangements for transporting passengers by air to this country when they are returning with infectious tropical diseases?
    Mr. Davis: I have already indicated in what was perhaps a rather long answer that IATA has recommended practices relating to the carriage of sick or infectious persons and that the World Health Organisation issued specific guidance about this particular disease some little time ago. Therefore, international action is being taken. I assure the hon. Gentleman that the Government do not view the matter with any degree of complacency.
    Mrs. Dunwoody: Does my hon. Friend accept that, while we sympathise very much with the captain of the aircraft who must have had to take the medical opinion of people at the airport, it is important that these international rules should be enforced, because there is a great likelihood that people who come into contact with Lassa fever will not only take the infection themselves but spread it widely? Will he, therefore, ensure that the airlines concerned take special precautions when they know that these regulations exist?
    Mr. Davis: My hon. Friend must realise that all responsible airlines take this matter most seriously. There is no evidence to suggest the contrary. The difficulty with this particular disease is its diagnosis. I am advised that it is very difficult to diagnose the disease and that there is at present only one organisation in the world, in Atlanta, Georgia, which has the facilities to carry out the necessary analyses that make diagnosis possible.
    Mr. Higgins: Is the Minister aware that there is widespread concern about this issue and that recommendations and guidance may not be sufficient? Will he consider whether regulations should be introduced? Would not the ICAO have a rôle to play in this direction?
    Mr. Davis: If additional regulations might be of help, we will consider the matter. However, as I indicated to my hon. Friend the Member for Crewe (Mrs. Dunwoody), the difficulty lies not in having regulations but in having effective diagnosis. This is most difficult with a rare disease, as this one is.

  INDUSTRY

    Shipbuilding (Public Ownership)
    Mr. Willeyasked the Secretary of State for Industry when he proposes to publish the White Paper on the public ownership of the shipbuilding industry.
    The Under-Secretary of State for Industry (Mr. Michael Meacher): It will not be possible to publish a White Paper in the time available, but a full statement on the Government's proposals will be made as soon as possible.
    Mr. Willey: I welcome the news that there will not be a White Paper, because both those in favour of and those against the proposed legislation are anxious that it should be introduced as soon as possible. Does my hon. Friend appreciate that some shipbuilders feel that their prospective plans are prejudiced until the publication of the Bill? Will he therefore do his utmost to ensure that the legislation is expedited?
    Mr. Meacher: I am grateful for my right hon. Friend's remarks. We are conscious that the Shipbuilders and Repairers

    33
    National Association has made clear that it accepts in principle the fact of nationalisation and is anxious to ensure the best possible organisation. We shall certainly hope to co-operate closely with the association to secure that result.
    Mr. Dodsworth: Will the Minister ensure that in any statement which is made the greatest possible care will be given to alternative forms of calculation of any compensation, bearing in mind the alternatives of valuing on a net asset basis, and earnings basis or share price value? These are extremely important considerations in ensuring fairness in any announcement which is made.
    Mr. Meacher: I am well aware of the point being made by the hon. Gentleman and of the fact that there are these alternative bases for the calculation of compensation. He will understand that I cannot at this stage indicate precisely what the form of compensation will be, otherwise there may be a good deal of undesirable speculation.
    Mr. Blenkinsop: Will my hon. Friend accept that the shorter the period of uncertainty the better, and that the sooner we get the Bill the happier we shall all be?
    Mr. Meacher: I am glad to assure my hon. Friend that we propose to bring in the Bill with the minimum delay.
    Mr. Viggers: Is the hon. Gentleman aware that a large number of overseas customers for ships being built in this country will be reluctant to purchase from a company which is owned by the State and that loss of orders will mean the loss of jobs? What is the hon. Gentleman going to do about that?
    Mr. Meacher: I do not believe there is any evidence that foreign ship owners will be unwilling to purchase from United Kingdom shipyards. What they will be concerned about will be the quality of the product, price and delivery date, and in all those we hope to produce improvements.
    Mr. Mike Thomas: Is my hon. Friend aware that concern about this matter is as great on the Tyne as on the Wear? We do not share the prejudices and fears of Conservative Members about this matter. We want to get it expedited for the benefit of both workers and management.
    Mr. Meacher: I can only again emphasise to my hon. Friend that it is our intention to introduce the Bill at the earliest possible moment. I am sure it will produce the kind of security and support that is wanted for workers at Swan Hunter as at other shipyards in the United Kingdom.
    Mr. Teddy Taylor: Can the hon. Gentleman say what possible advantage can accrue to the nation by nationalising the ship repairing industry, and precisely how I can explain to my constituents in Glasgow that the Government apparently have millions of pounds to spare to nationalise industry at the same time as they have reduced the school building programme by £30 million for the current year?
    Mr. Meacher: The PA Consultants' report of last year indicated considerable weaknesses in the performance of the ship repairing industry. In particular it drew attention to low investment, poor labour relations and the need for a new dry dock. Furthermore, the report indicated that the magnitude of the demand for new resources to ensure that this industry performs as well as possible was unlikely to be met from private sources.
    Mr. Eldon Griffiths: The hon. Gentleman is well known for his rash public statements. Can he confirm what he said, namely, that the shipbuilding industry accepts nationalisation in principle, when it must be well known to him that Vosper Thorneycroft and Swan Hunter do not? Would he like to comment on that?
    The hon. Gentleman having, as an exponent of open Government, said that there will be no White Paper, will he make sure that his further statement—which we shall all welcome—covers those matters not covered in the consultative document on the aircraft industry—namely, how much it will cost, whether it fits in with our obligations to the European Economic Community, and why he thinks it will produce a single extra ship or sell a single extra ship on foreign markets?
    Mr. Meacher: The hon. Gentleman has asked at least half a dozen questions. The answer to his first question is that the SRNA has told us that it accepts nationalisation as a fact of life and is

    35
    anxious to achieve the kind of organisation that will be most suitable. I assure the hon. Gentleman that the workers in the industry, who in terms of numbers form a great deal more than half of it, are satisfied and wish to press on with nationalisation as soon as possible.
    I have already indicated that because of speculation it is not possible at this stage to make clear the basis on which compensation will operate. We intend to introduce the Bill at the earliest possible opportunity.
    There is no question of any conflict with the EEC. There is nothing in the Treaty of Rome which prevents the nationalisation of industries.
    Several Hon. Members rose—
    Mr. Speaker: We are not going to debate these matters today.
    Mr. Eldon Griffiths: On a point of order, Mr. Speaker. I think it will be within your recollection that the Minister said that the industry accepts the fact of nationalisation. Is not that a matter for the House to decide?
    Mr. Speaker: Whether or not it is, no doubt it will be debated in due course.

  STATUTORY INSTRUMENTS
  Ordered,
  That the draft Supplementary Benefit (Determination of Requirements) Regulations 1975 be referred to a Standing Committee on Statutory Instruments.—[Mr. Pendry.]
  Ordered,
  That the draft Medicines (Dental Filling Substances) Order 1975 be referred to a Standing Committee on Statutory Instruments.—[Mr. Pendry.]

THE ARTS
3.34 p.m.
Mr. Bryan Magee: I beg to move,
That this House draws attention to the fact that we are now in a period, like the Second World War, which is an appropriate time to multiply public support for the arts; and calls on the Government to take appropriate measures to this end and to encourage local authorities to do likewise.
One of the salient characteristics of our method of controlling public expenditure in this country is that increases in public expenditure tend to be incremental. We always find ourselves struggling to get 5 per cent., 10 per cent. or 20 per cent. added to the expenditure of a particular Department, or subtracted from the expenditure of a particular Department, but it means that the struggle for the use of scarce resources, which is such an important part of the political process, tends always to take place on the margin of the expenditure of important Departments.
One consequence of this is that those Members in this House who think that the whole pattern of expenditure is mistaken, those who would like to see the national cake cut up into slices of entirely different proportions, have an almost insuperably difficult task ahead of them, but there are exceptions to this. The exceptions occur when the total amounts are exceedingly small, and I think that for that reason public expenditure on the arts is such an exception.
The central thesis of my speech is that Government expenditure on the arts should be doubled, and that local authority expenditure on the arts should be more than doubled. That is why I have used the word "multiply" in my motion. I think that the smallness of the sums involved makes this practicable, and I shall argue that the benefits that will accrue from that are out of all proportion to the size of the sums involved.
I must meet the argument, because it is the most important argument against what I have to say, that, although all these things are desirable in themselves, we cannot afford them now. I shall try to argue the positive case for the increases for which I am calling on three grounds: first, the unique value of the arts to this country especially at this time; secondly,

37
comparisons with what other genuinely comparable countries are doing; thirdly, and perhaps most important and most specific, the unmet needs for which the extra money is required.
First let me make it clear exactly what sums we are talking about, and what is the order of expenditure that we are to discuss. In the financial year 1973–74 the Government spent £47½ million on the arts. That was one quarter of 1 per cent. of total Government expenditure. Of that £47½ million, almost exactly half—that is to say, £23·4 million—went to the Arts Council to be further redistributed at its discretion, and £9·8 million went to sustain national and provincial art galleries and museums.
Local authority expenditure on the arts is extremely important, but local authorities are not required to give returns for their expenditure in this field and, therefore, any estimate has to be precisely that—an estimate—but the research staff of our House of Commons Library have been to great trouble to get me an informed estimate of the figures of local authority expenditure on the arts. For the financial year 1972–73 that amounted to £15½ million, which is 0·2 per cent. of total local authority expenditure.
In the financial year 1973–74, total expenditure on the arts in this country was approximately £63 million, or if we add to that the expenditure of local authorities on art galleries and museums it can be made up to £75 million. There is a further important source of patronage of the arts, and that is the private patron. Again, for obvious reasons it is impossible to put a precise figure on this, but informed estimates reckon that to be about £1½ million a year. At this point, as I shall not mention them again, I should like to say how grateful I am to the research staff in the House of Commons Library for getting these figures for me and, indeed, a number of figures that I shall use later in my speech.
I should like to say, in defence of the figures and of the staff who have worked so hard to provide them, that I do not want to hinge any of my arguments on the nice exactitude of figures. The fact that some of them are unavoidably estimates means that other speakers may, if they wish, by using a different basis of calculation, arrive at different estimates.
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The main point at issue in this debate is not the precise sums about which we are talking but their order of magnitude, and it is upon this that what I have to say depends.
Looked at from one point of view, the figures I have just read out illustrate a success story, because we have reached that level of public expenditure on the arts by a continuous upward development from a starting point in the Second World War, and that upward development, that growth of public expenditure on the arts, had to be fought for every inch of the way by people, some of whom are still fondly remembered for their work in this direction. When I talk of the unmet needs or criticise our attitude as a society to our willingness to spend money on the arts, I do not want anything that I say to be taken as reflecting on those who fought so very hard to get us to the present situation. On the contrary, what I shall say is that we in our time should adopt the same irreverent and pioneering attitude to public expenditure on the arts, the same unwillingness to stop at and be bound by the existing levels of public expenditure that we inherited, that those people did in their time.
I shall not debate this matter as a party matter. This is an area of activity in which the party to which I belong has a particularly fine record, of which one can be especially proud. No doubt the various parties on the Opposition benches can also point to achievements of which they are justly proud. I shall not be making any party points during the debate, so I hope that no one who speaks after me will feel any need to be defensive in his comments. I say that especially of my hon. Friend the Minister. The proposals I shall make for things which I hope the Minister will do with the backing of the Government, whom I support, are in no way meant to be criticisms either of him or of the Government's record so far. But I am talking now of unfinished business, of urgent needs for the future.
In one sense there is only one important argument against what I am proposing, because almost any civilised person is likely to have the view that in itself it is desirable for public expenditure on the arts to be increased. The only possible objection there can be to our doing so is the economic plight that the country is

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in at present. The only possible objection can consist in the assertion that, desirable though it is, we cannot possibly afford it. That is the only argument against my motion which I respect, because anyone who thinks on any other ground that it is not desirable to enrich and expand the arts in this country is unlikely in most circumstances to be an opponent with whom it is worth arguing.
But to those who say that we cannot afford it, I would say this: public financial support for the arts began, on any substantial and organised scale, during the darkest years of the Second World War, when we in this country were fighting for our survival against an enemy far more terrible than inflation, when we as a country were far poorer than we are today, when the average standard of living of most of the members of our community was immeasurably lower than standards of living today and when every penny which could be found of public money was diverted for other purposes. That is why I mention the Second World War in the wording of my motion. Anyone who says that we cannot afford it now must explain why, bad though our situation is now, we are less well able to afford what was afforded in far more terrible and dangerous times, when public subsidy of the arts began.
These public subsidies which first became an important factor in our national life and which revolutionised the theatre, music, opera and the performing arts generally, were continued by the post-war Labour Government in years which were again, though peacetime years, years of bleak financial austerity, shortage and continued wartime rationing. It was in those grey years that the Arts Council was incorporated, in August 1946. It was in those years that we had the Festival of Britain and built the Royal Festival Hall, which has so enriched the musical life of our capital city. There were plenty of voices raised in those days to say that we could not afford it. I remember fulminations in the editorial columns of national and local newspapers saying that we should not have the Festival Hall because we could not afford it. But there is no one now with the slightest concern for the arts who would unwish that building and the difference that it has made to the cultural
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life of this country, and particularly this capital, in the last 20 years.
It is not only our society which has behaved in this way and spent money on the expansion of the arts, especially the performing arts, in what were some of the darkest and most difficult days of our history. The brilliant director of the National Theatre, Peter Hall, has carried with him for most of his life memories of a vivid kind from his experience in post-war Germany as a young National Service man. In the current issue of the magazine "Opera" he recalls them, saying:
"I have memories of Germany in 1949–50, still poor, still ruined, yet to my amazement spending money on the arts. No houses, yet building new opera houses. Making sure that the opera was going, the orchestras were subsidised, that the theatres were there. It was a revelation to me, as I had left a country where the Arts Council was a very under-subsidised struggling organization, where art was not in the centre of a town's life."
I have very similar memories from a similar time, in fact a year before Peter Hall's, when I was a young Service man in Austria. I vividly remember the Austrians, even poorer than the Germans, their cities destroyed by the war, insisting on the priority of having the Vienna State Opera rebuilt. In the remote country town where I happened to be stationed. I remember subsidised music and subsidised concerts of Schubert and Mozart, to which the audiences, consisting of farm labourers and peasant women, came in their droves.
Coming back to even later peacetime England, when the Labour Government came to power in 1964 after 13 years in Opposition, we came back to power in the middle of what was then the worst economic crisis there had been since the immediate post-war years, and yet again precisely at that time, for the first time, a Minister responsible for the arts was appointed. In those very difficult financial days, Jennie Lee, with the co-operation of Lord Goodman on the Arts Council, did creative and pioneering work of permanent importance which is still smilingly remembered and very gratefully remembered in the world of the arts in this country.
I would say that the argument that we cannot afford it because times are bad really holds no water in a historical context. It has always been when times

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were bad that some of the most valuable things of this kind were done in our society, and as far back as one goes, in times of great social upheaval, even civil war, one finds that that has been the time when some of the most important and lastingly valuable public projects, such as cathedrals, churches, public buildings and so on, have been created.
One might even say, as I would, that it is when times are bad that we need these things most. That is particularly true in an age like ours, when the consolations of religion are not accessible to large numbers of people and when the deepest emotional and, if I dare use the word, spiritual experiences which are available to many, perhaps even to most, people are those provided by the arts and it is through the arts that increasing numbers of people find their deepest sense of contact with enduring realities and values.
In the light of the importance of the arts and of the considerations which I have outlined, it is footling to say that we cannot afford increases of expenditure of the order that I am asking for, especially when we consider just what other things we as a society spend immense sums on. Considering what we as a community spend on things like drinking, tobacco and gambling, all of which incidentally have given me enormous pleasure, the sums involved for the arts are miniscule and almost invisible.
Since we are talking about Government expenditure, perhaps I should make a comparison with Government revenue from these sources. The estimated Government revenue this year from alcoholic drinks is £1,110 million, from tobacco £1,325 million and from gambling a mere £240 million. The figure of additional Government expenditure on the arts for which I am asking is less than a quarter of the smallest of those figures.
There is no other sphere in our national life in which such a small expenditure could make such an enormous difference or, indeed, where Britain is so preeminenly in the forefront in world terms. When one considers what Britain has done since the end of the Second World War in a global context, one sees that there are only about two things for which we are really outstanding. One is the grace with which we have divested ourselves of what must have been much the largest empire that the world has ever
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seen and the fact that we managed to do so in a comparatively peaceful and civilised way.
The other is that Britain, or at any rate London, has became the world's artistic centre. We are acknowledged throughout the world to have the finest theatre. We are far and away the most important centre in the world for the public performance of music. More books are published here than anywhere else in the world, more gramophone records are made here and I believe that we are the world centre for dealing in works of art. This has happened in London in about the last 20 years. So there is no other sphere which so deserves our support and the financial nourishment which it is within the power of the Government to bestow.
But even if we consider this matter in vulgar terms of money, prestige and promotion, there is an enormous return to be got from our arts. There is, first, the incalculable prestige and promotion value of the foreign tours by the Royal Opera Company and the Royal Ballet Company. There are the gramophone records which sell by the million all over the world and the revenue that they bring. There is our world trade in books and the revenue that that brings.
But the specific example that I would give is the theatre, which, to put it no more highly, is an enormous earner of foreign currency. The tourist authorities have discovered in their investigations and surveys that over half of all the foreign tourists who visit this country give going to the theatre as one of their reasons for doing so. In, 1973, for example, of 1,300,000 American tourists over 1 million went to the theatre. So this is not just something that visitors say they will do: they actually do it. It clearly is one of the reasons for coming to this country, because it is something which can be found here which can be found almost nowhere else in the same quantity and quality. Bearing in mind the fact that the total spent by tourists in 1972–73 was £682 million, it is clear that the theatre alone makes an enormous, indirect, but very real, contribution to the earning of large sums of foreign currency.
We get revenue from our theatre in other ways. For example, it is the actors, writers, directors, designers and producers

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who work their way up through the live theatre, through repertory companies, and so on, who sustain the whole of the acting side of our television industry and the Anglo-American film industry, from which even those who do not go to the live theatre benefit.
Yet this goose which lays such golden eggs, the live theatre, we are in danger of allowing to die from starvation. At the moment, of 60 provincial theatres no fewer than 11 are having seriously to consider the possibility of closing. In London's West End half a dozen theatres are dark and two are given over to one-man shows. It has become almost impossible for an unsubsidised commercial management to put on a play which has a large cast and requires several changes of scene. It simply is no longer economically possible.
Last year was a disaster, financially, for the Royal Shakespeare Company and there has been talk, which I hope will come to nothing, of a merger between that company and the National Theatre Company. Talking of the latter, it has now become clear that for financial as well as other reasons the new building for the National Theatre Company will not open—estimates differ, but this would be mine—until summer next year at the earliest and possibly not until the autumn.
What can the Government do to help the theatre in its present straits? There are many things that the Government can do. The first thing that they can do, and immediately, is zero-rate the theatre for VAT. I would beg the Government to do so for all the performing arts. We all know from personal experience as ticket buyers for any form of entertainment that the law of supply and demand operates powerfully in ticket prices. Other things being equal, the cheaper the tickets are the more people buy them and the more expensive they are the fewer people buy them.
The fact that all the performing arts are being required to collect a tax of 8 per cent. on the tickets they sell artificially lowers their audiences or their income, depending on how one looks at it. It means that if they were able to charge what they themselves collect—in other words, if they could charge the lower seat prices without the 8 per cent. VAT—they would
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get a substantially larger audience. Conversely—this is what I suggest they be encouraged to do—if the performing arts were zero-rated but encouraged to keep their prices at the existing level, this would be an enormous immediate increase in revenue without any increase in seat prices or loss of audience. For even a comparatively small theatre in London's West End this would make a difference of some hundreds of pounds a week. In this way, by immediate action, the Government could help greatly to increase the amount of money available to the theatre and to the performing arts generally.
There are other ways in which the Government could help in the present situation. They could greatly increase the amount made available through the Arts Council for distribution to the arts generally. Here, since I am discussing specific ways in which the Government could assist the arts, I underline that they could make some changes which would in themselves cost the Government no money.
One important change would be to return to the triennial system of financing the Arts Council. At present, the Arts Council is on an annual budget, and we have the extraordinary state of affairs that less than eight weeks from the beginning of the next financial year the Arts Council still has not been officially informed what its grant for next year will be, which, in turn, means that it is unable to inform all those multitudinous organisations whose survival depends on it what their income for next year will be.
This is a disastrous situation for any organisation, but for certain organisations dependent on the Arts Council—for example, Covent Garden, whose budget runs literally into millions—it is preposterous.
The Arts Council would benefit enormously if it were allowed to go back to the old system of triennial finance. Under that system, in June of each year the Arts Council would be given an estimate of the grant likely to be made available to it in the following financial year, with further estimates of what would be available in the second and third financial years beyond that. At the beginning of the following calendar year, in about January, the estimate for the next financial year would be made firm, and the

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estimates for the second and third years would be revised in the light of inflation or any other relevant considerations. I plead with the Government, through my hon. Friend the Minister, to give serious consideration to returning to that system of finance.
There is yet another way in which the Government could give enormous assistance to the performing arts without themselves directly spending money—that is, to take steps to preserve the buildings in which performances of the arts occur, notably the theatres.
Theatres considered as buildings are subject to some very odd influences in our market economy. For obvious reasons, they tend to be in the centre of cities, and they tend, therefore, to be in those parts of cities which have maximum site values. London's theatres, of course, are concentrated in the West End, where site values are among the highest in the land. Moreover, because of their nature, theatres, though large buildings, are in use for only a few hours out of the 24. This means that, considered brutally in exclusively economic terms, they are uneconomic buildings, and this makes them a standing temptation to the property developer.
If market forces alone are to be allowed to determine the future of our theatres, I fear that many of them will have no future at all, because it will always be more profitable in purely monetary terms to knock down these buildings in the centre of cities, especially in London's West End, and replace them with multi-storey office blocks. If that is allowed to happen—it has already happened in a number of cases in London, which has lost some of its best loved theatres purely to the greed of the property developers—the future for the theatre will be dark indeed. It is within the Government's power, without spending money, to preserve these buildings for their existing use.
I shall not make specific suggestions as to how this might be done. Many suggestions have been made. Equity, the actors' union, has asked the Government to consider nationalising the buildings. A body which has been set up to try to save London's theatres has made the alternative suggestion that the sites might be nationalised. It would be possible to list the theatres so that either the buildings
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or the sites could be used only for their existing purposes, without nationalising either.
The Government should consider those possibilities carefully, and I beg them in any event not only to consider the problem but to choose one or other solution so that, without involving themselves in expenditure, they ensure that the theatre buildings themselves are preserved.
The Government could help also with the National Theatre building itself. In the light of the history of this project, it is interesting to consider its present position. For decades, radicals in the theatre have been campaigning to have a National Theatre and a National Theatre building. But, now that we are on the verge of having one, it begins to look to some people as though it is part of the establishment and we are in the paradoxical and ironical situation of seeing radicals in the theatre now campaigning against it.
The true explanation, when one looks into it, I think, is that in our present state of financial stringency, when the sums of money made available to the arts are so small, people working in other parts of the theatre are afraid that a gigantic institution such as the National Theatre—as it undoubtedly will be when the building is open and running, with all three auditoria—will pre-empt scarce resources and starve the rest of the theatre. It seems to me that their hostility to the opening of our National Theatre is based straightforwardly on a fear of the consequences for them. This fear could be assuaged, or entirely removed, and the conflict within the world of the theatre removed, by the assurance of additional resources which it is in the Government's power to bestow.
One of the undesirable consequences of the extreme shortage of money for the art which characterises our national life is that it incites conflict within the arts of the kind I have just instanced. It makes artistes in the same field jealous and frightened of one another, and, worst of all, it makes artistes in the same field frightened of expansion on the part of rivals because of the effect which that has on the availability of scarce resources.
The biggest target of that fear and jealousy over a number of years—certainly in London, and probably in the

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country as a whole—has been Covent Garden. It is natural that this should be so, because the Royal Opera House is far and away the biggest single spender of Arts Council money. For many years now, voices have been raised to say that Covent Garden should have less so that other artistic enterprises in the country could have more.
I believe that this hostility—financial hostility—to Covent Garden is misplaced for many reasons. One reason is that, in spite of all the difficulties and obstacles with which it has had to contend, Covent Garden has raised its standards during the past 20 years until they are at their best equivalent to any to be found anywhere in the world, and it has done this, and is continuing to do so, in spite of extreme shortage of money in its own operations.
The chorus at Covent Garden is far too small; it is smaller than that of the English National Opera at the Coliseum. The workship capacity is too small. Its backstage facilities generally are too small. The orchestra is too small, with the result that members of the orchestra are overworked and orchestral standards are lower than they would otherwise be, and lower than they need be.
There is need for a bigger orchestra pit at Covent Garden. In fact, the need is of two kinds—need for room to accommodate a larger number of musicians, and need also for room to improve the orchestral sound. Acoustics experts have advised that one reason why the quality of orchestral sound at Covent Garden is not as good as it might be is that the pit is so constricted that there is insufficient reverberation of sound in the pit before it emerges into the auditorium. What is desirable at Covent Garden therefore, is that the front row of the stalls should be removed entirely and the orchestra pit extended so that it could take the greater number of players needed and at the same time give the improved quality of sound which is so much needed. Again the obstacles to this are purely financial. To remove that one row of the stalls permanently would cost Covent Garden between £30,000 and £40,000 in revenue a year. In its present financial state it cannot afford to meet that expenditure.
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Covent Garden is suffering in all sorts of ways. It has had to abandon some productions and postpone others. Completion of "The Ring" has had to be postponed until next year. Covent Garden is still hundreds of thousands of pounds short of the money that it requires even for the coming financial year. In this situation standards are not merely threatened; I am afraid that already standards are falling. I do not think that anyone who is familiar with what goes on at Covent Garden would deny—though perhaps many would not wish to say so in public—that artistic standards there are lower now than they were four years ago. I repeat that for an organisation of that size and degree of complexity—which, if it is to compete in the international market for singers and conductors, must lock itself into contracts with artistes two years ahead—not even to know what its income is going to be eight weeks ahead is to put it under almost crippling financial disabilities. I do not know what its income for next year will be. I suppose it will be about £3 million, or slightly more, but it would be surprising if it were as much as £3¼ million. The need, if it is to maintain its standards, is for about £4 million.
I should like to make some comparisons with the situation abroad. For example, the opera company at Frankfurt, in Germany, does not pretend to be one of the world's front-line opera houses. It does not imagine that it is in the same league as those companies in its own country such as Hamburg and Munich. Yet last year the Frankfurt Opera Company had a public subsidy of £4 million, and the public subsidy for this coming calendar year, in 1975, of £5 million was already voted on and committed at the beginning of last year. Subsidies of this order, almost twice what our national opera house gets, come not from the Federal Government of Germany but from the city authority of Frankfurt.
Something of this kind happens to the even more important and better opera houses in Hamburg and Munich. Those opera companies are all subsidised to the extent of about £6 million a year, and that is the order of subsidy which all the international opera houses, except for Covent Garden, enjoy. It is the order of

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subsidy for opera houses such as La Scala and Vienna. Hamburg and Munich get these subsidies of £6 million not from the national government but from the regional government, from the Bavarian Government in the case of Munich and from the Hamburger Land Government in the other case. What a contrast with the picture of public subsidy in this country.
Another extremely important effect of public subsidies in the performing arts is to enable ticket prices to be kept lower than would otherwise be the case. This is especially so with opera. It is particularly important for social reasons, if for no other, that ticket prices should not be allowed to rise the slightest fraction more than is absolutely necessary. It is only by public subsidy, especially of the most expensive of all the performing arts, which is opera, that ticket prices can be kept down to a reasonable level.
I turn to the situation of orchestras in this country, and this is the last of the specific examples which I want to give. The situation governing orchestras in this country parallels that which governs the theatre and opera houses of which I have been speaking. In London we are uniquely favoured by the number of first-class orchestras which we have. There are four symphony orchestras in London, in addition to the symphony orchestras of the BBC, our outstandingly fine chamber orchestras, the Academy of St. Martin's in the Fields and the English Chamber Orchestra and the orchestras of our major opera houses. No other city in the world has that number of orchestras and, in consequence, this amount of first-rate orchestral music. We give, of public money, to each of our four London symphony orchestras about £120,000 a year. The major orchestras in other countries with which they have to compete get subsidies of over £1 million a year. Even the Concertgebouw Orchestra of Amsterdam—and I remind the House that Holland is much smaller than this country and has a much lower level of national resources—gets over £1 million in public subsidy, as indeed does the orchestra in Paris, while the orchestra in Berlin gets over £2 million of public money.
People may think that in the United States the situation is significantly
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different. Most of us have a picture of the arts in America as being entirely dependent on private patrons and very little provided for by public money. By our standards that is not the case. Recently I met in London the man who manages the Los Angeles Orchestra, which would not claim to be one of the front-line American orchestras. It is not an orchestra of world class like Boston, Philadelphia, Chicago or Cleveland. Yet the Los Angeles Orchestra gets a subsidy of $500,000 a year from the county authority. The county government of Los Angeles makes available another $500,000 for facilities such as the free use of the Hollywood Bowl for its concerts. Therefore, from the county authority the orchestra gets a total subsidy of $1 million a year. The Los Angeles city gives the orchestra $65,000 a year in addition.
I am not asking the Government to give subsidies of this order to all four of London's symphony orchestras. That could not be justified on artistic grounds, let alone financial grounds. There is not the artistic need or the possibility of having four world-class orchestras in London. But what I should like to see happen—and it is within the Government's power to help it to happen—is the amalgamation of those four orchestras into two, one based at the Royal Festival Hall and the other based at the Barbican Hall, which is due to open later in this decade. I should like to see those two properly established orchestras absorb the other two, and those musicians in the other two who were not absorbed into the two established symphony orchestras would be very much needed by the orchestras of our national opera houses where orchestral standards are not as high as they could be or need to be.
One aspect of the question which we are discussing concerns the working lives of the artistes involved in the arts. One of the most important ways in which the arts are subsidised at the moment, and should not be subsidised, is by sacrifices made by the performing artistes. It is possible for our symphony orchestras to produce works at the level at which they do produce them only because the musicians are overworked; they work many weeks at a stretch and often without a day off. They have low salaries, with low or no pensions. They have very bad rehearsal

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facilities in outlying places, involving them in yet more burdensome travel at difficult hours. This kind of subsidy for our arts is the one kind of subsidy that we ought to try to abolish. One of our aims in reestablishing, for example, the symphony orchestras of London on a different foundation should be to transform completely the working conditions of the musicians.
There is no doubt, and I do not think anyone involved with these things will question what I am saying, that an improvement in the working and living conditions and the security of the artistes concerned would have a considerable artistic bonus. It would result in a considerable rise in standards, and the better these people are the more money they make, so there is even a financial aspect to that matter, too.
So far I have spoken only of London, and I have done so for some very good reasons. In a country as tiny as ours it is inevitable that artistic ventures should be concentrated in the capital city. It is also unavoidable that centres of excellence in a small society like ours have a profound effect throughout the whole of society and influence artistic activities taking place everywhere else. However, there is another side to the coin, and that is the artistic improverishment of the regions. The situation is utterly extraordinary when compared with the situation in Germany, Italy or even in some respects France and the United States.
It is not possible for our excellent London-based ochestras and opera and ballet companies to meet the need in the regions by touring because there simply are not the places for them to visit and perform in. It is an astounding fact that outside London there is no theatre which can take the full stage productions of the Royal Opera Company of Covent Garden. With the doubtful exception of the Hippodrome in Bristol, there is not a single theatre which can accommodate the productions of the Royal Ballet Company of Covent Garden. Outside London there is only one fully-equipped concert hall, and that is in Liverpool. This is a fantastic degree of improverishment. I shall not launch into comparisons between this country and other countries because on that front they would be painful to any patriotic Englishman.
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When considering spending money on the arts, especially the arts in the regions, we should consider the effect the arts have on community life in ways which are not directly artistic. We have seen what can happen in the case of many repertory theatres in the regions. The buildings become social centres with restaurants, coffee shops, clubs, jazz concerts, lectures, film shows and so on. But they can also become centres from which people move out into the community. The actors in these repertory theatres can, and do, get involved with amateur theatrical enterprises in the communities in which they live. Perhaps most important, the actors and musicians can be made available for work in schools.
Here enormously valuable work can be done and has begun to be done. I have in mind not just that actors should visit schools and put on plays, or that musicians should visit and give concerts, but that they should actually rehearse with the children, direct them in plays and concerts, and sit around with them in seminars or in the classroom to discuss what they are doing. In other words, the professional artistes should create a workshop situation in the schools. This can be done, and the means to do it are there if the artistes are there. Young actors—and most of them are young—have shown themselves to be extremely enthusiastic for enterprises of this kind, and all that is needed is encouragement and a bit of money from the local authority.
The local authorities have so far shown themselves unwilling to spend more than a pitiful amount on promoting activities of this kind. In 1972–73 they spent £2,500 million on education, yet they spent less than £16 million on the arts. The training that it is possible to give children by bringing artistes, in co-operation with the local authority, into the schools is of incalculable value in all sorts of ways. Not only should all our children be involved in the theatre, drama, painting and music as a normal part of education, but everyone should be taught to read music as one is taught to read a language and everyone should be taught to play an instrument.
This is training not only the professional artistes of the future, who are a very small proportion of the children involved. It is preparing the audiences

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of the future and even the patrons of the future. Some of these children will be local councillors or will work in firms and schools. They will have a hand in buying pictures and commissioning artists in all sorts of ways. I know that local authorities face their worst financial crisis for a long time, but I apply the same argument to them as I applied to the national Government at the beginning of my speech. Because times are bad and the need is great, now is the time for them seriously to rethink their priorities. In times of extreme financial stringency I do not believe in making cuts across the board. When the authorities have to cut they must most seriously consider which things can be done without. They must be prepared actually to increase expenditure in some other areas. We did precisely that during the war, and the arts were beneficiaries, and we should do it now.
There is one other source of patronage, and that is the private patron. We have a number of private patrons in Britain. The Guinness company assists the Wexford Festival, the Wills company the London Philharmonic, the Peter Stuyvesant Foundation assists the London Symphony Orchestra and, most imaginative, the Midland Bank gives help to the Royal Opera and the Royal Ballet Companies at Covent Garden. What these private firms do is itself an indication of how much more can be done with Government encouragement. I plead with the Government most seriously to consider emulating the United States and other countries in making the money that is given to the arts by private individuals and business firms exempt from tax to some degree. That kind of encouragement for the private patron would be of enormous benefit to the arts.
It is of great advantage to the arts that there should be a multiplicity of patrons. It is not good for the arts or the patronage that all the commissions should come from one source or that they should all come from sources of one particular kind, like local authorities. It is considerably to the advantage of the arts that they should come from as many different sources as possible, and the very quirkiness and eccentricity of the private patron often adds to the value of his patronage and to what comes out of it.
I am not speaking of one side of industry. The TUC should get much
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more involved in the arts than it has done in the past. I am pleased to say that it has at least set up a special committee to deal with the subject. I hope that the trade unions here will learn many lessons from the Scandinavian trade unions, which have been fruitful patrons of the arts.
I hope there will be more co-operation of another kind from some of the trade unions involved in artistic ventures. The technicians, electricians, stage hands and so on who work behind the scenes in the performing arts are every bit as indispensable to the success of performances as the actors and singers. They do not always behave in that way, however, and, to do them justice, they have not always been treated as if they are indispensable. They should be brought into the community enterprise and made to feel part of it, and I hope that in response to that kind of approach they would be much more co-operative—I am thinking in particular of the recent dispute at the Coliseum—than they have sometimes been in the past. In disputes of that kind there are two sides, and one of the two sides at fault was certainly the union side.
Yet another way of financing the arts which would not cost the Government anything would be the use of the lottery system. I would very much like to see lotteries used to finance artistic enterprises. Almost every one of the buildings, for example, of the kind for which I listed the need earlier could be paid for by one monthly national lottery of the sort that is employed in France. I have listed a catalogue of specific needs that exist in the world of the arts. They are needs which it is within the power of government to meet.
Although I have spoken at great length, the case that I have made is in many important respects incomplete, and I shall leave it incomplete. I have said virtually nothing about the visual arts. I have said virtually nothing about the need to subsidise creative artists as distinct from performing artistes. I have talked almost entirely about the performing arts for two good reasons. The first reason is that by far and away the biggest spenders of public money are the performing artistes. It is therefore more relevant to talk about them than about any other kind of artistes in the context of a debate of this

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kind. The second reason is that I happen to have had a lifelong involvement in one capacity or another with the performing arts. It is a subject of which I have some knowledge. I know something about the organisation and running of that sector of the arts.
I have not talked about all the major areas of need in the performing arts. I have said almost nothing about ballet, for example, yet we have a world famous ballet company—it is widely thought to be the best ballet company in the world—that does not even have a theatre of its own. It can perform on only half the evenings of the week in a theatre which it shares with an opera company.
I have said nothing about the film industry, yet it is moribund for lack of public money. It desperately needs public finance. I will give one figure and from that one comparison hon. Members can draw all the lessons that I wish to draw. The British Film Institute now provides for the British film industry £110,000 a year in subsidy. France subsidises films to the tune of £13 million a year. Italy subsidies its film industry to the extent of £14 million a year. The incompleteness of my case and the fact that I have left out so many deserving areas of artistic activity means that the case is very much stronger than that which I have been able to make even in the time available. I am sure that the case will be much strengthened by other speakers.
My last point is that all the needs that I have instanced could be met by one man if he were determined and if he had the imagination and the political will to do so. They could be met by one decision from the Chancellor of the Exchequer. The total increase in central Government expenditure that we are talking of is of the order of £50 million a year or less. It may be tactless of me to recall it, but there was an incident in this Chamber only a week ago last Wedesday in which, contrary to the Chancellor's expectations, he found himself called upon by a vote of this House to find an extra £54 million in his forthcoming Budget for expenditure in the next year. I cannot pretend that he was pleased by that. He lost his temper and shouted at many people, including me.
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I am prepared to forgive my right hon. Friend for that. I am prepared to overlook that incident, on condition that he listens to me in the context of this debate. The example to which I have referred shows that the Chancellor can, if called upon, find a sum of that magnitude in the Budget even at short notice. If we look more than one year ahead it can be done given the political will.
It is something of a paradox that the survival of the creative arts depends on money which is made available by party politicians. Given that that is the case, there is nothing that we can do collectively or individually which is of greater value and enrichment to our national life and the community that we are supposed to serve than to increase the money which it is in the power of the Government, drawn from our numbers and sustained by us in office to give, and without which the arts cannot survive.
Mr. Deputy Speaker: I remind the House that this is a brief debate. Unless there can be less enthusiasm there will be a great deal of frustrated oratory.
4.36 p.m.
Mr. Robert Cooke: I share the enthusiasm of the hon. Member for Leyton (Mr. Magee) and I thank him for giving us this opportunity to debate an important subject. Already a third of our time for the debate has gone. I hope that the Minister will seek other opportunities to debate this matter. If he wanted to do so he could find the time even if he cannot find the money for the arts.
I wish to make a brief and unembroidered intervention. I share the hon. Gentleman's enthusiasm but he must know that we cannot all do it his way. He must know in his heart that he will not get the total amount of money required from the Chancellor. It would be demoralising and initiative-sapping if all the money came from the Exchequer.
I hope that the Minister has come here today, despite the present financial stringency, with a few new ideas. I hope that he will present some ideas in terms of the new ground which could be broken. I also hope that he will say something about his position in the Government. We do our best to bolster him up on

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occasions. It is not all criticism and attack. For instance, what is his relationship with the Department of the Environment, which owns the greater part of our national heritage that is in public hands and with which the Minister's Department must be greatly involved? What is his relationship with broadcasting, the outlet for much of that which the Minister subsidises? What is he doing about industrial design and the great Department of State involved there?
I share the hope that we shall have some continuity in arts finance. It is not satisfactory to leave the Arts Council guessing right up to this moment, even though it has had a few gentle hints from the Minister. It cannot make any planned progress unless it knows where it is. Although I cannot go as far as the hon. Member for Leyton, it surely should be a growth industry and not a stagnant or declining affair.
I come straight to some proposals for alternative finance. We must be realists. There have been some notable examples of patronage on the part of industry despite its present difficulties. Local authorities cannot be expected to do much more at present. So far their efforts have proved extraordinarily uneven. An influential and persuasive Minister could persuade some of them that are not doing their bit by pledging a little for the future if they are not prepared to do it now.
We must consider bringing finance back into the arts from the public and private sectors of broadcasting. The Under-Secretary of State was present when I had words the other day with the Secretary of State for the Home Department, who is responsible for broadcasting. I suggested that because BBC 2 would obviously have to suffer some financial stringency because of the present BBC licence proposals, there would be a considerable loss to the arts. The right hon. Gentleman said that that was not his affair but the affair of the Under-Secretary of State. I hope that he will mention that matter.
Next, there is the missed opportunity of ITV 2 which many of my hon. Friends wish had been introduced some time ago. I hope that the Minister will give some thoughts about what he might say to the Annan Committee. There is no doubt
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that out of the Annan Report should come more finance for the arts. I hope that the Minister will not be shy to give evidence to Annan by whatever process is appropriate.
We have heard a little about opera. It must be true that more people could see the opera on the television in one week than could possibly get into Covent Garden between now and the end of the century. Any of the unkind and jealous remarks made about Covent Garden could surely be set at nought if only the opera were to be televised a great deal more. In one of the national papers today a headline suggests that we can now all go to the opera. That is because there is to be televised by the BBC the present production of Verdi's "The Masked Ball". The production is possible because of the finance put into the production by the Imperial Tobacco Company and the National Westminster Bank. I feel that I, too, have a part to play in this matter because, running a struggling stately home, I have paid the National Westminster branch in South Street, Dorchester, enough in interest charges in recent years to have given a considerable boost to that production. I am glad that at least some of the money has gone to a good cause.
The point about this initiative by these two great public companies—national institutions, one might call them—is that they will get no credits on the television screen for financing the production. That would be against the rules of the BBC. The BBC is not allowed to say, "by courtesy of" or "sponsored by".
I hope that the Under-Secretary of State will give attention to this aspect. After all, a great deal of advertising goes on through the BBC now. It frequently shows sporting events sponsored, rightly, by great companies, and one sees their names through the camera, even if, as it were, it is accidental. Indeed, there have been complaints about it. If we want great companies to do these good things for the arts and sporting events, they must be allowed some public credit for it. I hope that the hon. Gentleman will talk to his colleagues in the Home Office about this matter.
I welcome also the way in which the unions are at last showing common sense in this matter. It was not possible at

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one time to televise opera productions because of the vast fees asked by some performers. Now they are being more realistic and are embracing television as a friend and not regarding it as an enemy.
I hope that the hon. Gentleman will adopt a flexible approach towards housing the arts. We must make greater use of our historic buildings, including redundant churches. You, Mr. Deputy Speaker, know how in the land of your fathers so much of your music is generated in churches and chapels. Incidentally Wales was the land of my birth. We should make more use not only of redundant churches but of our living cathedrals.
How many cathedrals are fully used for artistic and cultural activities? Has the hon. Gentleman any figures? It does not look as if he has any. Perhaps he can go into the subject with some care, because a little or even no help could make it possible for many people to enjoy performances by national orchestras and others in our cathedrals. Cathedrals are the ideal places for a certain kind of music. Some of the more recent works of contemporary composers are perhaps hardly suitable for ecclesiastical buildings, but some of the earlier music—the sort which I prefer, in any case—is often very suitable to gothic architecture. I hope that the hon. Gentleman will think about that.
Museums and galleries are having a difficult time. What can we do to bring them to a wider public? Some already do a splendid job. Some of our national institutions do better than others. Some local museums are quite splendid in serving the community. One of these is the Dorset County Museum—a private enterprise concern, which is not run by the county council, although the council does give a little help. There is a tremendous expansion under way, with new buildings and the funds being raised by private subscription. If that museum and others, such as the Kendal Museum, can do it, so could local authority museums.
The hon. Gentleman is the catalyst in this matter. He has a unique opportunity to encourage museums and galleries.
In the theatre the problem of value added tax looms large. It is a compre
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hensive tax. We knew when it was introduced that it would produce considerable difficulties in certain directions, but we never intended that the performing arts should be crippled through it. If the Government remove VAT from theatre tickets, they must also do so for museums and galleries and so on.
The right hon. Member for Vauxhall (Mr. Strauss) and I combined recently to do our little towards saving the national heritage, at least in part, from the threat of taxation. It was all due to my right hon. Friend the Member for Finchley (Mrs. Thatcher) and her team on the Finance Bill that we got the concession that the Government have announced in Committee upstairs. The Government have given a firm pledge, but we need to see the details. We cannot preserve the national heritage without the resources, so the concession will have to encompass houses, contents, gardens, supporting estates, and, in some cases, trust funds as well.
The hon. Member for Leyton spoke at some length about theatre buildings. The Under-Secretary of State and I have had exchanges in Standing Committee, when he showed how concerned he is not only to preserve the fabric but the use of such buildings. I hope that he still bears this in mind.
There is the problem of the theatre museum. Perhaps we made a mistake in thinking that Somerset House would be ideal. Of course we must have a theatre museum, but I wonder whether the wealth of material can properly be displayed in the fine rooms there. The commitment so far is that there should be a theatre museum. It is not an irrevocable commitment that it should be in Somerset House. There is the rival claim now of the Turner Collection. Probably, with the fine rooms and one side of the courtyard, the Turner Collection could be well displayed in Somerset House which might be more suitably for it than a theatre museum. Surely, in the Covent Garden area, among the buildings which are now vacant there is room for a theatre museum which would be far better than we could have in Somerset House.
There is also the question of Public Lending Rights. Could not a self-financing scheme be used to get over this problem? Could there not be, for example,

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some scheme of extended copyright to 60 years with the extra 10 years for living authors. The hon. Gentleman will understand what I mean.
Another problem is that of the crafts. A number of private enterprise institutions such as West Dean Crofts College, do a splendid job. But could we not have an agency to collect the work of craftsmen and market it? Many craftsmen have considerable problems in marketing their work.
There is also the problem of the national film archives as well as the British Film Institute. A little help here could make a great deal of difference. Many films will be lost for ever unless we do something quickly.
Art teaching in schools is important. Art is about life. Let it be integrated with life and not taken in isolation.
What is the Under-Secretary of State doing about the European Architectural Heritage Year and about the international influence that this country could have across the whole spectrum of the arts? I would like him to be our ambassador of the arts and tell people abroad about the good things that we are doing and that we have, and also to bring back ideas to us.
I hope that the hon. Gentleman has anticipated my questions and is receptive to my suggestions. He has a difficult responsibility to fulfil. He will have our support if he displays energy and force in working towards what are, after all, our shared objectives.
4.48 p.m.
Mr. G. R. Strauss: We are all grateful to my hon. Friend the Member for Leyton (Mr. Magee) for raising this very important subject today. He gave us an informative and persuasive speech covering the whole range of the nationally-sponsored arts. His speech was not a moment too long, and I am grateful to him for his wide range as it enables me to make my speech much shorter than it would otherwise have been. Unlike certain hon. Members, I have a strong aversion to making points in a debate which have already been made by other hon. Members, particularly if they have been made better than I could make them. I shall confine myself to very
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few remarks, addressed to my hon. Friend the Under-Secretary of State on one or two important questions.
I endorse almost everything that the hon. Member for Bristol, West (Mr. Cooke) said, but I was a little surprised that when he mentioned museums and galleries there was not a blush of humiliation and guilt on his face, because if there is one thing that he and his colleagues in the Conservative Party will never be forgiven for it is their criminal attitude to museums and galleries when they tried to erect a financial barrier between the cultural heritage they contain and the viewing public.
I want to ask some questions which I think my hon. Friend will be able to answer easily. It would be useful if he could reiterate some of the assurances he has given recently. Many people are worried that the amount of money available to the Arts Council has not yet been settled by the Treasury, and, in turn, the Arts Council has not yet found it possible to give a definitive undertaking to its various beneficiaries as to what they will get in the coming year.
There is anxiety amongst those bodies that the undertakings on these matters given by the Government may not be wholly fulfilled. We have been led to believe that it is the purpose of the Government, fully supported by the Minister responsible for the arts, that the support for the arts by the Arts Council will not be allowed to suffer as a result of inflation, and that all enterprises supported by the Arts Council will receive sufficient grants to enable them to carry on at the same standards as in the past.
My hon. Friend the Member for Leyton asked for much more than that. He wants the Arts Council grant doubled, if not trebled. That would be lovely, but I do not think we can expect it. I shall be satisfied if, during this year, they receive from the Treasury sufficient money to ensure that the present standard of excellence achieved by the theatres and other Arts Council supported bodies, including museums and galleries, can continue at the same level, with the prospect of a substantial increase next year and in the year, to come. Will my hon. Friend the Minister with responsibility for the arts, repeat his assurance?

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One of the reasons why there is some anxiety on this matter is that in their speeches some Ministers, perhaps unintentionally, have given rise to doubts as to what will happen. A short time ago the Lord President of the Council said that everybody, including actors, would have to tighten their belts. I cannot believe he meant that. May we have some reassurance that the money available for the arts will not be reduced; that it will not be too long before the amounts are announced, and that the arts will not suffer as a result of inflation. It would indeed be foolish and tragic if we allowed the standards of excellence which have been built up, especially in the performing arts, to be reduced because of inflation. Once the standard of an artistic enterprise, such as the theatre, opera or ballet, is allowed to fall, it is difficult to recover it, and irremedial damage can be done.
I should like to say a word in support of the plea made by my hon. Friend the Member for Leyton—which I know the Minister responsible for the arts has very much at heart—for the preservation of our existing theatres, not only for the reasons he gave but for the reasons which I believe are very important. I do not believe that the theatres can now be built which are as attractive for drama, ballet or opera as theatres built in the latter part of the last century and the early part of this century. These have a warmth and a welcome which enchants any audience the moment it enters the theatre, and which, in turn, must be encouraging to actors and actresses. However fine and magnificent the new theatres may be, and however acoustically perfect, all those I have seen lack—I am a little fearful that even the National Theatre may lack it—that atmosphere which can be found only in theatres built in the 50 years between 1890 and 1940.
I ask the Minister responsible for the arts what is happening to the National Theatre. We know that, through no fault of the National Theatre Board, further delays are occurring. First, we were told that the National Theatre was likely to open last year. Then we were told that it was likely to open in the early part of this year. Then we were led to expect
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that it would open in the latter part of this year. Now we understand that it will probably not be opening before the early part of next year. That is the fault not of the National Theatre Board but of the construction industry. Never mind whose fault it is. It is not only exceedingly disappointing but very costly, as every time it is announced that the builders expect that the theatre will be ready by a certain date, the theatre board becomes active, employs technicians, engages staff, and makes arrangements to open all at great expense. That expense is particularly infuriating if, a short time later, the whole project has to be cancelled.
I ask my hon. Friend what is the present position of the National Theatre. Can we receive any assurance on the matter? Many questions were asked about this when we discussed the National Theatre a short while ago; in particular, whether, in spite of all the delays and the increased cost, due to inflation, which will arise as a result of those delays, the additional amounts, supplied by the Arts Council to support its other sponsored activities, will not prevent the full operation of the National Theatre when construction is finally completed.
In an earlier debate I expressed my hope that the desire of some people to turn the Old Vic, when the National Theatre leaves it, into an opera or ballet theatre, should be turned down. It would mean extensive reconstruction of the auditorium of the Old Vic and would seriously damage its atmosphere. I am glad now to learn that the Old Vic will continue, as it traditionally has been, a theatre—its delightful auditorium preserved—showing classical plays, and will not be used for other purposes.
Museums and galleries are late, too, in receiving information from the Government about the amount of their annual grants. I assume that the delay—possibly inevitable because of the economic circumstances of today, does not mean any reduction, and that museums and galleries will receive, like the theatres, an increased allocation to make up for inflation.
I have heard a rumour—I do not know whether it is true; perhaps the Minister will comment on it—that there is a proposal that some of the museums and

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galleries in London will suffer a diminution in Government financial support for the benefit of museums and galleries in the regions. I am all for increasing the money and contributions to the regions, which I think may need it as much as, and perhaps more than, London. However, I do not think that that should be used as an excuse to reduce the contributions at present paid to London galleries and museums.
We have heard of the proposal, advanced in responsible circles, to house the Turner pictures in Somerset House. That matters was touched upon by the hon. Member for Bristol, West. Many people feel keenly about the matter, particularly my hon. Friend the Member for Warley, East (Mr. Faulds). Both Sir John Betjeman and Mr. Henry Moore suggest that this would be an appropriate place in which to house permanently this great collection of pictures. Many of us have seen it recently at Burlington House.
At first, I was entranced by the idea, but, reluctantly, I have reached the conclusion that it is a doubtful proposal. I am unwilling to disagree with the views of Mr. Henry Moore, who is a warm friend of mine as I accept his views on all artistic matters. But I wonder whether it is a good idea to concentrate the works of a great artist like Turner in one place. Is it not far better to maintain a policy of dispersal? The Turner pictures are pretty well dispersed at the moment. There is a magnificent collection at the Tate, where they can be seen together with the gallery's exhibition of other English artists. I should like to see Turner pictures in galleries throughout the country. The idea of concentrating them in one place and therefore making them much more difficult for visitors to see when they go to a gallery to see a wide range of pictures, possibly for comparison purposes, is a doubtful one.
There are technical reasons, too, why it would be unwise to put these pictures in Somerset House. There are lighting difficulties. There would have to be artificial lighting which would be expensive and difficult to arrange. Water colours could be exhibited only for a short time, or they deteriorate. On the face of it, this is an
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attractive suggestion, but I feel it should be considered carefully before it is accepted.
Contrary to what my hon. Friend the Member for Warley, East believes, in my view the suggested use of Somerset House for a theatre museum should not be abandoned. The idea of a theatre museum has been discussed for many years. There is a strong case for putting together the magnificent collections which now exist in the Victoria and Albert, Leighton House and many other places, of costumes, documents, scenery and other evidence of our theatrical history. They should be put together for the benefit of historians and the public.
After much discussion it has been agreed that Somerset House would be a good place in which to house such a comprehensive theatre museum. Under the auspices of the Victoria and Albert, the project has now been organised and settled. It is hoped to open the museum in about a year.
Somerset House may not be the ideal place. The ideal arrangement would be to build a new museum. But Somerset House is there. It is a lovely building, and it would be more than adequate. Of course, if we were prepared to spend the money we could readopt some of the buildings which have been abandoned in the Covent Garden area. I am told, for example, that at a cost of many hundreds of thousands of pounds the Flower Market would make an even better museum. But unless that is guaranteed, it would be unwise to abandon the Somerset House project. The theatre is the art form in which this country is outstanding, and to have a museum devoted to it is a good idea, which should not be jeopardised. This is a minor problem for my hon. Friend the Minister, but it is being persuasively urged upon him from many authoritative directions which cannot be ignored. I ask him to act cautiously.
Above all else, I want the assurance from the Minister asked for by my hon. Friend the Member for Leyton that the amount of money to be made available by the Government to the Arts Council will be maintained at least at its present level in the next year or two. We

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are fortunate in having Ministers responsible for the arts who have such a deep personal interest in them. The Labour Party is on record as having, on all occasions, both in this House and in local government, endeavoured to carry out its philosophy of giving high priority to the arts and public availability of the arts.
In this House, we now have a Minister responsible for the arts who from personal experience is deeply involved in one aspect of the arts, and I know that he is equally interested in many others. We have a Chancellor of the Exchequer who is similarly interested in and devoted to the arts. He has always taken an immense interest in their development. We also have a Financial Secretary to the Treasury interested in the arts. He is a key man in the Government set-up, as it is he who considers and, if necessary, vetoes all requests which come to the Treasury for departmental expenditure. We have, therefore, three people who are anxious to do all in their power to help the arts and to prevent any deterioration during the period of inflation.
I am therefore sure that the Minister will give the House satisfactory replies to the questions which I and others have asked. I await his reply with confidence.
5.6 p.m.
Mr. J. Grimond: I wish to emphasise two points which have been made already. The first is that the Arts Council should be told as soon as possible what its allocation is to be. The second is that there should be a triennial budget for the arts.
Like other right hon. and hon. Members, I welcome this opportunity to debate this important subject of support for the arts. If I appear to approach it from a slightly different angle from that of previous speakers in the debate, it is not because of any conceivable antagonism either to the motives which have led them to make their speeches or to the arts themselves.
We are bound to ask not only that adequate resources are made available to the arts but for what purpose these resources are to be used. I was impressed greatly by the annual report of the Arts Council, but I had one slight reservation
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about it. It seemed to be saying that there must always be an increase in real terms in the amount of resources available to the arts.
I question that approach. I take the point made by the hon. Member for Leyton (Mr. Magee) that the amounts in question are very small and that the time is very apposite for giving the nation some sort of lift. But the Government must be beset by people demanding more resources, all pointing out that the amounts are very small and that this is the moment for their projects to be carried out. The fact is that, unfortunately, production of all sorts in this country is not rising.
I do not believe that all-round increased expenditure necessarily encourages creativity, and it is about the encouragement of creativity that we should be most concerned. Further, for reasons which go wider, I question the attitude which judges the success of Ministers in charge of the arts, of members of the Arts Council and of museum and gallery curators simply by the amount of public money that they can squeeze out of the Treasury.
We live in times when the nation is split into innumerable bureaucracies each claiming more in terms of salaries, pensions, payments in kind, perquisites and funds to be spent. We still have "growth", no matter what sort, as our dominant fashion. Public authorities especially must use more of everything. In this process values go by the board.
This seems to be the onset of barbarism. The Barbarians grabbed what they could and were incapable of economy or restraint. They had little regard for the past and still less for the future. Above all, they had no respect for individual flowering, freedom or the common good of communities.
Civilisation has not only accepted economy, it has seen economy as being essential to its values. Civilisation has stood for the individual and for individual choice in a decent society. Civilisation has never been achieved by the worship of size, the pursuit of growth for growth's sake or the spectacular waste which is the feature of much public wisdom today. Art is intimately concerned with civilisation, and it is indeed the core of the

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civilising values which have fought against barbarism.
Painters have never demanded more and more colours on their palettes. Art in general has been a matter of choice and of making use of hard materials. Very often it has been a matter of some astringency. I regard art as the main hope of the twentieth century in its struggle against dehumanised, wasteful and self-destructive attitudes—bureaucratic attitudes. I must, therefore, be disturbed that sometimes the arts seem to be in danger of bureaucracy and in danger of catching the fatal disease that we must all always demand more and more.
I welcome the suggestion made by the hon. Member for Bristol, West (Mr. Cooke) that we should look to the use of cathedrals for concerts. My own county of Orkney has a beautiful Norman cathedral, Kirkwall, which is used for many public occasions and for concerts.
There are two matters which I wish to mention. I put forward the first with great diffidence. It might be said to be outside the main theme of the speech made by the hon. Member for Leyton. He, quite rightly, was concerned with the living and performing artist. My point is about the policy of art galleries and museums. I make it with diffidence because many people, better qualified than I, take a different view. I believe that the buying up of pictures, china and furniture by the great public galleries needs to be done with extreme care and in moderation. I cannot believe that the £1 million spent on "Diana and Actaeon" was well spent. There are many Titians in the National Gallery. Pictures which go abroad are not destroyed: they are enjoyed by other people. On the other hand, if public money is not available for the preservation of buildings, they are destroyed. If money is not available for the provision of opera houses and theatres, performances do not take place. The Prado buys no more pictures, and I believe that to be right. The Wallace Collection would not benefit if it went on accumulating French furniture.
In every debate of this sort in which I take part I make a plea that the dozens if not hundreds of pictures kept in the basements of galleries which the public never see should either be exposed to
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view or ultimately be disposed of by those galleries to people who can enjoy them and see them. I reject the view that huge sums must be spent for prestige purposes. Still more do I reject the view that the buying of art is a good investment.
The right hon. Member for Vauxhall (Mr. Strauss) touched on the question of the Turners. I agree with him. The main reason for considering housing the Turners in Somerset House is to free space in the Tate Gallery. The Tate has a great many pictures which are seldom if ever seen by the public. But it is possible to have too much of a good thing. A hundred Turners would be admirable but 500 or 600 would be too much. I very much enjoy going to the National Gallery in Edinburgh and seeing "Summerhill". I hope very much that the pictures of King George IV's visit to Edinburgh will be returned. I do not think that those pictures would be more enjoyable were they to be with the innumerable Turners in the Tate.
There seems to be some point in buying pictures which are intimately connected with the history of the country, and I am more sympathetic, though not entirely sympathetic, to the demands of portrait galleries. It may be right to buy a picture of Sterne to keep in England. I regret the dispersal of the remarkable series of pictures at Gifford House outside Edinburgh. I hope that it might be possible to get the great galleries of the world to enter into a mutual self-denying ordinance not to put up the prices of old masters to astronomical limits. It is done simply for prestige purposes and I am sure that it is not a useful use of public funds.
A purpose for which public money is much needed is the preservation of buildings and areas of cities which are of great beauty and for opera houses and theatres for the performing arts. In this regard I touch on the delicate state of our architecture. Our opera, our music and to a great extent our visual art and our design—I think of the designs of Mary Quant 15 years ago—and of the reputation of our art schools over the last 30 years have reached an international level which has seldom been seen in British art. At the same time our architecture has been

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appalling. Cannot the Government, the Arts Council or someone do something about the training of architects?
First, there has been the destruction of Birmingham. That is now being repeated in Glasgow. The Scotsman on Saturday contained an article on Glasgow. What is said in the article is true. Glasgow is awful. Even so, the article does not mention the horrors that have been perpetrated in Glasgow's vast bleak housing schemes or in those inverted matchboxes in the Gorbals. Those atrocities have not been committed by wicked private landlords. They have been committed by public authorities employing supposedly highly qualified architects.
At least, we should give up believing that architects are fit to plan. If one takes a visitor round the universities and the great cities one sees that the number of buildings built in the last 30 years that are worth looking at can be counted on the fingers of one hand, and most of them were designed by foreigners. Are we to go on pretending that this dehumanised profession which cannot even carry out its proper task properly should be put in charge of the planning of human communities?
The three points which I wish to put forward are these. First, it is not so important how much money we give to the arts but that we should judge its results by different criteria from expenditure. We should judge its results by the art which flows from it. Secondly, we should concentrate on the living arts, the performing arts, providing artistes with a means of performance and encouraging them, cutting down if necessary upon the accumulation of pictures which are of the greatest artistic merit from the past but which will never-the less be preserved, if not in this country then somewhere else. Thirdly, we should pay attention, particularly in this year, to our legacy of buildings and beautiful cities and villages and do something to improve the standard of architectural training.
5.20 p.m.
Mrs. Renée Short: I wish to add my congratulations to my hon. Friend the Member for Leyton (Mr. Magee) on his choice of subject. We get few opportunities to
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debate the organisation and future of the arts. I am sorry that this subject appears to be such a minority interest since the arts comprise a very important part of our lives. Therefore, we should seize this opportunity to make our contributions and we hope that, even in this short debate, our speeches will be read by the Chancellor of the Exchequer with great care.
I should at the outset declare a certain interest. I hasten to say that it is not a financial interest but its brings me a fair amount of work. I refer to the fact that I followed my hon. Friend the Under-Secretary of State for Education and Science as Chairman of the Theatre Advisory Council when he relinquished that post to take up his present appointment.
On 2nd December I took a deputation from the council to see my right hon. Friend the Chancellor of the Exchequer about the vexed problem of VAT on the theatre. The Theatre Advisory Council represents the independent and the subsidised theatres. It represents the Arts Council, the London West End managers and the provincial theatres. The unions in the entertainment world are represented by the Musicians' Union and Equity. Therefore, the council is a very representative body, and when we visited my right hon. Friend we were speaking for the whole of the entertainment industry. I think I can say that he listened to us sympathetically.
Since that time the Evening Standard has taken up the campaign and it is being supported by members of the theatrical profession. Although not a large amount of money is involved, a very important principle is at stake. I support the view that the price of theatre and concert tickets should not be kept as high as it is at present, for if it is we shall have falling audiences in our theatres and attendances will decline even more than they have declined in latter years.
I am concerned at the view that the theatre and opera appeal to only a minority of the community. We need to examine the way in which the money now used in the arts is employed. We have a difficult problem of trying to persuade whole sections of the community that the theatre is a place for them. I am afraid that the theatre is regarded as

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an upper middle-class entertainment. The right hon. Member for Orkney and Shetland (Mr. Grimond) mentioned the City of Birmingham and its buildings. It is a surprising fact that although many cities have been rebuilt since the war, the threatres within them are still not supported by the large mass of the people.
I also happen to be a member of the Round House Management Council, and recently we have been trying to raise money for the redevelopment of that theatre. We seek to transform it into a real community arts centre embracing all sorts of activities and this, I believe will reflect the future development of the theatre. It is a building in which the public can view plays and in which people can put on theatre workshop productions; where they can do photography where amateurs can stage their performances, and indeed where the public can go in much the same way as they attend functions in public houses. People can also take their children in the centre and involve them in play groups, drama and all the rest of it.
We envisage a building that will be open seven days a week, from 10 o'clock in the morning until midnight or beyond. Films could be screened and late-night pop concerts could be staged. Classical concerts and other activities could also be put on. All these activities would amount to a stimulating and exciting form of community centre.
We are trying—with limited funds and, I am glad to say, with some help from the Arts Council—to organise the rebuilding of what was an old engine shed at Chalk Farm. To supplement the funds we receive from the Arts Council, we decided to launch an appeal. The appeal was aimed at firms, organisations, trade unions, and so on. I regret to say that the result has been absolutely depressing. We have reached only a small part of our total target. We found very few firms willing to risk even a few thousand pounds, which is not a lot of money for a flourishing and well-established firm to donate. We found the trade unions similarly timid about providing any money at all for what we hoped the trade union movement would regard as a rather exciting project. Therefore, we cannot be sanguine about what can be achieved by such approaches.
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I believe that we shall achieve a thriving and flourishing theatre only if we are able to stimulate all sections of the community to think that the theatre is something for them and something in which they must be involved. Therefore, we need to look at ways and means of attracting people into the theatre, whether it be the drama, ballet or whatever it may be. We might have more success with our efforts if we transform some of our conventional theatres into community arts centres of the kind I have described, and, above all, if those centres were situated in places where people live and work rather than in some beautiful park remote from the community.
One way in which we could upgrade the whole business of support for the theatre would be by making sure that my hon. Friend the Under-Secretary of State for Education and Science, who is to reply to the debate, becomes a fully-fledged Minister with his own Department. I believe that there should be such a Minister responsible for this important part of our national life and that he should have the proper backing and support. This will mean nothing less than a Minister with his own Department and entitled Minister for Arts, Culture and Entertainment, or the Minister of Arts and Leisure, or whatever it may be. I hope that this proposal will be considered.
What has been said so far in the debate about the value of the theatre economically is quite irrefutable. The fact is that in 1973 tourists to Great Britain spent the staggering sum of £872 million. The fact that visits to the London theatres can be put up by travel agents as a bait to travellers is a very important matter to be considered. I know that the theatre is often put forward as a tourist attraction when visits to this country are advertised in the United States.
One theatre management responsible for four West End theatres has kept a close check on the box office. That management submitted evidence to the Chancellor that about 30 per cent. of its total clientele throughout the year comes from abroad. The theatre is a very important foreign currency earner.
A total of £3½ million would flow back to theatres if the theatre were zero-rated. This would be excellent insurance to make sure that the money which flows

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into the country through tourism does not decline. Certainly over the years the total sum flowing from foreign earnings into the United Kingdom has increased, and that is something we want to encourage.
There is no doubt that many theatres are in darkness because of the existence of VAT. It makes all the difference between a successful show and one which cannot continue because of the increased costs—costs which are being met by theatre managements all over the country.
I suggest that if we promote my hon. Friend as a fully fledged Minister—and I am glad to see the Under-Secretary of State has returned to the Front Bench, since I am anxious to elevate him—and if we develop our theatres on the lines of community art centres, we shall fully involve the whole of the population in all that is going on. I believe that this is a vital way to bring more people into the theatre and with them more financial support.
I hope it is not too ambiguous to say that, if the Ministry was established on these lines, to aim for about 5 per cent. of the total education Vote might not be unrealistic, not this year or next year, but over three or four years. I do not think it would be unreasonable to hope to get that in order to expand the theatre and music and to stimulate activities of all kinds. We must stimulate creativity by giving opportunities to those who are trained to do the job for which they are trained, and to work in the art form of their choice.
This is probably one way in which we can stimulate more interest in the theatre and in the arts. Without it I do not think we shall achieve the sort of development that all of us would wish. I hope that my right hon. Friend will be able to indicate that he is prepared to press on these lines for this additional help.
I was impressed by what the right hon. Member for Orkney and Shetland said about the training of architects. I am not clear whether he was referring to training architects for house building or for the kind of buildings that we are considering today. There is an urgent need to train architects to build the kind of buildings that we shall need in future, such as community art centres or theatres. But theatres tend to be one-off jobs by
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architects. We have no tradition in the kind of theatre buildings that are needed. I agree that theatres built before 1912 are delightful and beautiful places and most of them ought to be preserved. My hon. Friend would do a great service if he could stimulate architects into designing the kind of buildings that we need for the future.
5.33 p.m.
Mr. Nicholas Fairbairn: It is an inevitable concept at present that all services which the State subsidises or supplies should be retracted and that logically each should be retracted by a similar amount. In my view, that is a false attitude.
If there is one area in which the confidence, imagination and development of this country has had success in the past 10 or 15 years, it is in the increase in our cultural stature. Here I pay tribute to the late Aneurin Bevan, who insisted on giving local authorities the capability to make provision for this purpose in the local authority grant to the extent of 4¼d in England and 3¾d in Scotland.
I have a broad interest in these matters. I was responsible for the development and the existence of the modern Traverse Theatre in Edinburgh. I have served on the Edinburgh Festival Council which might be regarded as a more traditional art form. I have been responsible to an extent for the development of various art galleries and theatres in Edinburgh. I have heard a lot today about Covent Garden, Turner, and so forth. Needless to say there are no Scottish Nationalists here, because they belong to a separatist party and not a Scottish party. In the regions—I do not exclude Wales, Mr. Deputy Speaker—there have been remarkable stimuli of cultural capability on very small budgets. I think that this is a matter which must be advanced and not restricted.
Art is about perfection. It is about élitism and excellence. One cannot cut down on a standard of excellence or artificially stop a movement towards excellence. It is often said—and this argument has been put forward in committee on the Edinburgh Festival—that art is a middle-class or upper-class entertainment. I do not accept that. That is an utterly false attitude. Art is perfection and it

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is élitist. Unless art is perfection, it is nothing.
I entirely agree with the right hon. Member for Orkney and Shetland. To take a balance of art is wrong. Architecture involves the environment in which all of us live. We allow buildings which are either good or bad works of art to be put up or destroyed. We do not have the same bad standards in other visual concepts.
Is art a good investment? I think that it is an extremely good investment. I hope that what I propose to say is not too nationalistic, but the Scottish Arts Council exists on £1·9 million. It spends on culture, on a conservative estimate, one-fiftieth of what is spent on the bread subsidy in Scotland. About one-tenth, £274,000, is spent on housing the arts, and that is less than the Government spent on creating four new toll booths at the Forth Bridge Road. The Edinburgh Festival, which is without question the major unchallenged international festival, existed last year on a subsidy of £275,000—less than the cost of four toll booths and their associated lights.
Now we begin to get the matter into proportion. If the Philadelphia Report is correct, the annual income to the Edinburgh area from those who go there is about £16 million. From this small investment, trade and income worth £16 million is being generated. I pay tribute to Dr. Diamand and those who are involved in the festival for having maintained the standard with so small an investment.
In Edinburgh there is also the question of the Opera House. In this respect I make a plea to the Minister. When I was first involved in the question of the Opera House it was to cost £2·4 million, but by the time they had dithered the cost had risen to the astronomic sum of £4 million. There has been a futile delay and now the cost is £20 million. If there is one lesson to be learned in the arts, it is that we must invest in the capital of the arts rather than in the income. Although it is normally thought that now is a bad time to invest in the arts, the lesson should be learned by the Minister and impressed on the Chancellor of the Exchequer that now is the best time. Tomorrow is always a worse time.
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The arts cannot drop their standards. If we allow the income of the arts to fall, it will not be possible to run festivals such as the Edinburgh Festival. We cannot have a low-standard international event. Whatever people's incomes may increase to, there is a psychological point above which we cannot raise a price. In the theatre and the arts we have almost reached that point. We shall therefore have to find a way of raising more money.
I am anxious that there should be more community participation in the arts. I do not like public subsidy of the arts in the way in which the Treasury subsidises false teeth. That is not a good system. I should like the Minister to allow tax relief to companies and individuals so that they can indulge in patronage of a capital object, such as a theatre, opera house or orchestra. That would be of great benefit. If they do not have strong feelings for one or another, let the money be put in a fund which the Arts Council can run. It is bad to have annual accounts, but it is important, when dealing with a subject concerning the way in which the world will judge our civilization, that we should realise that good opera companies, good festivals, good buildings and good exhibitions have an investment value which goes far beyond trivial financial considerations.
I should be the last person to advocate an increase in Government expenditure, but we must sustain the arts and the quality of the arts—which essentially is in a labour-intensive and therefore inflation-vulnerable sphere of investment—and whatever else we allow to drop and whatever other national difficulties there may be, we must keep our culture and civilisation at a level which all other countries will envy.
5.43 p.m.
Mr. Jasper More: It is curious that in any discussion of the arts a differentiation soon creeps in between the architects and the remainder of the arts. That was apparent in the speeches of the right hon. Members for Orkney and Shetland (Mr. Grimond) and Vauxhall (Mr. Strauss). It may be a psychological fact of deeper significance than we think.
Usually artistes are renowned, certainly in literature, for the gaiety of their lives—the demi-monde in which they live and

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the general attractiveness and sometimes advanced character of their way of life. But it has been pointed out by a great literary authority that it is a curious fact in the history of fiction and literature that there is no recorded case of a heroine in literature losing her reputation or virginity in the company of an architect. That may be a fact of some importance in the diverse considerations which have to be applied first to architecture and then to the other arts.
Being a county councillor, I declare an interest in this debate as a member of a local authority. I wish to say a few words about the last sentence of the motion so ably moved by the hon. Member for Leyton (Mr. Magee), which proposes that the House should call
"on the Government to take appropriate measures … to encourage local authorities to"
multiply public support for the arts.
Local authorities are in a difficult position. They can ignore the other arts if they wish to do so, but they cannot ignore architecture because of the obligations and powers laid on them by the planning Acts, and increasingly they are, facing practical problems which they cannot avoid relating to historic houses, listed buildings and schemes for maintaining the centres of beautiful towns. Increasingly they face situations in which a building needs to be preserved, a large sum of money is needed to repair it and the owner says to the local authority, "You wish this building to be preserved. What are you prepared to pay towards the cost? "If the bill is to be several thousands of pounds, the local authority usually produces a few hundred pounds. That is unsatisfactory and leaves everyone in a false position—local authority, ratepayers, owner, and the Department of the Environment, which wants the building to be preserved. The public are left in a false position, if they are interested, or, if they are not, think that the money has been wasted.
That is one aspect of the problem which affects local authorities, but looking at the matter financially it is part of the general problem of the extent to which local authorities should or could contribute to the cause. In local government, now is not an appropriate time to multiply public support for the arts. According
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to the Government and all the powers-that-be, it is an appropriate, and indeed imperative, time for economising on almost every aspect of local government expenditure. It is not easy to say to local authorities that they must economise and yet spend more money on the arts.
My hon. Friend the Member for Kinross and West Perthshire (Mr. Fairbairn) referred to the forward step taken by the late Aneurin Bevan when he created for local authorities the special capability to spend so much in the pound on the arts. But, in practice, that has not been enough. If we want local authorities to take action, should there not be a new system of finance between central Government and local authorities—in other words, a specific optional grant from the Government in aid of the arts to be administered by local authorities?
There might be great resentment if a special rate subsidy were paid or authorised every year by the Government, but there should be created a scheme of proportionate or percentage grant whereby up to a stated limit of expenditure local authorities could be told, "To anything which you spend up to this level in the cause of the arts in your area the Government will contribute such-and-such a percentage". That would be a specific encouragement to local authorities and might prevent the reproach that local authorities are not interested in this all-important sphere of their activities.
5.49 p.m.
Mr. Arthur Blenkinsop: I am specially interested in the way in which we can encourage local authorities and others to support developments in the arts on a regional basis. While I was not a Member of the House for a time, I had the opportunity of helping to establish the Northern Arts Association, or, as it was then, the North-Eastern Association for the Arts, which has proved to be a trail blazer for the other regional bodies which have since been established.
I welcome the support given to that concept by Governments of both parties. There was the work of Baroness Lee as the Minister with special responsibility for the arts. I am particularly glad that the Government have indicated their good will towards this concept. The Arts Council, in its last published report, said

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that it welcomed this approach and had every intention of maintaining support on a regional basis. It also called attention to the fact that it is not wholly satisfactory that too great a proportion of the support should come direct from central funds, whether the Arts Council or the Government.
There is a great deal to be said for insisting that local authorities should face this problem and the inevitable criticism that is bound to come. If local authorities—in a sense, local communities—do not indicate in a fairly clear way their concern about the position, it is unreasonable to expect either the Arts Council or the Government direct to step in and take their place.
We want some effective form of parnership. I share some of the anxiety expressed by the Arts Council in its last report where it points out that recent figures suggest that it is contributing more than half towards the support of regional work.
At a time of obvious difficulty and pressure upon local authorities, I am happy that support for the arts in the North has been maintained as well as it has. Since we established the Northern Association for the Arts, support for the arts has increasingly become accepted as a proper and reasonable sphere for public patronage. That was not the position in the past. We had a considerable battle to get this concept accepted, but I am glad that, at least to some degree, it has been achieved.
I should be happy if local authorities could be persuaded to contribute a good deal more. We cannot burke the issue. It should be discussed openly in our local communities to win the understanding and good will of people for this activity. Broadly speaking, that is what we have been able to do in the North.
I turn now to the important issue: on what area should we concentrate our support of the arts? Inevitably, there is conflict about this matter. There was a great deal of conflict when I was involved in it. Some of my political friends and others would ask, "How can you justify spending public funds in this way when those who are benefiting or seeking the opportunity of going to the concerts and other works that we are helping to finance largely come from one
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stratum of society? You are encouraging one group—an élite—and making it possible for them to enjoy what they want to see, but you are not necessarily making a contribution to widening the scope of artistic enjoyment." That is a real problem.
The frontiers of experience and enjoyment of some of the highest standards of artistic production, whether in music, the theatre, opera, ballet, and so on, are being steadily pushed out. The idea that such works were for a narrow élite group to enjoy is gradually being broken down. There is still a lot of this feeling. We must try to overcome it by encouraging support for a wide range of activities, some of which clearly have much wider support than others. This is where locally-based organisations, regional bodies, are in a better position to pick and choose and to decide what should be given encouragement than is a central body such as the Arts Council.
In the North we have band contests. Some areas in Northumberland and on Tyneside are still rich in some of the remaining colliery bands. Some famous festivals have been staged over many years. Basically, they were provided for band contests, but they included a good deal of local music, too. These activities have been encouraged and developed with support from the regional centre. What was undoubtedly a limited form of activity has been broadened, and we now have a more extensive and widely supported festival because of the support that has been given by the Regional Arts Council. Because of its interest, a great number of local arts associations have been established which encourage all kinds of local activities, both professional and amateur.
I believe that the Arts Council has rightly concentrated its whole effort on the support and maintenance of a high standard of excellence of professional work. We would have no hope of seeing ballet, opera, or many of our great orchestras without that support. But we should also encourage effective amateur work. A serious effort should be made to establish a reasonable standard of work. Again, a regional body can do a considerable amount to help for relatively small expenditure. I support the motion because expenditure in this area can do a great deal to fructify a lot

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of other activity of both an amateur and a professional kind which otherwise would not be available.
I pay tribute to all those who have helped to ensure that projects started on a regional basis have become nation-wide and we have a level of support which some years ago seemed hopeless even to dream of. They are all under the grip of inflation, like everything else, and therefore need all the support that we can give them. I hope very much that my hon. Friend will be able to increase the support wherever he can so that the standards which we have managed to achieve can be maintained.
6.0 p.m.
Mr. Norman St. John-Stevas: I congratulate the hon. Member for Leyton (Mr. Magee) on his motion, the terms of which I entirely agree with. I read in my Evening Standard yesterday that he said:
"I am likely to speak for quite some time",
and I think the hon. Gentleman kept his word. We had not only a tour d'horizon but a tour de sous sol as well.
I must not complain about that, because the views expressed by the hon. Gentleman closely parallel the views which I have been expressing for a considerable time. If I may allow myself the luxury and indulgence of quoting from an article of my own without, I hope, being mistaken for the Prime Minister, I refer the House to the Sunday Times of 17th November, in which I wrote:
"With an arts budget so minuscule a substantial increase would have a negligible effect on the economy. Doubling the arts appropriation—and the Arts Minister should demand no less—would still further revitalise the artistic scene in Britain; it would be an investment which would bring immense returns, not only in artistic achievement but in national self-confidence and prestige abroad, and reverberate helpfully even in that most mundane of spheres, the balance of payments."
It was also the view of the hon. Member for Warley, East (Mr. Faulds), expressed in a paper called a "Practical Arts Policy" in June 1973, that the amount spent on the arts should be doubled. The hon. Gentleman, who, alas, is not present now, is the best Minister for the Arts that we have not got, and if only the Under-Secretary of State would join us in this campaign for doubling the amount of money spent on the arts
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harmony and concord would reign in what would become a truly ecumenical endeavour.
I want to deal first with the general question of principle. It would need a decision at Cabinet level to double the amount of money devoted to the arts. They would have to be treated as a special case and exempted from the cuts in public expenditure. I do not see why that should not be done. I agree with the hon. Member for Wolverhampton, North-East (Mrs. Short), who has also disappeared at an untimely moment, that it would be a help if the Under-Secretary of State were a full Minister, with his own Department. However, I would go further. The hon. Lady said that she wished to elevate her hon. Friend. I suggest that the Minister for the Arts should be in the Cabinet. The hon. Gentleman looks nervous, but I assure him that he has both the temperament and the profile for it.
There are three practical reasons why we should support this increase in the arts budget. First, our great successes since the war have been in the arts, and in the performing arts in particular. I agree with my hon. and learned Friend the Member for Kinross and West Perthshire (Mr. Fairbaim)—he, too, has vanished; I hope it is not the effect of my rising to my feet that has denuded the Chamber—that this priority would be in the national interest. We have led the way in ballet, opera and the theatre since the war.
Secondly—the point has been made frequently during this debate—the sums are small. The grant to the Arts Council last year was £19 million. If that were doubled the sum would hardly be noticed in an education budget approaching £4,000 million. The amount spent on the Arts Council at the moment is less than the cheese subsidy, and palls into significance when one considers other items in the budget which have been detailed by the hon. Member for Leyton.
The third point is that there would be a direct return on the balance of payments. I yield to no one in my espousal of ars gratia artis, but the arts are not only justified on their own merit; they pay their way. It is perhaps because I am not as middle class as the hon. Member for Leyton that I consider there is

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nothing vulgar about referring to money in relation to the arts. We want to cornsider money, and the amount the arts earn, because that gets down to the nitty-gritty of the subject. It is true that all the arts, but the performing arts in particular, earn money for this country.
Many people come to this country for the theatre. In 1971 it was said that 58 per cent. of the tourists coming here gave as a reason for visiting Britain their desire to participate in our theatre. In 1973, in the West End alone, the theatre—that excludes Stratford, Glyndebourne, Edinburgh and the other great regional centres—contributed £12 million to the balance of payments. In 1974, a research project showed that overseas visitors at four West End theatres contributed 35 per cent. of the cash at the box office. Also, there are great gains for exports in the arts. One has only to look at Broadway, New York, and see that of the 21 shows running there 11 are British to realise what a contribution the theatre is making to our balance of payments.
Compared with what other countries spend on the arts, what we spend is small indeed. France spends a mere £118 million, but that is four times as much as we spend in Britain. Germany spends five times as much as we do, and in Italy expenditure on opera, ballet and drama alone, at £23½ million, exceeds the whole Arts Council grant, so there is room here for considerable improvement. I think that both in principle and in practice it would be desirable to double the amount spent on the arts.
What are the sources to which we could look? First, there is the Exchequer making grants through the Arts Council, but local government is just as important, and I agree with my hon. Friend the Member for Ludlow (Mr. More) that there is a dilemma here. We are calling upon local authorities to economise, and at the same time we are asking them to spend more money on particular projects, but I plead in aid once again the smallness of the sums involved.
When, in July 1973, as a Minister, I addressed the Standing Conference of Regional Arts Associations, I suggested that the desirable division between the Arts Council, the regions and private sources was one-third each. In 1973–74, unhappily the balance had tipped further
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away in favour of central Government. Seventy per cent. came from the Arts Council, local authorities, provided 20 per cent., and 8 per cent. came from other sources. I ask the Minister what he intends doing about this. There is a permissive power, of course, given in the local Government Act 1948, to provide a sixpenny rate, but many authorities do not use that power. I believe that the most active councils spend the equivalent of only a twopenny rate.
I ask the Minister, first, to give us up-to-date figures about the situation. What is the amount spent by local authorities in 1974–75, and what is the proportion now between the amounts spent by local authorities and money that comes from other sources? Secondly, I ask the Minister what he intends to do to improve the situation.
The hon. Gentleman's eight-point programme for the arts was the subject of an exclusive interview in The Guardian. Unhappily, it seems to have remained exclusive to the readers of that paper ever since, because we have not heard any more about it. The report said:
"'Local authorities have got to be encouraged to take a far greater share in the financing of the arts.' Mr. Jenkins contemplates direct grants to local councils and every pound of local authority expenditure on the arts would be matched by grants from central government."
I hope that those contemplations have led to some practical results and that we shall hear about them when the Minister replies. Would he please also let us know the Government's view on the use of local lotteries for the arts? That would be a most desirable development.
A third source of finance to the arts comes indirectly from the Exchequer in the form of tax relief. Here, one thinks of value added tax. The Chancellor of the Exchequer, as he has made clear, is not unsympathetic to the project of exempting the arts, or portions of them, from VAT. I urge the Under-Secretary to throw his weight into the argument on the side of the exemptors. He says that he has been pressing the Chancellor of the Exchequer since September 1974. Will he continue that pressing until it comes to a successful conclusion? It certainly makes no sense to give a grant with one hand and take it away with the other. If it is not robbing Peter to pay Paul, at

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any rate it is, perhaps, robbing Hugh to pay Denis.
Could we not see a more reasonable approach in the financial sphere? A campaign has been mounted by the Evening Standard to secure the exemption of the arts from VAT. I applaud that campaign and certainly support it. It reinforces the Evening Standard's claim to be the most civilised newspaper in Fleet Street. I would award that palm to The Guardian were it not for its rather doctrinaire attitude to education. I urge the Under-Secretary to secure from his colleagues in the Government the exemption of the living artists, the theatre, the opera and the concert hall from the effect of VAT.
I should be content to see films exempted from VAT as well. Just before this debate began I received a telegram from Michael Relpho, the Chairman of the Film Production Association, saying:
"British film-makers urge you that you include films among the arts for which you are advocating VAT zero-rating. Present plight of film production most serious yet and preservation of our cultural identity demands a strong home market. VAT accelerates cinema closures, prevents modernisation. Entertainment tax proved unsupportable and was removed. Now VAT imposes tax burden at time of much greater difficulty."
I hope that the Minister will take note of that expression of opinion, particularly in view of what he said in that eight-point programme, when he suggested
"A scheme to save the flagging British film industry by a National Film Fund subsidised by 50 per cent. of the profits from the Eady Fund and a Government subsidy for non-profit making film companies or films made for the public good and of high quality. All responsibility for films would pass to the Arts Minister."
I do not think that that has happened as yet, but the Minister might make a start by helping the film industry—I know that he has its welfare at heart—by securing exemption from VAT.
Value added tax on ticket sales amounts to 8 per cent. of the product of the tickets. The same expenditure goes to the author-8 per cent. It costs the theatre alone £3·5 million a year, and the 1972 figures show that for the commercial theatre, an overall loss of £675,000 was made. Yet the commercial theatre is just as important as the subsidised theatre for the future of theatre
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in Britain. The Arts Council in 1973–74 spent £1·2 million on VAT. Admittedly it got a grant of £750,000 back from the Government but that was a once-and-for-all grant. We would welcome a statement from the Minister today that the Arts Council will continue to get a remission of the money which it expends on VAT.
We welcome the concessions already made by the Chancellor of the Exchequer on the capital transfer tax in relation to the national heritage. I hope that he will expand that concept to include theatres. I should like to see positive legislation in this sphere protecting London's theatres. They are not adequately protected under the present planning law. Once again, I come back to the eight-point programme, when the Minister, in his days in opposition, referred to
"Security for all West End theatres, including those threatened with demolition by the public ownership of the site. Independent producers would be granted security of tenure."
That is an admirable sentiment. I hope that we shall soon see some Government action in that respect.
If we turn from, alas, the all-too-theoretical eight points to the actual financial situation, what we see is grave indeed. The ravages of inflation are threatening to wreck the whole of the arts programme. We have grown accustomed to 10 per cent. growth, in real terms, for the arts. I make no party point about this. It was a growth rate that was achieved under both preceding Governments. Even when cuts were made in the winter of 1973, a growth rate of 3 per cent. remained for the arts.
What will the Minister do to help the Arts Council? We really need to know. Lord Gibson, in his annual report, pointed out that he needed £25 million for the Arts Council to maintain the projects which it had already embarked upon, and to maintain activity at the same level in the coming year. But, of course, that was written in September 1974, since when inflation has rushed further ahead. It is clear that £25 million, which he calculated as being sufficient, will not be sufficient today, and must be up-graded to a sum which I calculate as being about £26·5 million. That is allowing for no growth at all. Of course the arts are an extremely labour-intensive industry.

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If it is impossible that the arts should be treated as a special case, what yardstick can we use to see what, in a time of admitted economic stringency, it is fair to give the arts? At the very least, they should advance at the same pace as education. The arts are connected with the Department of Education and Science. They should have the advantages as well as the disadvantages of that connection.
On 5th December last, the Secretary of State for Education and Science was reported in The Times as having said,
"Education in England and Wales is likely to expand by about a tenth over the next two years."
When I faced the Under-Secretary, at Question Time on a date not so long ago, he told me that the Secretary of State had not made that statement. I am very glad to see that the Secretary of State has just taken his seat on the Government Front Bench. I was referring to the statement he is reported to have made, according to The Times of 5th December—that education in England and Wales was likely to expand by about one-tenth over the next two years.
Following the denial of the Under-Secretary, I checked with the education correspondent, Mr. Devlin, who sticks by his report. My submission is that if there is to be a 10 per cent. growth rate in education services in general over the next two years, the same rate of growth should be made for increases in the Arts Council's budget—and they would be quite dramatic.
The Secretary of State for Education and Science (Mr. Reg Prentice): I am sorry to interrupt the hon. Gentleman—particularly after coming in so late in his speech—but the comparison of 10 per cent. was a comparison of the education component in the rate support grant for 1975–76 with the actual expenditure in 1973–74 by local authorities.
Mr. St. John-Stevas: I accept absolutely that explanation from the Secretary of State. All that I can say is that it is not the statement he was reported as having made in The Times. I know that Departments do not like their Ministers writing letters to newspapers, but it would have been helpful if the Secretary of State could have overruled his officials on that occasion and made the point clear.
Mr. Prentice: I made it clear several times.
Mr. St. John-Stevas: Never so clear as the right hon. Gentleman has made today in timely arrival in this debate. Alas, my statistical researches on this point have been wasted, since I shall not project further. But had the Secretary of State's assessment for the expansion of the educational budget been what The Times said it was, in 1976–77, allowing for a modest 25 per cent. inflation and a 5 per cent. growth rate, the grant for the arts would have to be about £37 million a year. No matter; the Secretary of State has cleared un this point, and I must, therefore, go to another source which cannot be so simply dismissed—the White Paper on Public Expenditure to 1978–79.
Looking at that document we find that education expenditure over the next two years, 1975–76 and 1976–77, increases at a rate of 5·7 per cent.—that is, education excluding the libraries and the arts. But if one looks at the figures for the arts, one finds that there is a 6·5 per cent. decline in the same period. Admittedly—before the Minister for the Arts sends for his advisers—there was one special item in that—the site for the Royal Opera House. But even allowing for that special item and excluding it, the growth rate for the arts over the next two years will be only 1·8 per cent., if that. That is the estimate made by the survey.
My point is that discrimination is being practised within the education service, of which the arts are part, against the arts and in favour of other components of the programme. We see this discrimination again if we follow the figures to the end of the period covered by the White Paper to 1978–79, where expenditure on education will have grown by 11 per cent. whereas expenditure on the arts, on the first basis of calculation, including the special item, will grow by only 2½ per cent. and on the other basis, by only 8 per cent.
Those are the serious facts of the situation. I found the fantasies of the hon. Member for Leyton agreeable, but unfortunately they were only fantasies. The facts of the situation are that the arts will not do well in relation to the rest of the education budget.
A further most important point is that the triennial system of grants has broken

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down. Previously, in June, a preliminary notice was given of how much the Arts Council could expect for the following year; in January it was revalued, and in April the council got the money. But here we are in February and still, as far as I know, no figure has been given to the Arts Council. It may be that a private figure has been given by the Minister. If so, the House is entitled to know it as well.
I freely admit that the inflationary situation has created great difficulties for the Minister for which he is not primarily responsible, but he should bestir himself and find some alternative means of informing the Arts Council sufficiently far in advance so that it may know what its grant will be, in order that it can fulfil its commitments.
I conclude on a number of points of a positive character. The Chairman of the Arts Committee in the Conservative Party—my hon. Friend the Member for Bristol, West (Mr. Cooke)—made various suggestions, which I noted with great interest. They ranged from the use of television to that of Canterbury Cathedral. I want to raise some points with the Minister under the general heading of public support for the arts. What about public lending right? It is true that if we had not had that little local difficulty last February, this measure would have been passed into law by now. We would have had a public lending right, and a long-standing injustice would have been righted. On coming back to the eight-point programme, what do I find? This is the platform which the Under-Secretary put forward as his platform—an admirable one—for gaining votes from those interested in the arts at the election. There he said
"The financial situation permitting"—
that is the small print—
"the Minister for the Arts should ask the Exchequer for £5 millions a year for public lending right, and £20 millions a year for the Arts Council."
We have not seen even the first draft of the Bill, let alone the £5 million. Are we to have £5 million for public lending right? No one will be more delighted than myself if that is so, because authors are badly treated. Under the Arts Council system they got only £133,000 out of
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the whole budget of the Arts Council last year.
May I also ask the Minister to take action over the Criterion Theatre? I hope that he will get his colleague who has direct responsibility here—the Secretary of State for the Environment—to appoint an inquiry, so that we can be assured that the theatre will be kept open, as the planning committee of the GLC has suggested. Secondly, will he intervene with Sir Charles Forte to ensure that the rentals and the length of the lease will be equitable, and will be such as to be compatible with the running of a legitimate commercial theatre?
I come, thirdly, to the question of the Turner paintings. Sir John Betjeman has suggested that they should be housed at Somerset House, in which the theatre museum already has a prior claim. I do not wish to get involved in a squabble between two sets of artistic protagonists; that would be foolish indeed. The point is that we really need both. I suggest that the Minister uses his good offices to bring them together. It has been suggested that the Covent Garden flower market should be used for the Turner paintings. That would cost, I think, £330,000—not much more than the £250,000 which is projected for housing them in Somerset House. I hope that the Minister will intervene—that is his job, as the Minister—and bring the parties together to see whether he can work out an amicable agreement by which we can get the best of both worlds and get the projects housed.
Lastly, I hope that the Minister will devote the attention of himself and his right hon. Friend the Secretary of State to the extremely important question of extending the audience for the arts away from a limited portion of the middle class to the vast majority of the people. I believe that the solution to this matter lies in the schools and in giving art education a much higher priority, and ensuring that resources are devoted to that. I have been active myself in promoting a trust for the Unicorn Theatre, which performs plays for school children, and I hope that its work will continue to have the Minister's support.
This has been a valuable debate. I congratulate once again the hon. Member for Leyton on devoting his time to it. On the whole, it has been a good-tempered

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debate and I have been nice to the Minister. I cannot guarantee that I shall go on doing that, but I have made an effort today. I have only the hope that that eight-point programme review will be put into operation. The only point which so far has been put into effect is that in which the Minister said:
"I'd get away from the aristocracy, except for Lady Antonia Fraser."
History, perhaps mercifully, does not record the lady's views on the prospect of proximity to the hon. Gentleman, but tonight at any rate we look forward to hearing from the Minister a positive speech with constructive proposals for the future of the arts. For the moment, we shall be content with that.
6.31 p.m.
The Under Secretary of State for Education and Science (Mr. Hugh Jenkins): I, too, should like to congratulate my hon. Friend the Member for Leyton (Mr. Magee) on his fortune in the Ballot, on his selection of subject, and on the manner of his presentation of his argument. He carries perhaps rather more weight—certainly rather more conviction—than does the hon. Member for Chelmsford (Mr. St. John-Stevas), if only because he has not been a member of an administration which, when in office, totally failed to carry out any of the things which the hon. Member now advocates in opposition. We can therefore take much more account of my hon. Friend's points than of those with which we are becoming over-familiar from the hon. Member for Chelmsford. I hope to reciprocate what the hon. Member for Chelmsford claimed to be his kindness to me; after having made that one point, I shall try to be equally kind to him.
I have some sympathy with my hon. Friend's point that our methods of public finance for the arts are, in general, over-rigid. He also made good points about the Government's revenue from drink and gambling, and so on. That is salutary information for the House to have. It is difficult for me to reply to all the points that he made in a long and interesting speech, but I shall try to cover most of them. I am afraid that I shall have to take most of the remaining time, if not all of it.
On a Private Members' day, the Government are here first to listen, second, to
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reply and, third, to provide information. We are a rather thin House today. Perhaps that is due to the fact that the media do not find front page space for the Government's good works for the arts, for galleries, libraries and museums. Perhaps we should not complain too much; while the Opposition have been providing a daily sensation-drama, a serial compared with which the Pallisers pale and Barlow is baffled—
Mr. St. John Stevas: What about Pearl White?
Mr. Jenkins: I was about to say that there has been nothing like it since Pearl White. With such competition, we must be grateful that our doings attract any attention at all.
Despite the thin House, I have good news for all those who have taken part in the debate. The arts world is full of diligent readers of Hansard, and what hon. Members have said will not be wasted. What is more, I believe that the media are more and more finding that viewers, listeners and readers are deeply interested in the arts. Even people who have not read the book or seen the play or the film like to be able to talk about it knowledgeably. There is an increasing public for news and comments about the arts. I have listened with close attention to what has been said and I shall try to reply to specific questions. I shall have to resist any attempts to intervene unless hon. Members press very hard, because I hope to cover most points.
I should like to remind the House that the motion says that we are now in a period like the Second World War, which, as my hon. Friend said, is an appropriate time to multiply public support for the arts. The motion calls on the Government to take appropriate measures to this end and to encourage local authorities to do the same. What are the facts? I can put matters into perspective here.
The Arts Council's predecessor was the Council for the Encouragement of Music and Arts, which was formed in December 1939. In that month, the Council received £25,000 from the Pilgrim Trust and five months later had a grant of £50,000 which was borne on the Vote of the then Board of Education. By 1944, that grant had risen to £175,000, or by seven times over the period, despite the

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financial difficulties of the war years. That was no mean achievement.
Let me remind the House of the record since then. The total grant-in-aid to the Arts Council was £235,000 in 1945, but for the current year it stands at £21,335,000, including just over £500,000 for expenditure on housing the arts and £21 million on supplementary grants this year to the Arts Council, which Parliament has now approved.
Those figures represent nearly a hundredfold increase over 30 years in the funds made available from central Government to the Arts Council. Even allowing for inflation, the post-war record of successive administrations represents a significant improvement on that Second World War period. In this sense, therefore, what successive Governments have already achieved since the war in terms of hard cash support for the arts more than answers the motion.
Indeed, my hon. Friend himself went far to make withdrawal of his motion a self-imposed necessity. He paid great and justified tribute to this country's achievements in the arts. At one moment I thought that I was seeing a band of emaciated pilgrims and the next moment a crowd of princes clothed in diamonds and pearls. My hon. Friend cannot have it both ways. I understand that his feelings stem from a real concern for the arts, which I warmly share.
The growth of this expenditure since the war has been steady, but the increases in grants to the Arts Council were particularly significant from 1965 onwards, with the appointment of my noble Friend, Baroness Lee, as the first Minister for the Arts. That year also marked the first year of the "Housing the Arts" fund, which has been of such benefit in providing central Government contributions to the construction of arts buildings of various kinds by local authorities and other bodies.
Hon. Members may have noted from page 100 of the Government's Expenditure White Paper for the period to 1978–79 that since the introduction of the scheme 217 projects have benefited or have been promised support, and the Arts Council's contribution to them is nearly £6 million out of a total of £34 million-
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worth of capital expenditure on the arts from all sources. This is one reason why the hon. Member for Chelmsford suffered from his usual confusion with figures—
Mr. St. John-Stevas: Will you substantiate that, please?
Mr. Speaker: Order. The hon. Gentleman asks me to substantiate something; I would not dream of it.
Mr. Jenkins: I am grateful for your protection, Mr. Speaker.
As for the recurrent grant, the rise from 1965 onwards has been similarly encouraging. In that year the grant to the Arts Council was nearly £4 million. It rose to nearly £6 million the following year and has increased steadily to the total, for the current year, or over £21 million.
Hon. Members know the financial problems facing the arts both now and in future years. It has been emphasised correctly in this debate that the labour-intensive nature of the arts, particularly the performance arts, makes them especially vulnerable to inflation. As my hon. Friend who moved the motion said in his article in The Times on 9th October last, and as was pointed out by Beaumol and Bowen in 1966, it is difficult, if not impossible, to reduce the number of words in "Hamlet", or to enable a company to play it in less time or with fewer actors. Indeed, at the moment we have three Macbeths in one play, so we have more rather than less in that respect. There is also little scope for reducing the number of instruments in an orchestra. The City of Birmingham Orchestra at the Royal Festival Hall on Friday, using a number of instrumentalists and a choir which were certainly not over-large for the Grande Messe des Marts of Berlioz, had to overflow into the boxes.
It is an earnest of my intention, and of the Government's determination to maintain standards in the arts, that this year we have presented, and Parliament has approved, two Supplementary Estimates for the Arts Council—one of £750,000 last July and one on 9th December last of £1¾ million.
Many hon. Members have, quite naturally, asked about the money that the Arts Council is to receive from the Government in the next financial year. I welcome, in particular, the good intention

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of my hon. Friend the Member for Leyton that finance from the central Government should be increased, and should be seen to be increased. I hope that steady progress can be made in this direction.
It is, perhaps, an awkward time for me to be talking on this subject—when we are expecting the presentation of the Estimates. It will be well understood that I can hardly anticipate my right hon. Friend the Chancellor in these matters. The hon. Member for Chelmsford must, as I have advised him before, learn to contain his impatience until the Estimates are presented to Parliament.
Mr. St. John-Stevas: Will the hon. Member give way?
Mr. Jenkins: I can tell the hon. Gentleman that I shall shortly be dealing with the point he raised on the Public Expenditure Estimates. In those Estimates there is a slight error in presentation. I hope to clarify that matter in answer to a Question, which should clear up some of the points that have added to the hon. Member's confusion.
Mr. St. John-Stevas: I am grateful to the hon. Gentleman for establishing that the only confusion that exists—since my figures were perfectly clear—is in the Estimates published by the Government. The hon. Member made a rather sibylline utterance about that, and we shall be interested to hear from him further.
I rose first to tell the hon. Gentleman that it is not my impatience that is important but the impatience of the Arts Council and all those who are dependent on it who cannot go ahead with their projects until they know their financial position.
Mr. Jenkins: The hon. Gentleman said that if any private information had been given to the Arts Council it should be given publicly in this House. But if that were done it would no longer be private, so that, even if there had been a private communication to the Arts Council, we could not pursue that in the House now.
I challenge the hon. Gentleman's figures and his comparison with the Education Vote, and my right hon. Friend the Secretary of State adds the weight of his office in joining with me in that challenge.
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I should like to turn to one or two points raised by my hon. Friend the Member for Leyton whose motion this is. I agree with him that on the preservation of buildings we have a problem. The Government have tackled it. It will not have escaped my hon. Friend's notice that the daily outcry about theatres in peril that used to occur has now stopped. This is largely because of the different political climate. It is known that permission will not be granted for theatres to be pulled down, and therefore developers are not as eager to put their money into theatres in the hope of converting them to other uses as they used to be when the Conservatives were in power.
The hon. and learned Member for Kinross and West Perthshire (Mr. Fairburn) raised a number of points with particular reference to Scotland. I disagree with him on one matter, which does not relate specifically to Scotland. I agree with him that art is certainly about excellence, but it is not about élitism, and I do not agree that excellence and élitism are exactly the same.
A number of hon. Members have referred to value added tax. The Government are still considering this matter. The House is probably aware—it has been made aware—that the Chancellor of the Exchequer recently saw a deputation led by my hon. Friend the Member for Wolverhampton, North-East (Mrs. Short), who gave me her apologies for having to leave early. She succeeded me as Chairman of the Theatres Advisory Council. My hon. Friend's meeting with the Chancellor resulted in a useful exchange of views, and he is taking those into account before coming to any decision on value added tax.
At the same time, it must be made clear that value added tax is a Common Market tax—that the EEC is unlikely to relieve any part of the theatre from the tax, and will certainly not recommend any relief for the commercial theatre. On the contrary, if we remain in membership, harmonisation of policies will not make it easy for any Government to act unilaterally in the matter. The Evening Standard campaign may therefore be regarded as a reversion by the Beaverbrook Press to its previous anti-EEC position. As far as I am concerned, that is not unwelcome, but supporters of the campaign should be aware that

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they may be regarded in Europe as firing the first shots on behalf of the anti-Marketeers in the coming referendum campaign.
A good deal has been said about the currently fashionable notion that the fine rooms in Somerset House should become a Turner gallery rather than a theatre museum. There is a firm Government commitment to the theatre museum, and there is no intention of abandoning that commitment.
Turner's great works were passed to the trustees of the National Gallery as a result of the settlement by the Court of Chancery in 1856. Since then, as a result of gallery organisation and other events, the drawings and paintings have come to be held by the Tate Gallery and the British Museum as well as the National Gallery. The Government have no authority to deprive the various trustees of their holdings.
Greater space for display of works of art will arise from the current improvements and extensions of the National Gallery, the Tate Gallery and the British Museum. Whether the works of an artist are better shown en masse than in different galleries is arguable, as we have heard today. It is not a matter on which the Government would wish to take a firm view. It is not the Government's intention to interfere in matters that are the proper rôle and function of the trustees. As my right hon. Friend the Member for Vauxhall (Mr. Strauss) pointed out, other Governments have not taken the attitude that we have—that the views of trustees should be taken into consideration in these matters and they ought not to be interfered with too much. I hope to announce at some time a measure of greater devolution of responsibility to the trustees of the museums and galleries.
I have from time to time drawn attention to the over-centralised nature of public spending on the arts.
Mr. W. R. Rees-Davies: May I bring the Minister's attention back for a moment to the idea of having one gallery or museum where the whole range of Turner's work might be seen? I feel that this is a scheme well worthy of consideration by all three groups of trustees concerned. Have the Government considered putting to the trustees of the
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British Museum and the others concerned the possibility of having one suitable place for all Turner's work? Such a scheme would commend itself to a great many of us who have some knowledge and understanding of this artist's work, and there are a great many people who believe that it would be the right approach if it could be done with the general agreement of those concerned.
Mr. Jenkins: Had the hon. and learned Gentleman been here earlier he would have heard those matters fairly fully canvassed. I hope that he will forgive me if I do not at this stage give him a full reply. I am sure that his remarks will be given due weight.
The opening paragraph of the public expenditure White Paper emphasised the necessary restrictions which the Government have to impose on public expenditure, and it would therefore be misleading of me to give any indication to the House tonight that local authorities can be encouraged to increase their total expenditure. What is open to them, however—this is important—is to examine very carefully their priorities for expenditure with a view to seeing whether they can obtain better value for the money which they spend within existing resources. My hon. Friend the Member for South Shields (Mr. Blenkinsop) had that very much in mind.
Mr. Fairbairn rose—
Mr. Jenkins: We have very little time, and I ask the hon. and learned Gentleman to allow me to continue.
As local authorities know, it is my view that the channelling of money to the regional arts associations can often lead to more fruitful results per pound spent than if an authority goes it alone on some particular project. There is no time like the present for concentrating the mind on obtaining better value for money. Indeed, as that was the very point made by the hon. and learned Member for Kinross and West Perthshire, I hope that my response there may satisfy him so that he will not wish to intervene further.
That leads me on to what I want to say about the multiplier effect of the arts deriving their finance from a wide variety of sources, a matter to which my hon. Friend the Member for Leyton

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referred. I commend to the House the words of the Secretary-General of the Arts Council in the current annual report of that body on how the Arts Council works.
Sir Hugh Willatt elaborates in some detail the response theory of patronage, of contributions from a wide variety of sources to independent enterprises contributing to the remarkable results which have been achieved in this country, which have saved us from the dullness and conformity of "establishment" art. This has largely been the result of what one calls the response method.
The policy of aiding and subsidising a large number of local initiatives has resulted also in significant changes in the pattern of Arts Council support as between the national companies and the regions. I have no time to go into detail now, but there has been a large move away from the four national companies out into the regions. Whereas at one time about two-thirds of Arts Council expenditure was spent in London, now the situation is reversed and the majority of Arts Council expenditure is spent outside London.
Mr. Fairbairn rose—
Mr. Jenkins: I must ask the hon. and learned Gentleman to forgive me. I have a good deal more to say. I very much hope that private organisations and individuals will continue their smaller but nevertheless significant contributions to the arts. I am having some private discussions to this end, and I have opened them with a talk with Mr. Campbell Adamson of the CBI. Some business organisations are already doing quite a lot, and it is time that we gave these beneficent activities greater publicity so that others may be encouraged to follow their example.
Comparisons with other countries are somewhat misleading. Neither the totally centralised system in France nor the fundamentally local system in Western Germany can be directly compared with our own methods of support. It is the deliberate policy of this Government—and, to be fair, it was the policy of previous Governments—to encourage diversity of support for the arts, and this very fact makes it more difficult to ensure that one is comparing the whole of expenditure on the arts with similar expenditure
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abroad—that is, whether one is, in fact, comparing like with like.
In any event, I am inclined to question—this point was made by the right hon. Member for Orkney and Shetland (Mr. Grimond)—whether that is an aim which we should seek to pursue, whether we should drive up our subsidy to the point which it has reached in some Continental capitals.
For example, Covent Garden manages at present on about 50 per cent. support from the State, compared with about 75 per cent. for many Continental opera houses. Is it not a healthy state of affairs that Covent Garden should have a larger income from the box office and that some of the financing of its productions is undertaken by business? I see nothing against that. Bearing in mind the limits on financial resources, I should hesitate as a matter of principle to say that Government subsidy ought to be larger just because it seems the right thing that Government subsidy should be larger. I see nothing to be ashamed of and nothing to apologise for in what we are doing in this country.
Most of the Arts Council's clients raise more than half—some of them much more than half—of their income from the box office. This is a strength—it is something to be proud of—because people are going to the theatre. It is no cause for apology I hope that inflation will not have the effect of making the Arts Council the chief source of finance for more and more projects.
In some countries the State pays most of the cost, but the quality of State support for the arts is not measured only by the amount of money involved. It is measured by the quality and variety of the national artistic output. In this respect, as has been said, we can hold our head high throughout the world. In our method of support, in the way we go about it, we are on the right lines, and even in times of stringency we can improve.
I turn for a moment to the arts notices in the papers. What other capital in the world has such an offering to make? Quite apart from the National, the Royal Shakespeare, the Royal Court and the Mermaid, there is always something valuable and controversial to be seen in our fringe theatre. We have a mass of

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concerts of all kinds, the great picture and museum galleries, and the series of splendid exhibits. What other capital has two major opera houses playing all the year round, and a range of first-class orchestras? Ask Louis Fremaux or Paavo Berglund what they think of British music. They will say that we are the greatest.
Travel the country as I do, visit the new museums and new extensions being built, and the rebuilt galleries—go to Edinburgh and Glasgow to see what they are doing—try smaller places such as Kendal, Lincoln, Milton Keynes or Battersea—visit one or two of the new community workshops and watch people doing their own thing—hear the Wandsworth School Choir or the John Bate Choir in my constituency—there has never been a time when so much artistic activity has been going on; nor has there been one in which so many people not only participate but appreciate the best there is to experience.
This is not a country starved of culture. It is a country eager for culture. My hon. Friend has seen avidity and mistaken it for emaciation. He himself described our plenty.
Of course, there is still much to do, but even in this time of stringency we have not stood still. Let me remind the House of some of the things we have done in the past year. We began by removing the museum charges.
Mr. St. John-Stevas: What else have the Government done?
Mr. Jenkins: Then, despite the difficult times, we protected the Arts Councils against rises in costs in 1974–75, giving the council a real increase over inflation. Subsequently, we obtained a Supplementary Estimate to keep it that way, and a further Supplementary Estimate in recognition of the cost of value added tax. We spent £15,000 on research into the practicalities of public lending right, and we are now drafting a Bill to legislate on it. We increased the grant to area museum councils by 300 per cent. We have this year given £440,000 to the Crafts Advisory Council. We started the process of drawing the membership of the Arts Council and its committees from
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a wider spectrum. We are pushing ahead with a major building programme for our national museums and galleries. We have bought land earmarked for a future extension of the Royal Opera House. We are finding money to complete the building of the National Theatre. Go where one will—it is all happening.
Soon I shall be issuing a publication provisionally entitled "Arts with the People". Those who read it may find it difficult not to take pride in belonging to this nation and in being one of these people.
What other inducement can I offer my hon. Friend to withdraw his motion? The other day, I saw that sprightly nonagenarian Sir Robert Mayer rejecting the lift and walking up the stairs at Queen Elizabeth Hall. He told me that he had written to the Prime Minister. I have since seen the reply, and I have permission to quote from it. The Prime Minister said to Sir Robert:
"I know of the daunting problems that music and the other performing arts now face, because of the effects upon them of rising costs and prices. Of course, the arts are not alone in suffering these effects; but I recognise how especially vulnerable they are.
"In the difficult economic situation that faces us, the Government has to weigh the claims of the arts, comparatively small though they may be, against the other demands for public support. I do not think that I can say much more than that we shall try to strike the right balance. It is clearly not a time for expansion, and we shall not be able to do everything that people would like us to do. But we shall try to help maintain standards, and we shall hope to sustain what has been achieved in music and in the other arts. I am deeply conscious of the value of that achievement in our national life—as important in difficult as in easy times—and its contribution to our international standing."
On the basis of what I have said, and on the basis of what the Prime Minister has said on behalf of the Government, I invite my hon. Friend to withdraw his motion, on the understanding that our purposes are identical and our effort will be unremitting.
Mr. Magee: In the expectation of even greater benefits to come than we have received already, I beg to ask leave to withdraw the motion.
Motion, by leave, withdrawn.

ORDERS OF THE DAY

  EXPORT GUARANTEES AMENDMENT BILL
  Order for Second Reading read.
  7.0 p.m.
  The Under-Secretary of State for Trade (Mr. Eric Deakins): I beg to move, That the Bill be now read a Second time.
  The Bill has two purposes. First, it proposes that the Export Credits Guarantee Department should be empowered to make loans and grants for specified purposes connected with exports. Second, it proposes that the two limits on the Department's commitments set out in the export guarantees Acts be combined and be subject to increase by order.
  In the Written Answer which my right hon. Friend the Secretary of State gave on 21st November to the Question put by my hon. Friend the Member for Norwich, South (Mr. Garrett) he referred to the Government's intention of introducing legislation in connection with the refinancing arrangements between the Government and the banks. It is to this that the first proposal is basically directed. The second proposal is simply an administrative change designed to give greater simplicity to save parliamentary time.
  Before discussing these proposals in greater detail, I should like to make some general comments to set the background against which the Bill might perhaps best be considered. This debate comes at a time when we are facing a very difficult and rapidly changing world trading scene. There has been a significant shift in the balance of economic and commercial power and in the terms of our international trade. Inflation is an international problem which has still to be solved.
  One feature of this spreading inflation over the last two or three years which is of particular relevance to this Bill has been the dramatic rise in interest rates. Competition for export markets can scarcely ever have been fiercer, and we cannot afford a return to the kind of protective or beggar-my-neighbour policies of the 1930s. No more can we contemplate with equanimity the kind
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  of world trade recession from which we and almost all other countries could only lose. We face a daunting balance of payments challenge, a key feature of which is the need substantially to increase our exports.
  These are the stark facts of the present situation, and they mean that the support and assistance which we give to out exporters must be broadly comparable with that available to exporters in other countries. To do less than this would mean placing British exporters at a significant competitive disadvantage. I take this opportunity to assure the House that it remains Government policy to maintain the position in which the package of facilities available from the Export Credits Guarantee Department stands comparison with those available from any other credit insurance institution in the world.
  I recognise that one or two institutions may offer individual facilities which are not available from ECGD. I should, I think, comment on this in three ways. First, it is necessary to look at the whole range of facilities and services involved in order to judge whether United Kingdom exporters are at a competitive disadvantage. Second, ECGD is constantly reviewing existing facilities to see whether they might usefully be extended or amended. The Department is also considering new forms of cover and new facilities. Indeed, following discussions with industry and the banks, several such possible new ventures are currently under very active consideration.
  Third, when considering whether a new facility should be introduced we must consider not only the benefits expected to flow from such changes but also the costs and expenditure likely to be involved. This is of particular importance when public expenditure is involved or where losses on one new facility mean that extra charges have to be raised from other ECGD policyholders who will have no share in the benefits of the cover. It is also important to draw a distinction between commercial credit insurance and aid.
  I should, therefore, stress that support for exporters and efforts to ensure that they can offer internationally competitive facilities are not cost free. Second, I have referred to the general

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  package or range of facilities available from the Export Credits Guarantee Department, but I have not said that we should seek fully to match each and every facility which one or other overseas credit insurer may offer. Third, there are limits beyond which it is simply not worth going in order to support exporters in their search for exports.
  Let me turn now to the detailed purposes of the Bill before the House. An essential competitive feature of exports is the financial arrangements or terms offered to overseas buyers. Over the years ECGD has played an increasingly significant rôle in this, whilst never actually financing exports or acting as an export bank. On balance, we believe that it is probably right for this to remain the position.
  For many years now the clearing banks, with the backing of the Export Credits Guarantee Department, have made available special financing facilities for exporters. In 1972, as part of these facilities, the banks agreed to new arrangements under which they would provide finance for exports sold on two years credit or longer, and for home shipbuilding, at fixed rates. The Bill is concerned only with the export side of the arrangement. These fixed rates have been set within a range in the light of the rates available from our major overseas competitors, and for some time the rates have been below commercial and market interest rates.
  The clearing banks could not and cannot be expected to lend vast sums of moneys for long periods at rates below market rates. Therefore, as part of the package or scheme agreed with the banks, in return each bank participating in the refinancing scheme was to receive refinancing loans to cover that part of its total fixed rate lending in excess of 18 per cent. of its current account balances. It was agreed that the banks lending at fixed rates to exporters could receive an agreed rate of return on unrefinanced fixed rate lending based on commercial rates.
  In very general terms, this scheme represented—and represents—one aspect of the cost of keeping British exports competitive. However, I want to stress that it was, of course, never the intention that
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  the cost of operating the arrangements should become a charge on ECGD's premium income. Indeed, it was expected that the interest supplement in respect of the difference between the fixed rate and the agreed rate would not be large and that it would be offset by adjusting the interest due from the banks on the refinancing loans. In practice, however, this has not in fact happened.
  There are two main reasons why this has been so. In the first place, due largely to the unprecedented rise in commercial interest rates and the continuing need to keep fixed export rates generally in line with our overseas competitors so as to ensure that our exporters are not placed at a serious competitive disadvantage, the gap between the fixed rate and the agreed rate has widened. At the same time, the banks' current account balances increased faster than expected so that the amount of fixed rate lending required to reach the 18 per cent. threshold was higher than anticipated. Thus smaller amounts became eligible for refinancing, while the agreed rate of return was earned on a larger volume of lending.
  Inevitably, therefore, the interest supplement payable to the banks from ECGD far exceeded the amount of interest due from them to ECGD on the refinancing loans. As ECGD does not have the necessary statutory powers to make grants to the banks, substantial arrears of interest supplement accrued. By October of last year these amounted to approximately £86 million.
  In the light of this developing situation, a review of the fixed rate scheme was commenced some months ago. Modifications to the scheme came into effect on 17th October 1974. The modified scheme will have broadly the same framework as the previous one in that banks will continue to finance exports at fixed rates set by the Government, but with the important difference that when commercial rates are at a high level the agreed rate of return which the banks receive on their unrefinanced lending will be subject to a taper.
  The precise effect of this taper will depend on a range of factors such as future levels of interest rates, the level, size and profile of future exports and the total amount of current account deposits.

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  It is possible, however, that if interest rates remain at their present level the financial benefit to the Government of the modified arrangements over the next three years will be of the order of £30 million.
  I gave full details of how the return to the banks is calculated, and of the rates which have applied for the last 12 months, in a Written Answer to the hon. Member for Tonbridge and Mailing (Mr. Stanley) on 23rd January. An integral part of this modified scheme is that arrangements are made to ensure that no arrears arise in the future. The House is already aware that provision was made in the winter Supplementary Estimates to pay the banks the arrears, and these have now been paid.
  Mr. John Stanley: Will the Minister confirm that the dimensions of the taper are not wider than 1¼ per cent.?
  Mr. Deakins: Indeed, and I hope to give more details in my concluding speech if hon. Members wish to know more of the facts that the hon. Member has been seeking to cover in the Questions he has been asking.
  The main purpose of the Bill is to provide ECGD with the necessary powers to operate this scheme more effectively. One is the power to make grants in respect of the interest supplement. This will enable us to ensure that further arrears do not accumulate in future. The other is to enable ECGD to make loans to refinance part of the banks' fixed rate lending. ECGD has until now been providing refinancing loans under an existing power. These powers are not wholly satisfactory. The Bill will provide a more satisfactory basis on which to operate refinancing.
  It is the Government's intention to ensure that United Kingdom exporters are able to compete with their overseas competitors, and the fixed rate finance scheme has played a vital part in this respect. In 1970 ECGD sought more specific powers to enable it to assist United Kingdom exporters in competing with unusual credit terms offered by foreign competitors. The need arose because of the use by some overseas competitors of a mixture of commercial credit and so-called
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  aid which led to an overall softening of the credit terms for some contracts.
  The United Kingdom has always opposed these arrangements since it believes that aid and commercial credit are two separate matters, that these should be kept separate and that this separation is in the interest of both the developing and aid-giving countries. In addition, ECGD and commercial credit are not suitable vehicles for aid giving.
  However, in order to ensure that United Kingdom exporters were able to compete with these terms if necessary, the ECGD needed to be able to match this competition by providing grants in respect of interest payable in connection with such contracts. But, in view of the Law Officers' advice that the 1970 Act does not provide the necessary power, the grant-making powers in the Bill are wide enough to cover this use as well. I confirm, however, that it remains our policy that these powers will only be used sparingly and only where there is a clear national interest in doing so. They do not in any sense represent an escalation in the international credit race.
  Clauses 2,4 and 5 contain certain technical amendments to the ECGD Acts. These are the necessary consequential changes following from the taking of the specific loan and grant powers in Clause 1. I shall of course be dealing with these clauses in detail in Committee.
  I stressed at the beginning of my speech that support for exporters is not a cost-free process. The size and scope of the refinancing arrangements perhaps serve to reinforce this point. It is, therefore, essential that there should be a continuous watch and detailed scrutiny on all resources used to assist exporters. On the one hand there is the continuing—indeed increasing—need for exports and the clear need for support to exporters to be of a kind and at a level to ensure that our exports are fully competitive in terms of credit.
  But on the other hand, the cost and length of credit is only one factor, particularly for the majority of goods which are sold for cash or on short-term credit, in export competition, and we need to be clear that we are not making our exports too cheap or unnecessarily competitive, or supporting exports which will not be paid for. In other words, we must ensure

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  valuable resources are not used to provide open-ended support or support which is not required.
  Of course, the balance between these two extremes is not easy to find. But the difficulties involved in trying to reach it cannot be avoided. The modifications to the refinancing arrangements are one result of attempts to reach a balance. It is not, however, the only one.
  For some time now, the United Kingdom has been playing a very active rôle in international discussions and negotiations designed to rationalise competition between supplying countries on the terms, cost and length of export credit. In particular there is general agreement on the need to put export credit to other developed and rich countries on a more realistic footing. These discussions have taken place within a number of international fora, but I should stress that they are not intended to set up some kind of cartel between supplying countries, simply to shift some of the competition away from what has, perhaps, become an undue emphasis on credit terms. Competition paying regard to price, delivery dates, quality and after-sales service can scarcely be against the interests of overseas buyers.
  These international discussions have already borne some fruit and agreement has been reached between a number of major exportinig countries on a minimum interest rate of 7½ per cent. for business involving more than five years' credit. Perhaps I should repeat an assurance which has been given before that there is no question of the United Kingdom unilaterally restricting terms in advance of international agreements and thus putting our exporters at a competitive disadvantage.
  The prerequisites for us are that we are satisfied that it is in our general interests to implement any agreement and that it is signed and implemented by our main competitors. The negotiations have been in progress for some time. However, the difficulties are such that it is not possible to anticipate their outcome, either in terms of timing or content. In view of this I cannot speculate on what results may emerge.
  There is one minor adjustment to interest rates. At present, for business on credit between two and five years,
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  ECGD guarantees to banks make finance available at a fixed rate of 7 per cent. I am proposing to vary this arrangement to the extent that 7 per cent. should become the minimum rather than the fixed rate. Thus where it is clear that it would be possible to charge more than 7 per cent. without any significant risk of the business being lost, ECGD will have freedom to use a higher rate. This is not, of course a very significant adjustment to the present arrangements, but it will give ECGD some useful discretion.
  Mr. Tom King: The Minister has commented on efforts which have been made to equalise competition between different countries. Those efforts are most important. He will be aware, however, of the difficulty of comparing assistance when some of the aids are distinctly opaque in certain countries. Have the Government studied aid which is palpably not opaque, and have they examined the study by Professor Jones which has shown that British companies are taxed four times as heavily on exports compared with the situation in Japan? Is he aware that this is a most significant factor in the investment potential of Japanese industry compared with British industry?
  Mr. Deakins: The hon. Member has raised a very much wider question about the way the Government manage the economy.
  Mr. King: This is a most serious point.
  Mr. Deakins: I accept that it is and can be serious for exporters, and one has to consider not just the ECGD facilities but the whole package of Government economic measures. I do not wish to cross swords with the hon. Member on this point since it would take me and the debate rather wide of the purposes of the Bill. I take his point that we cannot consider ECGD in isolation, but the Bill is concerned only with the ECGD part of what might have to be a total package for exporters. That package must include the taxation of companies, the investment sources available to companies, general incentives which are given to firms and so on. All these will have to be taken into account, but they are not within the ambit of the Bill.
  Mr. King: The hon. Gentleman has extensive ministerial responsibility for

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  exports. Professor Jones's report was apparently made to the Secretary of State for Industry. Has the Secretary of State for Trade asked for this matter to be further investigated?
  Mr. Deakins: The hon. Gentleman can rest assured that we have a close relationship with the Department of Industry, not least because we are at opposite sides of a couple of corridors in Victoria Street. Secondly, in view of the prime need to increase British exports and the efficiency of British firms exporting to the rest of the world, my Department is increasingly taking an interest in what goes on in industry in this country. That takes us into the ambit of the Department of Industry. We have a close and harmonious working relationship with the Department of Industry. I believe that the relationship will have to get a lot closer in view of what is being proposed in the Department of Industry and elsewhere.
  Mr. King: There is an argument for amalgamation.
  Mr. Deakins: At this stage I shall not argue about whether or not the Departments should be put together. A number of changes have been made in Government Departments during the past 10 years. Some of them have come full circle. Some Departments have been separated, amalgamated and then separated again.
  I now return to my speech. I have earlier referred to the fact that not all exports are worth while, for it cannot make economic or commercial sense to export at any price. In spite of this, some kind of ECGD cover is available, for exports to virtually every country in the world. However, it must remain the case that whether or not ECGD cover will be available for a particular contract to a particular overseas market will depend on ECGD's underwriting judgments based on the circumstances applying at the point in time. There will always be a few cases where there is no point in ECGD giving a credit guarantee since the risks of non-payment are so high that they cannot be insured at a reasonable premium. An exceptionally high risk of non-payment makes the export itself unattractive from a balance of payments point of view. Indeed, if
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  we are not paid, there has not been an export in any real sense no matter what the trade accounts may say. We have merely given goods away at the expense of ECGD or, indirectly through ECGD premium charges, at the expense of the general body of exporters.
  The recent history of ECGD has been characterised by the continuing rise in business. This is the main reason for the second provision of the Bill, namely, the need to adjust ECGD's statutory limits.
  This increase in business has not only reflected the rise in United Kingdom exports but also represents an increase in the proportion of exports covered by the Department. In the first six months of this financial year ECGD covered £3,018 million of United Kingdom exports representing 37 per cent. of the total. This was a 40 per cent. increase on the volume of business covered in the same six months last year. Most of the increase was in the short-term field. This has been of particular benefit to the balance of payments and illustrates the competitiveness of United Kingdom export prices. Because of the rise in the volume of the Department's business it would have been necessary to seek an increase this year in one of the two existing statutory limits on the amount of liability that the Department may undertake. This would in itself have necessitated further legislation.
  The two limits on ECGD's liabilities are, first, £6,200 million in respect of Section 1 business—that is, commercial business undertaken with the advice of the Export Guarantees Advisory Council. The other limit is £6,000 million for Section 2 business which is underwritten in the national interest. Although these are revolving limits against which only live liabilities are counted, new liabilities have built up faster than old ones have run off. It now seems clear that the Section 1 limit will be reached this year.
  Both limits have been increased at fairly regular intervals in the past by legislation. However, it has nearly always been the case that limits which were expected to last five years have needed to be increased after only some three years. Inflation makes this all the more likely to be so. Therefore, the second proposal in the Bill is that the two limits should be combined into one of £12,200

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  million. This, of course, represents the total of the two existing limits and no increase in this limit is thus proposed.
  The Bill also provides that increases may be made by affirmative resolution of the House up to a total not exceeding £21,200 million. Although this may seem a high figure it represents a volume of business which could well arise over the next five years. I wish to stress that this is simply an administrative change. It will not change the way ECGD underwrites business, nor the relationship between ECGD and Ministers and ECGD and Parliament. The provision for increases by order will of course provide the opportunity for debate if the House should so wish.
  In referring to the ECGD's Section I business, I mentioned the Export Guarantees Advisory Council. It would not be right to let this pass without placing on record the Government's appreciation of the valuable work carried out over the years by this body whose members are drawn from business and the City. Their skills and experience help the Department to react positively to the changing exporting world with which it is faced.
  The ECGD has a high reputation—I think a deserved reputation—for the range and quality of the facilities and services which it offers to exporters. However, this is not to say that the Department is perfect or that its facilities cannot be improved and extended or that it never makes mistakes.
  ECGD is constantly looking for ways of speeding up the processing of the enomous number of cases put forward each week. In this connection, an extensive computerisation programme will soon be under way. The new computer which will be sited in Cardiff should be operational by 1977, and this should help to speed up decisions on individual overseas buyers. In addition, a major reshaping and rationalisation of the Department's regional organisation has recently been completed. This has represented a departure from traditional practice, but one which it is hoped will bring important advantages to exporters all over the country. Instead of virtually all the business decisions being made in the London headquarters of the Department, many are now going to be made in the new regional
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  centres. This should mean a quicker and more direct service from ECGD. And it will be a service from officers who are based in the regional centre and who thus have an intimate knowledge of the exporters in the area and the problems which they face.
  This decentralisation of work to regional offices does not mark the end of the changes. Indeed, the Department will shortly face one of its biggest changes and challenges for many years. Plans are now in hand for the implementation of the decision announced to the House on 30th July last year that 800 jobs from ECGD Headquarters in London are to be dispersed to Cardiff. The aim is to complete the move by the end of 1979. Much of the planning will of course be concentrated on organising the move without any disruption of services to ECGD's customers.
  Some Members of the House will no doubt be aware of the increases in ECGD's premium rates for short-term business which were announced last autumn and come into effect on 1st April this year. I should perhaps stress that these increases—and, indeed, ECGD's premium income as a whole—are in no way affected by or related to the refinancing arrangements which I have earlier discussed. These arrangements are a distinct function from the credit insurance operations with their charging of premium and are accounted for separately. There can, therefore, be no question of premiums having been raised or need to be raised because of the cost of operating the refinancing arrangements.
  In general terms ECGD in its credit insurance operations is charged to operate at no net cost to the Consolidated Fund. This is becoming an increasingly difficult thing to do. Not only is ECGD faced with rising costs, but the risks it accepts are increasing as both individual buyers overseas and whole markets are hit by inflation and by the general uncertainties which have followed in the wake of the oil price rises. The Department expects these increased risks to be reflected in the pattern and level of its claims payments. Claims paid in respect of private buyers' insolvencies and default under ECGD's Section 1 commercial underwriting account are an interesting example.

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  In the financial years 1971–72 and 1972–73, these claims payments were between £8 million and £9 million in each year. In the last financial year they rose sharply to over £16 million. I think few of us can be under any illusion that in the foreseeable future, the international trading world is likely to be an increasingly uncertain and difficult one. It is important, therefore, that ECGD is equipped to meet this situation.
  The short-term premium increases are put into perspective when I tell the House that the changes still leave premiums lower than they were 10 years ago. Even including the increases, an average rate would be less than a third of the rate which applied in the late 1940s, when the form of cover available to exporters was much more restricted.
  I should stress that in raising some of its premium rates, the ECGD is seeking to make prudent provision for a developing situation. It should be borne in mind that many of the risks underwritten in one year will remain on the ECGD's books for many years ahead, and the premiums received in one year and credited to its underwriting accounts in that year will need to reflect these risks—risks which stretch over a decade and for which no additional premium will be received. It is partly for this reason that the ECGD is re-examining the form of its accounts with a view to providing a clearer picture of its financial position than is to be obtained from the present simple annual cash flow accounts.
  The ECGD's notional operating balances are sometimes quoted as proving that the Department is charging too high premiums or is taking too conservative an attitude. Perhaps I can best illustrate how misleading this kind of allegation is by reminding the House that, at the end of the last financial year, the ECGD's Section 1 commercially underwritten commitments stood at £4,922 million, whilst the Section 1 balance stood at £111 million. It is, I think, against the background of the total liability outstanding and the developing nature of the risks involved that the size of the balances and the level of premium charges can best be viewed.
  The proposals in the Bill are designed to make a number of technical adjustments to the ECGD's powers. The pro
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  posals all have the same objective—namely, to enable the Department to continue to react flexibly and with imagination in a rapidly developing situation to the changing needs of United Kingdom exporters. This is not an easy task. However, the post-war history of the ECGD has been characterised not only by a steadily rising stream of business, but also by a steadily developing range of facilities and activities. The Bill will, I hope, enable this to continue.
  7.32 p.m.
  Mr. Terence Higgins: The House rarely has an opportunity to debate the question of export credits. The last occasion was in 1970. Since then, there have been significant developments both in the trade pattern and in finance for international trade, especially in the breakdown of the Bretton Woods system, and now in the régime of floating exchange rates. All of these have tended to transform the picture, and it is appropriate that we should therefore examine both the principles of the Bill and, as the hon. Gentleman has done, the general environment within which we expect the provisions of the Bill to operate.
  First, I express our appreciation to the hon. Gentleman. His notes were perhaps a little copious, but I have rarely heard copious notes read so clearly. The technical points were explained very clearly—and they are pretty complex. I join him in some of the points he has made, particularly in relation to the Governments' attitude to the avoidance of beggar-my-neighbour policies. That is a view shared on both sides of the House.
  I also agree with the hon. Gentleman's point about not financing exports that will never be paid for. There is sometimes a great danger, and perhaps even more temptation, that one is so concerned with the problem of exports that one overlooks the question of payment. That is certainly true as far as the figures are concerned. I am sure that the hon. Gentleman is right in saying that the important thing is to strike a balance between promoting exports, on the one hand, and the cost to the taxpayer on the other. I want to concentrate on that question in a moment, but first I must declare an interest, to the extent that I am a director of an engineering firm some products of which are exported.

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  I shall deal first with some of the more general points raised by the hon. Gentleman. The first is that one must clearly look at the package as a whole. Export credit is only one of the items which determine whether firms find it advantageous or desirable to export. In this context, we are in a critical situation. We have had the effect of the so-called "J" curve which followed depreciation of the sterling exchange rate. This made our exports, in particular, more competitive, or, alternatively, enabled firms to sell them at the same prices but at a higher profit margin. This position has since been eroded significantly, if not entirely, by the increase in domestic costs, which, in turn, has affected the profitability of exporting.
  All of us must have been concerned by the Press statement issued by the Department on 15th January, which showed that in the fourth quarter of 1974 exports averaged £1,333 million a month—4 per cent. lower than in the previous quarter. We are in an extremely difficult balance of payments situation—the three-months' trend is not favourable—and therefore we need to look at the whole question of the package which determines whether our exports are competitive.
  In this context, the hon. Gentleman distinguished between the insurance aspect of the ECGD and the refinancing function. It is true that although the two are to some extent inextricably mixed this Bill is concerned largely with the refinancing function, and I am sure that it is on that aspect that the House will wish to concentrate tonight.
  A number of questions arise. We have to ask, first, whether the Government should guarantee—or, at any rate, subsidise—export credits at all, and if so—this question has not arisen very clearly on previous occasions—to which countries or groups of countries. The hon. Gentleman made an interesting distinction in mentioning that we should consider to what extent credit was extended to developed or rich countries. The second question is at what rate of interest exports should be financed. The third is where such financing fits into the general pattern of export promotion.
  There are other questions—for example, whether the supply of export credits should be used in any way as a
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  bargaining counter to eliminate some of the undesirable practices which may be followed by some of our trading partners to whom we export. A case that springs to mind in this context is flag discrimination in shipping.
  Finally, there is the whole question whether the innovations in the Bill are necessary and desirable, and whether the information which will be provided under the Bill is going to be adequate. We may well have doubts about some of these aspects, and I hope that we shall be able to persuade the Government to change their minds about some of them.
  First, then, should the Government guarantee exports at all, or subsidise them? We all agree, of course, that a system of export credits is desirable, and we appreciate the points made by the hon. Gentleman concerning that aspect of the ECGD being self-financing, or at any rate intended to be so. The question of whether the rate of interest should be below the market rate is more difficult, and one needs to put it in the context of the extent to which export credit is outstanding.
  It is not just a question of saying that our exports in some cases are not going to be paid for, but also that some of them will not be paid for for a very long time. Constant increases in the amount of export credit outstanding at a time when we are in balance of payments difficulties, as distinct from the balance of trade situation, is a matter we need to consider. I had some difficulty in distinguishing the figures, but I understand that the total amount outstanding of more than six months to maturity is some £556 million. It would be helpful to know, if not on this occasion then in Committee, the extent to which credit is paid out, through both time and duration.
  I understand that a sample survey in 1972 in the construction industry, for example, showed that 41 per cent. of the exports were on terms longer than five years, and that about £1,000 million of exports last year which were insured were for periods of greater than six months. The whole question of how the commitments are spread through time and how soon we are going to be paid is a matter to which in Committee we will perhaps want to give greater attention. We must take into account the fact that,

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  through time, the exchange rate may change, which may mean that the amount we are eventually paid in terms of sterling is different from the figure which originally appeared in the trade statistics on an immediate basis.
  That brings me to the question whether we should distinguish between the countries to which we export. The Minister referred to the terms we give to developed or rich countries. It would be a little paradoxical if we extended credit to oil-producing countries at a low rate when at a time they were depositing funds here at a higher rate. Even from their own point of view there may be an argument for saying that even for a large industrial project, which is typically the kind which is paid for over time, payment should be made on a very short-term cash basis rather than deferred, since the extent to which we shall transfer real resources to the oil producers over time is limited. Therefore, there are complex arguments which alter the picture from that which existed in 1970, when we last debated this matter, and to which we should give some attention.
  As regards the rate of interest, I see the case against a credit war. However, we must be careful to ensure that we do not in any way precipitate such a credit war, since that will alter the balance between the cost to the taxpayer and the gain to the balance of payments. We shall wait to see what will arise from the enigmatic statements that the Minister made about the new forms of cover and facilities.
  For many years, export credit was provided effectively at market rates. Although I am sure that the Opposition want our terms to be reasonable and competitive, we ought to consider whether we should be doing more to ensure that all exporting countries do not tend to provide credit at a lower rate, which is justified in terms of the cost to the taxpayer, because the differential is being made up by the taxpayer. Therefore, it is not just a question whether the rates are comparable but whether the rates, in relation to domestic rates, are in any way too far out of line. We shall need to consider that.
  There is the question whether some countries are engaging in practices which are suspect. I believe that my hon.
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  Friend the Member for Tonbridge and Mailing (Mr. Stanley) drew attention to that in a recent Question about the French and the so-called inflation-proofing clauses. The right line is to take an extremely tough position in ensuring that that kind of competition, which will tend to produce repercussions, is not engaged in. However, we need to debate that at further length.
  Regarding our position vis-à-vis other countries, there has been a tendency for us to find ourselves at the bottom end of the interest rate scale. Perhaps the Minister will give us greater details about where our rates stand in relation to others—although we note with interest his announcement this evening that the ECGD rate will not now necessarily be fixed but that there may be scope for raising it in certain circumstances, thereby reducing the cost to the taxpayer, though that must be done in relation to the danger of losing orders which may be important to both employment and the balance of payments.
  I turn to Clause 3, and the related parts of the Bill. Here, we wish to take issue with the Minister because he has pointed out that the previous limits which have been imposed—£6,200 million for Section 1 advances and £6,000 million for Section 2 advances—are to be amalgamated into a single limit. The Minister argued that that would be administratively more convenient and would save the time of the House. If there is one argument which the House views with more suspicion than the fact that something cannot be done because it is administratively impossible, it is the argument that the House should do it because it is administratively convenient.
  There is a case for separate limits. If we are up against the limit in one category, the House will view sympathetically the argument that we should raise that limit. However, it is a curious argument to say that the way to deal with that problem is to amalgamate all the limits into one homogeneous mass. That would be the wrong way of setting about it. We ought to leave the division as it is now. There is probably a strong case for giving rather more consideration to the possibility of breaking down the figures into the various categories, so that we know how much is commercial guarantees and how much is special

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  guarantees. A breakdown of the figures is contained in the statistics provided, but there is no breakdown of the special guarantees case in any detail.
  There were exchanges about the relationship between the Department of Industry and the Department of Trade. I notice that the name of the Minister for Industry appears on this Bill, although it does not appear as a sponsor of the Bill concerned with travel agencies. We view that with some suspicion, because the Secretary of State for Industry may feel that an industrial enterprise should be provided with additional facilities because he, in his wisdom, has decided that he wishes to support that enterprise. In those circumstances it may be possible to use the powers in the Bill to give additional special help to one of those firms.
  It does not appear from the Bill whether the statistics to be provided, which will enable the Secretary of State to make grants to cover areas of self-financing, will be used, perhaps for political reasons, within a domestic context. We hope that provision can be made to ensure that, if there are any special cases of that kind, they are reported annually to Parliament and that it is made clear that the Secretary of State for Industry is not using the provisions in the Bill to secure ends which were not envisaged by the House of Commons at the time when it passed the legislation. We shall wish to pursue that matter in Committee.
  I have discussed the possibility of using the export credits provisions to ensure that discriminatory trade practices are removed, and I mentioned flag discrimination. I understand that some of the trade with Eastern bloc countries is conducted on the basis that the deal goes through only if the arrangements are f.o.b. rather than c.i.f., and effectively there is flag discrimination to that extent. Perhaps, as a result of that, our balance of payments loses, since we do not provide the shipping services, even though they may be more competitive. We may pursue that matter subsequently to ensure that in providing export credits we do not agree deals which are discriminatory against other sections of British industry. That is a sensitive area, and we need to take into account the possible repercussions. In the present context, that is worth examining.
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  I come finally to the technical matters referred to by the Minister. He pointed out that new provision is taken to make grants effectively to the clearing banks. That raises the question whether the terms on which these arrangements are negotiated are satisfactory, again from the taxpayer's point of view.
  Obviously we need to strike a balance. Obviously we need to examine in some detail the provisions which are made for the taper. As I understand it, the need to pay some £86 million to the clearing banks arises from the fact that the operations for the past two years or so have resulted in the leads and lags between the ECGD and the clearers being other than those which were expected in the first place. It is that factor which accounts for the £86 million which we are asked retrospectively to validate.
  The £86 million is not the total amount of the differential between all payments of interest at the export rate and the normal market rate. The provision is essentially to deal with leads and lags problem and the fact that there may be future changes of that kind, rather than the overall question of the differential rate.
  Nevertheless, if we take the picture as a whole, we shall need to probe carefully the extent to which there is a cost to public funds and the extent to which the profits of the clearers are higher, presumably, than they would otherwise be. The Bank of England is presumably providing the credit base on which the clearers provide the credit. This is a matter of judgment and balance. We do not wish to inhibit desirable exports. At the same time we ought to examine this carefully, and we propose to do so in Committee.
  Subject to those qualifications—and some of them are important—I do not intend to urge my hon. Friends to oppose the passage of the Bill. In the overall context, especially the difficult balance of payments situation that we face, it is a desirable measure, but we shall need to look at the detail, and I hope that we shall scrutinise it carefully in Committee.
  7.53 p.m.
  Mr. John Cockcroft: I agree that the terms of the Bill are unexceptionable. There is no doubt that over

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  many years the ECGD has offered favourable terms to exporters. By any rational standards, it compares favourably with almost any comparable organisation in the world.
  My fear, however, is that we may be getting to a situation where every country is competing to provide almost unlimited credit terms and that the beggar-my-neighbour policies of the 1930s could arise again. There are certain risks which cannot be insured against. I think that it would be a mistake if what used to be regarded as the richer countries of the world insured their own exporters against political risks to a greater degree. If that happened, it would only encourage countries which are nationalistic and, even by our standards, Left-wing to nationalise more than they would otherwise. There is a limit to the process which we see in train of encouraging exporters by cheap State loans, and so on.
  Turning to the wider scene, I seek not to make partisan points. The poor export performance of the country over many years going back to 1945 and the end of the Second World War has many causes. They include poor delivery dates, poor quality, bad invoicing, strikes, slow delivery at the ports and so on. This has been caught up in the vicious circle of competitive devaluations by this and other countries, making it essential for us to earn more foreign currency.
  At the same time, our price is depressed in sterling terms. We are in a very serious vicious circle and, in the short term, it is difficult to see how to get out of it. In the longer term, the solution lies at home in higher investment, in more machinery behind each worker and in creating a climate of optimism which has not existed for some time. Above all, it lies in avoiding the kind of taxation policies which discourage exporters from doing their best.
  There is a limit to what any Government can do to encourage exports. Companies can do it themselves as long as they are provided with the right environment. In the longer term, we shall have to concentrate more on import saving rather than on exporting more. But, to the extent that we can export more, so much the better.
  I speak from memory, but I think that in volume terms our exports have doubled since the beginning of the First
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  World War. There is a limit to how far the process can go in a country which, apart from North Sea oil, which is heavily mortgaged already, is almost devoid of natural resources. Increasingly, the emphasis should be on import savings.
  I want to suggest one possibility which has been canvassed before but from which nothing very much has come. Since importers have been encouraged over the years to export more by means of cheap loans from banks, ought not we to think seriously about encouraging import savers such as farmers, by offering them cheap or subsidised loans? The theme of the future must be import saving rather than increasing exports. We must be almost at the limit of that process.
  7.56 p.m.
  Mr. Michael Morris: We all agree that this is an important Bill concerned with the important area of exports, not least at a time when our deficit is running at about 4 per cent. of our gross national product.
  The Minister and my hon. Friend the Member for Worthing (Mr. Higgins) were right to pull out the fact that this is only part of the general support for export services which needs careful scrutiny. We should never forget, especially in the context of the ECGD, that we have in the City a very sophisticated area of financial activity which in itself is very much engaged in the export markets. That is an advantage we have as a nation.
  Although the Minister was fairly emphatic in suggesting that we did not want a return to beggar-my neighbour policies and that there were only minor areas in which we were at a disadvantage, I suggest that the disadvantaged areas are not of such a minor nature. Although we rebate VAT, simply because our level of VAT is lower than the levels of Germany and our other continental friends, the benefit is less.
  We see a situation where in France, Italy and Japan there are varying forms of exemption from or delayed payment of corporation tax or its equivalent which give major exporters a significant advantage.
  Mention has been made of shipping, and we know in current terms that there has been comment that our pre-shipment insurance rates are not as competitive as those in other countries.

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  The Minister said that we should not export to places where we could not be sure of getting payment for our goods. As a professional marketing man prior to coming to this House, I know that the most costly time for any exporter is when he is opening up a new market. It is when someone is opening up markets of great potentiatl that he looks for flexibility in the ECGD and in other areas.
  I suggest that in recent months in the Middle East offered a case in point. Had the ECGD really been sharp as a pointer to exporters, or perhaps through the BOTB or some other organisation, there could have been some competitive advantage to our exporters in terms of insurance rates in opening up the new ground areas, we might have benefited a little quicker. The French, and to some extent the Japanese, seem to have achieved the ability of getting greater Government involvement in large projects. That is particularly so in the capital goods and construction area. There is no doubt that when the BNEC was set up we were in the forefront of ancillary services. It is the general view of people in the exporting world that we are no longer in the forefront, and attention should be paid to this.
  I know that the Queen's Award is being reviewed. One must ask in this general context whether it is right that the time taken over the review should be so long. As the Minister said, it is an area of considerable urgency. One wonders whether the review should not be brought forward. Could we not consider implementing it for this year's awards rather than the following year's awards?
  Lastly in the general area of credit, the French have a system of crédit mixte in which ancillary orders alongside a main Government project are pulled into the net. The French have been very successful in this area, and Italy and Japan seem to have learned the tricks of the trade. I hope those general areas will be taken into account, because they are of great importance to a number of exporters.
  I come specifically to the Bill. It is right that Opposition Members should raise the question how it is that given all the circumstances we are having to pay off £85 million—or a figure substantially in excess of that, although that is just a rumour. I should like to have reassurance
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  that the figure is only £85 million. How has that amount been allowed to run up in considerably over a year? It should have been brought to our attention a little earlier.
  Correspondence has appeared in the Press, and I draw to the Minister's attention letters which have appeared in The Times, one of which was dated 16th December which contained complaints of the mechanics of the ECGD. Like many other hon. Members I am full of praise for the general running of the ECGD, but specific complaints were made in that correspondence, and I hope that the Department will see what can be done about them.
  The Minister has not mentioned performance bonds. They are particularly relevant to the Middle East where our exporters, particularly those in the heavy capital goods and construction area, are being asked to provide between 10 per cent. and 30 per cent. performance bonds on demand. The net result is that there is some difficulty in laying off that risk and our sub-contractors working alongside the main contractors are laying off performance bonds one against the other. That is a problem area which should be looked at quickly, otherwise the situation will get out of hand.
  There are a number of detailed aspects of the Bill which we shall want to consider in Committee. I have tried to look at some of the overall problems of the credit and export promotion area and to pick out particular instances where the ECGD will have to look sharply at its performance.
  I echo what my hon. Friend the Member for Worthing (Mr. Higgins) said about reporting back to the House, particularly on the question of who is being granted what. I respectfully suggest that an annual report is hardly adequate. If we are to have quarterly returns on the money side we should have quarterly returns saying where the money has gone.
  If the Minister cannot cover all these questions in his reply tonight, I hope that he will give an indication that they are recognised and that some action will be taken.
  8.5 p.m.
  Mr. Geoffrey Dodsworth: May I, first, declare

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  an interest as director of a London merchant bank? I have responsibility for its export finance operations and can claim to be involved day to day in the details and problems involved in trying to secure financing arrangements. That work is done because exports are achieved by manufacturers and exporters, and finance is the handmaiden or servant, albeit an important one, of that operation. In the course of those activities from the ECGD point of view I have had long, interesting and detailed negotiations in London and overseas. I add to the tributes which have been paid to the work of the ECGD. The Department has an expertise and dedication which is admired throughout the world, and rightly so.
  I understand the meaning of the comment that perhaps we do not have quite the same leading position as we did, but I do not share the view that our credit operations are not still looked upon as the foremost in the world. Many countries look at the way in which the ECGD arranges its operations before deciding how to carry out their own. The ECGD is an interesting and happy example of co-operation between industry, financial institutions and Government. That is why we are being so successful with it. There are lessons to be learned from this area of co-operation. When we seek to improve our industrial performance and to decide what rôle Government should play we should do well to look at this example and to see what lessons can be learned.
  Each side has mutual respect for the other's rights and the Department's reputation throughout for professional expertise and knowledge put it in a dominant position in the world. It is because of that respect that industry and the institutions are able to work so closely together. The Department has managed to ally the strength of Government to the business acumen of the credit insurance industry, so that thousands of individual firms have been able to carry out work of national importance. That must be a valuable experience, and it suggests assistance and support rather than interference with independent business operations. There is no interference, but there is co-operation, mutual confidence and trust. Those are the factors which generate business and export performance.
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  I turn to the question of exports and their success or otherwise, and of course the situation is affected by world inflation. A document has been produced by the Government showing provisional results for 1973–74—and, incidentally, I noticed in the Minister's remarks a promise to improve the methods of presentation. That document has one interesting passage which runs as follows:
  "As is usual with Government Department accounting, the figures in this report have been prepared on a cash flow basis …"
  That is a very nice way of saying that the document is incomplete—in other words, that the system used is similar to that employed with golf club accounts. "Receipts and payments account" is perhaps a kind way of putting it. It is a sad reflection on much Governmental accounting that it is carried out on a purely cash basis. We do not attempt to reflect the true expenditure or asset position. That is perhaps a topic for discussion on another occasion, but it is an important and serious matter.
  I suggest that when a similar document is next produced, my hon. Friends who have some marketing knowledge and experience might apply their minds to it. It is difficult to follow through the descriptions in the document, although the explanation is valuable and no doubt accurate, but it does not differentiate clearly between the different types of finance. I hope that we shall, see an improvement in future. There is a great deal to be proud of in what is reported, but it would suggest that a little more time and effort in reporting would be well repaid.
  It might be helpful to examine some of the figures in the Bill. Parts of the Bill's provisions come back to me like an old friend. For example, on Clause 3 we are given the familiar reassurance that all is well and that it is just a matter of administrative convenience. When I hear that phrase, I am immediately on my guard. I ask myself "From what are we being protected, and why is it better that we should not know?" I recollect experience of the Public Works Loan Board which involved a doubling of the sums of money which were being made available and the extra amount was to be brought about by affirmative order. Well sure enough, here it is—another affirmative order. Last time with

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  the board the figure was only a modest £4,000 million. This time the figure being governed by affirmative order is an extra £9,000 million—
  Mr. Deakins: May I put the hon. Gentleman right on details? There will be provision for up to three orders and there will be tranches—I prefer to use the words slices or portions—of up to £3,000 million each time.
  Mr. Dodsworth: I am grateful to the Minister. He has saved me having to come to the next part of my explanation as to how the tranche works. I accept that the £9,000 million is to be divided into three parts. But the fact is that there is a total lending capacity written into the Bill of £9,000 million and it is to be doled out in appropriate pieces. What is astonishing is that there is no time interval or limit on the amount of the pieces. In some of the other provisions I believe there is a reference to the provision taking effect at a certain date. Therefore, we should examine the Bill in Committee and look at the intervals which will occur.
  I went to the Library to try to ascertain the number of orders now going through the House and I sought to carry out some sort of monitoring operation. It was a hard task and difficult to know where to begin. If we are to rely only on "administrative convenience", I suggest that we should have the matter in a different form from this. The method proposed in the Bill appears to envisage far too lax a control of the expenditure of sums of money through the House. This is not a method that commends itself to me. I understand the excellent motives and ideas lying behind the Bill, but the method of control leaves something to be desired. Perhaps we can pay some attention to that task in future.
  I refer to two other detailed matters. Let me deal first with import savings. We have a curious situation in this country in which we support the export of goods as commendable and desirable, but we also have an international arrangement and convention which allows similar levels of credit and interest rates. What is the situation that faces the British manufacturer? If he wishes to choose to buy a piece of equipment, he is able to obtain from some other country five
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  years' credit at 7½ per cent. or 8 per cent. interest rate which is far too competitive for him to buy goods produced in his own country. We are all on a carousel and it is difficult to get over the situation. There is entirely different international market operating on a different scale from the home market, and that is a most unfortunate and difficult circumstances.
  The Government's policy is to have a level of interest rate which reflects about 13 or 14 per cent. per annum compared with a supported rate of 7½ per cent. in foreign competition. The shipbuilding industry has had support of this nature and it has been very successful in supporting British export orders and British shipbuilding orders. It will be helpful if we address ourselves to that matter.
  I refer to one last detailed question which might be helpful in aiding our export performance. Delay is caused in the short-term financing of export orders by the bureaucratic structure. I tried to make a procedural manual on the steps which were required. I found that there were 11 documentary stages required for a person to get the benefit of the supported interest rate funds. It may be worth going through those stages very briefly to indicate the frustrations which can be involved for people seeking to support an export order.
  The first step is the application to the Department for cover for the transaction. Second, there is the receipt of the approval of the cover; third, the receipt of the notification of an application for a bank guarantee; fourth, the issue of the necessary bank guarantee forms; fifth, the completion of the forms and their return to the bankers; sixth, the draft facility letter issued by the bankers for ECGD approval; seventh, confirmation by the Department of that approval or any amendments that are required; eighth, the issue of the draft guarantee agreement by the Department; ninth, the recourse agreement from the Department for signature; tenth, the return of the recourse agreement to the Department; last but not least, the guarantee and the opportunity for the exporters to get the benefit of the supported funds. That process may take between two and four months.
  I have carried out a census and an operation to identify the cause of the delay.

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  One of the principal reasons for it concerns the issue of the forms by the Department. It seems to me that that could be easily overcome if instead of treating the items separately there could be an omnibus approval for the supplier by the bank concerned so that they could be covered up to a certain amount and we could thereby expedite the export transaction concerned.
  This is a matter which is worthy of the Department's attention because delay is genuinely experienced and it seems to be across the board. The effect of the delay is that an exporter does not know exactly what the cost will be of supporting or financing the operation until the receives the subsidised funds. I reiterate my praise for the work of the Department for which the country and all the people who use its services have need to be grateful.
  8.18 p.m.
  Mr. John Stanley: I should like to deal with the implications of this Bill for the profits of the clearing banks and the rate of return which the banks get under the ECGD arrangements. In February 1974, at a time which coincided with a General Election, much interest was expressed by the Labour Party about the question of clearing banks' profits, which contrasts somewhat strangely with the almost total absence of Labour Party Members.
  We are dealing with a Bill under which £86 million will be entered in the profits of the clearing banks. As parliamentarians and taxpayers we have an obligation to examine the extent to which the rate of return which is being secured by the clearing banks under the ECGD scheme represents a fair balance as between the national requirement to boost exports and the charge which is being made on public funds. The calculation of the rate of return to the clearing banks is one of the more obscure areas of public accountability and it may be helpful if I detail my understanding of the position so that the Minister can correct me if I am wrong.
  I understand that there are three components of the rate of return to the clearing banks. First, there is the observed rate, which is calculated monthly and which represents the mean of the average yield on Treasury bills and the lending rate to the nationalised industries.
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  That would seem to be a perfectly reasonable basis from which to start. That is topped up by a second element, known somewhat euphemistically as the unmarketability margin. I have never understood why the clearing banks should seek to top up their rate by an unmarketability margin, because I cannot conceive of a circumstance in which they would want 100 per cent. liquidity of their assets. Under this head there is a further addition to the agreed rate of return up to a maximum of 1¼ per cent. which, as the Under-Secretary said, is now subject to a taper when the observed rate is between 7½ per cent. and 14½ per cent.
  It is worth recalling that that adjustment in the agreed rate to the clearing banks was secured only after a fairly thorough investigation by the Public Accounts Committee, which was reported in its report for the 1974 Session. It was as a result of the Committee's investigation that the Treasury decided to make the tapering arrangement concerning the so-called unmarketablity margin of 1¼ per cent.
  This produces—here I have the Under-Secretary's most recent figures given to me in a parliamentary Answer of 23rd January—a monthly agreed rate of return to the clearing banks. In the last month for which the hon. Gentleman was able to give figures—December—that agreed rate was about 12½ per cent. I understand that it was reproduced incorrectly in Hansard and that there is a letter in the post to me making the correction. That rate is not particularly out of line, bearing in mind that this is the most secure possible banking one could have, because effectively it is lending on the back of a Government guarantee.
  It is difficult to compare that 12½ per cent. with what might be obtained in other types of lending, because it is impossible at present to obtain long-term fixed-rate finance. There is, however, one comparison in the £75 million issue announced last Friday by Finance for Industry, which offers a redemption yield of 13·1 per cent., with a redemption date in 1981. It would seem, therefore, that the combination of the observed rate with the tapered unmarketability margin is more or less in line.
  But that is not the entire story, because there is a third element in the overall return which represents the icing on the

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  export credit cake concerning the clearing banks—this is the commitment fee which the clearing banks have agreed with the Department of Trade and which is payable on the conclusion of all loan agreements for export finance. I understand that the commitment fee is 1 per cent. on the maximum amount of credit offered. It is in excess of the normal standard international financing commitment fee, which is ½ per cent., not on the total amount of credit offered but on the undrawn balance. This represents an important increase in the rate of return to the clearing banks.
  I recognise the need to encourage the clearing banks to continue to participate in the scheme. I also recognise that they lock 18 per cent. of their assets on current account into the scheme. But this is attractive business for the clearing banks, and from a public accountability point of view the overall rate of return which they secure needs to be kept under review. As an overlap to that, I suggest that there is a case for considering whether it is right to continue the monopoly position of the clearing banks.
  Mr. Higgins: Perhaps, for the sake of completeness, my hon. Friend should bear in mind the point to which I made reference in my speech, namely, that we shall need to consider whether the advances made by the clearing banks in this context are, so to speak, at the expense of other advances or whether the credit base is being expanded by the central bank and that, therefore, there is no opportunity cost to the clearers. I am not wholly sure whether that is the right way of looking at the matter, but it may be worth putting as a footnote to what he said and as a marker to be considered in Committee.
  Mr. StanleyI am grateful to my hon. Friend for his additional remarks. I think that we should consider whether the monopoly position of the clearing banks in the ECGD context should be continued.
  The Under-Secretary will know that the accepting houses have for some period—extending over a number of years—considered that they could make a contribution to the provision of export credit. I have seen recent Press reorts to that effect. It would seem to be in line with the competition and credit control policy
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  that, if members of the Accepting Houses Committee are able to provide facilities, they should in principle be encouraged to do so. In that way we can ensure that the best possible use and advantage is made of our financing facilities in order, as far as possible, to diminish the liability on the taxpayer whilst not in any way inhibiting our export effort.
  I should like to make three points about the ECGD system. Earlier the Minister said that we wish to be able to offer an overall package of export credit which would stand comparison with that provided by any other exporting country, but at the same time we did not feel that it was incumbent upon ourselves to match every individual facility that was available elsewhere. The hon. Gentleman was no doubt alluding to the practice of the French export credit agency in providing insurance against inflation.
  I suggest that the absence of any inflation insurance on our export business is seriously threatening our competitiveness in a number of key export areas. I refer particularly to the two areas referred to by my hon. Friend the Member for Northampton, South (Mr. Morris)—major capital plant exports and construction. By not being able to offer insurance against inflation we are seriously disadvantaging ourselves in competing for fixed price contracts. That is the important point. The Minister will know that today fixed price contracts are insisted upon all round the world. Therefore, this represents an increasing handicap to us. Will he therefore particularly consider introducing a contingency scheme for insurance against inflation which could provide that cover in those localised areas of our export business which are fairly easily definable but at the same time represent areas in which some of our largest export orders, in money terms, are being registered? Indeed, they are areas in which we still have companies which are leaders in their spheres taken worldwide.
  Secondly, will the Minister consider the position that he has been taking in the exchanges that we have had through the Written Answers columns in Hansard on the question of the historic practice, which is still continued, of not disclosing to buyer countries the amount of insurance premium that is being paid in their export credit arrangements? We have the practice of adding to the contract price the

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  insurance premium of ECGD. This has the effect of inflating the actual declared contract price to the buyer, with an obviously disadvantageous impact on the British exporter.
  The traditional justification for continuing with that practice is that if we disclose to the buyer exactly what insurance premium is being paid we shall reveal to a foreign country Her Majesty's Government's credit rating of that country. The traditional Foreign Office position has been that that would be diplomatically embarrassing and therefore we should not contemplate it.
  My reply to that is that many other countries have no difficulty at all and apparently suffer no diplomatic embarrassment in revealing the amount of insurance premium that their export finance agencies require. The insurance premium is disclosed by ExImbank as far as the USA is concerned, and by COFACE as far as French exports are concerned, and it does not inhibit the export efforts of those countries. I therefore ask the Minister to reconsider the position, because as long as the insurance premium is not being disclosed it means that British exporters are competing on the basis of a contract price which is artificially inflated, and that must be against the public interest in this country.
  Thirdly, will the Minister explain why the public expenditure White Paper shows a sharp reduction over the next five years in the sums allocated for the refinancing of fixed rate export credits? I cannot believe that this must imply a declining expectation of the amount of export credit that we shall use, but the figures are dramatic. From the figure of £450 million for 1974–75, the White Paper shows a decline every year down to £157 million in 1977–78, and remaining at that figure in the following year, 1978–79. Perhaps the Minister can explain why the White Paper shows a considerable decline in export credit refinancing.
  Finally, I welcome one clause of the Bill to which the Minister referred, I thought, rather diffidently. He appeared to be somewhat embarrassed by the clause, but I do not feel there are grounds for embarrassment. In fact, I welcome Clause 1(2) in which the Minister is taking power to be able to supplement existing credit arrangements by the payment of
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  a grant direct to buyers. It is a growing practice, however much it may be deplored, to blur rather than to define more clearly the distinction between export credit and foreign aid. The French have developed a system which is called crédit mixte, which is merely the bringing together of COFACE export credit and French foreign aid. It seems that the British Government have decided that they must have a similar ability to be able to bring together export credit and foreign aid.
  I see nothing to be apologetic about in that. In fact, I welcome this initiative, and I hope it is symptomatic of a thoroughgoing readiness to be truly competitive in exports and to go out and compete aggressively, with the backing of the Government, in a difficult and intensely competitive market. I hope that Clause 1(2) is a symptom of a new aggressiveness towards British exports which is sweeping through the Minister's Department and will shortly be sweeping, though it is not evident now, through both the Department of Industry and the Treasury.
  8.34 p.m.
  Mr. Geoffrey Pattie: It has been said many times before, but not so far in this debate, that British exports would increase by a large measure if the companies concerned were able to operate in a healthy domestic market, and this would seem to be somewhat out of reach at the moment.
  The present economic difficulties are, however, posing certain problems which I wonder how far ECGD will be able to assist. It has been suggested to me, for example, that certain companies in this country are finding considerable difficulty in being able to afford the cash to buy components—this was touched on by one of my hon. Friends—and are therefore unable to meet certain export commitments.
  I should like to put a series of points to the Minister. It has been suggested to me that the Government should be prepared to share the risk of unpredictable cost escalations to a rather greater degree than they are at present. This is particularly important for capital goods exporters. Although they may be a small share in terms of the total amount that we export, individually the contracts are for very large sums of money indeed. It

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  is very important for the Government, through ECGD, to take the necessary action in these very inflationary times in which we live.
  It has also been drawn to my attention that a scheme which was introduced last year for pre-shipment finance, whereby banks will allow larger overdrafts—has been spoken of in very complimentary and laudatory terms; I understand that it is a good scheme—though it is described as being too restrictive in its terms. The Minister may discover that the take-up under the scheme is not as high as it might be. I gather that it is a scheme which is extremely beneficial to companies who have a long manufacturing lead time. Therefore, it might be worth looking at the scheme to see whether it can be improved so that there will be a higher takeup.
  In the Third Report of the Public Accounts Committee last year, there were certain references about which I would like to remind the House. One in particular was:
  "The Department told us that the fixed rate of interest charged to exporters was determined primarily by the rates charged by foreign competitors because the object of the scheme was to enable British exporters to compete against foreign exporters. It seemed to us that this might lead to competition among the major capital exporting countries, so we were pleased to learn that discussions were taking place at government level to try to diminish uneconomic petition in this field and arrive at a more rational basis by fixing a minimum rate of interest to which all would adhere."
  Can the Minister say how far such discussions have progressed, if at all?
  Secondly, further on in the same report, there was an exchange about the way in which the precise rate of interest was fixed for our exports, taking the comparison with other countries. I quote:
  "Currently, from January of this year, we changed our rates to a range of 6 to 8½ per cent. If we add the bank charges to that we get a range that we are using of 6·4 to 9 per cent. That is the British interest rate."
  I speak, obviously, of the time when this report was published.
  "The current Japanese rate in the same field on the same basis is 6·25 to 8·77 per cent. The current French rate is 6·6 to 6·95 per cent. We simply take these rates and try to see how we compare with them."
  I go back to a point raised by some of my hon. Friends. How competitive are
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  we? I share the suspicion that has been voiced both here and in other places that very often other countries are using various ruses to advance the cause of their own companies. I should like to feel that the Minister could give us the assurance that we are being strictly competitive.
  Finally, in the same Public Accounts Committee's Report, dealing with this very vexed question of the precise interest rate that ought to be fixed, I quote again:
  "One has to have regard to the fact that if one were to stop providing credit at, say, 7 per cent. for particular purposes and said that the rate should go up to 10 per cent. or that it should be left to find its own level, it could have a very severe short term effect on several industries. Shipbuilding would be one; some of the heavy plant manufacturing would be another. We have looked into this and there is a fair economic case for saying that it makes sense to provide credit … for situations in which the export element may make all the difference between economic capacity and noneconomic capacity for the particular industry concerned."
  Will the Minister say something about what I regard as this extremely grey area, when we move from the precise sensible return on the sums of money being advanced to the necessity to make a sale for not only industrial considerations but also even strategic, military and tactical considerations? I have in mind here the question of the possible sale of Jaguar aircraft made by the British Aircraft Corporation to the Indian Government. Here we have a classic case, where the Indian Government wish to have whatever terms they may get spread over what might be even infinity. I am sure that they would like something along those lines. Obviously, however, we must take a different line. But how far is consideration being given to the necessity—desirability would, perhaps, be a better way of expressing it—of making a sale, possibly albeit rather reduced on the initial order involved in this particular case, but with the possibility in mind that subsequent sales could follow, hopefully when the Indian economy has improved? One cannot necessarily assume that everything will always be as bad as it now is. We should also bear in mind the further possibility of extending out from such an economic bridgehead.
  One is very aware that on a strictly actuarial basis that particular deal, and

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  many others like it—I give that deal only as an example—could look particularly unattractive. But how far is there an over-rider from a trade consideration which says, "Although this looks rather tough in the sort term, if we once get a foothold we shall be able to develop and extend it and have the spates, training and all the things that go with it." I look forward very much to hearing what the Minister has to say about that matter.
  8.42 p.m.
  Mr. Peter Viggers: I had not thought to intervene in the debate. It has been an interesting debate, with speeches of a uniformly high calibre. I am sure that the fact that all the speeches have come from the Opposition side of the House and none from the Government back benches is not connected with the high calibre of the speeches. Indeed, if there had been hon. Members on the Government back benches they would have appreciated the debate and may, perhaps, have been urged to take part in it.
  It must be right to give increased flexibility to our export credit guarantee system. It would be quite inappropriate to try to criticise or cavil at the manner in which the Bill seeks to do that.
  Timing can cause a problem in export credit. I ought to declare an interest. I do not think it is relevant, but I shall declare it anyway. I am a director of a merchant bank which does export business. I know that timing in the preparation of documents can cause difficulty, although I pay tribute not only to the staff of the Export Credits Guarantee Department but also to the comparative simplicity of their documentation. Anyone who has sought to make his way through a National Insurance form will appreciate the nature of the export credit guarantee forms. Although the matter and system with which they deal is complicated, the forms are not too complicated.
  Will the Minister comment on the manner in which multi-national companies with operations in the United Kingdom use British export credit guarantees? This is a subject upon which I cannot urge any particular views, but I want to draw the attention of the House to the fact that a number of multinational companies which operate within this country
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  find that it is quite useful for them to use the British system of export credit guarantees rather than the system of other countries in which they operate. One suspects that there is a point here and that the British system gives certain advantages which, perhaps, may be to the detriment of the British economy as a whole, rather than to its benefit. This point needs to be followed through elsewhere.
  As I have mentioned, the debate has been of a high standard. One might well have been in a non-political arena. It is with some diffidence that I lower the tone. One might have been in a Chamber in which politics did not exist. But in the area of exports the factors which are relevant are price, delivery, and certainty of performance. On price, export credit guarantees are relevant. They are not particularly relevant to delivery, but they are very relevant to certainty of performance. Not only does the exporter know that he has a certain market and a certain payment, but the customer knows that the contract has the backing of the British Government.
  It simply is not good enough for a debate on export credit guarantees not to raise the major subject of the suspicion in the City of London and among exporting companies that the Government are using the system for doctrinaire purposes. I must make the point that the Government use and are seen to use a number of weapons in their battle to do business with countries they like and to discourage business with countries that they do not like. It is not good enough for the Government to hide behind a shield of anonymity on this subject. Every time the British Government behave in a selective way, it diminishes the stature not only of the Government but also of the companies which have worked so hard to build up a reputation for reliability.
  One of the reasons that this country does quite well in international trade is that it is respected for standing by its word and because it is thought not to be selective in its use of measures such as export credit guarantees. It is appreciated that the Bill is a detailed and sophisticated weapon, but it is right that the cruder terms of export credit guarantees should be brought into the debate as well. I hope that the Minister will be able to comment on this.
  8.47 p.m.
  Mr. Tim Renton: My hon. Friend the Member for Gosport (Mr. Viggers) referred to speeches from the Opposition back benches as having been of uniformly high calibre, and his own certainly fell into that category. Speeches by my hon. Friends have been excellent—short in time but full of knowledge and expertise on the subject of ECGD. It is unfortunate that they have been totally unmatched by speeches by Government back henchers or by the Liberals. With their well-known interest in international trade, one might have expected some contribution from them. I am disappointed that there has been none from the Government side, because I know of at least one Labour Member who has been asking questions about the cost escalation policies to which my hon. Friend the Member for Tonbridge and Mailing (Mr. Stanley) referred, and to which I should like to refer later.
  Like my hon. Friends, I should like to pay a tribute to the ECGD on the skill and the depth with which it handles the many complex problems presented to it. I too had a good deal of experience with the ECGD over the years, often at one remove. It is very good indeed on general principles. If I have a criticism it is that often, after it has given a go-ahead to a project on a general basis, when it comes down to the detailed permission on the buyer's creditworthiness and the detail of his credit, the delays start to build up.
  I too must declare an interest, as a director of a London-based overseas bank whose customers, I am glad to say, make extensive use of ECGD facilities.
  The Under-Secretary said that the Bill brought about a number of technical adjustments. He was being a little too modest. In some ways the Bill is more noticeable for what it does not tell us than for what it does. In fact, over the past five years, since the Second Reading debate on what became the 1970 Act, a great deal of change has taken place in the export world and in the rôle of the ECGD itself. To give just one example—the fixed interest rate offered by the banks at that time to exporters was a mere 5½ per cent. During the debate that followed considerable reference was made and compliments were paid to the clearers on the substantial subsidies that they were giving
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  to British exporters. But there was no thought whatever, five years ago, of there being any need for relief from the Treasury.
  In 1972, as the Under-Secretary said, refinancing of long-term fixed interest export loans commenced. But, again, at that time no thought was given to supplementary interest having to be paid by the ECGD to the banks. It was thought more likely that the flow of interest would be the other way. That is why, in this Bill, it is necessary to make formal legal provision for this payment of £86 million of supplementary interest to the clearers and, as we have been told, a further £20 million in the next financial year.
  I was pleased to hear confirmation that the fixed interest rate now payable by exporters is a minimum of 7 per cent. As the Under-Secretary said, this can be varied upwards. The real answer is not to have a credit war but to try, on the question of fixed minimum interest rates, to have a credit peace. If this could be achieved, and if every major exporting country were to agree to jack up the basic rates further, we should not have to consider this supplementary payment to the clearing banks today, with a further provision in the year to come.
  I am sure that in a world of rapidly changing interest rates and changing demands among consumer countries, it is necessary that the ECGD should be flexible. But it is equally right that the House should look carefully at what is happening. Very large sums of money are involved. My hon. Friend the Member for Hertfordshire, South-West (Mr. Dodsworth) referred to the size of the tranches. Since, at the end of the day, after these three tranches have been approved, the ECGD may have total footings of over £21 billion, it is clearly right that the House should have ample opportunity to consider the figures involved. This is a matter that we may wish to refer to again in Committee.
  The Under-Secretary said that the ECGD had not become an export bank. I wonder whether that is right. I have the impression that first through the bank guarantees and then through the refinancing facilities that are now extensively offered to the clearers, the ECGD has in many ways become an export bank in all but name. Let me take the House

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  through what has happened in the past four or five years. First, we had the bank guarantees by which exporters could secure post-shipment finance to back their export credit. This was developed so that new major British firms could use this device—for want of a better word—to secure large sums with which they financed their own overseas operations without any effect whatever on their balance sheets.
  The Department's liability in this field is now around £500 million. Out of this grew the bank guarantee which brought forward finance at the concessional rate of interest that we have been discussing for credits longer than two years. Both sorts of bank guarantee were and are given by the ECGD at 100 per cent. and quite unconditional to the clearing banks involved.
  Out of this came bigger credit and other developments, so that we now have the ECGD giving 100 per cent. unconditional guarantees, fixing and subsidising where necessary the level of interest rates for medium-term credit, fixing the terms of these credits, and refinancing the clearers for a large part of their holdings of export paper, a refinancing commitment which appears at present to involve the Government in some £450 million a year.
  In short, what was originally an export credit insurance business has in this respect developed an entirely separate wing, the growth of which depends more or less on what business on a longer-term basis the ECGD is prepared to accept.
  I state the position thus not in any way to criticise the past operations of the Department's wide powers in this respect but to question on two counts whether the Department has the right controls for the future. The first question arises from the matter so well raised by my hon. Friend the Member for Hertfordshire, South-West—I hope that we shall have confirmation from the Minister on this—when he pointed out that the accounts of the ECGD do not now by any means properly represent or reflect the increased scope of the business. The cash flow accounts and profit and loss accounts of the ECGD are now totally inadequate, especially for the banking business which it is doing. For the future, we should like to see a split-down of the
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  liabilities and assets of the Department both in terms of the market and the length of the operation, and all the other details which one would normally expect to see from what is becoming a large-scale banking business.
  I go on from there to ask whether the ECGD is properly geared to act in this way as, I believe, very close to an export bank. Is the Minister satisfied that it has proper and adequate staff for the purpose, that it has the right sort of organisation, and that there is within the Department a proper financial mechanism to control the immense sums of money which it is now receiving from the Treasury or from the Bank of England?
  The sums of money involved will grow larger. In the debate on the Consolidated Fund Bill on 4th December, my hon. Friend the Member for Croydon, North-West (Mr. Taylor) pointed out that the refinancing long-term fixed interest business was up from £315 million on the original Vote last year to £450 million, a rise of £135 million in one year. Plainly, with inflation and with, I suspect, a lesser growth in the money supply and, therefore, a slower growth in the banks' volume of current accounts, more business on this basis will be offered to the ECGD in future, and its volume of refinancing business is bound to grow. The finance for this will have to come out of the public sector borrowing requirement, and it is important to know that the ECGD is properly staffed to handle it and that its accounts will fully reflect the banking business in which it has become involved.
  Arising from that, we want an assurance that, in judging whether to commit public funds, the ECGD will above all be guided by the commercial credit worthiness of the propositions put to it. My hon. Friend the Member for Worthing (Mr. Higgins) wanted confirmation that grants would not be used for political purposes, or, if they were, that a Minister would at the appropriate time make it absolutely plain so that the House knew.
  I feel that exactly the same comment applies to any loans being made by the ECGD which are strictly in the national interest but in respect of which there is not proper commercial viability. We should have an undertaking from the

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  Minister that on such occasions he will tell the House about it at the earliest opportunity.
  I should like to refer the hon. Gentleman back to no less a person than the present Prime Minister who, when he was President of the Board of Trade, said in the Committee stage of the appropriate Bill on 8th February 1949, that no "undue hazardous" or "crazy risks" business would be undertaken by ECGD. "Crazy risks business" may not be parliamentary language, but our concern today is very real that we should have a formal assurance from the Under-Secretary or from the Secretary of State that the same constraint applies.
  We have spoken tonight almost entirely about the arrangements for longer-term credit, the refinancing arrangements under bank guarantee. It is, however, worth reminding the House that it is the short-term business of ECGD—the whole turnover business—which it takes on and backs with comprehensive guarantees which forms the staple part of ECGD's business. It is the old Section 1 business, of which about £4,000 million was written by ECGD in the last year. I am not at all certain that it is right to amalgamate the Section 1 business with the Section 2 business in one overall limit. I think the House would still like to know what was the individual limit for commercial business under Section 1 and what was the business undertaken in the national interest under Section 2 or the old Section 3.
  In the Scholey Report, Review of Export Credits Guarantee Department March 1972, many recommendations were made and I understand that many of these have been adopted, but this report, in Recommendation 10, specifically saw the need for modernisation of the comprehensive guarantee policy. I was interested, therefore, in the Minister's remarks that he was expecting the computerisation of the Department to be fully in operation by 1977. The computerisation will affect particularly the whole turnover or comprehensive guarantee business, and I believe it to be most important for the British export effort that there should be no delay in this computerisation taking place.
  I referred earlier to the difficulties that I had found in years past in getting
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  specific answers from the ECGD about the credit worthiness of overseas buyers. Once the computerisation is under way and there is access from the regional offices directly to the central computer, I trust that a number of these delays will be wiped out. I should like an assurance that the present constraints on public expenditure will not delay this computerisation programme. I think it is most necessary for the continued success of ECGD in short-term business.
  This leads me to the question of the range of new policies being offered by the Department on both short-term and long-term credit. My hon. Friend the Member for Tonbridge and Mailing referred to cost escalation policies and I shall await with interest the Minister's further answer on that point. It should be borne in mind that if we do introduce these—and I am aware of the competition from the French which makes it a matter of considerable interest to some of my hon. Friends—it is right that the manufacturer should continue to bear a share of the escalation costs, and that the split between the manufacturer and the Department should be in the ratio of, say, 30–70 rather than that the Department should take on the whole burden.
  My hon. Friend the Member for Chertsey and Walton (Mr. Pattie) referred to pre-shipment finance. I particularly endorse the remarks of the hon. Member for Northampton, South (Mr. Morris) about recourse underwriting by ECGD on the performance bonds that have to be put up by consortia. These often take the shape of joint and several liability bonds to which each member of a consortium has to put his name. This involves severe potential liability on the member of the consortium, and since in almost every case these members have separate banks it is very difficult, if not impossible, for one bank to come into the middle and put up a consortium bond on behalf of every member. It is obviously time consuming and expensive for members of a consortium to obtain cross-guarantees from each other. The amount of cover available from the private insurance market is limited, and therefore this is an appropriate area for the ECGD to examine. It falls directly into the business of credit insurance rather than banking. The sums involved are

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  very large, but it will take British companies into those large tenders and orders for whole plants in, for example, Middle East countries where we wish to build up our export effort.
  Clearly the United Kingdom has a propensity to import manufactured goods. When incomes are rising here, the country's incomes elasticity of demand for the import of manufactured goods appears to be nearly 50 per cent. higher than in France and West Germany. This can be compensated for only by a higher volume of exports.
  My hon. Friends referred to the decline which is shown in the latest available statistics on our quarterly export performance. It is sad that our average annual percentage increase in exports between 1968 and 1973 was only about two-thirds that of France, West Germany and Japan expressed in dollar terms. I believe that the policies of ECGD play a vital part in helping industry to try to rectify this export gap.
  I hope that the Secretary of State for Trade's pathological dislike for the Common Market will not stop his considering all means by which the ECGD can help to expand our export trade both within and without the Common Market. It is only in this manner that we shall be able to help British industry to improve its export performance compared with other manufacturing nations.
  I do not urge my hon. Friends to vote against the Bill. I support it in principle, but there are a number of points that we shall wish to probe much more deeply in Committee, particularly on Clauses 1 and 3. Britain must export to live, and we wish to be sure that the Minister, with his right hon. Friend, is doing all he can to ensure an upward momentum in our exports on a completely commercial and creditworthy basis.
  9.8 p.m.
  Mr. Deakins: With the permission of the House, I should like to reply to this interesting and useful debate. It has illustrated the recognition in the House of the importance of ECGD's rôle in the nation's export effort. May I begin by congratulating the hon. Member for Mid-Sussex (Mr. Renton) on what I understand to be his first appearance at the Dispatch Box. He put up a remarkably impressive performance, if I may say so
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  as one who has himself only recently been "blooded", and I hope that we shall hear a lot more from him on this and other matters. I was very impressed by his expertise, as I was by that of a number of other hon. Members who have spoken. At one stage I thought that I was the only non-banker taking part. I am grateful, as I am sure my colleagues in the ECGD will be, for the compliments which have been paid by most of the speakers to the work, facilities, expertise and general efficiency of the department.
  The need for additional exports has been emphasised often enough, but I reiterate that not all exports are necessarily profitable to the country. As far as possible we must concentrate our efforts on worthwhile exports which result in as quick and large a net return to the United Kingdom as is possible. Export sales on excessively long credit and at unnecessarily low interest rates, or exports which will not be paid for, are of doubtful value when world-wide inflation is running at such a high level.
  The ECGD will therefore be continuing to play its part in the negotiations to try to reach international agreement on more realistic levels of interest rates and on a reduction in the length of export credit terms. Many of those who have taken part in the debate have alluded to the desirability of taking such action. I assure them that their views on that matter are fully endorsed and shared by the Government, who are trying to take action. However, in doing so the Department's primary objective will be at all times to ensure that United Kingdom exporters continue to be able to compete on equal terms with foreign suppliers for worthwhile business.
  Against the background of world-wide inflation and a rapidly changing trading situation, special and sometimes temporary measures may be necessary from time to time to maintain our effective exporting capacity and competitive position. The Government will not hesitate to take any necessary or urgent action in this direction.
  A number of hon. Members have referred to the problems facing exporters and contractors involved in very large projects overseas. The problems fall into three main categories. First, there is the need for finance to meet costs during the

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  manufacturing period when the sheer size of the contract may throw severe strains on companies' liquidity. Second, there is the increasing call from some overseas buyers—the Middle East has been mentioned—for performance bonds or guarantees which the present commercial bonding market does not seem fully able to meet. Third, there is the problem of cost increases and the difficulties which our exporters and contractors face, both in estimating price increases where manufacturing periods are long and in competing with exporters from other countries who are able to obtain some measure of protection or cost-escalation cover.
  Mr. Stanley: Will the Minister make clear that it is usually impossible to obtain exports contracts unless fixed-priced contracts are offered, and it is the need to go into a fixed-price tender against inflation at home which represent the real risk to British exporters? The real exposure, if they are unable to get insurance cover against inflation, is the fixed-price requirement, which is absolute. That is what makes inflation insurance imperative.
  Mr. Deakins: That is one of the most important factors which will be taken into consideration before the Government reach a decision. It is one of the factors underlying much of the pressure to which we have been subject in recent months from British exporters. The Government are well aware of the problems which have been mentioned. The ECGD and other departments have for some time been in discussion with industry and with the banks about these problems, and they are actively working to check whether there are possible solutions.
  In the general area of preshipment finance the ECGD has already agreed with the banks—this was a matter that was alluded to by the hon. Member for Chertsey and Walton (Mr. Pattie)—on an outline scheme which would make pre-shipment finance available for large projects with a long construction period. As this finance would be guaranteed by the ECGD and could represent lending over and above what the banks would otherwise make, the scheme obviously presents many difficulties. In general terms it will be restricted to large projects which are regarded as having a special national interest.
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  The ECGD is discussing with the banks and other bodies both the extent and the nature of these problems and needs in the general area of preshipment finance. Until this has been done, possible solutions cannot sensibly be considered. Some means of trying to help are already being considered but it must be recognised that the provision of working capital has been the traditional rôle of the banks. In addition, preshipment or manufacturing finance difficulties are usually the symptoms of wider and often structural problems of liquidity and under-capitalisation. It would be wrong for me to suggest that quick, easy and wide-ranging solutions are about to be produced by the ECGD. This is a difficult area, and the problems are of such a nature that it will take time for decisions on viable solutions to be made.
  The hon. Member for Northampton, South (Mr. Morris) alluded to performance bonds. The Department is drawing up a scheme of cover which should help in what has been found to be the area of greatest need—large projects. Details have still to be finalised, but the new cover should make it easier than in the past for exporters and contractors to obtain performance bonds and issue performance guarantees. But again I must stress that very difficult problems arise when the Department moves into this area, which to some extent cannot but involve the Government in guaranteeing the contract performance of individual firms.
  Then there is the problem of cost-escalation cover—a subject alluded to by the hon. Members for Tonbridge and Malling (Mr. Stanley), Chertsey and Walton, and Mid-Sussex. I have frequently answered questions about it in the past, and the House is aware of the difficulties the subject produces. However, the Government are well aware of the increasing problems that the present situation is producing for exporters. The matter is in the final stages of consideration, and my right hon. Friend the Secretary of State for Trade will be making a statement about it in due course.
  I now turn to the large number of individual and detailed points raised in the debate. I should apologise, perhaps, for the length of my reply on these points, but I hope that I shall be forgiven, since

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  there were such very good speeches and nearly all who took part asked a reasonable number of intricate and detailed technical questions, apart from making general political remarks.
  The hon. Member for Northampton, South asked about special facilities in the Department, possibly to help us do better in the Middle East. The Government do not think that that would be the best way of improving our export performance in that area of great opportunity. We believe that the best way of going about it is to strengthen our commercial representation in the area, which we have done, to concentrate the attention of home exporters and businesses on the tremendous potential opportunities there are in the area, and, in general, to strengthen our own internal organisation in the Department of Trade, which we have also done, in that we now have a special division devoted entirely to the Middle East.
  The hon. Gentleman also mentioned the possibility of Government involvement in large projects, which are sometimes called "jumbo" projects—that is becoming the technical expression. I cannot say much at the moment on this, but we are looking at it closely, as is the British Overseas Trade Board.
  The hon. Gentleman also deplored—he was the only hon. Member to do so—the demise of the British National Export Council. We have recently revised our arrangements for export promotion services. We have, we hope, added to them and improved them without substantially altering the basic structure. We have announced the setting-up of the British Overseas Trade Board Advisory Council, and hope that this will strengthen the links between the Government and the top level in industry concerned with exports.
  The hon. Gentleman also mentioned that the review of the Queen's Award might not be ready just yet. I am afraid that this matter is out of my hands. A committee is looking into it. I shall do my best to see that it reports as quickly as possible, but we must await its report. I do not think that it is a matter on which my Department can help very much. The hon. Gentleman also asked about the build-up of the £86 million. Others mentioned it, so I shall deal with it later.
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  I turn now to a point raised by the hon. Member for Worthing (Mr. Higgins) and the hon. Member for Mid-Sussex—the payment of arrears to the banks. I should make it clear that in the Bill we are not seeking approval retrospectively for the payment of these arrears. Payment was made under the authority of the winter supplementary estimates and in the subsequent Appropriation Act. The Bill is designed to give continuing powers to prevent arrears arising in future.
  The hon. Member for Worthing asked why the £86 million was not disclosed earlier. I was also asked about the comments of the Public Accounts Committee on the matter. Much of the £86 million was accumulated under the previous Government. I say that not in a partisan way but merely to make the point that this has happened over two years. I cannot say why the previous Government did not announce the losses. Equally, the report of the Public Accounts Committee did not prompt the renegotiations with the clearing banks, which started under the previous Government and which we have carried to a satisfactory conclusion. I am sure that would have been done equally by the previous Government.
  The hon. Member for Worthing asked whether we should not think of distinguishing between countries, especially the richer countries. I have much sympathy with that point of view. It is a pity that we cannot insist on cash payments for exports to a number of countries which are able to pay cash down. We live in a competitive world. If there were no assurance of cash but an insistence on credit, and if that were the reason for our losing a vital contract, we could not go so far as to insist on cash. That is the present situation. With the down turn in world trade in the OECD countries there is greater rather than lesser competition among the industrialised countries for exports to the rest of the world.
  The hon. Gentleman raised the possibility of obtaining an international agreement on export credit rates, so as to bring them nearer to the market rates of interest. I assure the hon. Gentleman that that is Government policy. It would be the policy of any Government in the present circumstances. But there is no telling when commercial rates of interest will come down. Therefore, it is in the

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  interests of the taxpayer and of the international business community generally to try to put up export interest rates. However, one can only push them to the extent that the international market will bear.
  The hon. Gentleman also asked why we should give credit to wealthy oil-producing countries rather than insist on cash. I have alluded to that. The best way of rationalising the position vis-à-vis the wealthy oil-producing countries must be through international agreement.
  On the subject of our rates in competition with those of other countries, when export credit was offered at market rates, market rates were much lower than they are now. Overseas rates vary in different ways from ours. In general, German, Canadian and American rates are higher than ours, Italian rates are about the same, and French and Japanese are lower.
  Several hon. Gentlemen asked whether we had a valid case for abolishing the separate limits in the Bill. I do not want to go into details here. I am sure that we can deal adequately with this matter, to the satisfaction of hon. Gentlemen, in Committee.
  The hon. Member for Worthing asked about the financial limits and their makeup. I am advised that Clause 3 relates neither to loans nor to money. It concerns the total volume of risks or the potential liability that the ECGD can assume. The extra total of £9,000 million is estimated to last for up to five years. That is the usual practice. In 1949 the total limit was £450 million, since when liabilities have risen to £9,000 million, which is a twenty-fold rise.
  Mr. Stanley: Will the hon. Gentleman confirm that though the figures that he has quoted do not represent the total cash liabilities of the ECGD but the total risk liabilities, they are also exclusive of the interest due?
  Mr. Deakins: I am advised that that is the case. They exclude interest. They are concerned with capital sums.
  I come to the matter raised by the hon. Member for Worthing about the amounts of export credit outstanding. In May 1974, it was £4,843 million. By November 1974, it had risen to £5,506
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  million. That is a fantastic rate of increase in five or six months.
  The hon. Member for Nantwich (Mr. Cockcroft) spoke about our poor export performance and gave some reasons for it. He went on to speak about the necessity to concentrate on import savings by means of cheap loans. If I went into that subject, it would take me wider than the general area of debate on the Bill. But if we extended cheap loans to home industry or even just to home agriculture it would represent another very big cost to the Exchequer. In view of the size of the Government's present borrowing requirement, we would wish to avoid that.
  Several hon. Members spoke about the qualities of the ECGD as insurers, compared with other insurers. It is fair to say, as a broad generalisation, that our premium is generally lower, that our percentage of cover is generally higher, and that our claims waiting period is generally shorter than anywhere else.
  We cover a higher percentage of our national exports than any other country except the Japanese. Our scheme is so good that we have helped Australia, Canada, India, Pakistan, Hong Kong and even the United States to set up credit insurance scheme. Currently, we are helping Cyprus and Iran.
  I turn now to a major point raised by the hon. Member for Worthing and the hon. Member for Mid-Sussex, who was kind enough to quote some words of my right hon. Friend the Prime Minister when he was President of the Board of Trade. In February 1949 my right hon. Friend said:
  "We have no intention of trying to guarantee exporters against unduly hazardous or quite crazy risks."—[Official Report, 8th February 1949; Vol. 461, c. 259.]
  That has remained the policy of successive Governments. It is the policy of this Government, just as much as it was in 1949. There can be no question of the Bill's being intended or used to enable the Government to circumvent assurances previously given to the House about ECGD operations and the avoidance of unduly hazardous risks.
  The purpose of Clause 1 is not to enable the ECGD to undertake the direct financing of exports. Some powers of this kind already exists in Sections 2

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  and 3 of the 1968 Act, as amended. By contrast, Clause 1 is concerned with giving the ECGD a clearer and therefore more satisfactory refinancing power, which enables the ECGD to make loans to persons who provide financial facilities in respect of export contracts. Those persons will almost always be banks. The clause is not limited specifically to banks, however, in case opportunities should arise to finance British exports from sources other than banks. Refinancing of such loans under this power would be no less appropriate and possible than under bank lending.
  I turn to the speech of the hon. Member for Hertfordshire, South-West (Mr. Dodsworth). He talked about the need for a proper accounting system and accounts presentation. I shall return to that presently, because another hon. Member referred to it. However, we are well aware of it and of its importance.
  The hon. Gentleman was also worried about the higher limits. We can have an interesting and, I hope, useful discussion in Committee about the necessity for them.
  Then the hon. Gentleman referred to the need to have some relationship between export credit interest rates and internal interest rates. Here again, if we were to try to bring the two closer into line it would not help in the safeguarding of public expenditure or, for that matter, of taxpayers' money. It would involve the ECGD in doing something which it has no power to do.
  Mr. Dodsworth: I accept that when we are raising capital for finance for industry, for example, it may be a more suitable application of Government funds to ensure that investment is aided on an import-saving basis rather than a general basis. I am suggesting that there is an illustration in the shipbuilding industry of that happening already, and that the Government might explore it.
  Mr. Deakins: I am grateful to the hon. Gentleman for saying that. On that aspect of export credit and internal credit he is preaching to the converted. I personally believe that we should move away from the general macro-economic approach in many areas, particularly in helping exporters and in enabling our industry to re-equip itself so that it competes more effectively in world markets.
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  I hope that in the next few years we shall move on to a much more selective basis, and that will probably meet the hon. Gentleman's point.
  The hon. Member for Worthing spoke about flag discrimination and the use of ECGD facilities in that connection. That problem, if necessary, can be examined in Committee, but the Government's position remains the same. To condition the Department's guarantees in that way would be an unacceptable use of the Department's facilities. Credit insurance should not be used as an instrument to fight flag discrimination. That is a matte: to be dealt with in normal trade negotiations.
  The hon. Member for Chertsey and Walton referred to interest rates on exports under Section 2. In no circumstances should we encourage exports which will be a dead loss to the balance of payments and the Exchequer. If the hon. Gentleman does not mind, I should prefer not to make any public comment on the specific deal he mentioned, which has been under fairly detailed consideration.
  I certainly accept that we have to weigh up the balance of trade considerations against other considerations, but in the present state of the national economy and with our balance of payments deficit and the likely expected deficit over the next couple of years, increasing our exports and ensuring that we get paid for them must be priority number one for any Government. Therefore, if the possibility should arise of doing a deal which will not benefit the balance of payments we must look askance at it, consider it in a detailed way and perhaps even decide not to do the deal, although there may be a possibility that some of our competitors will be tempted to do it. Our national economy cannot stand the strain of deals like that.
  The hon. Member for Gosport (Mr. Viggers) spoke of multinational companies which were using our ECGD facilities. We are happy that multinational companies operating in this country should use our ECGD facilities. As long as they are exporting we want to encourage them to go on exporting. If they want to set up manufacturing plants in this country, those plants, like native British firms, will have access to all ECGD facilities.

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  The hon. Member for Gosport also suggested that the Government were using ECGD facilities for their own purposes. I give him a categorical assurance that that is not so. My right hon. Friend the Secretary of State for Trade, has already given assurances to the House in this connection. The matter arises in connection with so-called sensitive markets, and several questions on this subject have been asked in the past few months. The hon. Member for Tonbridge and Malling pursued it not long ago. I repeat my right hon. Friend's assurance to the right hon. Member for Stafford and Stone (Mr. Fraser), when he said:
  "I am happy to give the right hon. Gentleman that assurance. If, with my colleagues, I decide to restrict ECGD transactions in relation to particular countries, I have no doubt that I shall want to make a statement to the House about that."
  He went on to say:
  "The right hon. Member for Stafford and Stone (Mr. Fraser) made the perfectly reasonable request that if we made changes in ECGD we should inform the House. I shall be glad to do that."—[Official Report, 10th June 1974; Vol. 968, c. 1208.]
  I hope that these assurances are considered satisfactory by the hon. Gentleman who raised the subject.
  Mr. Viggers: In view of the importance of this matter, I am most grateful for the Minister's categorical assurance.
  Mr. Deakins: The hon. Member for Tonbridge and Mailing raised a number of points. He asked whether the overall rate should be kept under review. I can tell him that we keep the overall rate under review, as, indeed, we keep under review all other aspects of ECGD operations.
  The hon. Gentleman asked about the taper of the agreed refinancing rate. I confirm that the maximum margin is 1¼ per cent. The taper runs from 1¼ to ½ per cent. The minimum ½ per cent. margin applies when the agreed rate is 14½ per cent. or more.
  The hon. Gentleman also asked about the commitment fee, and said that it was higher than that of our international competitors. I can inform the House that the commitment fee was taken into account when the arrangement was drawn up. It recognises that the banks earmark funds up to the total of the ECGD
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  facility. Some such charge figures in overseas banking transactions. Their charges may be lower than ours, but our credit insurance premium charge is generally lower than that of our creditors.
  The hon. Gentleman then mentioned the extension of the scheme to non-clearing banks. I do not wish to say too much about that matter in detail, but a possible extension of the refinancing scheme to non-clearing banks is under active consideration. This raises problems of compatibility between existing arrangements and any extension.
  Mr. Stanley: I do not want to draw the Minister too much on what is obviously a delicate commercial matter, but his last remarks presumably refer to the fact that the 18 per cent. ratio on current account balances would not be applicable to non-clearing banks.
  Mr. Deakins: That is one factor which has to be taken into account and it is making the task of extending the facility to non-clearing banks rather more difficult than was envisaged.
  The hon. Gentleman asked about the disclosure of premiums. Disclosure abroad is not automatic. We have had experience of the fact that difficulties arise over demand by foreign buyers for disclosure. Therefore, we prefer at present to stick to the generally accepted practice of not disclosing the amounts of premium which reffect our assessment of the risk involved. We do not think that it would be in our export interest to alter the situation. Insurance premium forms part of the contract price and I am not aware that this gives rise to uncertainties.
  The hon. Gentleman referred to the public expenditure White Paper. The figure of expenditure which he quoted represents the balance between new loans and repayments and also the balance between the contribution of the banks and the contribution by the Government. They also are at 1974 prices, with no allowance for inflation. This explains why the Government's annual expenditure is expected to go down while the total amount of export credit outstanding will go on increasing.
  I should like to turn to the points made by the hon. Member for Mid-Sussex, who concluded the debate for the Opposition. The whole House will share his hope that

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  we need a period of international credit peace, not credit war. I assure him that the present Government are striving for that aim in every available international forum, of which there are a number.
  Several hon. Gentlemen referred to the subject of the ECGD accounts. Following the Scholey Report recommendations, we have revised our accounts substantially in a way which has already been referred to. I do not want to delay the House on that point now, but perhaps in Committee we shall have an opportunity to go into it in more detail.
  The hon. Member for Mid-Sussex asked whether our organisation, staffing and financial control were satisfactory. I said earlier that the ECGD was not perfect, but in so far as we keep a constant look-out for what our competitors are doing and for what our City and other business advisers tell us we ought to be doing, we are in control of the situation and flexible enough to adapt when the need arises.
  The hon. Gentleman also asked for assurance that there would be no delay in computerisation. I can assure him that we in our Department shall resist strongly any attempt to delay computerisation, but I do not think there will be any such attempt.
  I have dealt with most of the points that were raised by the hon. Gentlemen opposite. If I have not covered every point I apologise, but I am sure there will be an opportunity in Committee to return to these matters.
  The ECGD will certainly face a number of challenges in the coming years. Continued negotiations in the EEC on the form of export credit insurance, negotiations on export credit terms with our major exporting competitors and in the OECD, and participation in the activities of the Berne Union will involve the Department in important and demanding discussions. The changing world economic situation will undoubtedly affect buyers in many countries, as well as firms in the United Kingdom. Any increase in claims and related problems in assessing buyer and country risks cannot but make the Department's work that much more difficult. At the same time, extensive computerisation, which has already been mentioned, will be taking
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  place and planning of the partial dispersal to Cardiff will be reaching its final stages.
  All this will put a considerable strain on the ECGD, but it has dealt successfully in the past with many difficulties and I am sure it will do so again. The new powers proposed in the Bill are technical amendments to the ECGD's powers, which will enable it to carry out its funtions more satisfactorily.
  The ECGD has often been a pioneer in the export credit insurance field, and, as I have noted, has helped many countries in the establishment of their own schemes. Its package of facilities stands comparison with those of its competitors and it is our firm intention that this should continue to be the case. The Department should have the ability to react speedily and flexibly to the changing export situation and it is our aim that it should have the powers and the resources to do so.
  Question put and agreed to.
  Bill accordingly read a Second time.
  Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).

  EXPORT GUARANTEES AMENDMENT [MONEY]
  Queen's Recommendation having been signfied—
  Resolved,
  That, for the purposes of any Act of the present Session to make further provision in connection with the powers and duties of the Secretary of State under the Export Guarantees Acts 1968 and 1970, it is expedient to authorize—

  (1) the payment out of moneys provided by Parliament of any sums required by the Secretary of State for making—

  (a) loans in connection with the provision of financial facilities in respect of export contracts;.

  (b) grant—

  (i) for supplementing interest received or receivable as consideration for the provision of such facilities;

  (ii) in respect of interest paid or pay able under such contracts;

  (2) any increase in the sums payable out of such moneys or charged on the Consolidated Fund under the Export Guarantees Act 1968 which is attributable to new provisions replacing section 4 of that Act;

  (3) payments into the Consolidated Fund.—[Mr. Dunn.]

  ARBITRATION BILL [Lords]
  Not amended (in the Standing Committee), considered.
  Motion made and Question, That the Bill be now read the Third time, put forthwith pursuant to Standing Order No. 56 (Third Reading), and agreed to.
  Bill accordingly read the Third time and passed, without amendment.

  BIOLOGICAL STANDARDS BILL [Lords]
  As amended (in the Standing Committee), considered.
  Motion made and Question, That the Bill be now read the Third time, put forthwith pursuant to Standing Order No. 56 (Third Reading), and agreed to.
  Bill accordingly read the Third time and passed, with an amendment.

  EDUCATION BILL
  Lords amendments agreed to.

  NORTHERN IRELAND COMMITTEE
  Motion made, and Question proposed.
  (1) There shall be a Standing Committee, to be called the Northern Ireland Committee which shall consider such specified matters relating exclusively to Northern Ireland as may be referred to them and shall consist of all Members sitting for constituencies in Northern Ireland, together with not more than Twenty other Members to be nominated by the Committee of Selection, who shall have power from time to time to discharge the Members so nominated by them and to appoint others in substitution for those discharged.
  (2) A motion may be made by a Minister of the Crown at the commencement of public business to the effect that a specified matter or matters relating exclusively to Northern Ireland be referred to the Northern Ireland Committee for their consideration, and the question thereon shall be put forthwith.
  (3) If such a motion be agreed to, the Committee shall consider the matter or matters to them referred on not more than four days in a Session and shall report only that they have considered the said matter or matters:
  That this Order he a Standing Order of the House.—[Miss Margaret Jackson.]
  9.44 p.m.
  Mr. J. Enoch Powell: I am much obliged to the Lord President
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  of the Council for being in his place on the occasion of this motion. It fulfils the indication which he gave the House on 14th January, and, since it is clearly important to Northern Ireland, there are one or two matters in connection with it which I thought should be on the record of the House.
  On 14th January, the right hon. Gentleman said, I think in relation to this Committee as well as to others which he was mentioning, that
  "matters would be sent to the Committee only by agreement".
  Later he said, quite certainly in relation to this Committee, that
  "The topic to be discussed will possibly be agreed with the Members concerned before the debate and agreed by the House."—[Official Report, 14th January 1975; Vol. 884, c. 211 and 213.]
  There is no disagreement, I think, that the right hon. Gentleman has indicated that it would be the intention that the agreement of hon. Members representing Northern Ireland constituencies should be secured both to the sitting of the Committee and to the topics which it was proposed it should discuss. He has generously renewed that assurance to hon. Members concerned in private, but I am sure that he would agree that as the Committee is likely to form quite a lasting institution of the House it is only right that it should be on the record.
  Secondly, unlike some committees which go by the name of Grand Committees, it is I believe the intention that only occasionally should there be found a subject which was thought appropriate for this special treatment. That is perhaps worth emphasising because plainly when a part of the United Kingdom is represented in this House by a large number of hon. Members a Grand Committee plays a different rôle from that which it would play in the case of Northern Ireland where the 12 or, one hopes, 21 Members representing Northern Ireland would be more or less bound to find themselves in a minority.
  Nevertheless, we entirely agree that from time to time there will be subjects which deserve mature consideration and debate in committee conditions possibly before they are brought to the House for briefer treatment. We noted with satisfaction—not that I would hold the right

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  hon. Gentleman to the exact figure—that the Lord President suggested in column 212 of the Official Report for 14th January that four times a year on average might be the number of times when a subject was thought appropriate for this treatment.
  Subject to those two points—first the agreement of Northern Ireland Members, which would not be unreasonably withheld now or in future, to the topic for discussion and to the sitting of the Committee, and, secondly, the restrained use to be made of this instrument—there would be no desire on the part of the party which I represent to oppose the motion.
  9.48 p.m.
  The Lord President of the Council and Leader of the House of Commons (Mr. Edward Short): I thank the right hon. Member for Down, South (Mr. Powell) for the spirit in which he has made his comments.
  I confirm that we shall always try to obtain the agreement of Northern Ireland Members before any subject is referred to the Committee. I should not envisage any debate taking place without such agreement. There will be no great problem about this matter.
  On the second point, we propose in the motion that the Committee should sit on four days in a Session. But we are not bound by that. If we need five days, provision could be made for that.
  I am grateful to the right hon. Gentleman for his remarks and co-operation in reaching agreement on the motion before it came to the House.
  Question put and agreed to.
  Ordered,

  (1) There shall be a Standing Committee, to be called the Northern Ireland Committee which shall consider such specified matters relating exclusively to Northern Ireland as may be referred to them and shall consist of all Members sitting for constituencies in Northern Ireland, together with not more than Twenty other Members to be nominated by the Committee of Selection, who shall have power from time to time to discharge the Members so nominated by them and to appoint others in substitution for those discharged.

  (2) A motion may be made by a Minister of the Crown at the commencement of public business to the effect that a specified matter or matters relating exclusively to Northern Ireland be referred to the Northern Ireland Committee
  166
  for their consideration, and the question thereon shall be put forthwith.

  (3) If such a motion be agreed to, the Committee shall consider the matter or matters to them referred on not more than four days in a Session and shall report only that they have considered the said matter or matters:

  That this Order be a Standing Order of the House.

  NORTHERN IRELAND COMMITTEE
    ADJOURNMENT
    Motion made, and Question proposed, That this House do now adjourn.—[Miss Margaret Jackson.]

  FISHING VESSEL "SILVER LINING"
  9.49 p.m.
  Mr. John P. Mackintosh: I wish to raise a constituency question which is the present position of the fishing vessel "Silver Lining" and the position of her owners. I also wish to raise a broader issue concerning the general interest in the disposition of public funds for assistance in building fishing boats as well as the particular issue of equity which arises.
  May I explain the circumstances of the case? Mr. Johnstone, a fisherman resident in my constituency, and his partner, who is resident in East Aberdeenshire, together wished to buy a fishing boat. I gather that the question of the choice of yard and design is left to the fishermen, and these two men went to the Bute Slip Dock Company at Rothesay, in the west of Glasgow, where, I understand, the director, a Mr. Cumming, had built six very satisfactory fishing boats in the recent past. They ordered the "Silver Lining"—one of the most sophisticated fishing boats built in Scotland in recent times—from the yard.
  Mr. Cummings, the director of the yard, designed two sister ships on what, for practical purposes, were identical lines. One was the "Trident" and the other was the "Silver Lining". I gather that in order to make these fishing boats turn more rapidly he cut the keel by 4 ft. and altered the stern design, compared with normal fishing boats, to remove a certain bulginess which is normally associated with them and gave these two boats, as it were, a flat stern section which was somewhat different.
  The point that exercises fishermen in Scotland is that the "Trident" went

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  down with all hands after reports that she was basically unseaworthy. The "Silver Lining" was impounded as unseaworthy or unstable and is still lying rusting in dock, although she is an expensive ship, because her seaworthiness and future and the savings of those who own her have not been established.
  I should like to put my finger on the public involvement in this matter. This fishing boat cost £160,000. Its present value, or the value of that kind of boat today, is reckoned at over £250,000. The £160,000 paid for the "Silver Lining" was made by a Government grant from the Herring Industry Board of £48,000, a loan of £65,000 on which the owners have to pay the current rate of interest which is extremely steep, while the two owners found £47,000, which represented their life savings. It is clear that this was a modern expensive fishing boat, that the two men involved put their total life savings into it, and that public money was involved. Therefore, apart from the question of the safety of men at sea, the public interest is important.
  The problem is that when the Government, through an ad hoc body like the Herring Industry Board, give a grant and a loan, one assumes that a reasonable check is carried out on the satisfactoriness of the expenditure. In this instance, that means the seaworthiness of the boat involved.
  I looked carefully into what check the Herring Industry Board carried out on the seaworthiness of this boat in view of the public money that it was lending and granting. I was shocked to find that the board asked for certain calculations about the shape of the vessel, which it checked, but that it did this without remeasuring the boat to discover whether it was built according to specification. Secondly, the figures were checked by surveyors, who were not marine architects. Why they were not marine architects, I do not fully understand.
  Finally, the boat was launched and taken to Peterhead on the other side of Scotland and, on 4th March 1974, a stability test was undertaken. However, it was not undertaken by the body that granted or lent the money, but by the builder who had a vested interest in establishing the seaworthiness of the boat. The builder certified that the boat reached the
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  minimum standards specified by the International Marine Consultative Organisation—IMCO, as it is known. The Herring Industry Board accepted the builder's verdict as a certificate of seaworthiness and allowed the boat to proceed to sea. The public involvement in terms of the grant and loan was thereby established.
  When the "Silver Lining" went to sea the skipper complained that it was unstable. Later I found that the Chairman of the Herring Industry Board asserted that that was because of subsequent additions to the deck of the boat. I do not think that that was adequately borne out by the subsequent stability tests. Nevertheless, the skipper complained that the boat was unseaworthy and he had eight tons of rock ballast put into the bottom of it to try to make it a little more stable.
  Meanwhile, the sister ship the "Trident" was at sea. There is some dispute about this, but I understand from people in the area that the skipper and other members of the "Trident" likewise complained about the unseaworthiness of that boat. Whether or not the fact is established, it is rumoured and talked about among the fishermen there. The "Trident" sank with all hands on 3rd October 1974, and a public inquiry has been instituted into why this vessel should have sunk under these conditions.
  Directly the "Trident" sank the authorities insisted that the "Silver Lining", the sister ship, should not go to sea again because its stability was in question, and on 11th October an inclining test was held, this time not by the builders, as in the first instance, but by other authorities, and the boat was impounded until the results of the test could become known.
  My constituent Mr. Johnstone, who had put his life savings into the boat, was thereby deprived of his source of income. He became unemployed, yet he had to pay the on-going rate of interest on his share of the £65,000 loan involved in the construction of the boat.
  At this point the situation became much more complicated, because three different groups of people were involved in the stability test. The first was the White Fish Authority because it has joint surveyors with the Herring Industry Board.

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  On 11th October the authority investigated the stability of this boat and wrote a letter to the owner of the boat, Mr. Johnstone who passed a copy of it to me, saying:
  "The stability of this fishing vessel does not fully satisfy the stability criteria as laid down in the draft Fishing Vessel (Provisional) Rules."
  Furthermore, the writer say that the operating assumptions on which the boat was designed were unrealistic, and that in future they should be made with the mutual agreement of the owner, the designer and the Department's surveyor.
  At the same time the Department of Industry took an interest in this stability test, and here a discrepancy arose. One of the problems is the number of public authorities involved in this whole question. I have here a letter from the Under-Secretary in which he said that
  "whereas the boat was unsuitable for going to sea, it was unstable only when fully loaded. When unloaded it was stable".
  That is contrary to the report on the same test carried out by two other public authorities.
  A third group interested in this matter was the Napier Company, a naval architect firm. It was employed originally by the owners of the boat, but the company's reputation is such that the Herring Industry Board accepted that its judgment could, in a sense, be an impartial arbitration on the matter. The company investigated the stability of the vessel by means of the same inclining test and said quite flatly that the boat was unseaworthy not, as the Department suggested, only when fully loaded but under all conditions. All these three authorities made no mention of extra gear or extra equipment being placed on the deck of the boat causing it to become unstable. They said it was the fundamental design of the boat that rendered it unseaworthy.
  What is to happen? There are two problems here. The first is the general principle of public money being put into vessels of this kind. The second is what is to happen in this particular case.
  Dealing first with this particular case, during the Christmas Recess I went along with another Member of Parliament, who has a constituency interest, to see the Chairman of the Herring Industry Board. He received us courteously and assured us that the test report would show that the
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  boat was basically completely stable and that any problem was that of added equipment on the boat deck. Both assurances turned out to be inaccurate because the boat is not inherently stable according to the report of the three authorities.
  It being Ten o'clock, the motion for the Adjournment of the House lapsed, without Question put.
  Motion made, and Question proposed, That this House do now adjourn.—[Miss Margaret Jackson.]
  Mr. Mackintosh: Neither of these two assurances turned out to be accurate because all three authorities say that the boat is not stable and none of them draw attention to any subsequent additions on the deck. All draw attention to the basic construction of the vessel.
  So there is this basic problem and certain difficulties have to be faced. First, is it satisfactory that large sums of public money should be given in grant and loan on fishing boats when no adequate check is being made that this money is being spent on boats that are inherently seaworthy? I know that stability is a difficult problem. I know that there are probably some boats which have fished for years successfully which, if tested, would prove to be unstable. I know that it would cause great difficulty if the new standards were to be imposed across the whole fishing fleet. Nevertheless, surely with new boats, on which public money is being spent, there should be a more adequate check than just the view of the builder himself, who has a vested interest in the stability of the ship.
  We want an external check on the stability of the boat and one ought not to have to wait for disasters such as the total loss of the "Trident" for the kind of external check we want to be made. In this situation, one ought not to give out certificates that a boat coincides with, or meets, minimum requirements when there has been no check other than that of the builder.
  I now turn to the particular case of my constituent, Mr. Johnstone. When I visited the Herring Industry Board, it clearly felt a certain sympathy with Mr. Johnstone. It certainly felt that there was some case in which a relationship of trust between him and the board had

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  been breached and it suggested that if the boat were cut in half—quite how one does this I do not know—and lengthened by 11 ft and a box keel added, the boat would become seaworthy and stable. This is interesting in view of what was said to me by the board, that the proposals for improvement made no mention of removing deck gear. So this argument that it was deck gear added subsequently goes by the board because if that had caused instability it could just be taken off. But the Herring Industry Board said that there had to be fundamental changes in the design of the vessel, that is to say, lengthening by 11 ft. and the addition of a box keel at a cost of £22,000. I take it that the Herring Industry Board feels some responsibility for letting this situation arise, because it was prepared to grant immediately 30 per cent. of the cost of this alteration and a moratorium on the interest on the boat.
  But the problem goes far further than this as far as my constituent is concerned. At first the marine architects said that this particular change would not be suitable. Later, the marine architects said that if, in fact, the boat were lengthened but, instead of a box keel, the fuel tanks and water tanks were altered, that would have a lowering effect on the centre of gravity of the ship and it would then become seaworthy.
  On this point, I think that the paragraph in the original letter from the marine architects hits the nail on the head as far as this ship is concerned. It says:
  "There are various alternative ways of improving the stability. If money was available these could be undertaken. The unfortunate aspect, however, is that the crew has lost confidence in the boat and we doubt if any changes, no matter how effective, will restore this. … We are trying to find someone to buy her to overcome this problem and our friends and agents throughout Europe are doing their best. So far, unfortunately, we have had no success. There is a big demand for this size and type of fishing boat but apparently"
  —indeed, understandably—
  "the first question any interested party asks is the reason for the sale, and on being told interest vanishes despite our assurances that the stability could be made satisfactory".
  The simple situation is that no man will go to sea in this boat, and no one will buy this boat because all know that the sister
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  ship sank and that it is fundamentally unstable.
  So my constituent's life savings are wrapped up in a fundamentally unsaleable boat, which had a certificate of seaworthiness which was checked inadequately or checked by no one. I feel a sense of unease that this man has not been treated fairly, though I appreciate that the HIB now feels that it should do something—though quite what, I know not—to try to help him.
  My worries about this case, therefore, are genuine and serious. I am pointing the finger at no one. I know that my hon. Friend the Under-Secretary has no direct responsibility and that the boards concerned have done everything possible to encourage fishing and to build up the Scottish fishing fleet. But this very sad episode has put its finger on two particular problems, which I repeat. The first is that grant and loan is being given without adequate supervision of the seaworthiness of the boats. The second is that as a result, in this particular case, an unfortunate pair of skippers have lost their life savings, without any possibility—as far as one can see at present—of any restitution or compensation.
  I draw the attention of the Government to this matter in the hope that something can be done, although perhaps not within the present rules, to ameliorate the situation.
  10.7 p.m.
  The Under-Secretary of State for Scotland (Mr. Hugh D. Brown): My hon. Friend the Member for Berwick and East Lothian (Mr. Mackintosh) has given a very clear account of his constituent's difficulties. I certainly appreciate his concern. I am sure that he believes, as I do, that there are two occupations which he probably never has any ambition to follow—one is mining and the other is fishing. In other words, I have a great admiration for people who go to sea in fishing vessels. My hon. Friend is accurately representing the difficulty which we all face here, because as well as being courageous and very experienced people, once there is a hoodoo or an element of superstition in the minds of fishermen it becomes a serious problem. Therefore, I appreciate the point that my hon. Friend has made.

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  I should like to make three small points. I am not sure that the figures given by my hon. Friend about grant and loan are absolutely precise, but they are near enough for it not to matter. I do not know that my hon. Friend is very sound on the point he makes when he says that it should be some kind of naval architect who checks a specification.
  Mr. Mackintosh: A marine architect.
  Mr. Brown: Or a marine architect. Although it is not, strictly speaking, involved in this matter, just as a general observation I would say that an architect designs a house, but it is usually the quantity surveyor who checks at the end of the day that the specification has been complied with. However, my hon. Friend has fairly stated the case.
  As I am sure the House will appreciate and understand, my difficulty is that I am somewhat confined in any reply that I can make. The construction of this vessel was a commercial transaction between the buyer—the fisherman—and the seller—the boatyard. It would be quite wrong of me to say anything which could possibly be interpreted as prejudicial to the respective positions of the owners, the designer, or the builder. Moreover, the "Silver Lining" is a sister ship of the "Trident", as my hon. Friend said, and the House will recall with sadness the disappearance of the "Trident" with all crew last October.
  Again as the House will know—my hon. Friend having referred to it—an inquiry has been ordered by my right hon. Friend the Secretary of State for Trade. Obviously, that means that to some extent I have to tread more warily than normal tonight. If there are any detailed points which I do not cover, I shall write to my hon. Friend or discuss them with him in as helpful a way as possible.
  Mention has been made of the rôle of the Herring Industry Board and of Departments, and I think that it would be useful if I set out the actual position here. Parliament provides funds for the giving of grants and loans for the construction and improvement of fishing vessels. The day-to-day administration of these arrangements has, however, been given by Parliament to the Herring Industry Board and the White Fish Authority. The rôle of Ministers is to lay
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  down the basic framework within which the authorities administer the schemes, and Ministers are, of course, responsible for broad questions relating to whether the funds advanced to the authorities are used in accordance with the wishes of Parliament. Ministers are not, however, responsible for the action taken by the authorities in particular cases.
  Ministers ensure that there are safeguards within the arrangements—this was my hon. Friend's point—so as to ensure the proper use of public funds. It is, for example, in order to protect public funds that the statutory grants scheme requires the board to approve the building contract. Again, to safeguard the public investment the board employs surveyors in order to ensure that construction is in accordance with the specification, that the workmanship is satisfactory and that payments are made to the builder at the proper time. Thus, as a result of these safeguards the board is closely involved in the construction of the vessel. On account of its expertise and experience it also—as one would expect—attempts to give advice to the fishermen in an era of ever-growing complexity in vessels. It is no rôle of the board, however, to attempt to guarantee the completed vessel, as such. My hon. Friend suggested that it should be, but at the moment that is not necessarily the case.
  Perhaps here I should make some general observations on standards of stability for fishing vessels in relation to the particular interests of the Herring Industry Board and the Department of Trade. As long age as November 1968 the Intergovernmental Maritime Consultative Organisation, through its Maritime safety Committee, published its recommended standards for the intact stability of fishing vessels. The United Kingdom had been prominent in the international discussions which led to the establishment of these standards and the Department of Trade. As long ago as November 1968 national findings domestically by passing them on to United Kingdom fishing vessel owners and builders with the recommendation that they be adopted. In addition, partly as a means of further testing the recommended standards and partly to honour the relevant recommendation in the Holland-Martin Report of 1969, the Department of Trade continued its investigations into the stability standards of

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  existing distant water trawlers, bringing a few near and middle water vessels into the investigation at the same time.
  An almost complete degree of compliance with the international standards was found in all vessels thus investigated and those for which data was subsequently submitted voluntarily by owners. The HIB, since the IMCO recommendations were published, has ensured that the specification for a new vessel requires the IMCO standard of stability to be met. This was done for "Silver Lining". In practice, however, the skipper was not happy with the vessel's handling and approached the Department of Trade, which readily agreed to help with the necessary calculations. The required information was still awaited at the time of the sad casualty to the "Trident". Meanwhile, the skipper and the builders have had their own investigations made.
  I can now inform the House that the Department of Trade has just completed its calculations on "Silver Lining" and is examining the results. Although in certain conditions the international standards of stability will not be met, a number of alternative methods by which they could be met suggest themselves. The Department of Trade findings are being collated for urgent presentations to all the parties directly involved—
  Mr. Mackintosh: My hon. Friend says that the only interest of the Department is to see that public funds are properly spent—but that it does not deal with individual cases. In this case, an IMCO certificate was given to this vessel. The Department's test has shown that the vessel did not meet these standards. Is the Department satisfied when public funds are given to boats—as a general principle, not in specific cases—and the certificate is given to boats when subsequent detailed tests show that they do not meet these standards? Is my hon. Friend not worried about this? What will he do about it?
  Mr. Brown: Obviously I am worried about it. I do not suppose that either of us would be here if we were not worried about it. Because there has been an inquiry and because the findings have not yet been made available, I think that there should be a pause. There will be no question of covering up—there is
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  nothing to cover up, and the very relevant and pertinent point that my hon. Friend has made will certain be looked into and answered in great detail.
  There is never an absolute guarantee that something which, on paper, is up to standard will turn out to be so when it is on the water. I am not an expert and I do not know whether my hon. Friend sails a boat, but I am sure that these things can happen. There is no accounting for it. It does not destroy the general argument on the provisions that have been made. United Kingdom Departments are aware of the need to get up to this international standard and it is accepted by the trade.
  I am suggesting that there should be a pause in this specific case.
  The Chairman of the Herring Industry Board has assured me that he will do all he can within the limits of his powers to secure a satisfactory outcome for Mr. Johnstone and Mr. Bruce. The chairman will be calling an early meeting of all the interested parties in the near future. This is the way to seek a solution to this difficult problem. I hope that some satisfactory solution to the difficulties of these fishermen will emerge. My Department will continue to give any help it can.
  My hon. Friend has spoken in general terms of the responsibility of the board for public investment. If we look at the picture as a whole, we see that since 1953 the board has been involved in the construction of 183 vessels of varying types. This is, however, the first occasion on which a problem of seaworthiness has arisen. That is no reason to be complacent. Any one accident or tragedy should give us all food for thought. Nevertheless, by any standard of efficiency I claim it is a good record. In the light of such a record it is not surprising that there have been no complaints from the industry about the board's administration on this score.
  Having said that, however, I know that the board would agree that there may be areas in which procedures could usefully be reviewed, and I know that the board would be only too glad to discuss any problems with the industry.
  I am not making any comment on the legality or otherwise of the situation. It is a fair assumption that there exists a

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  kind of paternalistic atmosphere where, while the board has its direct statutory responsibilities, in the past fishermen generally may have assumed that it was responsible when, in fact, it was not directly responsible in that statutory sense. After a system has been working and everybody seems quite happy with it, when something different occurs, obviously everybody starts looking at whose fault it is, who is responsible, and where the legal liability lies. It is in this context that everyone will want to review the procedures and the problems that have arisen from this incident.
  As I have already said, the work of the Department of Trade on the stability of fishing vessels has hitherto been carried out on a voluntary basis. I am glad to say that my right hon. Friend the Secretary of State for Trade will shortly bring in a most comprehensive set of regulations governing the safety of fishing vessels, including the stability of vessels of 12 metres and upwards in length. This statutory backing to the existing practice of the Herring Industry Board and the White Fish Authority in relation to new vessels should be a useful measure in promoting the safety of our fishing fleet.
  I ask my hon. Friend to accept that in good faith the Chairman of the Herring Industry Board has given an assurance that he will call a meeting of all the
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  interested parties. I certainly approve of that. I regard it as the way to proceed, and, given good will and understanding in a difficult situation, I believe that the outcome will be valuable. There are two possibilities—one, a legal battle, and two, an attempt to sell a vessel to the fishing communities. My hon. Friend has already said that if there is an attempt to sell something which has not been cleared there could be problems for the owner, and I do not believe that any of us would wish to contemplate a state of affairs which created difficulty for any one of the interested parties.
  I hope that my hon. Friend accepts the assurance that there will be a helpful meeting in an effort to seek a solution, and will recognise our concern for the owners, as well as the responsibility which we have in the Department. If confidence has been lost by those who work in the industry in either the board or a certain type of vessel, we should fail in our responsibility if we did not seek ways and means of restoring that confidence. It is that which is uppermost in our minds, as well as the desire to do justice to the constituent so well represented by my hon. Friend tonight.
  Question put and agreed to.
  Adjourned accordingly at twenty minutes past Ten o'clock.