Commons Sitting of 18 March 1975

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
PRIVATE BUSINESS
  CORN EXCHANGE BILL
    MERSEYSIDE METROPOLITAN RAILWAY BILL
    Queen's Consent, on behalf of the Duchy of Lancaster, signified.
  OCEAN TRANSPORT AND TRADING (DELIVERY WARRANTS) BILL
    STANDARD AND CHARTERED BANK BILL
    Read the Third time and passed.

    EASTBOURNE HARBOUR BILL [Lords] (By Order)
    Order for consideration, as amended, read.
    To be considered upon Tuesday next.

  BRITISH RAILWAYS (No. 2) BILL (By Order)

    LONDON TRANSPORT BILL (By Order)
    Orders for Second Reading read
    To be read a Second time upon Tuesday next.

ORAL ANSWERS TO QUESTIONS
  EMPLOYMENT

    Equal Pay
    Mr. Kilroy-Silkx asked the Secretary of State for Employment if he will now refer those organisations he considers have not made sufficient progress towards the implementation of equal pay to the Industrial Arbitration Board.
    The Under-Secretary of State for Employment (Mr. John Fraser): I expect to refer a number of collective agreements to the Industrial Arbitration Board very shortly.
    Mr. Kilroy-Silk: Is my hon. Friend aware that many thousands of women are suffering considerable loss of income because of the tardy implementation of equal pay by employers and the failure of the previous Conservative Government to activate the order under the Equal Pay Act? Will my hon. Friend give an assurance that he will refer those collective agreements which still contain discriminatory references to women to the Industrial Arbitration Board in the near future rather than at the end of this year?
    Mr. Fraser: I share my hon. Friend's regret that the Conservative Government did not make an order under Section 10 of the Equal Pay Act. Subject to the latest state of progress on equal pay, I hope to refer up to four agreements within the next week or so.

    Industrial Dispute (Rail Services)
    Mr. Moateasked the Secretary of State for Employment what records his Department keeps regarding the extent of disruption of rail services by industrial disputes.
    The Secretary of State for Employment (Mr. Michael Foot): My Department keeps no records of this kind. Details of any disruption to rail services are given to the Government by British Rail.
    Mr. Moate: Does the right hon. Gentleman agree that it would be a good thing if a record were kept of the extent of the

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    inconvenience and the loss of working hours caused to commuters who suffer from endless go-slows, work-to-rules and inter-union disputes which occur on the railways during the winter months almost every year? Would it not be a good idea to institute an inquiry into industrial relations in this nationalised industry before embarking on the nationalisation of other industries and bringing them down to the same level?
    Mr. Foot: I do not think that the kind of inquiry which the hon. Gentleman suggests would be helpful. I deplore the inconvenience and trouble which so many commuters were put to in the recent dispute. I would not describe that as an inter-union dispute. The results of the attitude taken by the Government, the National Union of Railwaymen and the board show that we were taking the right course. I know that there were earlier disputes on the railways, and I hope that the general restructuring agreement reached last year will contribute to ensuring that we do not return to difficulties of that kind.
    Mr. Snape: Is my right hon. Friend aware that thanks to the efforts of the NUR and the sensible approach of his Department to the signalmen's dispute the matter was concluded satisfactorily and fairly speedily? Will my right hon. Friend ignore the nonsense uttered by Opposition Members who would not know a railway signal box from a greenhouse?
    Mr. Foot: I agree with my hon. Friend that the NUR deserves congratulations for the effort it made to bring these difficulties to an end. I believe that the signalmen have taken the right course in seeking to settle the matter through the machinery of the NUR.

    Social Contract
    Mr. Skinnerasked the Secretary of State for Employment what proportion of pay settlements, in the public and private sectors, made since 1st October 1974, were in breach of the social contract.
    Mr. Hayhoeasked the Secretary of State for Employment what proportion of pay settlements, in the public and private sectors, made since 1st October 1974, were in breach of the social con-
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    tract; and which of the TUC pay guidelines, apart from the 12-months' rule, was breached most often.
    Mr. Foot: We do not have comprehensive information of this kind about pay settlements which would make possible sufficiently precise answers to these Questions.
    Mr. Skinner: Does my hon. Friend agree that apart from the lack of availability of the figures the Government, on that rather sad and miserable day just before Christmas, blasted the biggest hole in the social contract when they announced a massive increase in the salaries of judges and top civil servants? Why, therefore, does my right hon. Friend get terribly het up over the low-paid workers like the pickets outside the House of Commons—who take home less than £30 a week—because they might be breaching some terrible guidelines?
    Mr. Foot: On the first part of my hon. Friend's supplementary question, we had a debate on this subject some weeks ago in which I gave my views on the subject, and I do not wish to add anything further to that. On the dispute to which my hon. Friend refers, the guideline of the 12-months' rule was not laid down by the Government but by the General Council of the TUC and was approved at the congress of the TUC. We regard that guideline as being of great importance. Moreover, we believe that observance of that guideline can assist low-paid workers, because the Government have done their best to carry through and to assist in carrying through any guideline in the social contract accepted by the TUC designed specifically to assist low-paid workers.
    With regard to the dispute that my hon. Friend mentioned, an answer to the claim is coming from the Government this week, and I hope that it will assist the situation.
    Mr. Hayhoe: Is it not outrageous that the right hon. Gentleman cannot give factual information to the House about the difference between public sector and private sector settlements? Why cannot he give information about the guidelines which are breached most often? If he does not have the information, or is not prepared to share it with the House, how can he go no pretending that the social

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    contract is doing anything to help sustain a policy against inflationary wage settlements?
    Mr. Foot: It is a question of what figures are available and what kind of figures should be kept by the Government in dealing with the situation. We do not believe that we should keep figures on the basis that, say, the Pay Board did, or previous Governments did, when they were carrying out a statutory policy. We do not think that that would be the right course. As I told the House on 23rd January, my Department is reasonably well informed about settlements covering two-thirds of the working population, but that information relates to only a small proportion of the total number of settlements concluded. As I have repeatedly made clear, it is neither necessary nor appropriate for me to say in every case whether it is inside or outside the TUC guidelines.
    Mr. Golding: Is my right hon. Friend aware that the guidelines established by the unions provide priority for lower-paid workers, that the guidelines are imprecise, and that it will never be possible to determine whether each and every settlement is within the social contract or outside it?
    Mr. Foot: My hon. Friend is correct on both points. Certainly, as soon as the guideline referring to low-paid workers was passed and accepted by the congress last September, the Government indicated that they would do their best to ensure that it would be observed. We regard it as one of the most important guidelines of them all, but we want all the guidelines to be accepted and observed.
    Mr. Madel: As the Government look like running into difficulty with the electricity supply workers and the National Union of Railwaymen, should not they and the TUC sit down together again and decide how much the country can afford in pay settlements, rather than have the priorities first and the resources second? They should reverse that, otherwise they will have another year of great difficulty.
    Mr. Foot: There are certainly some difficulties around. I am not seeking to deny that, or obscure it. But the nego-
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    tiations of the electricity supply workers are still proceeding, and it would be most unwise of me to make any comment about them. The same applies to the railways. There is a meeting on Friday at which discussions will take place. One of the things which the Government have done as part of the social contract is to say that we should restore free collective bargaining, and we wish that to proceed in both those cases and in others.
    Mr. Prior: Surely the right hon. Gentleman can give us the figures for the public sector, even if he cannot give us the figures for the private sector. How can hon. Members or people outside the House who are interested in the matter gain any idea whether the social contract is working if the right hon. Gentleman refuses even to give figures which are within his control?
    Mr. Foot: I have had lengthy discussions with the right hon. Gentleman on this subject. I do not believe that it would assist in carrying through a sensible wages policy or in seeking to resist inflationary claims if the Government were to publish the results of each claim and pass their verdict on it. That would have the opposite effects to those which hon. Members might desire. That is the answer I have given the right hon. Gentleman on many occasions. It does not mean that we are concealing any figures, or anything of the sort.
    Sir A. Meyerasked the Secretary of State for Employment what discussions he has had with the TUC regarding the implementation of the Government's side of the social contract.
    Mr. Foot: I and other Ministers have had frequent discussions with TUC leaders on the social contract, including the implementation of the Government's side.
    Sir A. Meyer: Did the right hon. Gentleman read the article in the previous week's issue of the New Statesman by Wilfred Beckerman? Will he now admit that the trade unions, whatever their intentions, are no longer able to deliver their part of the social contract, however imprecisely it may be formulated? Instead of pretending that the emperor has some clothes on, will the

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    right hon. Gentleman not give some thought as to how the unions can be enabled to take some of the power. and some of the responsibility which should go with that power, and how they can be given an interest in maintaining the degree of wage restraint which is necessary to ensure full employment?
    Mr. Foot: I read the article by Wilfred Beckerman in the New Statesman. I attach a due amount of importance to any article I read in that journal. I have also read—and I attach even greater importance to it—the economic review produced by the General Council of the TUC. If the hon. Gentleman will read that document he will see how responsibly the members of the General Council and other trade unions have taken their responsibilities under the social contract. They are now seeking to observe the guidelines. We wish to see the guidelines observed as strictly as possible because we think that that can make a major contribution to overcoming our inflationary problems. Anyone who reads the economic review of the TUC will see how that organisation approaches the matter in a way that can be helpful to the country as a whole.
    Mr. Kilroy-Silk: My right hon. Friend has just said that the trade unions are carrying out their part of the social contract. He will be aware of the considerable concern that is felt due to the rising level of unemployment. Will my right hon. Friend say whether he regards a total of 1 million unemployed as a breach of the social contract on the part of the Government?
    Mr. Foot: I think that the present level of unemployment is too high. I think that the level of unemployment that prevailed when we came into office last February was already too high. I do not accept in any sense the statements made by leading Opposition spokesmen that these are dubious statistics and give a false impression of the dangers of unemployment. Of course we wish to guard against unemployment. That is one reason why we are asking everybody to observe the guidelines as strictly as possible. The more strictly those guidelines are observed, the better we shall be able to overcome our unemployment problems, as well as some other problems.
    Mr. Biffen: In view of the firm reference made by the Secretary of State to advice recently tendered by the TUC suggesting an increase in public spending of over £900 million a year, may we assume that he would regard an increase in taxation in the Budget as a breach by the Government of the social contract?
    Mr. Foot: Nobody will know better than the hon. Gentleman that I cannot anticipate the Chancellor's Budget Statement. If I were to answer the hon. Gentleman's question now, I should be doing so in some respect. I do not intend to be tempted in that direction at all. What I was saying was in reply to a question which was put to me about reading matter, and I was giving some advice on that score. On this occasion the hon. Gentleman would do better to read the TUC economic review than the New Statesman.
    Mr. Tomlinson: Does my right hon. Friend agree that if in the next year we have the levels of wage settlements which we have seen in the last year, the increase in unemployment will be an inexorable process which we shall not be able to halt.
    Mr. Foot: My hon. Friend is perfectly correct, in the sense that if wage settlements are at much too high a level they may increase the dangers of unemployment. If wage settlements in particular industries are based at too high a level, that again could cause unemployment. But there are many other causes of unemployment—world-wide causes—which must be dealt with by other measures. Therefore, the question must be put in proper perspective. I do not accept the idea that in the present situation wages alone are the cause of unemployment.
    Mr. Prior: Is the right hon. Gentleman aware that he is now indulging in double talk? On the one hand he says that he deplores the high level of unemployment, but on the other he says that he is perfectly satisfied with progress on the social contract. Does he not realise that in so far as he has failed over the social contract he is now responsible for allowing unemployment to rise? When will he make that clear to the nation?
    Mr. Foot: I did not know the right hon. Gentleman was such an enthusiastic

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    supporter of the social contract. It is a novelty for him to say that the social contract, as he interprets it, would be the salvation of the country.
    Mr. Prior: I did not say that.
    Mr. Foot: I was not engaging in double talk. I was stating what surely everybody in the House will accept—namely, that in the present economic situation if wage settlements are pressed beyond the guidelines in the social contract they may contribute to the dangers of high unemployment. I also said that there are other causes of unemployment to be taken into account.
    Mr. Ashleyasked the Secretary of State for Employment if he is satisfied with the operation of the social contract.
    Mr. Rostasked the Secretary of State for Employment whether he is satisfied that the social contract, as currently interpreted, is not leading to higher unemployment and rising inflation.
    Mr. Ioan Evansasked the Secretary of State for Employment if he is satisfied with the working of the social contract; and if he will make a statement.
    Mr. Foot: A great deal of progress has been made on both the Government's side and the trade union's side in fulfilling the social contract. But firmer adherence to the spirit of the TUC guidelines is vital to reducing the danger of higher unemployment and keeping down inflation.
    Mr. Ashley: I sympathise with my right hon. Friend's problems, but will he comment on one basic dilemma? The power workers are now demanding free collective bargaining as part of the social contract but are using that freedom to demand terms which clearly are outside the social contract. Does my right hon. Friend agree that if the power workers or any other trade union group pursue this line they will destroy the social contract and seriously damage the Government?
    Mr. Foot: For the same reasons that I have already given, I shall not comment on negotiations now in process in the electricity supply industry. That would be a most foolish course for any Minister
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    to take at such a moment. Those negotiations are not yet concluded. If it is the fact that the restoration of free collective bargaining leads to some other difficulties as well, those difficulties are far more likely to be overcome in this way rather than by returning to the old statutory system.
    Mr. Rost: Why does not the Secretary of State acknowledge what everybody at home and abroad acknowledges, namely, that the social contract as now administered is the cause of inflation and rising unemployment? Why does he not face up to his responsibilities and admit it and do something about the situation, before it is too late?
    Mr. Foot: The hon. Gentleman has not even troubled to examine the facts. I deny absolutely the suggestion that the social contract is in any sense the cause of inflation. We want to secure a stricter allegiance to the guidelines laid down in the social contract. We believe that the social contract, with all its different aspects, still offers much the best way of trying to overcome the danger of inflation.
    Mr. Evans: My right hon. Friend said that the statutory incomes policy led to the conflict and confrontation of last year and that this had been replaced by the social contract. Has any suggestion been made by the Conservative Party as to what should replace the social contract? If the Conservatives have no alternative, will they stop sniping at the TUC's efforts to try to reach an understanding with the workers which will get us out of our difficulties?
    Mr. Foot: I do not think that my hon. Friend is fair to the Conservative Party, which has been far too busy replacing its Leader to undertake the task of replacing its policies.
    Mr. Ridsdale: Is the right hon. Gentleman aware that the failure of the social contract is placing intolerable burdens on retired people? [HON. MEMBERS: "Oh."] Certain Labour Members may make noises, but that is a fact. Will the right hon. Gentleman have a word with Mr. Jack Jones, who displays great sympathy towards the pensioners, and tell him that the best way to help the pensioners is for the Transport and General Workers' Union to observe the terms of the social contract?
    Mr. Foot: One of the most essential parts of the social contract was the raising of pensions. The Government undertook that course. It was an integral part of the social contract.

    Factory Inspectorate
    Mrs. Wiseasked the Secretary of State for Employment why he is re-organising the Factory Inspectorate.
    The Under-Secretary of State for Employment (Mr. Harold Walker): This is a matter for the Health and Safety Commission and executive and I am asking the chairman of the commission to write to my hon. Friend.
    Mrs. Wise: Will my hon. Friend convey to the commission the fact that the factory inspectors appear to be deeply unhappy about the proposed changes, which involve not only specialisation—of which they approve—but an excessive degree of centralisation? Is he aware that the number of officers would he reduced from over 100 to 18, and that this would lead to inefficiency, excessive travelling and loss of support staff? Does he agree that what we need is to devote more resources to the service, on which workers' lives depend. and not to make people subservient to a bureaucratic and cheeseparing system?
    Mr. Walker: The House will recall that during the passage of the Health and Safety at Work, etc. Act I outlined the Government's plans for a substantial expansion of the inspectorate and substantially increased resources for the purpose. I understand that some discontent has been expressed by some inspectors. It is not clear how much this is part of wider and more complex issues of pay, grading and other matters, which are the subject of negotiations which are not yet concluded.
    Mr. George Rodgers: Does my hon. Friend agree that law without punishment is only advice? Will he give an indication when he will be able to recruit the qualified staff to administer his Act?
    Mr. Walker: I have referred to the negotiations which are taking place, a central part of which is about pay and grading. I am confident that the outcome will be much more attractive terms,
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    which will encourage faster recruitment of inspectors.

    Picketing
    Mr. Brittanasked the Secretary of State for Employment if he is satisfied with the current working of the law on picketing.
    Mr. Foot: The matter is still being considered.
    Mr. Brittan: Will the right hon. Gentleman give the House the assurance that whatever changes are made in the law of picketing he will not give pickets the legal right to stop people who do not wish to be stopped, as the overwhelming majority of people think that that is a right that should be reserved to the police?
    Mr. Foot: The hon. Gentleman raises a question that we have discussed on previous Bills, and no doubt will discuss again when the Employment Protection Bill is before the House. I ask him to wait for that Bill. I hope that he will not have to wait very long.
    Mr. Flannery: Does my right hon. Friend agree that many Labour Members are disturbed about the law on picketing? Does he further agree that any law which allows unlimited sentences, even life sentences, on pickets, is necessarily bad. and that it is time we had legislation that set right the entire law on picketing in favour of the pickets?
    Mr. Foot: The important question that my hon. Friend raises is a matter for my right hon. Friend the Home Secretary, who is considering possibilities of a change in the law on the subject. The aspects of picketing law which would fall within the Employment Protection Bill are the provisions which would protect peaceful persuasion on picket lines. That is what we shall discuss when we have the Bill before us.
    Mr. Hayhoe: Is the right hon. Gentleman aware that his answer to the supplementary question asked by my hon. Friend the Member for Cleveland and Whitby (Mr. Brittan) will cause considerable alarm, because the implication is that the Employment Protection Bill will contain measures to change the law on picketing, and a change along the lines

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    described earlier would be wholly unacceptable to many people?
    Mr. Foot: My reply did not say what the hon. Gentleman attributes to me. I asked the House to await the Bill. I do not know why that should cause such alarm.

    Redundancy
    Mr. Rookerasked the Secretary of State for Employment if he is satisfied with redundancy procedure arrangements in industry.
    Mr. John Fraser: No, Sir. I am far from satisfied. The Government will be introducing measures shortly in the Employment Protection Bill to require employers to consult the trade unions concerned before deciding on redundancies and to notify my Department well before they take effect.
    Mr. Rooker: I thank my hon. Friend for that answer. Does he appreciate that there is concern amongst my hon. Friends? We have not yet seen the Bill but our attitude towards it is the attitude of the Opposition to the social contract, namely, that it does not exist. Will my hon. Friend give a categorical assurance that the Bill will be before us before Easter?
    Mr. Fraser: We hope that it will be before the House before Easter. It will probably be before us during next week.

    Scotland (Departmental Functions)
    Mr. Dalyellasked the Secretary of State for Employment if he will list the functions of his Department in Scotland.
    Mr. Foot: As throughout Great Britain, my Department in Scotland provides manpower intelligence and participates in economic planning, collects statistics of employment, earnings, industrial disputes, and retail prices, and collates statistics of unemployment and vacancies. It administers regional employment premiums, deals with claims for rebate and guarantee payments in connection with redundancy payments, and provides the Wages Inspectorate, the Race Relations Advisory Service, and the Unemployment Benefit Service. It also provides lay support staff to the industrial tribunals and is responsible for supervision and inspection of the careers
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    service provided in some areas by education authorities and in others by the Employment Service Agency.
    It collaborates with the Scottish Office and other Departments of State with the employment service and training services agencies of the Manpower Services Commission, the Health and Safety Executive of the Health and Safety Commission and the Advisory, Conciliation and Arbitration Service, which also have the same functions in Scotland as in England and Wales.
    Mr. Dalyell: Whew! What would be the benefit either in terms of better service or of return to the Scottish taxpayer if these functions were hived off to a Scottish Assembly?
    Mr. Foot:That is a different matter, which is already being discussed in the devolution discussions that are taking place. I know that at this stage my hon. Friend would not expect me to intrude in those discussions. I thought that he and the rest of the House would like to know how much work we are doing in Scotland.
    Mr. Henderson: Is the right hon. Gentleman aware that he may be assured that we are most impressed by the long list of functions that his Department carries out? At least we are impressed, although it appears that the right hon. Gentleman's hon. Friend, the Member for West Lothian (Mr. Dalyell), is not. Does the right hon. Gentleman accept that there is a dominant feeling in Scotland that there is a need for a service which is much closer to the Scottish people? Is he aware that the Scottish people are becoming increasingly concerned that the social contract is not providing enough for them, in that costs in Scotland are comparable to those in the South-East of England but there is no London weighting for the people of Scotland? Will the right hon. Gentleman take into account the need to redress the balance and to bring social justice to the working people of Scotland?
    Mr. Foot: I have looked at the figures which compare wage rates in Scotland with those in the rest of the country. The figures that I have seen do not bear out what the hon. Gentleman is suggesting. Indeed, I think that he is making a wrong deduction from the figures. As he knows

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    very well, the organisations to which I have referred confer great benefits on the people of Scotland. I think that the hon. Gentleman fully appreciates that.
    Mr. Lipton: In the collection of unemployment statistics to which my right hon. Friend referred, has he come across any employment exchange which has more registered unemployed than the 4,023 so registered at the Brixton employment exchange?
    Mr. Foot: My hon. Friend travels a long way to get to his own question. I am happy to look at the situation in Brixton even if I have to get there via the North of Scotland.

    Earnings
    Mr. MacGregorasked the Secretary of State for Employment what are the latest annual percentage increases in average earnings, for the public and private sectors, respectively.
    The Minister of State, Department of Employment (Mr. Albert Booth): I regret that the information is not available.
    Mr. MacGregor: If, as seems likely, constraints on high wage settlements in the private sector are now beginning to apply and will increasingly apply over the coming months because of the economic situation, what action will the Department take to reinforce the Prime Minister's recent comment that the money is not available for excessive settlements in public industries? If those exhortations prove to be insufficient, what practical steps will the Department take to reinforce it?
    Mr. Booth: Both the Government and the TUC would like to see a closer adherence to the social contract wage guidelines than there has been in some recent cases. Both sectors will be using the influence that is open to them to keep future settlements in that area. In both the private and public sectors economic and financial constraints are operating at the moment which will be borne in mind by negotiators on both sides when determining the level of wage increases. That would have to apply whether or not there were social contract guidelines.
    Mr. Hardy: Even if, last year, the annual increase in the public sector were greater than in the private sector, does my hon. Friend agree that that increase
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    is against the trend of experience in the past 10 years, during which time private sector earnings were generally very much higher than public sector wages?
    Mr. Booth: It has been the case that public sector negotiators have represented to us that the general constraint over the past 10 years has been adverse to the public sector as compared with the private sector. I think that the position under the social contract guidelines has reversed that, particularly in the low pay area, where public sector manual workers have gained enormously from the TUC low pay target. To that extent we can find a large part of the explanation of some of the larger percentage increases that we find in the public sector over the past few months.
    Sir Frederic Bennett: A few minutes ago the Minister of State said that he did not have the information to be able to give the House average earnings in the public sector. In a subsequent reply, almost immediately afterwards, he said that they were far too high. If he does not know what they are, how can he say what judgment he has made?
    Mr. Booth: I did not say what the hon. Gentleman attributes to me. I said that in the public sector a number of the higher percentage increases were largely attributable to the fact that there were many low-paid people in the public sector —especially public sector manual workers —who have benefited particularly from the low pay guidelines. This can be determined by examining the published figures which are available to all hon. Members as regards settlements in the private sector and as to the number of manual workers in that area.

    Public Service (ILO Conference)
    Mr. Goldingasked the Secretary of State for Employment who will represent Her Majesty's Government as the ILO's technical tripartite conference on the Public Service from 7th to 18th April in Geneva.
    Mr. Harold Walker: Mr. R. W. Williams of the Civil Service Department will represent the United Kingdom Government at this conference.
    Mr. Golding: Will my hon. Friend ensure that the delegate supports absolutely a charter to give protection to

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    public servants throughout the world and also to ensure that he shows sympathy towards the demands of trade unions in the underdeveloped countries?
    Mr. Walker: I am sure that whoever the gentleman is he will be adequately briefed. My hon. Friend will be aware that the TUC is sending not only a delegate but two advisers, one of whom is a member of my hon. Friend's union.

    Employment Agencies
    Mr. Leslie Huckfieldasked the Secretary of State for Employment when he expects to receive the Manpower Services Commission's study of private employment agencies.
    Mr. Gwilym Robertsasked the Secretary of State for Employment if he has yet discussed with the Manpower Services Commission the making of a study into the effect on employment and the mobility of labour of fee-paying employment agencies and the Employment Services Agency.
    Mr. Harold Walker: I have not yet discussed with the commission the possibility of its undertaking such a study. The matter is still under consideration, since it raises important questions as to the scope of any study and the most appropriate thing.
    Mr. Huckfield: Is it not time that the Manpower Services Commission was asked to undertake such a study? Is my hon. Friend aware that private employment agencies are rapidly increasing and are now supplying anything from secretaries to lorry drivers to airline pilots? Will my hon. Friend confirm that the Government still intend to enable the commission to be the only employment agency in the country?
    Mr. Walker: My hon. Friend is no doubt aware that we are proposing to introduce regulations consequent on the Employment Agencies Act, but this will be delayed because of our announced intention to transfer the responsibility for administration and enforcement of regulations and licensing provisions to my Department. We do not rule out the fact that following experience gained it may ultimately be possible to transfer this responsibility to the Manpower Services Commission.
    Mr. William Hamilton: Is my hon. Friend aware that there is a good deal of dissatisfaction with this Act on the Labour side of the House? Does he appreciate that there would be almost unanimous, if not unanimous, support for the complete abolition of profit-making within this area? Is he aware that the sooner it is brought into public ownership the better it will be?
    Mr. Walker: I must remind my hon. Friend that when the Employment Agencies Bill—a Private Member's measure—was before the House it was not opposed but enjoyed a large measure of support from hon. Members on both sides. I made it clear on 18th February, in reply to a question from my hon. Friend the Member for Nuneaton (Mr. Huck field), that we have by no means ruled out the possible ultimate abolition of private fee-charging agencies.

    Health and Safety Commission
    Mr. Duffyasked the Secretary of State for Employment when he expects to make an announcement on the location of the office of the Health and Safety Commission.
    Mr. Harold Walker: The Health and Safety Commission has informed me that it proposes to put in hand a study of the question of its ultimate location. I am not yet able to say when the advice of the commission will be available.
    Mr. Duffy: Is my hon. Friend aware that even after a period of national growth in service employment the Yorkshire and Humberside Region's percentage of workers in the service sector is more than seven points below the national average of 56? Does my hon. Friend realise that it is devoutly hoped in Sheffield and district that the choice for this office will ultimately fall upon that city and its surrounding countryside?
    Mr. Walker: Since I travel with my hon. Friend to and from Doncaster every week I am sure that he will not allow me to overlook the powerful case which Sheffield has. I am sure that, equally, he will recognise the strong claims of other areas.
    Mr. Woodall: Does my hon. Friend accept that the Sheffield travel-to-work area, in practical terms, includes many

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    constituencies like my own and that in the Hemsworth constituency there is an almost total lack of service employment facilities? Does he further accept that in the South Yorkshire coalfield area there is a desperate need for this type of service employment?
    Mr. Walker: I assure my hon. Friend that the needs of South Yorkshire in this respect are least likely to be overlooked by me. I shall certainly bear in mind what he has said and will draw his remarks to the attention of all those concerned.

    Advisory, Conciliation and Arbitration Service
    Mr. McCrindleasked the Secretary of State for Employment what are the criteria for the intervention of the Conciliation and Arbitration Service in an industrial dispute.
    Mr. Booth: The Advisory, Conciliation and Arbitration Service can help in a dispute only if both parties accept its assistance. In most cases, the service becomes involved following a request by one or both of the parties, but it will sometimes take the initiative by offering assistance. In determining whether to intervene a major consideration is often whether the appropriate procedures for resolving disputes have been exhausted, or whether procedures have conclusively broken down. In all cases the decision rests with the service.
    Mr. McCrindle: I thank the Minister for that reply. Will he tell me whether the criteria he has laid down would be sufficient to justify the early intervention of the Advisory Conciliation and Arbitration Service in the dispute now going on at Westminster Hospital? In the meantime, will he take this opportunity to deplore the use of the sick, rich or poor in the interests of an industrial dispute?
    Mr. Booth: We are always concerned that the sick and the poor should not suffer as a result of any activities. Trade unionists who take action have this very much in mind. The criteria I have outlined do not of themselves prevent the use of the ACAS in the case mentioned, but in any case where the dispute is unofficial the official union machinery has to be consulted because the conciliation officers of ACAS have to maintain a
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    proper relationship with the official machinery if they are to be able to help in a great number of official disputes.
    Mr. Tugendhat: Does the Minister not feel it appropriate to go rather further than that with the Westminster Hospital? Is it not absolutely outrageous that the working of this great hospital should be interrupted because of an unofficial dispute of this kind, apparently with no consideration whatever for the well-being of the patients? Is the Minister aware that there is a grave threat to National Health Service patients as well as to private patients? Does he not recognise that if the arbitration service is to carry some credibility we must have a rather stronger statement from the Government about such behaviour?
    Mr. Booth: I am always willing to examine any dispute and to get in touch with ACAS to consider with it whether the service can be of assistance. I readily give an undertaking to do that in this case. I must, however, insist that discretion must lie with the ACAS conciliators on the question whether they can help, once they have examined all the circumstances. There are particular difficulties applying to unofficial disputes. It would be bad for the service as a whole and for industrial relations generally if, by intervening in certain unofficial disputes, ACAS totally disrupted its relationship with unions, with the result that it could not help in future official disputes.

    PRESIDENT FORD
    Mr. Skinnerasked the Prime Minister if he has any plans to invite the President of the United States of America to Great Britain.
    Mrs. Wiseasked the Prime Minister whether he will invite President Ford to make an official visit to London.
    Miss Richardsonasked the Prime Minister whether he will issue an invitation to President Ford to visit Great Britain.
    The Prime Minister (Mr. Harold Wilson): President Ford knows that he will always be welcome in this country but I am not aware that he has any plans at present to visit Europe.
    Mr. Skinner: I wonder whether my right hon. Friend would go to the United States Embassy to see the new American Ambassador, Elliot Richardson, who told the Foreign Relations Committee on 12th February that the CIA was working closely with its British colleagues. When my right hon. Friend got to the embassy he might bump into Cord Meyers, who is heading a number of CIA men operating with diplomatic immunity at the American Embassy. Will he do something positive, such as set up a commission of inquiry to investigate these appalling affairs?
    The Prime Minister: If anything comes out of the official American inquiry that requires investigating in this country I shall not hesitate to set up an inquiry. My hon. Friend may have been concerned about reports of the CIA engaging in industrial espionage here. These reports have been categorically denied and I have no reason at all to think that the denial was inaccurate.
    Mr. Baker: The Prime Minister will be aware that there is another visitor to our shores this year who will be much less welcome than President Ford, namely, Mr. Shelepin. We appreciate the dilemma that the Home Secretary is in when a visa is applied for in such a case, but will the Prime Minister confirm that when Mr. Shelepin comes here neither he nor any of his Ministers will meet him?
    The Prime Minister: I do not think it is likely that he will be coming in the suite of President Ford, who is the subject of this Question. My right hon. Friend the Home Secretary answered a question on the subject raised by the hon. Gentleman yesterday. I have never noticed from the Conservative Party the same opposition to the visit of the Fascist Caetano, whom we opposed and whom the Tory Government invited.
    Mrs. Wise: Is my right hon. Friend aware of the disclosures of Mr. William Colby, of the CIA, to the United States committee investigating this matter, confirming the part played by the CIA in destabilising—as it said—the elected regime in Chile? Can my right hon. Friend say positively that the CIA is not playing the same part in Portugal and that the British agency is in no way responsible? Can he be absolutely certain
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    that CIA agents would not attempt to undermine or destabilise a Labour Government in its pursuit of Socialist policy?
    The Prime Minister: It would take more than them, I think. I have not had the privilege of seeing the evidence to which my hon. Friend refers. I have not been going through that evidence; I have had more important things to do. If my hon. Friend would care to send me a copy or draw my attention to any particular reference I should be glad to look into it. If anything comes out of the inquiry in the United States which suggests the need for an inquiry here, one will be held.
    Mr. Norman Lamont: With reference to the last supplementary question, may I ask the Prime Minister to discuss with President Ford if he comes here the situation in Portugal? Does the right hon. Gentleman not agree that an extremely disturbing situation exists there, which has grave implication for the interests of this country? Does he not further agree that it would be a great tragedy if a dictatorship of the Right were to be replaced by a dictatorship of the Left?
    The Prime Minister: I share the concern which has been expressed about what has been happening in Portugal in the past few days. My right hon. Friend the Secretary of State for Foreign and Commonwealth Affairs made a public speech urging upon the Portuguese the need to maintain and strengthen the democratic system in their country. I repeat that when there was a Right-wing dictatorship there, the Cabinet of the Conservative Government strongly supported the visit of Mr. Caetano and voted the Labour Party down on a motion saying that he should not be invited, in view of the Portuguese atrocities.
    Miss Richardson: Does my right hon. Friend recall that in September 1971 Sir Alec Douglas-Home demanded the recall of 90 Soviet diplomats who were alleged to be engaged on intelligence-gathering activities in this country? Would the activities of CIA agents be equally inadmissible? If those agents were found in the United Kingdom would my right hon. Friend demand their recall, too?
    The Prime Minister: I think that the number was 105. Certainly, if there were any evidence that CIA agents were doing what those 105 agents were alleged to

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    have done, I would agree with what my hon. Friend said. If any evidence comes to my attention, either through the inquiry being undertaken on behalf of the United States Government or in any other way, I shall not hesitate to make all essential inquiries, not excluding an independent inquiry, into the matter.

    EEC HEADS OF GOVERNMENT
    Mr. Moateasked the Prime Minister when he now next expects to attend a meeting of Heads of Government of Common Market countries.
    Mr. Tomlinsonasked the Prime Minister when he now next plans to meet the EEC Heads of Government.
    Mr. Mike Thomasasked the Prime Minister when he now next proposes to meet the heads of EEC Governments.
    The Prime Minister: At our meeting in Dublin on 10th-11th March, the Heads of Community Governments agreed to meet again in good time to prepare for the International Energy Conference later this year, but no dates have yet been arranged.
    Mr. Moate: Does the Prime Minister recall that at an earlier summit meeting he endorsed a statement by the Heads of Government that economic and monetary union remained their objective and that their will had not weakened? Yet he is now reported as saying that economic and monetary union is either dead or at least on the list of endangered species. Is not it clear that on this issue the Prime Minister is presenting one face to Europe and another face to Britain? Will the right hon. Gentleman say clearly whether he does or does not support the objective of economic and monetary union?
    The Prime Minister: There is no problem. I have told the House that this remains an idea of the Community. After the Paris summit meeting I told the House that we regarded this as a very remote possibility indeed. We were not expressing concern about it. I likened it—as I shall in my statement this afternoon—to our aspirations in favour of general and complete disarmament. But that will not happen by 1980, either.
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    Members of the Community are clear about our views. I shall be referring to the matter in a statement which, with permission, I hope to make after Question Time.
    Mr. Tomlinson: Is my right hon. Friend aware that many Government supporters, and other hon. Members, are grateful, after the Dublin summit meeting. that there will be no need for another summit before the British people have a chance of making their voice heard on the question whether we remain a member of the Common Market? We congratulate the Prime Minister and the Foreign Secretary on the work which they did in Dublin, which is also in accordance with the terms of the Labour Party manifesto.
    The Prime Minister: I thank my hon Friend for what he said about this matter. Since the regular three-or-four-times-a-year summit meetings began, the practice has been not to arrange the date of the next summit as the old summit breaks off. On both occasions we have fixed the date by communication afterwards. No decision has been taken about the date of the next summit, whether before or after the referendum.
    Mr. George Gardiner: Since there is no immediate need to meet the other Heads of EEC Governments, will the Prime Minister take steps, instead, to reassure British nationals in those countries—who often do valuable work for this country by promoting our exports—that they will not be disfranchised in what will be a national referendum rather than a constituency party election?
    The Prime Minister: This matter was raised in the debate on the referendum, while my right hon. Friend and I were in Dublin. My right hon. Friend the Lord President of the Council undertook to consider representations relating to points made in the debate. This matter is being considered.
    Mr. Thomas: Will my right hon. Friend give an assurance that, regardless of how long it takes to bring the Heads of Government together, it need not take three months to seek the views of the British people? Can the referendum take place soon, before everybody is sick to death of the whole business?
    The Prime Minister: I have a great of sympathy with the point made by my hon. Friend. I should like to see this take place sooner, and so, I guess, would the whole House. [Interruption.] I would guess that the House and the country would like to see this matter brought to a conclusion as soon as possible. The Bill will be introduced in the near future. I hope that right hon. and hon. Members in all parts of the House, provided they are given enough time in which to decide the matters of contention, will co-operate to the full in setting as quickly as possible the earliest date for the referendum.

    NORTH-EAST LANCASHIRE
    Mr. Nobleasked the Prime Minister if he will pay an official visit to North-East Lancashire.
    The Prime Minister: I have at present no plans to do so, Sir.
    Mr. Noble: I thank my right hon. Friend for that reply. However, may I convey to him the disappointment of the people of North-East Lancashire? If my right hon. Friend visits that area he will meet thousands of textile workers who, anticipating the forthcoming debate on textiles, expect action on cheap imports. He will also meet thousands of footwear employees who are suffering from short-time working as a result of cheap imports from Eastern Europe. What assurance can my right hon. Friend give those footwear workers that action will be speedily taken to reduce the level of imports and to give those workers a secure future in the industry?
    The Prime Minister: I visited my hon. Friend's constituency early last September and met the representatives of the neighbouring local authorities on the North-East Lancashire Development Association. As regards this Question, my hon. Friend will recall the answer— I hope he feels it was a positive answer—which I gave to a Question by the hon. Member for Melton (Mr. Latham) last Thursday. A debate on this matter is now arranged for Thursday. My right hon. Friend the Secretary of State for Industry will meet the Members of Parliament representing the affected areas. I know the Rossendale footwear project very well, and I agree that the footwear,
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    textile and other industries are threatened by the kinds of imports to which I referred the other day.
    Mr. Tim Renton: Will the Prime Minister tell the House whether he plans to suspend the principle of collective Cabinet responsibility on the important question of import controls?
    The Prime Minister: No, Sir.
    Mr. Doug Hoyle: Will my right hon. Friend also bear in mind that one of the problems in North-East Lancashire is the decline in the population, and that we need more white-collar jobs and new industries in the area?
    The Prime Minister: I am well aware of that point. My hon. Friend will know that I discussed the matter, our hope in the future to obtain a redeployment of civil servants into that area, and the present difficulties about doing that. In case there is any doubt about the answer I gave while I was dealing with a minor liquidity crisis here—I spilt my glass of water—I meant that there will be no suspension of collective responsibility. That is a once-and-for-all answer in relation to the referendum, whereas every week there is a retrospective dissociation by the present incumbents of the Opposition Front Bench from the actions of the previous Conservative Government.
    Mr. Michael Morris: Is the Prime Minister saying that on Thursday the Secretary of State will make an announcement about stopping footwear imports dumped by East European countries?
    The Prime Minister: The hon. Gentleman had better await the statement by my right hon. Friend and the debate on it. He is giving urgent consideration to the matter, and we have been in touch. Many hon. Members representing North-East Lancashire have had much experience of this in the past. However, I cannot foreshadow what my right hon. Friend will say in the debate.
    Mr. Cryer: Will my right hon. Friend accept my approval of the fact that he has listened to back benchers, and will he accept also that I should like him to do it a good deal more over forthcoming weeks? Is he aware that import controls are needed as a matter of urgency to protect the West Riding wool and textile industry, and that in order to do this

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    he should show our independence of bureaucrats in Brussels and impose import controls freely and independently, as he has the right to do?
    The Prime Minister: Apart from the general question of import controls as a means of safeguarding our balance of payments, my hon. Friend is now referring to protection against unfair competition. Over the years, successive Governments have taken action in that direction. There is nothing in principle against it, and we are examining these matters for evidence of unfairness, subsidies or wrong pricing. My hon. Friend will be aware that as part of the Lom é Convention, which has been welcomed in all parts of the House, we, in common with other European countries, are providing increased access for the products of primary producing countries. I am sure that my hon. Friend is not against that.

EUROPEAN COMMUNITY
The Prime Minister (Mr. Harold Wilson): Mr. Speaker, with permission, I should like to make a statement on the European Community.
I regret that this will inevitably be somewhat lengthy, but this is one of the most important parliamentary occasions in our history, and I feel a duty to state the Government's position here in the House, rather than make a short, even perfunctory, statement here and a lengthy statement outside the House where it is not subject to parliamentary questioning.
Her Majesty's Government have decided to recommend to the British people to vote for staying in the Community. [Interruption.] Although this statement is lengthy, I hope that I can take time off for injuries.
Last Wednesday, after Dublin, I told Parliament that the renegotiations, begun last April, had now gone as far as they could usefully go and that, while some of our objectives—if Britain remained in the Community—could be pursued in the continuing meetings of the Council of Ministers, we had now reached the point where Government, Parliament, and then the country, must take the decision.
The House will be familiar with the renegotiation objectives we set out in the manifesto for the February 1974 General Election, and confirmed in October.
While the judgment of hon. Members, and of the electorate, may, in taking their decision, go far wider than the terms achieved in the negotiations, I feel it is right to give the House my assessment of what has been achieved.
OBJECTIVE ONE
The manifesto called for:
"Major changes in the common agricultural policy so that it ceases to be a threat to world trade in food products, and so that low cost producers outside Europe can continue to have access to the British food market."
My right hon. Friend the Minister of Agriculture gave precision to these objectives in his statement to the Council of Ministers on 18th June, on which he reported to the House on 19th June. He asked for:

1. The establishment of firm criteria or pricing policy, taking account of

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the needs of efficient producers and the demand/supply situation.

2. Greater flexibility, taking account of the need for appropriate measures to deal with special circumstances in different parts of the Community.

3. Measures to discourage surpluses and to give priority to Community consumers in the disposal of any surpluses which arise.

4. Improvement in the marketing régimes for some major commodities, particularly beef, with a view to avoiding surpluses.

5. The improvement of financial control.

6. Better access for certain commodities from outside the Community, with particular regard for the interests of Commonwealth producers and of the consumer.

Now as to the outcome.
On the supply of food at fair prices, in the three CAP price settlements since the Government took office the Minister of Agriculture has succeeded in keeping price increases below cost increases, and thus in real terms reinforcing the downward trend in CAP prices. This would benefit consumers and taxpayers and also is designed to reduce the risk of surpluses.
Increasingly, price proposals are being related to the costs of efficient producers and the supply/demand situation, and this approach is reaffirmed in the Commission's report on the CAP stock-taking for which we and Germany asked.
On the greater flexibility for special circumstances and improved systems of market regulation, especially beef, the Minister has secured changes for beef under which member States are no longer obliged to maintain high prices for producers by buying beef into store and denying it to consumers. Instead, they can let it go to consumers at reasonable prices and make up returns to producers by deficiency payments partly financed by the Community.
In addition, special encouragement has been given for sugar production in the United Kingdom. More generally, the monetary arrangements have been used to differentiate the percentage price increase between member States. There
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has been more flexibility in the use of national aids.
On the requirements of measures to discourage surpluses and to pay more regard to consumers, the downward pressure on CAP prices is itself a safeguard against surplus production—together with our proposals, now being pursued, for the reduction of support buying prices for milk products and cereals when surpluses start to arise. Then there is the recent practice, which I understand is to be continued, that any surpluses which do develop are run down by cheap supplies to Community consumers rather than being unloaded on world markets. We have had this in the beef subsidy for pensioners and in the increased butter subsidy. British consumers again benefit from the monetary import subsidies paid to countries which have devalued and from special measures to keep Community prices below world prices, particularly the sugar import subsidy which is financed by the Community.
On the objective of improved financial control, some progress has been made—better estimates of costs and budgetary implications of new proposals, tighter monitoring of expenditure and the introduction of precautions against fraud.
On access for third-country foodstuffs, in 1971 we condemned from the Opposition benches the failure to provide security for Commonwealth Sugar Agreement producers. We constantly criticised the lack of arrangements for Commonwealth Sugar Agreement supplies after the end of 1974, which in fact turned out to be a time of world sugar famine—hence the crisis and the high prices we faced. But we have now got assured access for up to 1·4 million tons of sugar from developing countries, for which we pressed from 1971 onwards, so this objective has been achieved.
During this period of shortage, British refiners and manufacturers have purchased 170,000 tons of sugar to maintain continuity of supplies with the aid of Community subsidies of £36 million.
On access for New Zealand dairy produce, in the autumn of 1974 we secured an increase of 18 per cent. in the prices paid to New Zealand to ensure continued supplies, and at Dublin we got agreement on

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the broad lines of the continuing arrangements for access of New Zealand dairy produce after 1977.
No commitments had been made in 1971, but so far as butter is concerned the Commission has been instructed to prepare in the next three or four months a draft based on the maintenance of butter imports from New Zealand to Britain at around the level of 1974–75 deliveries—in other words, none of the degressivity which had been understood was to be brought about—together with price proposals to which the New Zealand Government attach the greatest importance.
On cheese, the Protocol to the Treaty of Entry ruled out any more access for New Zealand cheese of the kind provided for in 1973–77. But last week's statement has left the matter open, and we have given notice that we shall pursue it in the Protocol 18 review. We shall press this urgently indeed.
Improved access for other foodstuffs has been secured as a result of GATT negotiations, the trade sections of the Lomé Convention, the Mediterranean agreement and the Community's 1975 Generalised Scheme of Preferences which has now been agreed; improved access, too, for tropical oils, Canadian cheddar, soluble coffee and lard, though no achievement yet on access for certain other foods such as canned fruit and hard wheat. We have requested levy-free quotas for hard wheat and flour, and put on record that we shall at an early date seek elimination or reduction of the tariff on New Zealand lamb.
OBJECTIVE TWO
Community Budget
The manifesto commitment was:
"New and fairer methods of financing the Community budget. Neither the taxes that form the so-called 'own resources' of the Communities, nor the purposes, mainly agricultural support, on which the funds are mainly to he spent, are acceptable to us. We would be ready to contribute to Community finances only such sums as were fair in relation to what is paid and what is received by other Member countries."
It rapidly became clear that we could best secure our objectives not by seeking to overturn the system of financing the budget from "own resources" but by correcting its unfair impact by a mechanism which would provide a refund to us.
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I reported to the House a week ago, and set out the corrective mechanism proposals, which as I said were an improvement on the Commission's proposals, and which satisfactorily met what we then proposed, involving a refund of up to £125 millions a year.
OBJECTIVE THREE
Economic and Monetary Union
The manifesto commitment is as follows:
"we would reject any kind of international agreement which compelled us to accept increased unemployment for the sake of maintaining a fixed parity … We believe that the monetary problems of the European countries can be resolved only in a worldwide framework."
Since that commitment was made there has been a major change in the attitude of other European Governments to the practicability of achieving EMU by 1980. As a long-term objective it was restated in the Paris communiqué, but for all practical purposes it has been tacitly abandoned. For example, the second stage, due to start on 1st January 1974, 15 months ago, has never been adopted and practical work has been virtually at a standstill for a long time.
There is no prospect of our coming under pressure to agree to an arrangement, whether in relation to parity commitments or otherwise, threatening the level of employment in Britain. As for EMU remaining as a long-term Community objective, its realisation in the foreseeable future, as I hinted at Question Time, is as likely as the ideal of general and complete disarmament which we all support and assert.
OBJECTIVE FOUR
Our election manifesto of February 1974 stated our objective as:
"The retention by Parliament of those powers over the British economy needed to pursue effective regional, industrial and fiscal policies."
Regional Policy
Since the turn of the year, and in the context of our renegotiations, the Commission has had an intensive discussion with us and other member Governments and has now formulated the principles under which it proposes to implement its rôle in the co-ordination of regional aids.
The Commission's hierarchy of assisted areas conforms to ours. No forms of

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national aids are ruled out in principle, and there is no intereference with our existing regional aids. There is a particular problem relating to assistance given by the Highlands and Islands Development Board, for which a derogation is being obtained. In discussing the way in which regional aids might be changed to meet new circumstances, the Commission has furthermore acknowledged that national Governments are the best judges of what is required in their own country and that the Commission will be prepared to consider changes in national aid systems compatible with the Common Market, when they are justified by problems of employment, unemployment, migration and by other valid requirements of regional development policy which constitute essential national problems. The Commission has further accepted that urgent action by Governments may be necessary and that treaty procedures will not hold this up.
Industrial Policy
We have not met with any serious difficulties from the EEC in the conduct of industrial policy during the past year. We have reported aids given under Sections 7 and 8 of the Industry Act 1972. Article 222 of the Treaty of Rome specifically permits nationalisation; and Government participation in the equity of a firm does not in itself raise problems under the treaty. The Commission has accepted that in urgent cases we shall provide aid without first giving it an opportunity to comment. In such rescue cases a solution might be that when we prepare a plan to restore the firm concerned to viability we should discuss it with the Commission within the following six months. This would not be an onerous requirement.
The Commission has not yet commented on the Industry Bill. The proposals for the National Enterprise Board and for Planning Agreements have much in common with arrangements in other member States. They are in no way incompatible with the treaty, provided that the Government's powers are not exercised so as to damage the competitive position of undertakings in other member States—a principle which we accept, as we have in the case of regional policy.
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I should add that, as regards State aids, we had just as stringent an injunction on us as members of EFTA, and non-Market EFTA countries which have agreements with the EEC have accepted obligations just like the EEC obligations without having any part in EEC decisions in these fields.
I believe that this meets our objective. Steel is more difficult, partly for inherent reasons, partly because of action taken by the previous Government when they repealed Section 15 of the Iron and Steel Act.
I am satisfied that potential problems over prices can be resolved by close contact between the Government and the Steel Board, and possible difficulties about mergers are also capable of a solution.
There is nothing in the Treaties of Rome or Paris or in practices or policies under the treaties which precludes us from extending nationalisation of the present private sector—even total nationalisation of the industry.
On the control of private investment there were, until the repeal of Section 15, powers under legislation passed by this House to prevent investment by non-British non-Community country steelmasters—and the much publicised mini-mill proposal at Newport could have been dealt with if Section 15 was still in force. It is not against the treaty in any way to use it.
My right hon. Friend the Foreign and Commonwealth Secretary gave notice at the Council of Ministers on 3rd March that it might be necessary to ask for treaty revision if there is no other way of solving this problem. If, as part of the control of the economy, the Government—any Government—have to hold back the level of new investment in the public steel sector, it is unacceptable that the private sector should be free to expand where it wants and by as much as it wants, thus adding to the inflationary pressure on resources, quite apart from the location and regional problems, for example, in areas where steel men have been made redundant by technological change.
Since it is well known that other member countries have met with those and similar problems and have found administrative means of dealing with them

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without asking for an amendment of the treaty, I told the other Heads of Government in Dublin that we would study the methods they have used, whether by environmental controls, planning controls, industrial development certificate controls, or other means.
Were this to fail, we could still have recourse to extending public ownership or to proposing treaty revision. Concerning this continuing objective, the reference in the manifesto objective to fiscal policies has not proved difficult. There are proposals for certain measures to harmonise the structure of some indirect taxes, but any which were objectionable to us would require our agreement. I will come to this again on VAT.
OBJECTIVE FIVE
Capital movements
The manifesto commitment says:
"Equally we need an agreement on capital movements which protects our balance of payments and full employment policies."
We have made use of the relevant Articles of the Treaty of Rome to revert to broadly the same exchange control régime as applied before entry. We can continue to take action under those Articles to protect our balance of payments.
OBJECTIVE SIX
The Commonwealth and developing countries
The manifesto said:
"The economic interests of the Commonwealth and the developing countries must be better safeguarded. This involves securing continued access to the British market and, more generally, the adoption by an enlarged Community of trade and aid policies designed to benefit not just 'associated overseas territories' in Africa, but developing countries throughout the world."
I have referred to Commonwealth sugar and New Zealand dairy products
Another major achievement was the Lomé Convention. What was achieved —and a great tribute is due here to the work of my right hon. Friend the Minister for Overseas Development—was the transformation of a paternalistic arrangement with a restricted range of mainly ex-French and Belgian Colonies or Territories, in which they had to offer the Community reciprocal trade benefits,
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into a relationship based on co-operation with 46 countries in Africa, the Caribbean and Pacific—22 of them from the Commonwealth. The new convention governs access without requiring reciprocity, a completely new scheme for stabilisation for commodity earnings, and much increased aid. The convention has rightly been described as historic. For this and other reasons, almost all Commonwealth countries, advanced and developing, have expressed their hope that Britain will stay in the Community.
As to Asian countries such as India. Sri Lanka, Bangladesh and Pakistan, a good deal has been achieved for them already. They have benefited from EEC emergency aid to those countries most seriously affected by the oil price rises. India has an agreement with the EEC, and the other three are negotiating them. The Generalised Scheme of Preferences has been much improved, and earlier this month the Council of Ministers agreed to work for continuing improvements to the scheme, with particular emphasis on the interests of the poorest developing countries, including those of the Indian sub-continent.
But it cannot at this stage be claimed, putting aside what has been achieved, good and less good, that all the problems so far as Asian countries are concerned have as yet been solved. In principle, yes, but there is so far no commitment about the necessary financial provision.
OBJECTIVE SEVEN
Value Added Tax (VAT)
The manifesto commitment is:
"No harmonisation of value added tax which would require us to tax necessities."
The proposals now being discussed in the Community are concerned with agreeing a uniform assessment base for VAT. They provide for our system of zero rating. We will be able to resist any proposals which are unacceptable to us.
Contrary to the situation four years ago, this VAT problem of harmonisation is no longer a real threat. So far from harmonising, a number of countries are insisting on increasing the number of VAT rates within their own tax systems and it seems there is no danger to our freedom here at all. That was not the position four years ago.

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To sum up, therefore, I believe that our renegotiation objectives have been substantially, though not completely, achieved.
I have set out at some length the outcome of the negotiations on each objective mentioned in the manifesto, including those where the passage of time has diminished or eliminated the threat that we foresaw.
What now falls to be decided is whether on these terms, the renegotiated package as a whole, the best interests of Britain will be best served by staying in or coming out.
It will be seen from what I have said that the Government cannot claim to have achieved in full all the objectives that were set in the manifesto on which the Labour Party fought and won two elections last year. Some we have achieved in full; on others we have made considerable progress, though in the time available to us it has not been possible to carry them to the point where we can argue that our aims have been completely realised.
It is thus for the judgment now of the Government, shortly of Parliament, and in due course of the British people, whether or not we should stay in the European Community on the basis of the terms as they have now been renegotiated.
So I do not believe that in taking this decision, if that is the decision which the country takes, we are entering into a narrow regional grouping to the detriment of our world-wide relationships. My first regard, ever since I entered this House, has always been more to the Commonwealth than to Europe. We have to face the fact that practically all the members of the Commonwealth, deciding on the basis of their own interests and what is good for them, want Britain to stay in the Community. Of course, it is a fact that many have diversified their trade away from Britain in the past four years. In many cases they felt themselves forced to do so as a result of the 1971 decision and terms. But a number also, New Zealand for example, have entered on a radical reorientation of their political stance related to the region surrounding them and are developing their economic policies in a similar direction.
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Again, I would not commend what I have announced to the House if this meant in any way weakening our transatlantic relationships. Relations with the United States are closer and better than they have ever been at any time, certainly in this generation, and in some contrast to what they have been in very recent times. Nothing in today's decision will in any way weaken that relationship.
Her Majesty's Government have decided to recommend to the British people that they should vote in favour of staying in the Community on the terms which I have described. I have given the Cabinet's view. I have only this to say before I sit down.
First, while perhaps some of these things might have been improved even if the Government had not entered into these tough negotiations—I say might have been—the renegotiations have themselves been more than a catalyst of change, they have been an initiator of change.
The second thing is this: many of us, including myself, have at various times been half terrified by reading the legal jargon, the apparently fussy legalism and theology, not to mention some speeches and statement of enthusiastic supporters, and not to mention interference in things, such as beer, milk, hops and un-eviscerated chickens. Much of this nonsense has now stopped—certainly those fussy Commission intiatives to which I have referred on those items. The Foreign Secretary and I have found the Market much more flexible than I think either of us expected, both in individual questions and in what we have noted as a substantial shift of power over these past 12 months. It is remarkable how flexible it can be when there is a British Government who are prepared to stand up for British interests, and not the kind of people who negotiated in 1971. They never even gave the Market a chance to be flexible.
Renegotiations, agricultural and financial crises, whatever the causes may have been, all have played their part in putting more power into the hands of national Ministers meeting in the Council of Ministers. I believe that few would have thought, even a year ago, that we would Minister of Agriculture negotiated on have got agreement, through what the

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beef, to what in practice is freedom to return to the principles of Tom Williams' Agriculture Act of 1947 in the matter of deficiency payments, which had been specifically excluded as a means of farm price guarantees as a result of the 1971 negotiation package. We got that changed, and no one would have thought that likely a year ago.
A fundamental change not in the Treaty but in the practice has been brought about by the new system of Heads of Government summits of a regular, routine character, started with that convened by President Giscard d'Estaing in Paris last September, and continued by the December meeting, and now the Dublin meeting. This system has, already, de facto reasserted a degree of political power at top level, not only over the month-by-month decisions but over the general method of operation of the Market. This does not mean it has become a Europe des patries. It is a Community. But, as compared with even a year ago, vital interests of individual nations are now getting much more of a fair hearing, and the political power in asserting those interests has certainly increased more than appeared possible in the battles of 1971, 1972 and 1973: more, in my view, than even a year ago, when the result of the February election made the manifesto objectives for the first time no longer a domestic, political argument but a governmental mandate for renegotiation.
My right hon. Friend the Leader of the House will announce our proposals for a two-day debate immediately after the Easter Recess. [Interruption.] If the Opposition do not want it, we can always use the time in some other way. What I have said this afternoon, including the announcement of the Government's decision, means that, for that parliamentary debate. the case now rests, and thereafter, following the referendum campaign, the case will then rest for the people to decide.
Mrs. Thatcher: Is the Prime Minister aware that we welcome his decision to recommend that we stay in the Common Market? We also welcome his statement that it has not been necessary to change a single clause in the basic treaties to carry out these negotiations, that they have all been completed within the exist
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ing terms and that, presumably, in due course of time there will be other improvements also within the existing terms, in the normal course of events. Is he aware that we also welcome his statement that practically all Commonwealth countries wish us to stay in the Common Market and his statement that the special relationship of this country with the United States will not be changed in any way but that it is his intention to strengthen it?
May I put to the right hon. Gentleman one main question? He was quite clear that this is the recommendation of Her Majesty's Government. Do the normal principles of collective responsibility apply to that decision? That would be the normal interpretation of a statement so clear and unequivocal, that Her Majesty's Government had decided to recommend the British people to vote for staying in the Community. I think that it will be a great pity if the one clear statement of the Prime Minister turns out to be unclear. If he does not intend to carry out the normal principles of collective responsibility, will he spell out the criteria which have decided him to depart from those principles on this occasion, so that we may know when it will occur again?
The Prime Minister: I am grateful to the right hon. Lady. She welcomed the fact, I think I heard her say, that we have not in these negotiations, these very fundamental changes in the terms, had to ask for any changes in the treaties. Surely that information was not new to her. It was in the White Paper that we published in April of last year, so she must have been aware of that. We said then that we hoped that it would not be necessary to ask for changes in the treaties. What in fact we have done is changed the 1971 terms without changes in the treaty, although, as I have said today—I also mentioned it last week, I think—we have given notice of the possible need to ask for treaty changes; for example, in respect of steel and even possibly in respect of New Zealand.
I welcome the fact that the right hon. Lady has acknowledged what she knows to be a fact, as the House does, about our relations with the United States. She will, of course, take full collective responsibility for the lower ebb of relations

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with the United States before we improved them last year. Presumably—[HON. MEMBERS: "Cheap."] There is no doubt about that, and it has been made clear publicly by the United States Government in recent weeks.
As for the right hon. Lady's question about collective responsibility, I announced in January the policy that I intended to follow on this unique matter, on a matter on which not only this party has divisions but the Conservative Party has divisions and, indeed, all major parties—
Mr. Donald Stewart: No.
The Prime Minister: Expecting, as the the Latin lesson says, the answer "No" I said that all "major" parties had divisions in them. This is true, and the same applies to many families and households in the country.
I announced that this would be the position. But the last person that I am going to listen to on collective responsibility is the right hon. Lady. We all welcome back to the councils of this House the right hon. Member for Sid-cup (Mr. Heath). We hope that he has come back rested and refreshed. But he will have noticed that, in his absence, there are very few major elements of the policy of the Government which he headed, and of which the right hon. Lady was a member, on which there has not been dissociation—
Mr. Prior: Why do you not answer?
The Prime Minister: I have answered. [Interruption.] I can understand their sensitivity on this, when no one had the guts to dissociate himself when the right hon. Gentleman was in charge of the Government but only when his back was turned—
Mr. Prior: Answer the question.
The Prime Minister: —including the right hon. Gentleman. Remembering when the cock crowed for the right hon. Gentleman, I would say that at least he had the decency to abstain from his present Leader about a fortnight later.
With regard to the question that the right hon. Lady has put—[HON. MEMBERS: "Hear, hear."]—I have answered it. I answered this in January. I said that I was agreeable to this agreement
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to differ in the unique circumstances of this referendum. The referendum is unique, as the right hon. Lady herself has said. I believe that it is right in the circumstances, so that a fair and free debate can take place in the country on the most important decision that we have had to take in this generation.
Mr. Thorpe: May I first welcome this statement? May I congratulate the Prime Minister on the consistency that he has always shown on European matters? Is he aware that when, in the early part of 1967, he said that he would not take "No" for an answer, we knew that that was exactly what he meant—no more and no less? Would he, in fairness to himself, confirm that the words he used were "I have given the Cabinet's view."? May we take that at its face value or any other value? May we, as those who agree with the Prime Minister, wish him well in obtaining the full-hearted consent of the Labour movement? Finally, since the Prime Minister rightly attaches importance both to the sovereignty and to the representative nature of Parliament, if the recommendation which he is rightly and enthusiastically pressing upon the British people is resisted, will he not find it very difficult to remain in office?
The Prime Minister: First, I thank the right hon. Gentleman for what he said about consistency. In 1961, when Mr. Macmillan—[Laughter.] Yes, he is going to get it now. When Mr. Macmillan said that they were applying for entry because it was the only way that they could find out what the terms were, we all said that we would judge by the terms. In 1967 we were told after we had visited six countries that if we wanted to know the terms we should apply. We said that we were applying for that very reason. That is what we said in our manifesto in 1970. That is what the Conservative Party said in 1970. The Conservatives' mandate was to negotiate, no more, no less, and they were not going to do it without the full-hearted consent of the people.
We have been consistent here. I regret that the right hon. Gentleman is falling below his usual standards—or his brief writers are—when he refers to the statement about taking "No" for an answer. That was made specifically, I think, on

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25th May 1967, but I should have to check that—
Mr. Thorpe: It was the 17th.
The Prime Minister: The 17th: I am obliged. That was said in the context that day or the day before of President de Gaulle's decision to veto any negotiations. It was on the question of the veto that I said that we would not take "No" for an answer. But no one at that time would have said that he would negotiate and get in whatever the terms. Even the Tory Party never said that. They very nearly succeeded in doing it, but they never said that they would accept whatever terms were offered—and no more did I. I now believe that the terms have been sufficiently improved.
The right hon. Gentleman asked about Cabinet judgment. Yes, Sir, this is a Government decision. Not all Government decisions are taken unanimously—as we now know from the right hon. Lady. She did not agree with anything that was done in those days. I have undertaken that when my right hon. Friends have had time to consider their position and when we have discussed the matter a little further, any one who wish publicly to dissociate themselves shall identify themselves—if they do not, I will—in order that the position can be clarified. I gave that assurance in January. I repeat it now.
Mr. Donald Stewart: Is the Prime Minister aware that in the coming battle on the referendum he will be leading a coalition of the Labour, Tory and Liberal Parties and that my party in Scotland will be fighting against that coalition? [HON. MEMBERS: "Some of them"]. Is he also aware that the temporary triviality announced today could have been arranged within the present Common Market set-up and that it is simply ground bait until the referendum has taken place and was quite unimportant within the context of the Treaty of Rome? Does he accept that in Scotland there will be great dissatisfaction that nothing has been done on fishing, steel and energy, but that primarily we shall fight this on the issue of sovereignty, because we are a people who know what it means to have lost our sovereignty?
The Prime Minister: The hon. Gentleman's assertion that I am leading a coali-
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tion of the Labour, Conservative and Liberal Parties is as offensive to the Leaders of the Liberal and Conservative Parties as it is to me. In fact, of all the coalitions, judging by the various things that have been said at elections, the various ways that votes have been won and the variegated membership, there is no coalition so diversified in the history of this country as that led by the hon. Gentleman.
Regarding the hon. Gentleman's other point, this could not have been got easily. It required extremely difficult and tough negotiations.
Mr. Ashley: The issue at present is not the cynicism or, indeed, the jealousy of hon. Members of the Opposition about these negotiations. Does my right hon. Friend not agree that Ministers and, indeed, back benchers on the Government side of the House who have been demanding better terms and are now presented with much better terms must be the most consummate contortionists if they are now to present the case for pulling out of Europe?
The Prime Minister: I am grateful to my hon. Friend for what he has said. For my part, I did not notice the appearance of jealousy on the faces of hon. Members opposite—a little cynicism perhaps, yes, behind their twittering; but I did not notice the jealousy in particular.
Mr. Powell: Is the right hon. Gentleman aware that, whatever view may be taken of the details of the statement he has made, the people of this country will not, over time, submit to be taxed otherwise than by the authority of this House, nor to live under laws which are not made by this House?
The Prime Minister: I did begin by saying that while I was setting out the terms achieved in detail, which matter to a great many of us and to a great many outside the House, some right hon. and hon. Members would decide their attitude on broader considerations. Everyone knows where the right hon. Gentleman has stood on these matters.
The Secretary of State for the Home Department (Mr. Roy Jenkins): And on other matters.
The Prime Minister: As my right hon. Friend has said—and on other matters.

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I do not think that those who take the view that virtually whatever the terms we ought to be in or whatever the terms we ought to be out will be very much affected by these terms. But many of us, including myself, take a very serious view of the question of the terms. That was why I spelled them out to the House.
On what I know is an anxiety of the right hon. Gentleman, I would say this to him. I am sure that his deep studies of this question will not lead him necessarily to take a different view. I believe that there is much more assertion of political power now than there was a few years ago. We saw it particularly in Dublin last week. Many criticisms have been made by many of us, including myself, about the irresponsible—in the best parliamentary sense of that word—powers of certain of the institutions, but these are now coming much more under a degree of control as a result of the initiatives taken at the Heads of Government conferences. The political element is now much more powerful than it was a year ago.
Mr. Ashton: Does my right hon. Friend remember that in 1972 we had literally dozens and dozens of divisions in the House over several weeks on the issues put before us by the then Conservative Government? Will my right hon. Friend give an assurance that every one of those divisions has been resolved and that we have no disputes now like those we had then?
The Prime Minister: On that occasion we voted primarily against the terms, which have been very much improved. But I said then, and so did many of my hon. Friends, including some who were quite strong pro-Marketeers on the principle as well as even on the terms, that—as we had made clear in the 1960s —had we done the negotiations and got terms we considered suitable, we would have legislated in a way that was very different from the way in which that was done in order to put the decisions on the statute book. They have been put on and now ratified by various orders, and many of these divisions are, therefore, in a sense, dealing with what was relevant in 1971. We shall continue at all points—indeed, we are now doing it —examining the legislation to see whether there is any need for change in the legis-
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lation, either on individual items or, where appropriate, on powers.
Mr. Tugendhat: Will the Prime Minister tell the House, for the sake of clarity, how many members of the Cabinet, and who they are, have supported his position, and how many have opposed it, and who they are?
The Prime Minister: There is a Cabinet decision that I have announced. I have undertaken that after a few more discussions I shall see that the House is informed as to who they are. We never had very much information about the number of times the right hon. Lady dissociated herself.
Mr. Michael Stewart: Is my right hon. Friend aware that although the Opposition will make certain ritual noises of disparagement, they must be aware that the improvements that he and his colleagues have secured are substantial and of great benefit to the country? Further, taking up the question asked by the hon. Member for the City of London and Westminster, South (Mr. Tugendhat), will my right hon. Friend give an assurance that in view of the constitutional interest in the agreement to differ, which most of us believe to be a sensible arrangement, the House will be informed of the number and names of the dissidents before we all read them in the newspapers?
The Prime Minister: That is something that can never be undertaken by any Government or any party. But I am glad that my right hon. Friend supports what has been said, and I thank him for what he said about the negotiations. I hope that he will not be too critical of the Conservative Party, because a party that has not a single policy on which its members can agree, and the members of which have dissociated themselves from every policy that it had, can do no more than make ritual noises of disparagement.
Mr. John Davies: Does the Prime Minister realise that the last 12 months have seen serious damage to the reputation of this country in Europe as a result of all that he is now claiming to be so beneficial? Will he now make it his business to repair that damage and to set this country back in the councils of Europe to where it was when he took over the Government?
The Prime Minister: The right hon. Gentleman is quite wrong about the last year. Indeed, the Community is now a great deal more realistic in the way that it operates. I certainly do not intend to restore the position of Britain in the Community to what it was when the right hon. Gentleman was the Minister responsible, because we do not grovel before the other side; we fight for British interests.
Mr. Roy Hughes: Will the Prime Minister appreciate that there is no enthusiasm for this venture among the ordinary people of this country who form the heart of the British Labour movement? Would it not now be the decent thing to do, before any recommendation is made, first to present these renegotiations to the annual conference of the Labour Party, particularly bearing in mind all the fudging on this issue that has taken place in that body in recent years? Or are the Prime Minister and the Foreign Secretary now in the hope that they might do very well from Tory voters in the south-east of England?
The Prime Minister: I recognise, of course, the authority of my hon. Friend to speak for all the ordinary people in Britain. For myself I prefer to await the result of the referendum. It will give them a rather more articulate form of expressing their individual views. Of course, there will be a party conference on this question, but my hon. Friend will be aware, because perhaps he was involved in this, that there are a number of leading figures in this party, of whom I am one, who for very many years found the decisions of the party conference extremely irksome, and I am sure that he did, too, as did most people on the centre or left of the party at that time.
Mr. Costain: Does the Prime Minister appreciate that we on the Opposition side can see the sub-committees of the Cabinet sitting there on the Front Bench? Does he appreciate that we realise the difficulties he has in getting unanimity in his party? The charade which has gone on over renegotiation is an example of that. However, will he be honest to the country and agree that what he has announced only confirms what my right hon. and learned Friend the Member for Hexham (Mr. Rippon) said during the original negotiations—that we would get better
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terms when we were in but that we would first have to join?
The Prime Minister: I do not agree with the hon. Member. We have got better terms because we asked for them, demanded them and pressed for them. I believe that these terms could have been got in 1971. I do not agree with him and I do not believe that any Heads of Government in Europe would agree with him either.
Mr. William Hamilton: Is my right hon. Friend aware that there are large numbers on this side of the House who always thought that he would do it? Can my right hon. Friend assure us, on a more serious note, that the powers that are being spelled out for the National Enterprise Board and the Scottish Development Agency will in no way be inhibited in the immediate or long-term future? Will he further assure the House that if the referendum result should go against the Government this will in no way soften and override the decision of the Government now reached?
The Prime Minister: As for my hon. Friend's opening remarks, praise from him is praise indeed, even if he went on to suggest that it was not on a serious note. As for my hon. Friend's assertion that this was always likely or, as he would think, certain, my right hon. Friend the Foreign Secretary and I can confirm that even a month or two months ago when we were not getting our terms these matters were very much in doubt. My right hon. Friend and I agreed and so warned the EEC that we would have no alternative but to recommend the House, the party and the people to reject continuing membership. Even last week there were times in Dublin—[HON. MEMBERS: "Rubbish."] Conservative Members are so conditioned to accepting everything put in front of them that they do not appreciate these matters. My hon. Friend is quite wrong in suggesting that until very recently there was no question of the outcome.
As for the National Enterprise Board and the Scottish Development Agency, and so on, we see no threat in the powers or the attitudes of the Community to what is proposed. On all matters affecting industry, trade, regional development, steel and the rest we are conditioned by the requirement, which is reasonable and

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which we have always tried to observe, that we do not use any of these methods, machineries or policies for giving us an unfair advantage in international trade, for example, by subsidy or price fixation. We were tightly held on these matters as members of EFTA. The restrictions in EFTA were very tight, and rightly so, and I understand that the EFTA convention with the EEC requires it to observe EEC rules on the question of internal methods which might distort competition between nations.
Mr. Marten: As one who has always taken the broader view to which the Prime Minister referred, and who did not attach very great importance to the fact that he was trying to renegotiate, may I ask whether he agrees that the political control and flexibility which he said had increased in the recent year or two is very much related to the change of personalities of the leaders within the Nine, and that, equally, if these personalities should change we could well go back to the situation of previous years? Will the Prime Minister reflect upon one aspect in his manifesto which, as he knows, I carry very close to my heart, that if the referendum says we stay in—and I do not want to argue that point now—it will he right for the Government to play a full part in the development of a new and wider Europe? In that context will the Prime Minister say clearly whether the Government are in favour of a directly elected European Parliament, and how is political union defined?
The Prime Minister: There may be something in the hon. Member's point. There have been changes of personalities. Seven of the nine Heads of Government have changed in the last 12 months and there have been changes in the political complexion of member States in that time. The majority of the Nine are either Social Democrat or Democratic Socialist led, or are coalitions involving such parties.
That makes some difference. We must guard against retrogressive and reactionary changes within the leadership of the Nine, although that lies within our control only in the case of one country.
On the question of the European Assembly and elections, I refer the hon.
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Member to the statement made in the communiqué issued after the Paris meeting in which our position was entirely reserved on all these matters until after the referendum.
Mr. Marten: That is the point.
Mr. Gwynfor Evans: In renegotiation of the terms, was any consideration given to the relationship between Wales and Brussels? Since the Common Market has now decided to establish a permanent office in Wales and to put it under the charge of Mr. Gwyn Morgan, a past assistant general secretary of the Labour Party, should not Wales now have an office in Brussels?
The Prime Minister: It is entirely appropriate that the Commission should recognise all the important areas, the individual regions, within the United Kingdom. However, I heard nothing said in any of the talks in which I was involved—I do not know whether my right hon. Friend the Foreign Secretary heard anything—saying that they wanted to negotiate directly with the hon. Member's party or with anyone else who has been an elected Member of Parliament for Wales. They were dealing with the duly constituted Government of the United Kingdom of Great Britain and Northern Ireland.
On the hon. Member's other question, he knows, especially in relation to internal matters of trade and industry and so on, that these are very much part and parcel of what we have been discussing and on which in due course we shall be legislating in relation to devolution.
Mr. Skinner: Does my right hon. Friend appreciate that it comes somewhat ill from him to make rather snide comments about the Labour Party and the National Executive Committee in responding to the question by my hon. Friend the Member for Newport (Mr. Hughes), especially when we take into account that it was a joint meeting of the Cabinet and the NEC that drew up the manifesto to decide the terms? If that is the case, why did my right hon. Friend not report back to the NEC and ensure that, before any decisions were made by the Cabinet, this joint meeting also declared itself and upheld the Labour

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Party conference? But then it might not be my right hon. Friend's last word.
The Prime Minister: When my hon. Friend has had about 20 years' experience of the national executive and conference he will speak with even more authority than he does at the present time. I have never been in doubt about my hon. Friend's credibility on almost any subject, but he must realise that many of those who have taken exactly the same view as he takes on most issues had to spend years of their life fighting against conference decisions and the executive, and fighting for their rights as Members of Parliament—and my hon. Friend knows exactly to whom I am referring—over many years. I do not think, therefore, that he can stand on his head and say that the conference and the executive should now be regarded as respectable because they are a little nearer now to his way of thinking than the thinking of those who fought against them in the past.
I certainly do not accept what my hon. Friend says. He will be glad to know that I have already talked to the general secretary of the party and that there is to be a special meeting of the national executive committee. I am sure that he is not suggesting that I should not have made a statement to Parliament before I met the national executive. There is to be this meeting of the executive committee next week and we have been discussing the advancement of the projected date of the annual conference. I hope he will be very pleased with all that.
Mr. Hurd: Could the Prime Minister help the House in a very real practical difficulty? When the list of dissenting Ministers is published, are we to take it that, over the range of EEC subjects, statements, letters and answers to hon. Members from those Ministers are worthless as statements of Government policy?
The Prime Minister: I am always anxious to help the House and hon. Gentlemen. I will make it my business to deal with the exact question of the conduct of business in respect of such matters when I give the information that the hon. Gentleman is seeking.
Mr. Luard: Will the Prime Minister accept that, given the substantial success of the Government in securing terms meeting those set out in the Labour Party manifesto, large numbers within the Labour movement will welcome the statement that he has just made as being the only decision that is fully consistent with both the words and the spirit of the manifesto, and will he agree that, provided the British people now decide that Britain should stay in the Common Market, this will not only provide this country with an opportunity of playing a more important role on the world stage than otherwise would be the case but will also provide an opportunity for the Labour Party to play a more important rôle in building democratic Socialism in Europe?
The Prime Minister: I am grateful to my hon. Friend, and of course I respect his deep knowledge of and interest in these things. I am sure that I would be the last person to suggest that our influence in word affairs depends solely upon this particular aspect. It depends to a very high degree on our transatlantic relationship and it depends upon our Commonwealth relationship, and I am also happy to feel that relations between this country and the Soviet Union are very much recovered from what has happened in the past.
Several Hon Members Several Hon Members rose—
Mr. Speaker: I would remind hon. Members that there is to be a two-day debate on this subject immediately after the Easter Recess.

BUSINESS OF THE HOUSE (CONSOLIDATION BILLS)
ordered,
That, notwithstanding the practice of the House, Amendments proposed to be moved to the Social Security (Consequential Provisions) Bill [Lords], and the Social Security Bill [Lords] and the Social Security (Northern Ireland) Bill [Lords] may be accepted by the Clerks at the Table before the Bill have been read a second time.—[The Prime Minister.]

STATUTORY INSTRUMENTS
Ordered,
That the draft Social Security (Mariners' Benefits) Regulations 1975 be referred to a Standing Committee on Statutory Instruments.
Ordered,
That the draft Companies (Fees) Regulations 1975 be referred to a Standing Committee on Statutory Instruments.
Ordered,
That the Anti-Dumping Duty Order 1975 (S.I., 1975, No. 368) be referred to a Standing Committee on Statutory Instruments.—[Mr. Stoddart.]

PARLIAMENTARY COMMISSIONER (AMENDMENT)
4.35 p.m.
Mr. Ian Gow: I beg to move that leave be given to bring in a Bill to amend the Parliamentary Commissioner Act 1967.
On 22nd March 1967, almost exactly eight years ago, Royal Assent was given to what is now the Parliamentary Commissioner Act of that year. The Act provided that the commissioner should have power to investigate any action taken by or on behalf of a Government Department where a written complaint was made to a Member of this House about injustice sustained by a citizen in consequence of maladministration and where the complaint was forwarded to the commissioner with a request that it should be investigated.
The Act, in my view rightly, prohibited the Commissioner, except in particular circumstances, from investigating matters where the aggrieved citizen had a right of appeal to a tribunal or a remedy in any court of law. The Act also provided that the commissioner should have no authority to question the merits of a decision taken without maladministration by a Government Department in the exercise of a discretion vested in that Department. Schedule 3 of the Act laid down 11 categories of Government action which are not subject to investigation by the Commissioner even though the other criteria apply.
The Bill which I seek to introduce would delete entirely one of those 11 categories from Schedule 3, namely, paragraph 10. That paragraph precludes the Commissioner from investigating any Government action even though there should be maladministration resulting in injustice to a citizen involving appointment, removal, pay, discipline, pensions or other personnel matters relating to service in any of the Armed Forces of the Crown and in the Civil Service. My primary concern this afternoon is that the Commissioner should in future have power to investigate injustice arising out of maladministration in regard to the payment of pensions for retired members of the Armed Services and retired civil servants.

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At present the Parliamentary Commissioner cannot investigate complaints by a former Service man or a former member of the Civil Service alleging maladministration, whether in the calculation of payment or commutation of his pension. An argument was advanced by the Government of the day in 1967, to my regret an argument in which my own Front Bench and the Government at that time acquiesced. I see my right hon. Friend the Leader of the Opposition at this moment delaying her exit. I am in respectful disagreement with my right hon. Friends who at that time did not agree to amend the 1967 Act in the way in which I now submit that it should be amended.
The argument which was put forward both by the Government in 1967 and by my right hon. Friends was that the Government were in a different position vis-à-vis the governed than they were in relation to their own employees or former employees. With respect, I find that argument unconvincing. For example, the Parliamentary Commissioner can investigate a complaint of maladministration about the payment of a war disability pension which does not arise out of service in any of the Armed Forces of the Crown but cannot investigate a similar complaint which arises out of service in any of the Armed Forces of the Crown.
Several of my constituents, some former members of the Armed Services and some former civil servants, have written to the Government Department concerned complaining about what they consider to be errors made in the calculation of their pension. They have been dissatisfied with Governments of both parties about the answers which have been given. They have asked that their complaints should be referred to the Parliamentary Commissioner, but in every case I have been compelled to reply to my constituents that under the law as it now stands the Ombudsman has no power to look into the matter.
The whole purpose of setting up the Parliamentary Commissioner was to give hon. Members a better instrument for the protection of the rights of the citizen, a protection better than could be provided by hon. Members. To the extent that decisions of a Government Depart-
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ment are excluded from consideration by the commissioner, the whole purpose of the Ombudsman is frustrated and, indeed, violated.
In its report published in 1970 the Select Committee on the Parliamentary Commissioner recommended the exclusion of paragraph 10 from Schedule 3 of the Act. The same recommendation was made by the Select Committee in 1972. In its last report published in 1973 the Select Committee reported unanimously as follows:
"Your Committee note with regret that the Government continue to deny to Members the help of the Commissioner in investigating the personnel grievances of Crown Servants."
I said that the primary purpose of the Bill would be to permit the commissioner to investigate the pay and pensions of members or former members of the Armed Forces or of the Civil Service, but there is also a secondary purpose; namely, to enable the commissioner to investigate maladministration resulting in injustice in respect of appointments, removals, discipline and other personnel matters relating to the Armed Forces or the Civil Service. Under the 1967 Act, even if amended by my Bill, the commissioner could not investigate any matter relating to the commencement or conduct of civil or criminal proceedings in any court of law arising out of the Service Discipline Act. Nor could the commissioner investigate—in my view, rightly—the merits of a decision taken without maladministration by a Government Department or other authority in the exercise of a discretion vested in that Department or authority.
However, this second change in the law which the Bill would achieve has been recommended, again unanimously, by the Select Committee on three occasions. Under the provisions of Section 5(4) of the 1967 Act, the Queen may by an Order in Council amend Schedule 3 so as to exclude from its provisions any matters which the commissioner is at present prevented from investigating. Thus, it would be possible to achieve the purpose of the Bill simply by Order in Council. Unfortunately, the Government Front Bench, like my own right hon. Friends when in Government, has not felt able to lay before the House the Order in Council which would achieve at a stroke precisely the purpose of my

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Bill. Hence, the necessity for the Bill.
Finally, I emphasise that the effect of the Bill, if it becomes law, will be to give additional protection to citizens to whom protection needs emphatically to be given; namely, those who are serving, or who have served their country, either in the Armed Forces or in the Civil Service. At a time when the power of Government is growing, when the size of Government is growing and the rights of the individual seem to many to be overlooked, the Bill would extend the power of the impartial and independent Parliamentary Commissioner to investigate complaints of maladministration resulting in injustice to the citizen. It is for that reason that I beg leave to introduce my Bill.
Question put and agreed to.
Bill ordered to be brought in by Mr. Ian Gow, Mr. Michael Marshall, Mr. Tim Renton, Mr. Tim Rathbone, Mr. Douglas Hurd, Mr. Peter Hordern, Mr. John Biffen, Mr. Peter Rees, Mr. Ivor Stanbrook, Mr. Antony Buck, Mr. Walter Clegg and Mr. Neil Martin.

PARLIAMENTARY COMMISSIONER (AMENDMENT) BILL
Mr. Gow accordingly presented a Bill to amend the Parliamentary Commissioner Act 1967; and the same was read the First time; and ordered to be read a Second time upon Friday 2nd May, and to be printed. [Bill 116]
ORDERS OF THE DAY

  SOCIAL SECURITY PENSIONS BILL
  Order for Second Reading read.
  4.46 p.m.
  The Secretary of State for Social Services (Mrs. Barbara Castle): I beg to move, That the Bill be now read a Second time.
  This is the third time in just over five years that a Secretary of State for Social Services has come to this Dispatch Box with legislative proposals for a new pension scheme, but the talking about and planning for a new scheme have been going on for a much longer period.
  The first Bill in this series took five years to devise and failed to reach the statute book. The next took over two years and, although it became an Act, the second pension plan it contained never started. This Bill has been produced in only one year and we have every hope that it will not only become law but will also be implemented. It could be said that we are getting better at it. Certainly, we have benefited from experience gained in the two previous attempts.
  Our White Paper "Better Pensions" claimed—rightly, in my view—that we had drawn on the best features of the two previous plans and added some important new ones. So we now have what I firmly believe to be the best scheme so far.
  It is a matter of history that the first new plan was produced by a Labour Government and scrapped by a Conservative Government. The second plan, produced by a Conservative Government, was stopped by a Labour Government. That was not just an argument between political parties. There was widespread disagreement throughout the country about the best way to reform our pensions system.
  I do not want to be drawn into an inquest into what has gone before. I have drawn attention to it, however, because it was very much in my mind when we embarked, as we felt we must after much anxious consideration, on devising a third set of new scheme proposals. In view of the unhappy background I was determined that this third

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  round should be conducted with the utmost speed and that it should produce a scheme which, while fulfilling the main requirements as we saw them, would also be as acceptable as we could make it to all concerned, including both sides of industry and the occupational pensions movement. In short, we wanted to produce a scheme that not only adequately met the needs of future generations of pensioners but also would command general acceptance and would stick. I hope that we have succeeded.
  We were encouraged and gratified at the generally favourable reaction to our proposals published in the White Paper "Better Pensions" about six months after we took office. We made it clear that we should discuss these proposals with the TUC, the CBI, the main pensions organisations and other interested bodies, and take fully into account their comments and suggestions before translating the proposals into legislative form, and that we have done. The consultations have been very valuable and I much appreciate the helpful spirit in which the suggestions for improving or amending our proposals have been made.
  As I have said, the general response was encouragingly favourable, but there were some aspects which gave cause for concern and on these we have tried to meet, as far as we felt able, the reservations expressed to us. As a result, the Bill which I commend to the House contain some changes compared with our original proposals and I readily acknowledge that it is all the better for them.
  In the short time that has elapsed since the Bill was published, we have been much heartened by the generally friendly reception to its proposals. I have with me a pile of complimentary Press comments which must be unique in their unanimity. They are certainly unique in my period of Ministerial activity. Their main feature is one of hopefulness that here at last is a general structure which will endure and which will enable the State and the occupational pensions movement to get on with the job of developing, in partnership, the provision of proper pensions in retirement, widowhood and chronic ill-health.
  There is bound to be some uneasiness, however, until the House has at least
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  approved in principle the sort of scheme proposed in the Bill. I hope that the House will do that today, clearly and unequivocally, thus confirming and adding to the general feeling of optimism that, through the scheme, we can end the uncertainties about the future development of pensions which have impeded progress for too long.
  The details must be scrutinised and thoroughly discussed. We shall note all that is said during the debate and during the subsequent detailed examination in Committee. In the light of that, we shall not hesitate to make such changes as seem to us to be justified and possible.
  It is a detailed Bill and I think that rather than going through it clause by clause it would be more helpful to the House if I concentrated on the main features. The details are set out in the Explanatory Memorandum published at the same time as the Bill. I should first explain that the Bill proceeds largely by way of amending existing legislation. That legislation is in the process of being consolidated. The Social Security Act 1975, which is the principal Act that the Bill amends, is the consolidation measure which is expected to receive Royal Assent soon, having been approved by the Joint Committee of both Houses appointed to consider all consolidation Bills. Under that Act, national insurance contributions for employed people will be put on an earnings-related basis from the beginning of next month. This Bill, when it can be implemented, will put retirement, widows' and invalidity pensions also on to an earnings-related basis.
  When Beveridge produced his great national insurance scheme 30 years ago everyone believed that his proposals would end poverty and deprivation in old age. Certainly the changes he inspired were revolutionary, but history and inflation over the years have falsified many of his hopes. There is now widespread recognition that his aims cannot be achieved by a system of flat-rate contributions and flat-rate benefits. We have had to start again. I believe that the proposals before the House will mark an advance in our provision for old age greater and more enduring even than the breakthrough which Beveridge achieved.
  The measure of our failure to date lies in the fact that 2 million out of our 7

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  million retirement pensioners, and no less than half of the elderly widows, have to depend on supplementary benefit. To escape from this poverty trap there has been an increasing reliance on occupational pension schemes. So far from ending the existence of two nations in old age, the Beveridge formula has encouraged its growth, with 8 million more fortunate workers enjoying entitlement to earnings-related pensions through their firms' private schemes while the rest have had no prospect of ever being covered by private schemes.
  This Government recognise the importance workers attach to their occupational pensions. Like the previous Government, we seek to integrate these schemes into a wider provision of earnings-related benefits for everyone. But there is a major difference between the approach of the Bill and that of our predecessors. Instead of whittling down the standards of pension provision to a level that private schemes can afford, we have fixed the standards at the level necessary to remove poverty in old age, widowhood and invalidity, and then provided forms of State help to private schemes to enable them to meet the targets that we have laid down. This is a unique form of partnership between the State and private schemes which has been widely welcomed. This holds out the hope that the new scheme will endure.
  What are the principles which inspire the Bill? First, the pension must be adequate for everyone, which means that we must have a redistributive formula to help the low paid. Secondly, it must have a much shorter maturity period than in our predecessors' scheme, so that the older workers can benefit. Thirdly, we must recognise the changed status of women in our society. We must get away from Beveridge's reliance on the dependency principle and provide that when women go out to work they shall share equal responsibilities and enjoy equal rights. Fourthly, we must end the discrimination against the manual worker and ensure that he enjoys equivalent benefits to those enjoyed by white-collar workers under final salary type schemes. Last but not least, we must guarantee the value of the pension against inflation by inflation proofing it. It is here that the State's helping hand to private schemes is most relevant.
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  How does the Bill fulfil these principles? I deal first with the level of pension. The main formula is quite simple. The pension will have two components—a basic component which will start at whatever is the amount of the flat-rate pension when the scheme begins, and an additional component giving, after 20 years, one quarter of a person's average earnings between the level of the basic component and a ceiling of seven times that level. The pension that will result can best be illustrated by imagining that the scheme has been in operation for at least 20 years and that the basic component is £11.60—the amount of the single flat-rate pension starting next month. In that event a man on very low earnings—say, an average of £20 a week —would personally get £13.70. If he was married, the combined pension for him and his wife would come to £20.60—more than he earned at work.
  As I have said, the formula is deliberately designed to give the low paid a higher proportion of their earnings than the well paid. Thus, the £30-a-week man would earn for himself and his wife a joint pension of £23.10 a week—over three-quarters of his earnings. At £40 a week, the joint pension would be nearly two-thirds of his earnings. Even at £60 a week the joint pension would represent more than half pay at retirement. The same would also be true at £70 a week, if one were thinking of take-home pay after deducting the national insurance contribution he would have had to pay while at work.
  The maximum pensions payable under the new schemes in present-day terms would be around £29 a week for a single person and nearly £36 a week for a married couple relying on the husband's record alone. In addition, there would be any graduated pensions which he and she had earned. If the wife had an insurance record of her own, their joint pension could be higher still.
  Because of the shortened maturity rate. men and women now in mid-career, with 20 or more years to go before retirement. will be able to qualify for full pensions. For those with less than 20 years to go the basic component will be payable in full. From the start of the scheme, the additional component will build up gradually at the rate of 1¼ per cent. a year. Even for this group the eventual

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  pensions will be significantly better than they would have been under our predecessors' scheme. For example, the £50-a-week man who retires 10 years after the scheme starts will be able to retire with a joint pension for himself and his wife of about half his take-home pay.
  Possibly the most vital aspect of the whole Bill is its provisions for fully protecting the value of all pension rights. Each year's earnings during a person's working life will be revalued in line with the general movement of earnings since the year in question, so that his or her eventual pension will fully reflect the improvements in living standards which have taken place.
  Moreover, after the pension has been awarded its value will be maintained by regular reviews at least once a year. The basic component will be kept in line with the general movement of earnings and the additional component will be increased in line with prices. I need hardly stress the importance to pensioners of having these firm guarantees of full protection against inflation. In the original White Paper I described that protection as
  "one of the most precious assets of the new scheme."
  We have even extended price protection to the pensions and pension rights under the graduated pension scheme due to be wound up in April—pensions which under our predecessors' proposals would have been left to shrink in value year by year until they effectively disappeared.
  There is a second exciting new breakthrough in pensions policy in the Bill—the innovation of basing pensions on a person's earning during his or her best 20 years rather than throughout working life. Full pensions will still depend on maintaining a contribution record throughout working life, but the rate will be based on the 20 years, not necessarily consecutive, during which a person's earnings after revaluation were the highest. This will particularly help those whose highest earnings come in early or middle life, as in the case of many manual workers. It will help those whose working life is affected by prolonged sickness or unemployment and those, usually women, whose working life is interrupted by the demands of bringing up a family or looking after an aged or infirm relative.
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  I give one example to illustrate the value of this provision. If a man earned an average of £60 a week from, say, the age of 25 to 45 and then, because of injury or redundancy, had to take a job at £30 a week for the rest of his working life, his pension would be based on the £60 average, not the £30, giving him and his wife a joint pension of £30·60—more than he was earning just before retirement.
  As a corollary, and in order to make sure that women fully benefit from this provision, there is the help we propose for those with home responsibilities. Full pensions will normally depend on maintaining a contribution record throughout working life, but where a person, normally but not necessarily a woman, has to interrupt working life to rear a family or to care for an aged or infirm relative, we think that it is wrong that he or she should be penalised. We therefore propose that such years should count as qualifying years for the purpose of maintaining full pension rights. The Bill leaves the details to be prescribed by regulations which will be brought before the House in due course.
  This brings me to the new deal for women which permeates the whole Bill. We believe that it is no longer tolerable to treat women as second-class citizens entitled to third-class benefits—a by-product of excessive reliance on the concept of dependency. Our starting point must be the married woman's option, which has always been the alibi for the inferior treatment which women have received. The Bill revokes this option for women who marry after the new scheme starts. But we recognise that the abrupt withdrawal of the option from women who have it now could cause considerable difficulties. Therefore, in their case the Bill provides for the option to he continued in circumstances to be laid down in regulations. I am having further discussions with interested organisations before deciding what those circumstances should be. In return for assuming equal responsibilities, women will in future receive equal rights. They will pay the same rate of contributions as men with the same earnings and will receive the same rate of benefit.

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  The Bill also abolishes two forms of discrimination which women have suffered even when they have been contributing in their own right—the half test and the lower rates of sickness and unemployment benefit. It gives them the same right of access to occupational pension schemes as men in situations in which they enjoy equal pay.
  Mr. R. A. McCrindle: Before the right hon. Lady moves off the interesting subject of the treatment of women under the Bill, does she not think that it would be of great assistance to the House if she talked, in some detail perhaps, about the retirement age of women and men respectively? I hope that she will say that she was just coming to that before I intervened.
  Mrs. Castle: The answer is that I was indeed just coming to it. It is such a detailed Bill, with so many points, that I should keep the House intolerably long if I spoke in too much detail. My right hon. Friend the Minister of State will be winding up the debate, and he will take up any detailed points that I have not been able to cover in the time available to me.
  I have asked the Occupational Pensions Board to advise me on what further provisions are needed to end discrimination against women in occupational schemes.
  The Bill also greatly improves the provision for widowhood. Widowed mothers and other widows entitled to full pension will inherit the whole of their husband's earnings-related pension entitlement, both the basic and additional components. It is as simple as that. Women who are widowed or who cease to have dependent children when they are between 40 or 50 will inherit a proportion of their husband's pension entitlement.
  Moreover, when a widow retires or if she is widowed after pension age she will be able to draw any additional component which she has earned in her own right as well as the basic and additional components which she has inherited from her husband, subject to the maximum which could be paid on a single person's record.
  I shall be honest with the House, and admit that we have now tipped the scales the other way, because women will still be able to draw their retirement pension five years earlier than men. There
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  is no justification for this logically, but there are two reasons why I think the decision is right. First, it would be wrong to raise to 65 the pension age of women who have been contributing on the assumption that they would retire at 60. Yet to bring the men's pension age down to 60 would be quite beyond our means at the present time. It would cost £1,400 million a year. Even the introduction of a flexible retirement age for both sexes, which I accept is the ideal solution, would cost more than we can afford. Secondly, the lower retirement age for women is some compensation to them for the lower wages they have been drawing all these years, when, as everyone will agree, many women have been exploited and have been paid merely sweated wages. No one can pretend that they will get real equality in pay and job opportunities for some time ahead.
  But we have one consolation to offer the men. For the first time in the history of national insurance we are introducing a form of widower's benefit. In the case of a pensioner couple where the wife dies first the widower will be able to inherit the pension rights she had earned, subject to the maximum I mentioned. Also, a widower under 65 who is ill when his wife dies will have the right, if his illness lasts or has lasted at least six months, to an invalidity pension calculated on his wife's earnings record if that is better than his own.
  Nor have we forgotten the disabled worker. As the Disablement Income Group has long pressed—
  Mr. McCrindle: I apologise for interrupting the right hon. Lady again, but, before she leaves the whole question of women, will she accept that there is a school of thought, at least outside the House, which considers that a woman contributing to the age of 60 is likely to receive the same pension as a man contributing to the age of 65? Would she care to comment on whether that is the case under the Bill?
  Mrs. Castle: That will be the position under the Bill if a woman has had the same earnings. The answer is "Yes".
  Mr. Kenneth Clarke: The right hon. Lady has reassured us that there are some consolations for men in the Bill. Perhaps she will accept that

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  the rather favourable treatment that she proposes for women as regards retirement age is compensated for by the unfair treatment that she is proposing as regards the married woman's option. The explanation that she has just given us about the entitlement of a married woman to add her own pension rights to make up what is necessary over and above that which she takes from her husband means that there is a maximum put on the level of pension or benefit which a contributing husband and wife can earn together. In fact, a woman who pays a full contribution and whose marriage subsists receives very much less in return for her own contribution than a man who pays the equivalent contribution. Does the right hon. Lady accept that she is enforcing a bad bargain on married women by doing away with the option?
  Mrs. Castle: I have no doubt that the hon. Gentleman will try to prove that assertion. It must be remembered that the Conservative Party never had the courage to abolish the married woman's option. It was a supporter of the old system which was always used as an alibi to give women inferior benefits even when they had contributed fully—for example, lower sickness and unemployment benefits. That was a bad bargain for women if ever there was one. Of course, it was justified by the existence of the married woman's option. I totally repudiate the hon. Gentleman's suggestion that under the Bill women will get a bad bargain, even taking into account the abolition of the married woman's option and the ceiling set on what can be added to their pensions through their own earnings.
  I have rather a lot of detail to go through and I merely say at this stage that I repudiate the hon. Gentleman's suggestion. No doubt my right hon. Friend the Minister of State will deal with it more fully when he winds up the debate. The hon. Gentleman will then have had a chance to justify in greater factual detail the false accusation that he has just made.
  We have not forgotten the disabled worker. As the Disablement Income Group has long urged, invalidity pensions in the new scheme will be earnings-related in the same way as retirement
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  pensions. What is more, the Bill provides for an improvement in the ages governing the higher rates of invalidity allowance. It is proposed that the highest rate shall be paid to people who fall ill before 40, instead of the present 35, and the middle rate to those whose incapacity began before they were 50, instead of 45.
  Up to now I have described the main benefit proposals in terms of those who will rely entirely on the new State scheme. I turn to those who have the good fortune to be in what the White Paper describes as "well-founded occupational schemes". As I have said, our aim has been to create a harmonious partnership between the State and good private schemes. In practical terms this has meant providing a facility for contracting out of part of the State scheme by those people who could look to their occupational scheme to provide at least equal benefits.
  Contracting out can relate to only part of the State scheme. We recognise that there are some things which can be done only by the State scheme. In drawing up the conditions for contracting out we have had very much in mind what good schemes are already doing. We have tried not to require of them anything which would be unreasonable or impracticable.
  I will explain the division of responsibility between the State scheme and the private schemes. The State scheme will provide everyone with the basic component of all pensions. It will also provide the whole of invalidity pensions—namely, both the basic and additional components. The contracted-out occupational scheme will undertake to provide the equivalent of the additional component of retirement pensions and half that component for widows' pensions. Where widows are concerned the State scheme will provide the other half. Once pensions have been put into payment, responsibility for increasing both the basic and additional components to take account of inflation will fall to the State scheme even where a pensioner is receiving some or all of the additional component from his occupational scheme. That is the kernel of the system of partnership which has been widely welcomed as being a practical recognition of the difficulties that we face.

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  I turn to private schemes. There are two main conditions proposed for contracting out. The first condition relates to the structure of the scheme. It must provide a retirement scheme based on final salary, or on average salary revalued in line with the growth of earnings with an annual accrual rate equivalent to at least one-eightieth or 1¼ per cent. of pensionable salary as defined by the scheme rules. That gives the sort of build up of pension rights which the vast majority of final salary schemes already provide, and it accords with the rate of build up in the State scheme for those who are within 20 years of pensionable age when the scheme starts. For widows' pension the accrual rate must be not less than five-eighths per cent. of pensionable salary —namely, one-half of the minimum accrual rate of retirement pension.
  The second condition relates to the pension of the individual. The scheme must guarantee the contracted-out individual a retirement pension of at least the amount of additional component which he has forgone in the State scheme during the period of contracting out. This is described in the Bill as the "guaranteed minimum pension". For widows' pension the guaranteed minimum must be at least half the husband's guaranteed minimum pension at the time of his death.
  The Bill also lays down the conditions which must be satisfied when a person leaves contracted-out employment before retirement. If he leaves within five years or if his scheme has ceased to be contracted-out, he can be bought back into the State scheme. Otherwise his pension must be preserved or transferred to another contracted-out scheme.
  When a person in the State scheme changes jobs his earnings in the job he has left will be revalued in line with the growth of earnings generally, thus protecting the value of his preserved pension. This is a valuable right and clearly those who are contracted out cannot be allowed to suffer by comparison. We proposed in the White Paper that contracted-out schemes should be required to revalue the preserved minimum pension of early leavers in the same way as the State scheme would have done if they had not been contracted out. During our consultations with those concerned the point was made that this commitment would
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  be open-ended and, being uninsurable, would be difficult in most occupational schemes to undertake for early leavers. We accepted that that was a genuine difficulty. The Bill now provides that occupational schemes may, if they wish, limit their liability to revalue preserved minimum pensions to 5 per cent. a year. If this option is taken, the State scheme will provide the balance that is needed to maintain the value of such pensions in line with the growth of earnings generally in return for a single payment by the employer to meet the estimated cost.
  So much for the provisions of the scheme. Can we afford it and how shall we pay for it? I remind the House that in just over two weeks' time a new system of earnings-related contributions will commence that was enacted by our predecessors. The joint contribution for an employee will then be 14 per cent. of earnings up to a ceiling of £69 a week.
  Mrs. Elaine Kellett-Bowman: I am extremely anxious, as I am sure is the right hon. Lady, that as many women as possible should be included in good occupational schemes. Unfortunately I can foresee a danger in that it will be more expensive for such schemes to include women. I feel that there should be a higher proportion of rebate for women. That would persuade companies which have a high proportion of women in their employ to embark on good schemes. There are many companies in my constituency which have a high proportion of women employees and I fear that they will be reluctant to embark on the sort of scheme that we have in mind.
  Mrs. Castle: I must point out that companies cannot be discouraged from including women if they are including men in the same employment situation.
  Mrs. Kellett-Bowman Mrs. Kellett-Bowman rose—
  Mrs. Castle: No. I have had to go on for rather a long time and there are one or two other points that I feel I should cover. It is not a question now of a firm being able to say "We shall leave out women because they are more expensive"—
  Mrs. Kellett-Bowman: In Lancashire this matter is regarded as extremely important.
  Mrs. Castle: This is a point of detail which we shall have to consider. It has been put to us, and my right hon. Friend the Minister of State in his reply will tell the hon. Lady why we have rejected the idea.
  The joint contribution for an employee will be 14 per cent. on earnings up to a ceiling of £69 a week—5½ per cent. from the employee and 8½ per cent. from the employer. This system will continue under the new scheme, though the percentage rates of contribution will need to be somewhat higher for those in the State scheme.
  The upper limit of earnings on which contributions will be paid will also be higher. The proposal is that this should be set at around seven times the amount of the basic component, which in April 1975 terms would give an upper limit of around £80 a week.
  As for the percentage rate, the Bill provides for an initial joint contribution for employees in the State scheme of 16½ per cent. of their earnings—split as to 6½ per cent. on the employed and as to 10 per cent. on the employer. The Government Actuary estimates that this joint rate will need to rise after 30 years to somewhere in the region of 18 to 18½ per cent. However, these initial rates are not yet firm. They should be regarded for the moment as illustrative only because, as the Government Actuary makes clear in his report which was published with the Bill, there are a number of factors which will have an important effect on the finances of the scheme in the early years. The most important of these is the number of employees who are contracted out and the rate of increase in earnings.
  We shall need to review all the factors involved nearer to the start of the scheme when the indications will be clearer. If we can possibly do so, we shall reduce the 16½ per cent. rate shown in the Bill. If it looks as though the 16½ per cent. will be needed, the Bill requires me to lay a report before Parliament explaining why. Whatever the initial contribution rate for those in the State scheme turns out to be, those who are contracted out will pay less and the reduction will reflect the cost of providing, through the occupational pension scheme, the amount of
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  benefit which would otherwise have come from the State scheme.
  We originally proposed, on the advice of the Government Actuary, that the appropriate reduction on this basis should be 6½ per cent, at the start of the scheme. But here again we have made another concession in the light of representations made to us. It was put to us that the figure was too low in view of the risks which contracted-out schemes would be taking on. We have therefore increased the figure by ½ per cent. to 7 per cent., and to compensate for these risks the further ½ per cent. reduction will go to the employer. The Bill therefore provides for a reduction of 4½ per cent. in the employer's contribution and 2½ per cent. in the employee's contribution on earnings above the level of the basic component. The contracted-out rates must be reviewed at not more than five-yearly intervals.
  The Treasury supplement to the finances of the new scheme will remain at 18 per cent. of all contributions as at present, but with this important difference: it will be 18 per cent. of the contributions which would have been received if there had been no reduction for contracting out. This will result in a substantial increase in the Treasury supplement. For instance, in the scheme's first year the supplement will be nearly £200 million higher in current terms.
  Finally, I should like to say a word or two about the starting date. We have already said that we shall bring the new scheme into force as quickly as possible, and in any case no later than April 1978. That is still the position. But if we possibly can we should like to start the new scheme one year earlier—namely, in April 1977. Throughout the recent consultations we have been urged from all sides—the TUC the CBI and most of the pensions organisations—to bring in the scheme at the earliest possible moment. This we shall certainly do. However, I do not at this stage want to raise false hopes about a 1977 start because it will not be easy to achieve. To succeed we shall need not only to enact. the Bill by the summer but also to work out the details to go in the regulations and the essential operational requirements for running the scheme.

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  That will be a tall order, but we shall do our best. We should know by the autumn of this year whether sufficient progress has been made for a 1977 start to be achieved, and a firm decision about the starting date will then be announced.
  We cannot hope to abolish poverty in old age overnight. The Labour Government have already done a great deal to improve the value of existing pensions. We have committed ourselves to uprating these pensions in line not just with prices but with earnings. The next increase begins in about three weeks' time and we have promised a further increase later this year. We have also promised that with the introduction of the new pensions scheme we shall further review the position of existing pensioners in the light of the development of the economy.
  The Bill establishes a pensions system which will be comparable with the best elsewhere in the world. It will provide pensions at an altogether new level, sufficient to ensure that people in their declining years will be able to spend them in dignity and security.
  I end on the note with which I began. The message we are getting loud and clear from the people of this country is "For heaven's sake, let us settle once and for all the great pensions debate that has been taking place for far too long". They are looking to this House for an equally clear response. I believe that the Bill provides the opportunity. I am proud of it and confidently commend it to the House.
  5.27 p.m.
  Mr. Norman Fowler: I realised when I first came to debates on the social services that I was joining an exclusive club. I had not realised until this afternoon just how exclusive that club was.
  The right hon. Lady the Secretary of State for Social Services said that this was the third pensions Bill we have had in the House in the last six years. There was a Bill, which later became an Act, sponsored by my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph), and before that measure there was a Bill introduced by the late Richard Crossman, who is remembered with affection on both sides of the Chamber. I must admit that I await with some anticipation the time when his diaries reach
  1502
  his pensions period. If the late Mr. Crossman considered Harry Hyams as his housing adviser, I am intrigued to know who were his candidates as pensions adviser. Sadly, we have not yet reached that stage in the diaries, but I have with me a copy of a lecture delivered in Liverpool by Mr. Crossman in 1972. That perhaps is a proper starting point to the debate and gives a proper sense of humility about policymaking in pensions.
  The Crossman scheme dated from a sudden speech which he was called upon to make at the Labour Party Conference in 1955. Replying to a debate on pensions, and in order to avoid defeat, he committed the Labour Party to national superannuation. As a conference speech it was a great success. The only trouble was that nobody on the national executive knew what national superannuation actually was. Crossman was asked what it was, and his endearingly frank reply was, "I'm not sure myself. I've got a pamphlet on it. I have just read it. It is marvellous". But events have moved on. The pensions task has been passed on not to the Dame of Whitehall but to the Secretary of State for Social Services, who perhaps will excuse me for calling her the Dame of the Elephant and Castle.
  I know that the right hon. Lady now has to leave us, but I am sure she will concede that whatever divides us on policy and methods, there is no monopoly of concern on this subject. The elimination of poverty in old age is an aim common to all parties and to all Members of Parliament. It is one of the tragedies that this whole area has been bedevilled by uncertainty in the last few years. As we pointed out in our Paper "Strategy for Pensions". as long ago as 1971 the Government said,
  "The present state of uncertainty about the development of State and occupational pensions has lasted too long and must be brought to an end. Pension provision can only thrive when there is confidence in the future."
  The aim of a second pension described by the right hon. Lady as opposed to basic pension is a principle which we welcome. We are also encouraged by the concessions which the Government have announced for the occupational schemes—concessions for which we and the pension industry pressed. We hope that those concessions are a statement of intent by the Government.

  1503
  Another reason why we should remember Richard Crossman is the refreshing frankness which he brought—certainly in retrospect—to what could reasonably be expected from a pension scheme. We should be equally frank today.
  In the Secretary of State's Press statement which accompanies the White Paper she observes that a scheme would eliminate means testing in old age. The same point was made by the Minister of State last month in Scotland when he said that the new scheme
  "will bring to an end the massive dependence on means-tested benefits which is the sad hallmark of retirement for millions of men and women today."
  It is right to express this as a hope. Nobody will be more glad than I if that hope is realised. Let us emphasise in our statements that essentially we are talking of the future, especially future generations of retirement pensioners. This Bill will do nothing to take any of the 2 million pensioners already dependent on means-tested supplementary benefits off those benefits.
  I enter that cautionary note for several reasons. I accept that no scheme under which pensions are gradually built up over the years can made a sudden and dramatic impact on those dependent on means testing. Nevertheless, it is important that this is understood outside this House, for otherwise the hopes of many thousands of pensioners will be raised unnecessarily.
  If, as the right hon. Lady and the right hon. Gentleman seem to suggest, the Government want to work towards ending means-tested benefits, why do they not consider how this can be done, set out their proposals in this document and give an undertaking to consider afresh the tax credit scheme proposed by the last Tory Government? That was a scheme which could lift up to a million pensioners from supplementary benefits by providing an income as of right. That would be a real contribution to the debate.
  The Bill will certainly be compared with the 1973 Act introduced by my right hon. Friend the Member for Leeds, North-East. When the Government took office in February last year that Act was on the statute book. That is a distinction
  1504
  which the Minister failed to make between the "Crossman Bill" and the "Joseph Act". By refusing to go ahead with that Act the Government missed an opportunity and wasted valuable time. They missed an opportunity, because several big companies would, by now, have had all their employees in the same sort of final salary scheme. They wasted time, because all employed people not previously adequately covered for a second pension would have started to build one up from next month. As the position stands—and I note what the Minister said—they will not start to do this until 1977 at the earliest, and in all possibility 1978.
  I do not intend to repeat all the arguments put forward in the debate last July. Many of us believe that whatever reservations Labour Members have, there was a base on which to build. Lord Houghton mentioned this when he spoke at the 1973 Financial Times Pensions Conference. He said:
  "I am convinced that it would be a great mistake for a Labour Government … to suspend the operation of the new scheme."
  Sadly, that advice was not taken. The result has been delay and an unnecessary continuance of the uncertainty which has been the complaint of virtually everyone in the pension industry. That uncertainty and delay could have been avoided had the Government accepted the 1973 Act when they took office.
  The Minister of State, Department of Health and Social Security (Mr. Brian O'Malley): As the hon. Gentleman wishes to continue with the reserve scheme and as it is common ground between the parties that it is essential for occupational schemes and pension provision to be inflation proofed, may I ask the hon. Gentleman one technical question. By what means is it possible to give a guarantee to inflation proof a money-purchase scheme, which is what the reserve pension scheme was?
  Mr. Fowler: I shall deal with that point later. I do not think that any of us made the claim that our Act was the final word. We said that there was a base on which to go forward. Clearly there is more between us then just simple timing.
  Mr. Robert Boscawen: During the gestation period of the pension scheme

  1505
  that we hoped to introduce the rate of inflation was under 7 per cent. There was nothing like the problem we have today of trying to inflation proof pensions.
  Mr. Fowler: My hon. Friend makes an absolutely crucial and central point. The right hon. Gentleman laughs, but it is a point which, as he knows as well as anyone—he has been consulting the pension industry—is absolutely crucial to the Government's consideration of the Bill. If the right hon. Gentleman does not believe my hon. Friend, he has not been listening to the representations of the industry.
  There is more between us than just timing, important as that is. There is a difference in approach. Above the basic pensions level our scheme relies on properly funded pensions, on real savings—something which I imagine the Government would also wish to promote. Apart from other benefits it is anti-inflationary.
  The Government scheme is "pay as you go." Contributions are used immediately to pay for the current cost of pensions and other benefits. The promises in the Bill depend upon the ability and the willingness of future generations of taxpayers to foot the Bill. It is a blank cheque drawn on the future. It has no anti-inflationary effect and relies upon other parts of Government economic policy, especially the fact that our tax-t ion policies should be designed to encourage rather than discourage the growth of national wealth.
  Let us be under no illusions. We are imposing a new and heavy burden on our children and grandchildren. The fundamental difference between the parties is the greater emphasis that we place upon occupational schemes. This is central to the debate. Let me summarise why I believe that our emphasis was and is right.
  Occupational schemes depend on real savings. They are anti-inflationary and the money is present to pay for the pension when it falls due. It is money saved, or deferred wages. Occupational schemes provide an invaluable source of finance for industry. If the number of occupational schemes were reduced, there would not only be a loss of savings but industry would be faced with the problem of
  1506
  finding another source of finance. Occupational schemes are inherently more flexible than the all-embracing State scheme. An occupational scheme is more sensitive to the needs of the individual. It can vary the age of retirement in line with the demands of the job and can place heavier emphasis on, for example, a disability pension in jobs of high risk. Occupational schemes can help industrial relations. They are an integral part of the terms of service and, rightly, are becoming an increasingly important subject of collective bargaining. They are geared directly to the needs of the employees of a firm.
  The advantages were summarised the other day when it was said that the occupational scheme was
  "…conducive to good industrial relations. It adds to savings on which investment is based and it can operate as a potent weapon against inflation. Occupational pension provision has therefore a vital part to play in the development of a fair and firmly-based prosperity".
  Those were the words of the Minister of State. They were fine, encouraging words, expressing sentiments which we share. Nevertheless, I am sure that the Minister will not expect us to rely entirely on those words. He will expect us to examine the fine print of the Bill, to decide what are the prospects of these hopes being realised and to attempt to judge the economic context in which occupational pension schemes will be operating.
  It is true that this Bill makes concessions as compared with the earlier White Paper. These followed the right hon. Lady's consultations with the pension industry, which we have been consulting, too. We welcome the direction of those changes. It is right to stress at once that the first fear and concern of those involved in providing occupational pensions relates not to anything in the Bill but to inflation. The Minister of State yesterday went to Scotland to talk to a conference held by the Faculty of Actuaries. As he knows, the Faculty has undertaken to let me have a summary of its views. One fear common to virtually every speaker at that conference was the fear of the effect of inflation on occupational schemes. That is shared by the entire pension industry.
  Mr. O'Malley: There will be no disagreement between us on this. What the occupational pension movement and the professional bodies are worried about is not inflation per se but the fact that wage inflation is moving at a higher rate than the yield on investment. If that situation were to continue for a long enough period it would create immense difficulties for final salary schemes. It is the gap which is worrying the industry.
  Mr. Fowler: I am grateful to the Minister of State. That is exactly the point I was coming to.
  The Bill proceeds on a number of assumptions which, as the right hon. Gentleman says, crucially affect the contracting-out arrangements for occupational schemes. The Bill assumes that average earnings will rise by 8 per cent. a year and that prices will rise by 5 per cent. a year while the occupational schemes will get a 9 per cent. return on investment—1 per cent. above the figure for annual earnings.
  The last figure is crucial. I am sure that the right hon. Gentleman, being a fair man. would concede that at the moment these are certainly big assumptions. When does the Secretary of State think we shall reach that happy position of a 5 per cent. annual price increase? Does she expect that position to have been reached by the time the Bill comes into operation? I see in the Daily Mail this morning that the current assumption of the Government is that the rate of inflation over the next 12 months will be about 22·6 per cent. These are the working assumptions. The fact that inflation currently makes a nonsense of them reveals the desperately serious prospect for better pensions.
  If the present rate of super-inflation continues, or worse still degenerates into hyper-inflation, no State or occupational scheme could hope to keep pace. We can only hope that in the Cabinet deliberations that take place the Secretary of State is sturdy in her warnings on this.
  We should be under no illusion about the position. Pensions are not something which can be considered in isolation from other economic policies. The Government Actuary makes the assumption that the rate of investment of occupational schemes will be ahead of the increase in average earnings. He is right, because
  1508
  unless that happens the outlook for the occupational schemes is hopeless. In turn, that means a profitable private enterprise system for the economy, a point acknowledged by the right hon. Gentleman when he appeared on the "Money Programme" earlier this month. It is a point which will have to be acted on by the Government in restoring confidence and profitability to British industry.
  The occupational schemes depend for their existence on private industry being profitable. So, too, do millions of members of those schemes. All the words in the world will not solve this problem. It needs determined and united Government action. At the moment there are over 11½ million people covered by occupational pension schemes. Of these, about 8 million are in schemes based on final salaries. The report by the Government Actuary on the financial provisions of the Bill is remarkably cautious about the number who are expected to be members of contracted-out schemes. Yet if, at the least the 8 million employees already covered by final salary schemes are not contracted-out the effect on savings and investment will be serious.
  If these schemes are forced to adjust and to sit on top of the new State scheme their scope and contribution would be reduced. That is why we should take serious heed of the warnings from the occupational schemes. Only last week Mr. Gordon Dunlop, the Chief Executive of Commercial Union pointed out that in present inflationary circumstances, open-ended commitments made to staff by companies operating pension benefits tied to final salaries were:
  "a high road to bankruptcy".
  His warning deserves repeating. In 1970 the pension contributions by that company amounted to 10 per cent. of the total salary bill. By last year the figure had risen to 25 per cent. This year it is expected to rise to at least 30 per cent. If that trend were to continue staff pension costs would be equal to the total salary bill by 1980.
  Commercial Union is not alone in this. I gather that since the publication of the report a week ago other companies have been in touch, telling it of similar difficulties which they face. Maurice Oldfield, who manages Allied Breweries' scheme

  1509
  has also pointed out the difficulties his scheme will face unless inflation abates. I think that he appeared on the same programme as the right hon. Gentleman. He said then that the Allied Breweries scheme was faced with a return on its investment which was 3 or 4 percentage points lower than the rise in prices and lower still than the rise in average earnings. He went on to say that if that sort of situation continued for more than three or four years it would not be possible for occupational schemes to continue in their present form.
  The stark truth is that unless inflation reduces there will be many schemes which will have to cease final salary arrangements simply because they cannot afford the topping-up required. If that happened many people would end up, not better off in retirement, but considerably worse off. What we should now consider is whether the Bill provides means by which these 8 million people are likely to be contracted out.
  The right hon. Lady has made two important concessions about contracting-out. The first is in respect of early leavers, those who leave the firm but retain a preserved pension. The effect of the change is that the scheme now faces a known annual commitment of 5 per cent. to meet the cost of inflation. As I understand it, it is not intended that occupational schemes should be excused in respect of any balance over 5 per cent. What is intended is that they should make a once-for-all payment to the State scheme. I ask the Minister to tell us what precisely are the calculations involved here and what consideration has been given to Maurice Oldfield's suggestion that liability should be confined to the 5 per cent. without any question of a lump sum.
  Mr. O'Malley: I thought that Maurice Oldfield was joking. I thought that his suggestion was not serious. It was never put forward formally by a large number of organisations which discussed the matter with me. I think that Maurice Oldfield was—I say this with no rancour —trying it on in a pleasant way during a television programme.
  However, I should like to help the hon. Gentleman with this matter. The type
  1510
  of proposition now contained in the Bill was brought to us by him and was suggested by more than one organisation. Since I understand that the pensions business is anxious to have detailed information on the matter, I hope to issue draft actuarial tables shortly. These will illustrate the cost of the State scheme premiums for scheme leavers where the scheme has chosen to limit the liability for revaluation in GMP to 5 per cent. per annum. A copy of the draft tables will be available in the Library of the House and they will be published on the first possible date. I hope that will be of some assistance to the hon. Gentleman.
  Mr. Fowler: The last part of the right hon. Gentleman's statement will be helpful and widely welcomed. I am not sure whether the occupational schemes will welcome his remarks about Maurice Old-field joking, since a number of people have said that we need to consider what I take to be an absolute rejection of that point.
  It is possible to go further, for the concession does not affect the inflation-proofing liability of contracted-out occupational schemes in respect of those who remain with their firms for the whole of their working lives until retirement. Here there is a largely unknown commitment to revaluing in line with average earnings in respect of the period up to the date of the award of the pension. Perhaps the Minister of State will say whether consideration has been given to the suggestion of limiting the liability of occupational schemes to a specified rate of inflation in the same way as is proposed for early leavers.
  The second concession announced by the Government is the contribution reduction for members of contracted-out schemes, which has been increased by ½ per cent. to 7 per cent. The reason given is that the assumptions about the level of interest rates and increased earnings are subject to a margin of error, and the ½ per cent. is suggested to compensate for that risk, although the Government will realise that many in the pensions business believe that that figure does not appear to compensate them for the risk they are taking. Will the Government accept that as a general proposition?

  1511
  I revert to the point made by my hon. Friend the Member for Lancaster (Mrs. Kellett-Bowman), since it was not taken up by the Minister. A feeling is developing that there should be different contracted-out contributions for women, or perhaps a generally greater contribution reduction. The grounds are the simple actuarial reasons that women on average live longer and retire sooner. There are some fears that if a concession of this kind is not made it could have an effect on the decision to contract out. My hon. Friend made that point. There is a fear that firms who offer good occupational schemes, but who employ a high proportion of women, may decide not to contract out unless they obtain an arrangement of this kind. That would not be in line with the Minister's policy, which we support, of increasing the rights of women.
  We believe that we must achieve a contracted-out target of at least 8 million people who are now covered by occupational schemes. We would welcome an assurance from the Government that that is also their target. If that is the case, three actions are urgently necessary. Urgent steps must be taken to control inflation and to restore profitability and confidence in industry. Contracting-out arrangements, at least for the first five crucial years, should be made more generous.
  To those who argue that what we are proposing is over-generous, I answer that in present circumstances some special inducements are necessary. In a situation where the return on investments is nowhere keeping pace with the rise in earnings and prices, such inducements are justified. A special effort is needed to persuade firms with good schemes to contract out rather than simply sit on top of the State scheme.
  To those who argue that the State will gain in contributions if only a small proportion of occupational schemes contract out, I answer that the effect over the years will be a growing liability on the State scheme which will increase the burden of pensions costs on future generations.
  My hon. Friend the Member for Rushcliffe (Mr. Clarke) will deal with some points in more detail. However, I
  1512
  should like the right hon. Gentleman to consider this point: the industry-wide occupational schemes must be organised on money-purchase lines. Under the 1973 Act such schemes could have contracted out. I cannot see how they can meet the contracting-out requirements of this Bill. However, they are valuable schemes, and the Minister of State, as I understand it, would like to see such schemes retained if a formula can be found. It will be impossible to retain the provision that the scheme must provide at least equal provision to the guaranteed minimum under the State scheme, thus dropping the final salary condition. That is one suggestion being made.
  Second, there is the question of the married woman's option. My hon. Friend will deal with that matter in more detail. However, at present approximately three out of every four married women in paid employment have opted not to pay the full national insurance contribution. They have weighed up the advantages and the disadvantages and have come to that conclusion. Many of us feel that they want to maximise their take-home pay, and in many cases there are very good reasons why they should do so, the obvious ones being the need to bring up children and to help pay for the mortgage.
  We have debated before and disagreed on the matter of the self-employed. Our disagreement has not concerned the principle of paying more for better pensions. We have disagreed about whether the self-employed have been given a disproportionate increase. That is the difference. Nor, to put it at its mildest, are we happy with the suggestion of the right hon. Member for Bristol, South-East (Mr. Benn)—in his unofficial and, as far as I can see, entirely uncalled-for proposals—that even greater burdens should be placed on the self-employed. We welcome the fact that the Government are now re-examining the position of earnings-related pensions for the self-employed. The right hon. Gentleman will know the feelings of the self-employed on the subject. We appreciate the difficulties and we do not try to minimise them, but we urge that that review should be as urgent as possible.
  The Opposition have questions and major reservations on the Bill. I am

  1513
  conscious of the uncertainty which affects the pensions business. We must ask the crucial question of what is best for the occupational schemes. We have sought to take as much advice as possible from those concerned with pensions. Their advice is overwhelmingly that we should proceed on the basis of the proposals contained in the Bill. We seek amendments to the Bill but we are endeavouring to provide a base for development. For instance, the CBI says that employers are anxious for a firm, long-term basis pensions, agreed by all parties, as soon as possible. The CBI think that the structure of the Bill could provide an acceptable and workable basis. A well-known firm of pensions consultants said that most of us have reached the stage where we do not want to see yet another set of plans sacrificed. Similar advice has come from many other quarters. For the purposes of the Second Reading debate, we are prepared to accept that advice. We are prepared to reserve judgment. We shall press for amendments in Committee, and we shall review our position on Report and on Third Reading.
  The ball is now firmly in the Government's court. I say only that in many ways this is a crunch issue for them. They can achieve the partnership with occupational schemes that they say they want only by policies which not only recognise but encourage the private enterprise system. If they want partnership, that is what they are committed to, and there should be no mistake about it. They can achieve the better pensions that they promise only by tackling inflation. Unless they do that, pensioners of both today and tomorrow face a bleak and cheerless retirement.
  6.0 p.m.
  Mr. Bruce George: Many Government decisions are still operative after a decade or more. Some Government decisions are destined for considerably shorter lives. It is an irony that pensions legislation which is intended for future generations has a regrettably short life. The two predecessors of this legislation were rendered obsolete by the General Elections of 1970 and 1974. I wish this piece of legislation more luck than its forerunners.
  This Bill is superior to both. In some ways it is an amalgam or, in parts, pos-
  1514
  sibly a synthesis. Clearly it has not only developed new ground; it has learned from the mistakes of the previous ventures. I compliment my right hon. Friend the Secretary of State and my right hon. Friend the Minister of State and his team of civil servants and advisers for their prodigious efforts in producing this legislation. It is to my regret that such an important piece of legislation appears to have generated an attendance falling somewhat short of the ideal. This was commented upon by the hon. Member for Sutton Coldfield (Mr. Fowler).
  We have heard a lot today about manifesto commitments which have been honoured. I should not like this opportunity to pass without again complimenting the Ministers for honouring what was one of the central planks in the Labour Party's manifestos in February and October. This is a substantial step forward in social legislation and embodies many of the basic principles upon which the Labour Party was founded.
  Few would dispute the need for this legislation. Governments of both parties have spent years arguing about new pension schemes. The scheme that we are now operating is a hotchpotch of past failures, and not many people can be found who would defend the existing structure and system. Now most political parties, both sides of industry and the organised pension interests recognise the need for a fundamental change.
  Most agree that the means-tested basis of State pensions ultimately is unacceptable. We have more than 8 million pensioners, and their numbers are increasing. One in four of our pensioners depends on a means-tested supplementary pension. Many pensioners are forced to be means tested to gain what is a living pension and, as we are all aware, many pensioners who are entitled to an increase in their pensions simply do not claim and thereby have a standard of living which is much too low.
  Despite the commendable way in which this Government have acted, today's pensioners are in a serious situation. We are all in difficulties in an inflationary situation, and we heard at great length from the hon. Member for Sutton Coldfield, although we did not hear about the partial responsibility of his own Government for the present situation.

  1515
  Since coming to office a little over a year ago this Government have had as their fundamental goal the abolition of poverty and of the problems associated with it. Where Governments have been unsuccessful in the past is that their approach to tackling poverty has been piecemeal, doing a little here and a little there. No Government have adopted an integrated approach to combating poverty. I feel certain that we have gone a long way along the road to adopting a much more integrated approach. We have recognised the areas of poverty—the disabled, one-parent families, the low paid and the pensioners. We must not treat each as an independent unit. In many ways this legislation is integrating the approach to the problems of these separate groups.
  This Bill is one of the weapons in the Government's armoury. At long last a good pension will be a right. In the past pensioners have suffered from the traumatic experience of a sudden and disastrous collapse of their living standards upon retirement. I am reminded of an advertisement which used to appear regularly in our newspapers. It was composed of a series of drawings. The first showed a man in his twenties. He had no problems about facing the future. The succeeding drawings showed him getting progressively older with his problems becoming greater. When he was in his fifties the prospects of facing retirement without an adequate pension were worrying to the extreme.
  As a result of this legislation, which I hope will sail through Parliament largely unamended—and, if there are to be amendments, I hope that they will be genuine improvements and not aimed at destroying the objects of the Bill—we shall see a situation where the benefits at present accruing to some members of private occupational pension schemes will be enjoyed by all. I say "some members". The hon. Member for Sutton Coldfield delivered a eulogy to private occupational pension schemes. In some cases this is merited, but in many other cases the criticisms which can be made of them are significant. I shall return to them in a moment.
  We want to see that ordinary citizens, regardless of the schemes in which they are involved, will receive on retirement pensions which not only are adequate
  1516
  but will represent a proper reward for some 40 or 50 years of service and hard work for the State. It is not difficult to imagine the feelings of disillusion, bitterness and cynicism experienced by an old-age pensioner who, having worked very hard throughout his life, faces a standard of living which is a great deal lower than that which he experienced before retirement.
  It is, again, one of the ironies of our modern State that white-collar workers fortunate enough to belong to good occupational pension schemes enjoy one set of standards but that very often workers on the shop floor enjoy a completely different set of financial circumstances. Little has been said from the Government benches so far about the defects of the scheme put forward by the previous Tory administration.
  We listened with interest to the right hon. and learned Member for Surrey, East (Sir G. Howe) when on 1st July of last year he said, in a debate on a motion deploring the "arbitrary" decision of the present Government not to implement the Social Security Act 1973, that it was one of the most "destructive" decisions taken by the present Government, and he promised to "reactivate" the 1973 Act when the Conservative Party won the ensuing election. Government supporters congratulate the Ministers on taking a courageous decision in not tinkering with the 1973 Act but bringing forward their own legislation. This is to be welcomed. It must be admitted that the Conservative Party's scheme had a number of merits. Nevertheless, it displayed serious defects. Perhaps I might touch upon them briefly.
  The Guardian described that scheme as a "selfish pension scheme" It said that there were to be little subsidies for existing pensioners and those who were about to retire. Instead, the retired worker would have got out of it only that which he put into it. The Guardian went on to say that the Tory scheme was un-favourable not only to existing pensioners, but to the disabled and to women.
  Sir George Young: Will the hon. Gentleman reveal to the House the name of the author of the article?
  Mr. George: That was The Guardian editorial. I shall be only too pleased to

  1517
  show it to the hon. Gentleman at a later stage. If he prefers to go into the Library, he will, no doubt, see for himself.
  This scheme was, perhaps best described by my right hon. Friend the Minister of State who said that it was "designed as a pensions dustbin" for those whose employment prevented them from membership of a private occupational pension scheme. I hope that he has not changed his mind on that assessment and that I have not destroyed a phrase that he might wish to use later in the debate.
  Although there has not so far been a bipartisan approach to this legislation, at least there has not been the vehement opposition that might have been expected. When Ministers introduce their own schemes they often say that pensions must be taken out of the political arena. It is easy to say that when introducing one's own scheme. Despite the many words that will be spoken in Committee—if I may express my view to the Whips, I hope that I am not included as a member of that Standing Committee, although speakers in Second Reading debates often find themselves upon such Committees—I hope that the Bill will go through largely unscathed. I am sure that it will he greatly welcomed by present and future pensioners. I am not aware of any opposition by organisations representing the poor or many pensioner groups. There has been opposition, but not necessarily from those sectors.
  Mr. Kenneth Clarke: I think that the hon. Gentleman will find that Age Concern has made some critical comments about the scheme. I speak from memory about which organisation it is. However, it has taken the criticism that the hon. Gentleman was quoting against our scheme—namely, that this plan does nothing for existing pensioners. I accept that that criticism could be levelled at the 1973 Act. Does the hon. Gentleman accept that the same criticism can be and is being made about this legislation? In reaching a bipartisan approach we must work for the future. But the Bill does nothing for existing pensioners.
  Mr. George: I have not read the article by Age Concern. However, the Child Poverty Action Group has given a great
  1518
  deal of support to this legislation. The hon. Gentleman has accused us of not catering for present pensioners. No doubt my right hon. Friend will expand on that point in detail later. The Tory scheme would have been fully implemented seemingly almost a century after it was first proposed. The hon. Gentleman really cannot criticise us for delaying the implementation of the full scheme because it is a considerable advance on the one proposed by the Tories.
  Mr. O'Malley: I think that my hon. Friend will agree that we cannot allow the hon. Member for Rushcliffe (Mr. Clarke) to get away with comments on this Bill taken in isolation. This Bill is only one prong of the Government's pension policy. The other prong is increasing the level of retirement pensions by almost 50 per cent. between July 1974 and April 1975.
  Mr. George: I am grateful to my right hon. Friend for mentioning that point.
  There are similarities between the two schemes, but I should like to point to some of the distinctions. One distinction is in the treatment of women. One newspaper described the Government's scheme as being "over-generous" to women. The Opposition may have made a contribution towards women's rights by selecting the right hon. Member for Finchley (Mrs. Thatcher) as their leader. However, I suspect that this Government have made a much greater and more lasting contribution to women's rights by many of the provisions in this Bill. If the Tory scheme had been implemented women would have received a lower pension than men even if they had the same earnings and contributions record. This may be the result of the difference in retirement ages between the sexes and the regrettable fact that women live longer than men. We must note that women receive their pensions three times longer than men.
  Women's organisations in my constituency and nationally generally recognise the improvements in their position brought about by this legislation. I am particularly interested in the response by widow's organisations because I am secretary of the All-Party Parliamentary Group on Widows and One- Parent Families. This Bill is recognised as a significant

  1519
  advance for widows. This legislation recognises the discrimination against women and advances are being made to counter it.
  A second difference is that the Government have adopted a formula which will lead to more redistribution than under the Conservative Government's scheme. This is not surprising. The scheme is favourably disposed towards the lower paid. For example, a man earning£20 a week would receive a pension somewhat in excess of his average weekly wage.
  A third difference is that the Government's pension scheme is calculated on the best 20 years' earnings of an individual. I have some reservation about pensions based on a man's final earnings. Many working class men, if I may be excused for using that term, reach their earnings peak long before they retire. Therefore, by taking the best 20 years we are giving advantage to those at the lower end of the economic and social scale who have not so far benefited from previous pension schemes.
  A fourth difference is that the Government's scheme is more successful in protecting those who are involved within it against the ravages of inflation, referred to at some length by the hon. Member for Sutton Coldfield.
  I turn now to private occupational schemes. There has been criticism of our proposals as being an attack on private pension schemes. I believe that the Government embarked on a lengthy process of consultation with those responsible for occupational pension schemes and a number of their suggestions have been incorporated in the Bill. Indeed, it does a great deal to encourage private schemes. There are few on this side of the House who would not want schemes of that type to prosper in future. Some schemes are very good, but others have a patchy record.
  The White Paper pointed out that a survey in 1972 showed that the average pension was £6 per week and that for about one-third of those in private schemes the pension was less than £2 a week. As the survey was carried out in 1972, we must adjust accordingly. We should realise with a greater air of realism that private schemes do not bestow upon the recipients a particularly high standard of living. Many people who contribute
  1520
  to private schemes find, following retirement, that their positions are only marginally superior to those in the State pension scheme. In some cases these schemes are unfavourable to those who die before reaching retirement age. That poses great problems for widows.
  Private pension schemes are far from being universally regarded as successful or ideal. We want to see them prosper. I believe that the Government's proposals will permit integration between private and State pension schemes so that both will prosper and benefit.
  Mr. Arthur Palmer: Does my hon. Friend agree that there is a wide range of occupational schemes in the publicly-owned industries and the co-operative movement, and that some are a model for funded occupational schemes generally?
  Mr. George: I agree with my hon. Friend about that.
  I commend the Bill to the House because it is relatively simple and fair. It is a consolidating measure which will simplify for the benefit of those interested in social security previous pieces of legislation. It will be more successful when the Government have solved the problem of inflation. We recognise that no party has a monopoly of concern or the right to say that its scheme is ideal. No doubt in future years amendments will be made to the Bill. Those who supported the Crossman scheme regarded that as the ultimate in pension provision but with the benefit of hindsight mistakes were seen, and these have been remedied.
  We recognise the problems facing people in old age. We do not want people to reach retirement age and ask "Is this the reward for 40 years of service to the State? "This Bill is a landmark in social security legislation, and I commend it wholeheartedly to the House. I do not think that there is any opposition to the Bill in principle, but if there are ways in which this measure can be improved they must be supported. The Bill is supported by pensioners and prospective pensioners, and I hope that it will receive the Royal Assent in due course.
  6.22 p.m.
  Mr. R. A. McCrindle: If the hon. Member for Walsall,

  1521
  South (Mr. George) considers the Bill to be simple, the quicker we have his services on the Standing Committee the sooner the House will get through the legislation. I have never yet seen a social security Bill which I should describe as simple, but that does not prevent me from welcoming this Bill in a broad general sense.
  As one who, on several occasions recently, has suggested to the House that the time has cone to try to come close to a bipartisan approach to the whole question of pensions I must concede that the Government have moved some way from their previous position towards achieving that objective, and to that extent, therefore, I give a broad general welcome to the measure. As my hon. Friend the Member for Sutton Coldfield (Mr. Fowler) made clear, there is ample scope for extensive criticism in detail of the Bill's provisions, but that is a matter for the Standing Committee rather than for discussion on the Floor of the House today.
  Before the Government become too satisfied with and complacent about the general welcome that is being delivered to the Bill, I think one must draw their attention to the shrill comments of some leaders of occupational pension schemes. I shall return in some detail to examine the whole position of occupational pension schemes as outlined in this legislation, but I must first say quite unapologetically that I still regret the Government's decision not to build on the Social Security Act 1973. It seems to me more and more, in retrospect, that to have done so would have achieved one major objective, and that is that they would have started building towards a second pension—no matter how inadequate that may be—about three years earlier than is now the practical date for the operation of the Government's scheme.
  Be that as it may, if I am approaching this matter with a real desire to be as close to the Government as possible I must ask them to do what they can to provide a period of tranquillity in the provision of occupational pension schemes, because no industry in this country has been more subject to the ups and downs of political fortune than the occupational pension industry and it is seeking more than anything else the
  1522
  period of tranquillity to which I have referred.
  I hope that at the least there will be agreement between the parties in this House that when this legislation goes on the statute book, no doubt suitably amended, neither side will in future attack it in principle, because it is a partnership in the provision of pensions for the people of this country. But that is very different from saying that future Governments cannot and should not come back to the detail of the scheme. As circumstances change, I imagine that the need to change the detail might be high on our list, but I hope that the alteration of principle is something that we can undertake not to do, and that in the process the uncertainty of which I spoke will be ended for all time.
  Although I shall be sneaking about occupational pension schemes, I agree with the hon. Member for Walsall, South that there are some occupational pension schemes of which very few people would be proud. What we have been talking about and pursuing the interests of are good occupational pension schemes which, where they are good, are not equalled by pension provision anywhere in the world.
  I want to put on record the reason why I am a profound supporter of the occupational pension idea. I must declare an interest in retrospect. I used to be involved in the private pensions industry, but I have no interest in it now other than to secure for the people of this country the best and happiest retirement that it is possible to achieve within our means.
  The great advantage of occupational pension schemes is flexibility, an ability to respond to changes in society which it is difficult for a State scheme to do. But much more important than flexibility is the fact that they generate a real service which marks them out as totally different from State social security provision. They are funded schemes which are anti-inflationary in that they provide savings and in the process do something to combat inflation, whereas the State scheme is, of course, a "pay-as-you-go" exercise.
  I always think it is wrong for the legislators of today to have the temerity to say to the working people of tomorrow that they will somehow go on providing for our pensions when we reach retirement age.

  1523
  I believe that there are many occupational pension schemes in this country which, if they were to become the norm, would provide for a far greater degree of security in retirement than has existed until now. I regret that the scheme which we are discussing is not primarily a funded scheme.
  However, having made my criticism of the "pay-as-you-go" method, I turn my attention to the main problem which it seems to me is facing these schemes now, and is likely to go on facing them, and it is summed up in the one word "inflation ". I could not help thinking that the right hon. Lady, although she spoke of the effect of inflation, rather airily dismissed the serious problem that it is when she talked about her inflation proofing of the State part of the scheme. I hope that she will take it from me that the occupational pension world is extremely worried about its ability to go on doing what it has done up to now if inflation continues to operate at anything approaching the present rate. Without being over-dramatic, I must tell the Government that if the present rate of inflation continues, it will sound the death knell of the private occupational pensions industry.
  It is not just the industry with which we must be concerned but the pensioner —or, more accurately, the man who sees on the horizon the return for all the contributions he has made in his working life. Up to now, because of the funding of those schemes and the return that it is possible to achieve on investments, that man has been able to say at the age of 60, "At 65 I shall receive a pension equal to X per cent. of my final salary." But if inflation continues unabated, for that remaining five years he would find that what he had anticipated during his working life simply and demonstrably could not be provided. So pension managers and pensioners alike have a major interest in defeating inflation.
  I make no apology for returning to this subject time and again. Inflation is also the worry in regard to preserved pensions for early leavers. I recognise that the Government have moved some way to assist here by taking upon themselves the burden of meeting increases above 5 per cent. in the rate of inflation, subject,
  1524
  of course, to a payment. The Government have sometimes given the impression that they have intervened subject to no payment. I am sure that the Minister would underline that point. Since the whole assumption of the scale is a 5 per cent. per annum increase in prices—a wholly unrealistic estimate in the light of recent events—would the Minister not consider a change to an even more generous approach by making no payment necessary in those circumstances?
  Still with inflation as my theme, I turn to the percentage of relevant earnings which can be contracted out of the State scheme. I welcome the increase to 7 per cent., but I question whether it is yet adequate. Before the Bill reaches Committee, would the Minister give still further thought to the basis upon which this decision to increase the amount has been reached? The assumption is that earnings will rise by 8 per cent. per annum and prices by 5 per cent. and that the return on investment will be 9 per cent. In 1975 to make these assumptions is to imply that one is living in a fantasy world.
  It is wrong not to allow a higher percentage for women. I was very interested in the intervention of my hon. Friend the Member for Lancaster (Mrs. Kellett-Bowman) and I hope that the Minister will pay particular attention to it. This is not to depart from the bipartisan approach of which I have spoken, but it is a serious matter. It would be wrong of the Secretary of State to give the impression that this is the great charter for women's pensions while failing to take note that the provision for women under the heading of which I am speaking is rather different from that which she gave us to understand.
  For all the reasons that I have given, I welcome the improved climate in which I hope occupational pension schemes will operate. The industry has serious fears that the Government have still not been generous enough. I would commend to the Minister of State the statement made only yesterday by the leader of one of the Scottish insurance companies, in which the fears that he expressed about the survival, let alone the development, of occupational schemes if inflation continued at anything like its present rate were underlined. The Government cannot

  1525
  ignore the fact that, if they truly want—I accept the sincerity of their intentions—to encourage the development of good schemes, they must bear ever in mind the virtual impossibility of doing so at present rates of inflation.
  It is a good step that the pension should be based on the best 20 years rather than the period immediately preceding retirement. Up to now the majority of occupational schemes have extended only to clerical and managerial people, so that the latest period of earnings was appropriate, but now that there is to be encouragement for moving those schemes to manual workers it is right to recognise that the manual worker's best period is not always—in fact, is hardly ever—that immediately preceding retirement.
  It is good that women will enjoy equality. I always accepted the Government's criticism when they came to office of the Social Security Act 1973 in this regard. I suggested to the Minister that the whole egg need not have been unscrambled and that an improvement in the situation for women could have been grafted on to the Act. That, however, is history, and I welcome the opportunity for equality of treatment.
  What I am not so sure I can welcome is the determination that women will have equality whether they like it or not. The phasing out of the married woman's option is not necessarily a part of this Bill. The Government could think about it again without failing to introduce a considerable reform in social security provision. I am glad that, so far as it goes, the Bill will benefit some of the lower-paid, although in Committee the Minister will have to examine closely whether the extent of the claim that the Government make in that regard is quite as valid as recent departmental hand-outs would have us believe.
  On balance, I greatly welcome the Bill. It underlines the partnership which can now truly exist between the occupational pensions world and the Government in the shape of national provision. I believe that it recognises the fact that to defuse pensions as far as possible from party politics must be welcomed on both sides. Although it has defects, not the least of which is that it is an unfunded scheme, nevertheless today we can almost celebrate a major move forward. I hope that the Bill will get a Second Reading and
  1526
  that in Committee the Government will listen to reasonable objections and amendments.
  6.38 p.m.
  Mr. Ted Graham: It is a pleasure to listen to all the expressions of amity today, although there will undoubtedly be some in-fighting in Committee concerning some of the precise details. I take very much to heart the cries from both sides that now is the time for all good men to come to the aid of, if not a good scheme, at least a scheme which can give continuity. It is a good scheme, certainly a better scheme in the earnings-related benefit that it gives than the previous one. The hon. Member for Brentwood and Ongar (Mr. McCrindle) talked about a period of tranquillity, if not exactly trouble-free, when those engaged in running the business and those involved by the business could be free of undue influence and interference.
  I also offer my warmest congratulations to the Government in general and to my right hon. Friends the Secretary of State and the Minister of State in particular. Although it has been said that this is a simple Bill, undoubtedly a great deal of time and detailed work has been put in by the Ministers and their civil servants.
  No party has a monopoly of concern for the aged or for pensioners. Clearly, what we are doing now will be looked upon in five or 10 years' time as being capable of improvement, just as tonight we are recognising that the prospective legislation of five years ago could have been improved and we are taking such opportunities now.
  I look upon the objectives of the scheme as being to encourage private thrift, prudence and sound financial provision and to aid good industrial relations for those who wish to make them. But all of this is against the background that it is the job of the Government to en sure that every person in the land is able to enjoy as of right proper provisions of a comprehensive nature which are provided by the State. As I see it that is what the Bill sets out to do.
  There are interests outside the House which have not been involved in the consultations but which very much appreciate the reactions of Ministers in those

  1527
  consultations and the improved terms for contracting out which the Bill provides. They are very much welcomed by, among others, the Co-operative Union, acting on behalf of co-operative societies. Perhaps we would say that the terms go far enough—but there is a question mark—to ensure a partnership between private schemes and the State scheme. Only time will tell whether that which appears today to be sensible and reasonable does not require change. Certainly, however, there is great appreciation among those whom the Minister of State has consulted about the willingness—" compromise "is not the right word—to see the realities of the situation.
  I am duty bound to point out, as have a number of hon. Members already, the grave defect—almost an Achilles heel —of many of the schemes which is almost written in or cannot be written out—that is, the effect of inflation. I do not share the view of the Opposition that the Minister appeared to be sanguine about this and was saying that it could be left to take care of itself. Perhaps the Minister of State's winding-up speech in reply will help to ease the burden. Undoubtedly, unless inflation is halted it could be beyond the interest-earning capacity of any pension fund to keep pace with it.
  I am a member of a board of directors of a co-operative society. In these days we frequently find that because of inflation, in addition to the normal provision that needs to be made for a pension fund additional sums need to be found on an actuarial basis to ensure that the fund is properly funded. Undoubtedly the shortfall between that which can be earned properly and that which is needed to pay out from the fund is a great problem.
  I want to comment on the self-investment aspect of the contracted-out schemes. It is generally acknowledged that a person who puts all his eggs into one basket is imprudent. It is not a good thing for a pension fund, in particular, to invest all its funds inside its business, because if something happens to the business not only does the business go wrong but the security of the dependants of the employees goes wrong also.
  We have had some odd experiences recently in which people who have
  1528
  Invested all their pension funds outside their business, particularly in equities and the property market, have found that it is not always the right thing to invest them at risk in certain other fields. There is a wide fluctuation in the capital values, and the going rate that can be earned can often prove inadequate. Even so, over the last 18 months well-secured self-investment has seen the capital sum protected while the rate of interest that could be paid by the business to the investment could be adjusted accordingly—obviously in the last two years, upwards.
  The irony of the nationalised industries and the investment policy for their pension funds ought not to escape a debate of a general nature such as this one. We have the problem that the pension funds of the nationalised industries invested outside those industries provide a great source of capital for the private sector. Speaking from the Government side of the House I find it ironic that much of the private sector is funded and capitalised by the pension funds of nationalised industries when those industries are seeking to obtain capital abroad against the background of Government guarantees. We are entitled to ask whether suitably secured self-investment of pension funds, obtaining good market rates, would give the consumer a better provision. After all, at the end of the day it is the consumer who pays for the nationalised industries. I would very much welcome greater evidence of investment inside the nationalised industries of the pension funds of those industries.
  Sir George Young: Perhaps the hon. Gentleman will deal with the question of the Post Office pension fund, which was deemed to be invested in Government securities. The deficit of several hundred million pounds which resulted was solely because it was not invested outside the business. It was invested within the public sector and it depreciated at a sensational rate.
  Mr. Graham: I understand the hon. Gentleman's question, but I am unable to answer it in detail.
  The point I am trying to make is that it is unwise to be too restrictive about the manner in which the pension funds of a large organisation may be invested within the business. It is all a question of

  1529
  balance. I appreciate that the management of pension funds is not only important to the pensioners but is a real art that needs to be practised, and practised successfully. I certainly want to see more of the investments of pension funds of nationalised industries being invested within those industries.
  I conclude by commenting on the good occupational pension funds and particularly those which are managed within the co-operative movement. The co-operative movement and co-operative societies pioneered pension funds in retailing from the 1920s. They did so at a time when it was not fashionable for many of their competitors to bother even to think of providing a pension for their employees. The co-operative movement did this when labour was far from scarce and its trading competitors would not accept the added costs of a pension fund in addition to the cost of employing people.
  Many of the schemes operated by cooperative societies are self-invested. This is a very important point. They are secured by a prior charge on assets. Many of the shops of co-operative societies are well depreciated. They are of good standing. They are freehold. They are an excellent form of investment. The nature of co-operative businesses is very wide and can carry this kind of investment. I hope that the plans to which I referred earlier will pay due regard to this matter.
  I was heartened and pleased when my right hon. Friend, referring to the manner in which the regulations are to be drawn up by the Occupational Pensions Board, said that the regulations would not include anything unreasonable or impracticable. The policy on self-investment is something which I hope will emerge from discussions and regulations and will be considered in a favourable light by those affected.
  I give the Bill the warmest welcome and I congratulate the Government on keeping an election promise. I look forward to our people being more secure than ever in their old age.
  6.50 p.m.
  Mr. Paul Dean: I begin by declaring an interest in pensions and insurance. This is the third major Bill on pensions in the last six years and many of us, as has emerged
  1530
  already from the debate, hope that it will be third time lucky. The Crossman scheme came and went and the 1973 Act came and mostly went, and now we are left with the present Bill. We simply cannot go on like this any longer. While one set of politicians produces a pension scheme and the next lot scrap it, it is the pensioners who are the main sufferers.
  There has been instability and uncertainty for much too long, and I hope that this time we shall get an agreed and therefore, enduring scheme. As a former pensions Minister, I am prepared to put aside some of my misgivings in the interests of stability and agreement. After all, pension schemes involve long-term planning and occupational schemes need to know what the State scheme is doing if they are to make the right kind of progress. They cannot plan ahead with confidence if the State is always changing the rules.
  I therefore welcome the Bill in general terms and I give credit to the Minister Of State. He said that he would consul, he has consulted and he has responded to those consultations. He has not gone far enough, but he has met two major points to some extent. If he continues in that spirit I very much hope that on Third Reading we shall be able to say from both sides of the House that we have a scheme which we can work and which we do not intend to change if there is a change of Government at the next General Election.
  Against that background I have one or two brief points to make. First, the Bill depends, as did it predecessors, on a partnership between the State scheme and occupational schemes. My hon. Friend the Member for Brentwood and Ongar (Mr. McCrindle) mentioned how significant the partnership is in this scheme. The reason is that the Government are relying not only for the basic pension, as is normal, but also for the earnings-related element on the pay-as-you-go principle. I forget what the ghastly jargon for that expression is. There is no saving, no funding and no investment. I therefore judge that the success of the Government's strategy on the pay-as-you-go principle, with all the dangers it involves, relies to a very large extent on a substantial number of people depending for their second pension on schemes

  1531
  which are funded and on schemes which are providing the seed corn for future investment and prosperity. In this sense, therefore, the partnership which the Government are creating is highly relevant.
  The pay-as-you-go part of the Government's scheme depends therefore on the savings part, and unless both elements prosper the whole scheme could easily founder under the sheer weight of cost. One of the disturbing aspects of the Secretary of State's speech was that she said very little about the substantial cost which will be involved in meeting the benefits which the scheme envisages.
  I agree with the point that my hon. Friend the Member for Brentwood and Ongar made about the threats of inflation. There is a danger that we may be lulled into a false sense of security by words like "inflation proofing ", which appear throughout this scheme. In theory they sound fine and we would all agree with the theory. We wish to see this put into practical operation, but with earnings inflation and price inflation running at their current levels, and comparing the two with the rate of return on investments, we are forced to conclude that such a situation cannot continue indefinitely without every scheme being undermined.
  I am one of those who believe in many respects that pension schemes, because they involve long-term investment and because they depend much more on an annual return to meet the pension bill rather than on having to realise investment, are able to weather economic storms more effectively than almost any other type of investment one can think of. However, even they cannot stand the strain of those harsh inflation statistics indefinitely. It is therefore very important if the scheme is to have any hope of being translated into practical effect that we should find ways in which this level of inflation shall be moderated.
  The other reason why the partnership is as important in this scheme as in any of its predecessors is the growing realisation on the part of more and more employers and employees and their trade union representatives that pension schemes and other employee benefits are now an element of good employment policy. The more that develops, the more
  1532
  will pension schemes be regarded not as remote and beyond discussion and consultation but as central to the negotiating process. This is to be warmly welcomed and it is one of the reasons why pension schemes will be increasingly significant in the future. They are elements of good industrial relations as well as providing security for men and women at work and for their families. There are, therefore, sound economic industrial relations and social reasons for the development of these schemes, and I think that the Bill provides a basis for that to happen.
  I shall mention only three points concerning occupational schemes. The first concerns the early leaver. I welcome the change that the Government have made in the Bill from the open-ended commitment to inflation-proofing the pensions of early leavers to the proposal of 5 per cent. plus a lump sum. I welcome the fact that the Minister of State in an intervention said that the prescribed actuarial tables referred to in the Bill will be published shortly. I believe he will agree that it is not possible to assess the value of his proposal unless one has the actual tables. I hope that in replying to the debate he may give the House a little more of his thinking on the way the Government have decided upon 5 per cent. and a lump sum rather than a higher percentage without a lump sum, since the reason for this is not immediately obvious.
  I can see the disadvantages of a lump sum in that one of the reasons why men leave their job is redundancy, the decline of a business or something of that kind; and, on the face it, an employer faced with having to pay a lump sum at that time might find it something of an embarrassment to him. It would help future discussions if the Minister could throw a little more light on that.
  Next, on the contracting-out figure, I welcome the move made by the Government from the original 6½ per cent. to 7 per cent. I do not believe that 7 per cent. will be quite enough, in particular in relation to schemes including employees of above-average ages and a substantial number of women. First there is the scheme with a labour force of higher than average age—for example, in the textile or some other industries which are tending to decline but which may have

  1533
  schemes at the present time or might wish to introduce schemes.
  If, as is often the case, the labour force tends to be on the high side, it will be found that the 7 per cent. figure probably is not adequate to provide the benefits that need to be provided to qualify for contracting out. This could also apply to some of the co-operative societies mentioned by the hon. Member for Edmonton (Mr. Graham). But even more striking is the case mentioned by my hon. Friend the Member for Lancaster (Mrs. Kellett-Bowman) of a scheme with a substantial number of women. It can easily cost a pension scheme 40 per cent. or 50 per cent. more to provide benefits for women because they live longer and for other reasons with which the House is familiar.
  I put it to the Minister of State, therefore, that there is a case for having special arrangements for these two aspects—age and the number of women in a scheme—or alternatively, if the Minister of State says that that would complicate things unduly, there is perhaps a case for having a higher than average figure to try to accommodate these schemes.
  My third point concerns money purchase schemes. One of the disadvantages of the double-barrelled contracting-out proposals in the Bill is that money purchase schemes cannot be readily accommodated within the contracting-out proposals. I know that the Minister of State is sympathetic to the good money purchase scheme and above all to the industry-wide scheme. In many cases it is simply not possible for every individual employer, either due to size or to the substance of his labour, to provide a scheme for himself.
  If, however, an employer could join in an industry-wide or federated scheme run by a chamber of commerce or something of that kind, it would be possible to provide the benefits up to the contracting-out level. I hope very much, therefore, that for schemes of these types it will be possible to devise a contracting-out arrangement without unduly complicating the Bill, so that good schemes of this kind will be able to continue and to provide cover for their members.
  In her opening speech the Secretary of State said that she hoped it would be possible for the scheme to start in April 1977
  1534
  rather than April 1978. I hope so, too. I have not yet heard any good reason why, assuming that the Bill receives Royal Assent in the summer and that the regulations are available in the early autumn, it should not be possible to start in April 1977 rather than April 1978. It would allow the same time for the work to be done as was the case with the 1973 Act. Some of the work which was done for that Act is relevant to the present Bill. Although I should not want to underestimate the great amount of work that has to be done in the Department by the Occupational Pensions Board, within industry itself and by the pensions experts, I believe that there is everything to be said for having the interval between Royal Assent and the coming into operation of the Act as short as possible, bearing in mind the work that has to be completed.
  I welcome this Bill in principle. I welcome the fact that the Government have already listened to the serious criticisms which have been made and have gone some way to meet those criticisms. I hope that the Government will continue in this spirit because, if they do, we may at long last have an agreed and enduring scheme. When we get that, the prospects for pensioners, present and future, will be brighter than they are at the moment.
  7.7 p.m.
  Mr. J. M. Craigen: I, too, welcome the Bill in general principle. While there is universal agreement that better pensions provision is something for which we should all strive, I find that there is noticeably less interest in the actual mechanics of how we achieve better pensions. This is in part reflected in the rather poor attendance in the House this evening when we are debating this fundamental measure. As has been said, it has taken us some time to reach this stage where we are debating one of the most fundamental changes in pensions policy since the war.
  I would hazard the thought that perhaps the circumstances surrounding the birth of this Bill are no less favourable than those which surrounded the Beveridge national insurance scheme when it got off the ground in the immediate after math of the Second World War. It seems to me that in some ways the problems

  1535
  of the 1970s and 1980s are more formidable than those of the late 1940s, because this Bill is being launched at a time when inflation is a major threat, when unemployment is a matter of growing concern to all of us, when tax policies are being questioned by an ever-increasing number of working people and when changes in the pattern of employment will become a matter of growing interest and concern.
  The Secretary of State for Social Services spoke of the fresh start which she hoped the Bill would provide. There is certainly a need to end the scourge of 2 million pensioners on supplementary benefit. This Government have a very fair and commendable record in the field of uprating pensions since they came to office last March. Here it might be appropriate to pay some small tribute to the work that goes on, both in the Department of Health and Social Services head office and also in the many district offices up and down the country. As an individual Member I always get every co-operation from my local offices in Maryhill Road and Malloch Street. I am sure that other hon. Members will share my feelings about the commendable assistance given by their district officer. Tedious, complex and time-consuming work is done in these offices, and it is made more difficult when the staff have to keep abreast of the changes that have to be made in these times of inflation.
  I welcome the improvements that have been made in the arrangements for occupational pension schemes. I have had correspondence recently from people who, after doing the calculations, felt that it was not worth while contracting out under the arrangements outlined in the White Paper "Better Pensions ". The changes that have been made in the Bill are, therefore, desirable. With an ever-growing number of people in the public sector, it is important that adequate arrangements be made for occupational pension schemes, and I welcome the partnership that is envisaged. I question the equity of the final salary schemes which exist in many private occupational pension funds. I hope that the unions will encourage schemes based on average earnings, as that is a fairer approach.
  Companies will have to face new responsibilities with inflation-proofed pen-
  1536
  sion schemes. Many have been accustomed to fixed-cost schemes, and here we are opening a door to the unknown. We can none of us with certitude calculate the rate of inflation in the years ahead. It is curious that so little interest in pension schemes is taken by trade unions. How many trade unions employ experts on pensions policies in their collective bargaining procedures?
  I am interested in the suggestion that the Occupational Pensions Board should take an interest in the solvency of firms so that the interests of work people will be safeguarded. I also welcome the assurance that between now and the implementation of the Bill another look will be taken at the 16½ per cent. Projections are always difficult. We are told that the birth rate is falling and we are aware of the growing number and percentage of old-age pensioners in the next decade. The number of students who are staying on for full-time education is steadily growing. Therefore, we shall have a smaller work force to carry the burden of better pensions. There will be a higher burden to be borne if we are to have better pensions. We live in an age of greater expectations. People are, rightly, looking for more, but they sometimes overlook the fact that in order to benefit they will have to contribute more.
  The scheme envisages some desirable arrangements for lower-paid workers, although I question the Minister about the possibility that many lower-paid workers will look forward to the time when they are retired. They will pay no tax, if they are not working. They will have fewer travel commitments and they will be relieved of many extras that working people have to bear. They will benefit from the many concessions that are being introduced for old-age pensioners.
  Problems will arise from changes in the employment structure. I notice that in his report the actuary bases his calculations on a 2½ per cent. level of unemployment, although he allows a margin. I hope that the level of unemployment does not get worse than it is now, but any realistic person must envisage the tremendous changes there will be in the structure of employment. In many industries there will be redundancies, and it is a matter of urgency that new jobs should be created to make up the job losses. This means

  1537
  the people will change their jobs much more frequently in the future.
  On a personal note, I have already been in and out of four occupational pension schemes in my working life. Politics is such an unstable business that one is glad to know that there are occupational scheme transfer arrangements. If I were to move, for example, to the Scottish Assembly I might have to make another change in my pension scheme. Many men in their late 50s argue that they are fixed in their job. They cannot and dare not change because they are afraid of losing their occupational benefits. That sometimes inhibits job movement when it would be in the interests of the people concerned.
  The Secretary of State told us that she had tipped the scales in favour of women in the Bill. I would expect nothing else from a Secretary of State who in another office was responsible for introducing the Equal Pay Act—which I heartily endorsed. However, the Act put at some risk women in employment because it made the cost of employing women higher for the employer. I should like to hear a little more from the Minister about that aspect of the Bill. Because of the greater costs to employers which the Bill envisages, there is a risk that women might be squeezed out of employment.
  Despite the enormous practical difficulties, perhaps we should give further thought to aligning the age of retirement for men and women. It is possible to carry Women's Lib too far. Although I am all in favour of doing more for women, I do not want men—who usually die at an earlier age—to have to pay for better pensions for women.
  There are several detailed points which are worthy of examination, but in the interests of brevity I shall leave those to other hon. Members.
  7.20 p.m.
  Sir George Young: I shall deal with one of the points raised by the hon. Member for Glasgow, Mary-hill (Mr. Craigen) about the future liability of the generations to come. However, I should like to start by saying how appropriate it is that in this debate, Mr. Deputy Speaker, you should have called upon the hon. Member for Walsall, South (Mr. George) and myself, because we are both significant members of the
  1538
  House of Commons football team. Comment has been made in the debate that pensions have become a political football. I believe that the time is fast approaching when the whistle must be blown. The concern felt by the Opposition is that in the remaining few minutes of time the right result should be secured. It is in that spirit that we approach the Bill.
  I should like to address myself briefly to two important questions asked by previous speakers. The first is "Who pays?" and the second is "What about inflation? "I have a major objection on the question of who pays. As a generation we have the collective effrontery to insist that our children make sacrifices on our behalf, on a scale that we are not prepared to make on behalf of the elderly today.
  The right hon. Lady said that her Bill is redistributive. I believe that she is right. But it is not so much redistributive between income groups as redistributive between generations. Those in work today will pay 6½ per cent. of their wages on average and the employer will pay a further 10 per cent., making 16½ per cent. However, when the time comes to pay for the pensions of those currently in work, the next generation may have to pay over 20 per cent. of their earnings.
  Not everyone shares the optimistic forecast of the United Kingdom economy that has been made by the Government Actuary. Many of us remember the optimistic forecasts in the National Plan which turned out to be more notional than national. It is right that we should look at the forecasts with some reservation.
  However, if it is right that future generations should pay, for example, 20 per cent. of their earnings to keep us in our old age—and I believe that the decisions are best left to them—why is it not right for us now to make a similar sacrifice on behalf of the retired? It seems to me that there is a hint of double standards in the Bill. It is easy to settle a bill by drawing a post-dated cheque, but the right hon. Lady has gone one stage further and drawn it on someone else's account. She is putting this generation in a uniquely privileged position, because we are being promised the higher level of benefit for the lower level of contributions. Future generations will

  1539
  also get the higher benefit, but they will have to make the higher contributions.
  Today's generation of retired people get the lower level of benefit, but they made a lower contribution. This generation has been promised the best of both worlds—the higher level of benefit with the lower level of contribution.
  The fact that those in work today are not saving a high enough percentage of their income to safeguard their future needs has other implications which I shall explore briefly. Saving as a proportion of income has collapsed dramatically from 15 per cent. in 1969 to approximately 5 per cent. last year. As savings have fallen, so have investments. The failure to modernise the country's capital investment prejudices the ability of future generations to create the wealth necessary to pay our pensions. Therefore, not only are we saddling future generations with a debt burden that we are not prepared to shoulder ourselves but we are jeopardising their ability to bear that burden. The only way we can remedy the situation is by checking consumption and switching resources into investment. This is exactly the opposite of what is happening under the Government's policies.
  Wage settlements and consumption are rising fast, and the incentives to save and to invest have almost disappeared. The situation has now been reached where the Government are forced to make people save involuntarily by taxing them and to make industries invest by nationalising them and making them carry out investments they they would otherwise be reluctant to make. This is because of inflation.
  I turn to the second matter to which I wish to refer—the Bill's provisions for inflation proofing. We are invited by the right hon. Lady to admire her Government for safeguarding pensions against inflation. This is really like a burglar declaring his intention to stop burgling certain homes—not all—and then expecting the public to admire him for his abstinence. Likewise, the criticism of private pension plans that they cannot keep pace with inflation is totally misguided, because the Government and not the insurance industry are responsible for this inability to inflation proof.
  1540
  While I welcome the Government's promise not to rob people of their pension contributions—that is really what inflation proofing is—would it not be better for them to renounce their kleptomania entirely rather than to say that they hope to restrict this unattractive habit? The case for the view that inflation does not matter is set out in the Government Actuary's report on page 7, where he says :
  " As the effect of inflation on contributions and benefits is broadly self-balancing, the rate of contributions required to support the benefits, expressed as a percentage of earnings. is not sensitive to the rate of inflation."
  The Government might just as well say that they have designed a new sailing ship which has the ability to maintain a straight course independent of the wind, as long as the wind is less than 20 knots. If the wind increases to more than 20 knots, the ship will most regrettably sink like a stone. This is the impact of inflation. If it gets out of control, inflation destroys the whole economic and social structure upon which the country depends. If we look at the experience of some South American countries, the question we have to answer is not what the pension will be when we reach retirement age but whether we shall live long enough to draw the pension.
  Having made those two criticisms, to which I hope the Minister will respond, I should be churlish if I denied that the Bill takes significant steps forward. I welcome the improvements outlined by the right hon. Lady. But she has given certain hostages to fortune in future benefits and inflation proofing. If the benefits which she has promised are forthcoming, it is not she whom we ought to thank but the future generations, as yet unborn, who have been committed by her to a level of contributions that we are not prepared to pay ourselves.
  I leave the Minister with this thought. How sad it would be if, in order to meet the contributions that future generations will have to make, the retirement age had to be raised to generate the necessary income, which would be a total reversal of the trend to which we look forward of lowering the retirement age.
  7.27 p.m.
  Mr. Arthur Palmer: I apologise for not being present when my right hon. Friend the Secretary

  1541
  of State opened the debate, but I was caught out unexpectedly, as I suspect many other hon. Members were, by the change of business and was otherwise engaged.
  I have heard most of the speeches, including the competent speech by the hon. Member for Brentwood and Ongar (Mr. McCrindle), who obviously has practical experience of pension matters. However, although he was anxious, like everyone else, not to make party points, he came out with the rather ritual Conservative observation that it was a great pity that the Government had not kept the Conservative reserve scheme, which was part of the 1973 legislation, and built on it. I also do not wish to be controversial, but if it had been a better scheme we would have built on it. It was such a poor scheme that it was necessary to abandon it and start again.
  I congratulate my right hon. and hon. Friends who have been responsible for the Bill on the excellent job that has been done. It is something of a platitude that trade unions do not take a great interest in pension matters. It may have been true at one time, but it is certainly less true today. Many unions, especially those in the staff areas, have always taken an extremely close interest in pension matters. From the point of staff trade unions, the average-salary scheme is not necessarily so attractive, because very often they have a career structure such that they hope that the paucity of their earlier earnings will be compensated later, although it rarely is, by the relative affluence of their final earnings. Very often the nature of the career structure and the salary structure is such for those in staff employment that the final-salary scheme is very attractive. Therefore, one cannot generalise. Pension schemes must be adjusted to the circumstances of the employees.
  The modern trade union approach to occupational pension schemes and pension schemes generally is that they should be seen as part of total remuneration over a lifetime. It is not unrealistic for a trade union to negotiate with employers on the basis that they will take somewhat less in current earnings in order that the pension provision will be more generous. In other words, one says that the standard of life is being spread not only over
  1542
  the working life but over the whole of life.
  I wish to say a few words about the statutory schemes in the nationalised industries, because they have not been mentioned so far. They are funded, but they are somewhat different from private occupational schemes in that, although they are under Inland Revenue control, there has been at various times, and still exists in the background, certain Ministerial supervision.
  The late Richard Crossman's pension scheme was much criticised by many staff trade unions in the public sector which felt that it would take too much away from occupational schemes. The unions also felt that to some extent their occupational schemes were being used to subsidise the State scheme. Clearly, the Bill starts on a different principle, on the basis of partnership.
  I remember Richard Crossman asking me, "Why don't trade unions, particularly staff unions, negotiate for pensions?" Perhaps he was referring to a union such as mine, the Electrical Power Engineer's Association. I pointed out that in the nationalised industries it was not possible to negotiate pensions in the ordinary sense, that pensions were not included in the provisions for collective bargaining and joint consultation, which deal with wages and salaries and with health, safety, welfare and the efficiency of the undertaking. Pensions are outside that bargaining. To a great extent they are still left to the will of the nationalised boards.
  I was present at a conference on this legislation organised by the TUC recently, at which my right hon. Friend the Minister of State spoke. Some criticism was expressed of the lack of democratic or employee control of pension schemes, even in the nationalised industry schemes as at present constituted. My union has gone into the matter in some detail and has submitted a memorandum, part of which was sent to the Occupational Pensions Board, which has been asking for opinions all round on the better, more effective, joint control of pension schemes. We asked that the management committees, which are usually jointly appointed, be given effective power to administer pension schemes. recommend changes in its principles and appoint the professional officers. At

  1543
  present. in the nationalised electricity supply industry the appointment of the professional officers is left entirely to the board's side.
  The negotiation of pensions should be seriously examined. There will probably have to be different legislation to amend the present nationalised industry statutes to include pensions in the mandatory provisions for settling terms and conditions of employment. Failing that. it would still be possible for sensible understandings to be entered into between the nationalised boards and the unions, but it would be much preferable to make it part of the statutory provision.
  The nationalised industry schemes vary. For example, I know that the railway pension schemes are not very good, but broadly speaking the nationalised industry funded pension schemes are among the best in the country. But as time passes they tend to continue to make the assumptions that were relevant 25 years ago. Some of those industries have been nationalised for a quarter of a century, and they do not always bring much of their thinking up to date. There are whole areas, even in the nationalised industries—I say "even" because one would expect them to be leaders in this respect—where advantage has not been taken of improved benefits which arc allowable under the Inland Revenue conditions.
  I turn to investment policies. It is necessary for all occupational schemes, in both the nationalised and the private sectors, that fuller information should be available on the investment policies of the funds—again, through the appropriate negotiating and consultative channels. It is not good enough for the management occasionally to issue a little book or a leaflet. If there is to be proper joint responsibility for the investment policies of the funds, it is important that plenty of information should be available through normal trade union channels, normal collective bargaining channels.
  I endorse what my hon. Friend the Member for Edmonton (Mr. Graham) said about the co-operative movement. There is an assumption that it is always wisest and safer for the pension funds of publicly-owned industries to be in-
  1544
  vested outside. I suppose that of necessity that means in the private sector. I have no objection to doing it in part. but there should be a proper balance between self-investment in the industries themselves and outside investment.
  In the electricity supply industry there is the remarkable situation that, except on a temporary basis, very little of the money in the staff pension fund and the industrial staff pension fund is put back into the electricity boards' development funds. While the boards are looking for capital and have to borrow it from Germany at a higher rate, the nationalised industry is putting money into the private sector through banking, insurance and other channels.
  I am making no party points. I am not arguing for or against private industry. But inevitable expense of that kind could be avoided. The principle that one should always invest outside is not always correct, as my hon. Friend said in relation to the co-operative movement.
  I have two final points of general interest. The first concerns pension increases after retirement. In my industry we have the indexing of pensions, which means that they are now being increased every year according to changes in the cost of living. It was quite a struggle on the part of the unions to obtain that indexing.
  Of course, the future health of pension schemes makes it essential that inflation is conquered. Once that is achieved we should consider basing pension increases after retirement on a salary or wages index. Within a particular industry or service that would be a possible alternative to the cost-of-living index as a basis for increases after retirement. There is often a great difference job for job between the position of a man who retires now, for example, and his predecessor who retired 10 years before. The gap in the standard of life of those two pensioners might be very great.
  It is a long time since we argued about the two-thirds rule. Why should the fiction of that rule, as the Inland Revenue upper limit for pensions, be maintained? As far as I can judge it does not apply in other countries in the EEC. Indeed, in some of those countries it is possible to have a pension which is 100 per cent. of a person's working wage or salary. I

  1545
  have never heard one good reason advanced for the rule to exist. Apparently it was decided upon in Victorian times in the same way that it was decided that 60 was a natural retirement age for women and 65 a natural retirement age for men. It seems that those were Victorian assumptions that were merely snatched out of the air. However, they have existed almost unchallenged through the generations.
  Those assumptions have remained almost unchallenged due, I think, to a puritanical feeling that in principle no one should be better off when not working than when working. I would have thought it fair that unions negotiating pensions should say "Under some circumstances we would prefer to see that the standard of life is rather better at a later stage, particularly if earlier general retirement is introduced. Earlier retirement would mean that we would still have health and strength to enable us to enjoy our freedom from the trammels of the routine of work. We would be free to pursue our own instincts ". Standing in the way at the moment is the two-thirds rule.
  I know that my right hon. Friend the Secretary of State has asked the Occupational Pensions Board to consider these matters. It has now produced a report. I have read it and I find it extremely disappointing. If I had responsibility I would send back the report and ask the board to do its job again and to do it rather better. I would ask the board to bring its thinking up to date and to be more adventurous.
  Finally, I believe that this measure is a great step forward and I hope that it will put all pension principles on a generally agreed party basis for the future.
  7.44 p.m.
  Mr. David Penhaligon: As I understand it, this is the third round of the saga that has gone on in this place to get some sort of satisfactory legislation on the statute book for pensions. It appears that the three attempts have worn away a great deal of the interest of hon. Members. That may account for the disappointing attendance tonight.
  On listening to the debate I have been struck by the great deal of agreement between the two Front Benches. At times
  1546
  it has struck me that there is a good deal of disagreement, but it seems that they have at last decided to come to an agreement that they will no longer argue. The Liberals have argued for a long time and will continue to argue that basically a Government should give full attention to increasing the basic pension to the maximum possible level. We regard some of the exercises along other avenues as little more than attempts to take away attention from the basic problem.
  Liberals have argued in election after election that an attempt should be made to make the pension half the national average wage for a married couple. We believe that that could be done by increments over seven years. We would like to see pensions expressed in legislation as a percentage of the national average wage, and then we want to see pensions reviewed automatically.
  Undoubtedly this proposal gives a great deal of hope to future pensioners. Indeed, for many of the pension income groups the sort of targets that the Liberals have put forward will be achieved by this legislation. Our criticism is that we want to see a great deal more help given to today's pensioners. We believe that the pensioners want jam today and not tomorrow. The 2 million people on supplementary benefit payments will have very little jam as a result of these proposals. I understand that any man who is now over 42 or any woman who is now over 37 will not be able to qualitfy for the full pension that is proposed. I believe that the scheme gives a magnificent vision of the humane face of the Government but rather puts off the day of paying the bill.
  Mr. Kenneth Clarke: We have heard this part of Liberal Party policy before. When will the hon. Gentleman explain how the Liberals would give full earnings-related pensions to those who are now retired or to those who will retire in the near future? How would they propose to pay for such pensions?
  Mr. Penhaligon: We have never said that we would give earnings-related pensions. We have said that we would give a flat-rate pension and link that pension to the average wage. As for paying for such a pension, we would pay for it in the same way as this scheme will be

  1547
  financed. The comment has been made that it is quite possible that in 20 years' time contributions will approach 20 per cent.
  If we express pensions as a percentage of the national average wage, we see that over the past 20 years we have made precious few percentage points of progress. That is why Liberals want to see more attention given to the pensioners of today.
  Despite what has been said, I believe that this is a complicated scheme. As I understand it, on the day a person retires every year's pay that he has ever had is indexed. Out of the indexed pay is taken the best 20 years. The average of that sum is determined and the next stage of the calculation is to find the indexed value of £11·60. From the average previously obtained is taken the indexed value of £11·60. That sum is divided by four, the proviso applying that no more than seven times the individual indexed value of the £11·60 is reckonable. The figure that is arrived at after that calculation, added to the indexed value of £11·60, is the person's pension.
  I believe that nobody will be able to calculate his individual entitlement. I hope that great efforts will be made by the Government of the day to inform people as they get nearer to their pensionable life of the sort of income they can expect. I should like to see that done over virtually all years of entitlement, but as people get nearer pensionable age they should be informed of the sort of entitlement they can expect so that they can begin the assessment of their living standards.
  Whoever is the Minister responsible in 10, 15 or 20 years' time will find that he has let himself in for having to spend an enormous amount of time replying to letters from hon. Members inquiring on behalf of individual constituents precisely how their pension was arrived at. That will be the position as the Bill progressively takes effect.
  I was interested to hear the great emphasis in this debate on the subject of inflation. I approach the matter in a slightly different way. We are talking in the scheme about a period of 20 years. Twenty years from now, a 5 per cent. rate of inflation will mean an increase
  1548
  of 263 per cent. If the rate is 10 per cent. the increase will be 669 per cent. ; if the rate is 15 per cent. the increase will be 1,640 per cent. ; and if the rate 20 per cent. the increase will be 3,800 per cent. In other words, a 20 per cent. annual inflation rate, which appears to be the order of things at present, will mean that over a period of 20 years the present figure of £11·60 for basic pensions will become £440 a week.
  We know that the private funds are being asked to contribute a 5 per cent. rate against inflation, so that if we apply the 5 per cent. to the same figure of £11·60 the total figure becomes £24·50. The difference between £440 and £24·50 is the commitment which the Government have bravely taken on. That is what will happen if they cannot control the rate of inflation. They are taking on a large burden, but they are right to take it on and I congratulate them. It might have a disciplinary effect on future Governments. It might give any future Government a greater interest in taking more active steps to stop or to control inflation. The Government are the only organisation with resources to pay out on inflation rates of 20 per cent. Frankly. I wonder whether even the Government have the resources to pay the final rates which are envisaged.
  The message which goes out from the Liberal benches is one which calls upon the Government to produce more jam today for the 2 million people now living on supplementary benefits. I hope that that message will get across loud and clear to the Government.
  7.53 p.m.
  Mr. Robert Boscawen: Before I turn to the provisions of the Bill, I should like to make a protest from the Opposition back benches about the incompetent way in which the business of the House is being managed. It is extraordinary that a Bill of such importance was brought forward, with practically no notice, two days earlier than was expected. It caused great inconvenience to many back-benchers. At the height of this debate when the right hon. Lady the Secretary of State for Social Services was addressing the House, only six Labour back-benchers were present. Such a low attendance during a debate on this very important measure flows from the

  1549
  incompetence of the Leader of the House in arranging our business. I should like that protest to go on record.
  My purpose in intervening in the debate is to welcome the end—if that is now to happen—of the damaging delay and uncertainty which has existed in regard to pension schemes for many years. I hope that the delay has at last come to an end. However, I do not share all the euphoria which has been displayed by some Labour Members. The Bill has major defects and before it is enacted I hope that some of them will be put right.
  The first defect was mentioned by the hon. Member for Truro (Mr. Penhaligon) —namely, that the Bill does little for the least well-off. It will do very little to reduce the number of individuals on supplementary benefit for a long time. In reply to an intervention the Minister of State said that it was part of the Government's other strategy to raise the level of benefits to help the least well-off, but he missed the real point. Simply to raise the level of supplementary benefit—in other words, the poverty line—at the same rate at which one raises the minimum pension line does not take people off supplementary means-tested benefits. I see no sign in the Bill of any means by which the Government intend to try to reduce the number of people who now receive means-tested benefits. However much the Government raise pensions or the poverty line, unless they take other action at the same time they will simply increase the number of people receiving means-tested benefits. The Minister of State knows that well.
  I am sorry that the right hon. Gentleman is not in his place on the Government Front Bench, but I shall return to the matter later. Had he been Shadow Secretary of State in the years 1970–74, we should have had a joint approach on achieving a negative income tax—or call it what one will—to bring greater benefits to those who are least well off and least able to protect themselves, such as the mentally handicapped and others. The reason why such a system does not exist is due in great measure to the fact that the Secretary of State would not accept our tax credit scheme or even consider any part of it.
  It was typical of the right hon. Lady to select £50-per-week wage-earners when
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  giving examples and to say how well they would do in pension terms. She did not pick out the low-paid wage earners, the £20-a-week men, and say how they would tare after a period of 10 years because of the slow build-up.
  The Under-Secretary of State for Health and Social Security (Mr. Alec Jones): I wish to defend my right hon. Friend the Secretary of State. It is not true that she did not use figures for the lower paid. One of the cases she mentioned involved a person earning an average of £20 a week who she said would receive a pension of £13·70. If one takes into consideration the £6·90 paid to a wife, the figure would come to £20·60. My right hon. Friend used that example in her speech. Therefore, it is not true to say that my right hon. Friend ducked the question of the lower-paid.
  Mr. Boscawen: The Secretary of State gave an example of an individual who received the maximum rate of pension of £50 per week. As for the low-paid, the right hon. Lady took the case of a person receiving £13·70 a week at the full rate—namely the £20-per-week man. That is not somebody off supplementary benefit levels and the Minister knows it.
  Mr. Jones: The lion. Gentleman suggested that my right hon. Friend had ducked the question of the lower-paid. I said that my right hon. Friend did not duck the issue. She used a figure involving a man on £20 per week. I intervened to protect my right hon. Friend's good name.
  Mr. Boscawen: Whatever argument there may be between us, I revert to the point that there is an extremely slow build-up in the scheme for the low-paid. I do not think that the hon. Gentleman can deny this. The scheme does not greatly help the low-paid.
  The second major question is how the Bill will affect existing occupational schemes and what likelihood there is of expanding occupational schemes under the Bill. There has been a total abandonment of savings for old age except in the private sector. Once the "Joseph" fully-funded scheme is discarded, all savings in industry will be in the hands of the 8 million individuals in occupational schemes.

  1551
  I welcome the change of attitude of the Labour Party towards occupational schemes. We owe a great deal to the Minister of State for the consultations he has had in the past few months to try to achieve co-operation between the Government and industry. I welcome the change of heart among some Labour Members who have spoken of the need for and the advantage of having a strong. expanding fully-funded private occupational sector. Such schemes can be tailored to suit the individual needs of firms or industries. In so doing they help industry and industrial relations. They represent real savings and reduce inflation. They are not a transfer of spending from one pocket to another, which the State scheme could he said to be.
  Because there is no limit to the build-up of these schemes over and above the guaranteed minimum pension, they can provide a substantially better pension in many cases. As my hon. Friend the Member for Somerset, North (Mr. Dean) said, this country has some of the best occupational schemes in the world and we ought to be proud of them. Those occupational schemes which fall below that level should be given a boost. The Bill will do this, as indeed did the 1973 Act.
  However, the number one priority for occupational pension schemes must be surviving the next few years at the present rate of inflation. With inflation at the present appalling rate, with a negative yield gap, with gilt-edged securities yielding 14 per cent. against a rate of inflation of 20 per cent. and with the equity market in a complete shambles, thanks to the activities of the Secretary of State for Industry, the days of occupational schemes could well be numbered.
  My hon. Friend the Member for Sutton Coldfield (Mr. Fowler) was right to quote the report by Mr. Dunlop of Commercial Union. It is in the Library and hon. Members should read it carefully. It shows that good occupational pension schemes, no matter how sound the firm backing them may be, are in jeopardy unless something is done about the rate of inflation. Far more than just tinkering with fuel taxes, adding, a little to VAT or ending "bed and breakfast" deals,
  1552
  which we hear about at the moment, is required in the next Budget to restore confidence to industry and so put the occupational pension schemes back on to a sound basis.
  Labour Members who support the Bill and who want to see a sound partnership between the State scheme and funded occupational schemes must restrain some of their hon. Friends from attacking industry, the Stock Exchange, family businesses and the self-employed. If they do not, the private sector will falter or fail and with it will go the occupational schemes. Only once before have we had a negative yield gap of the present size. Sadly, that led to massive unemployment in the 1920s and 1930s, before the situation could be reversed. Labour Members must persuade their hon. Friends to lift the attacks on the private sector of industry.
  What is the future of the many valuable money-purchase schemes. I hope that the Minister will do something to keep some of these schemes alive. This is a human problem. People in the middle stages of their careers who participate in these schemes have aspirations and hopes for their retirement. If money-purchase schemes are unable to contract out, those people will be seriously affected. It will be complicated to introduce a money purchase scheme into this system. That was one of the advantages of the scheme introduced by my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) because it based the test for contracting out on contributions.
  It ought to be possible to do that for money-purchase schemes under the State scheme which is based on benefits. There are many good money-purchase schemes like the Merchant Navy officers' pension scheme and industry-wide schemes such as for the building industry and agriculture are needed. These should be encouraged, and I hope that the Minister of State will consider this before the Bill goes to Committee.
  I want to be optimistic. I hope to some extent that many schemes will be able to protect early leavers. The right hon. Gentleman mentioned the concession he has given in Clause 33. I am not quite sure how far it goes. He says that he will make a statement about what premium industry will have to pay if it chooses to

  1553
  opt to limit its liability to a 5 per cent. revaluation of a preserved pension. What is to be the buy back premium in Clause 41? I did not fully understand the right hon. Gentleman's intervention but I strongly recommend that he makes this clear to industry soon. Unless he does this they will be moving from one open-ended commitment to another. The credibility of the Government's scheme depends on this issue of the liability of the private sector for revaluation of a preserved pension for the early leaver.
  Is the contracted-out reduction rate sufficient? The open-ended commitment is still there for the pre-award protection against inflation about which the report of the Commercial Union spoke, pointing out how difficult this will be unless inflation is brought under control. There are many points about the State basic scheme that I should like to raise. I know that we shall have many arguments about the ending of the married woman's option. There is also the question of the invalidity pension. I see that it says that where the claimant has not been insured for 20 years he will not be credited with the additional base level earnings in the same way as a widow. That is a complicated issue but I should be grateful if the right hon. Gentleman would write to me about it.
  Mr. O'Malley: May I reply now in broad terms? Let us take as an example a man aged 40 who has been in employment for 20 years under the new scheme. He would then become entitled not only to the basic level pension but to the full earnings-related pension. Had he been in for 15 years he would get an earnings-related pension based on 15 years—that is fifteen-twentieths of the total maturity period. It is for that reason too that the age at which the invalidity allowance rate becomes payable has been amended in a later clause.
  Mr. Boscawen: I can see that. I do not see why a person should lose the basic element.
  Mr. O'Malley: Such a person receives a basic pension. Take the example of an invalidity pensioner who has been paying full contributions to the scheme for 15 years and had a full contribution record in the old scheme before that. He would be entitled first to £10 in current terms plus an earnings-related pension at
  1554
  the 25 per cent. rate based on the 15 years of his contributions.
  Mr. Boscawen: I am grateful to the right hon. Gentleman. I clearly had not understood that.
  There is a great deal in what has been said here of the Bill being one of "promise now and pay later". It swings the burden of our graduated State pension on to our children and grandchildren. Let us not be deceived by the slow build-up in cost—only £216 million more than the existing scheme in 10 years' time. The truth is that we are asking the next generation to fork out for the cost of this scheme. We are doing it because we are not prepared to cut our own consumption to the level at which we ask the next generation to live. They must pay for our pensions. I strongly suspect that this is the case because the Government realise how unpopular it would be to increase contribution levels and even out contributions as between this generation and the next one.
  I have been supplied with some figures by the Library. Let us consider the cost of the scheme today and compare it with what it would cost in 15 years' time. The figures I have show that if 8 million people contracted out, in 15 years' time the cost would he 10 per cent. higher than today. If 4 million people contracted out it would be 12–9 per cent. higher. When the scheme is fully operational, in 30 years' time the total cost of the scheme will be 31½ per cent. higher than it is now under the present scheme. That is a substantial burden that we are placing on future contributors.
  In terms of the share of the gross domestic product, using the figures of the Government Actuary, that is an increase of 1·8 per cent. The Actuary's figures are incredibly naive. They assume a rate of inflation of 5 per cent. and an average earnings increase rate of 8 per cent.—a far cry from what is happening today. The Actuary must have been wearing the most rosy-tinted spectacles ever to have produced those figures. With average earnings rising at nearly 30 per cent. it is clear that the increase in the share of the gross domestic product in 30 years' time will be considerably higher than 1·8 per cent.
  Where will the money come from to meet this increase in the share of the

  1555
  gross domestic product? Largely it will come from industry—60 per cent. of it. In today's cash terms, if 8 million people contract out this will mean an extra £1,180 million burden on industry. If 4 million people contract out the figure will be £1,400 million. If the private sector occupational schemes dwindle any further as a result of inflation, it will be higher still. That is a huge new burden to come from the investment potential of industry in 30 years' time. Today industry is not succeeding very well yet we are not taking that figure from it. What will it be like when we are doing so?
  The Bill will draw a huge blank cheque on future generations. I do not think it is realised how we are pushing the cost into the future. As a country we are not doing very well without this extra burden. However, when we add this burden to industry and to the contributor, it will be even more difficult to bear than some of us realise. We have abandoned the idea of a fully funded scheme. Under this measure we shall no longer save for our old age. We are trying to get away with a minimum contribution, hoping that our children and grandchildren will pick up a blank cheque and pay us substantially higher pensions than are paid today. That is economically wrong, morally wrong and inflationary, and that is why I find the Bill unsatisfactory.
  We must try to bring to an end as soon as possible the uncertainty which has hung over the pensions business for so many years. We must try in Committee to make this a better Bill. If the Bill is not improved, we shall have great reservations on Report and Third Reading.
  8.21 p.m.
  Mr. Kenneth Clarke: Reference has already been made to the unhappy and uncertain history of past pensions legislation. I begin by touching on that history, although it is not the desire of the Opposition to dwell on past troubles. We refer to history in a spirit of sadness rather than anger.
  The Opposition have said that this major piece of legislation is unnecessary. It seems to have its origins in the pointless and wanton abandonment of the
  1556
  1973 Act which was on the Statute Book and which should have been used as a basis for a bipartisan approach to future pensions. Much hard work had gone into preparing that new funded pension scheme and putting it into operation by the time the Government took office. When the Act was on the statute book a great deal of effort was put into it by industry, trade unions and employers in preparing for its operation. That Act was thrown out of the window so that the Government could have the pleasure of claiming the authorship of "the" definitive pensions scheme. The last thing that the House and pensions interests want is yet another scheme based on a major piece of legislation.
  I shall not go over the details of the history of our major pension schemes. However, I will refer to the main points. The process began in 1957, when the Labour Party produced a national superannuation scheme which, as my hon. Friend the Member for Sutton Coldfield (Mr. Fowler) reminded us, was at that time a phrase in a speech without much meaning. In 1960 the Conservatives introduced the Boyd-Carpenter graduated pension scheme. In 1970 the Labour Party launched the Crossman scheme. That measure had not reached the statute book by the time of the following General Election. In 1973 there was a Conservative pension scheme on which my hon. Friend the Member for Somerset, North (Mr. Dean) did so much work and which was pointlessly abandoned when the Government came to office.
  I accept that the need now is to work towards certainty and an end to the pointless political battle which does so much harm to pensions' interests. I speak of the need for certainty. However, the Minister of State, when in Opposition, did not do so. Nor has he done much to achieve it since he took office. The Conservative Party is at a slight disadvantage in being obliged to make an effort to work towards a political truce, because its schemes have been based upon the need for funded occupational pension schemes. The uncertainty and the political debate have done great damage to the prospects of those funded occupational schemes. The Conservative Party runs the risk of throwing the baby out with the bath water if it rejects yet another Labour scheme, because damage will be

  1557
  done to the pensions business, which we hope to make the hallmark and the basis of future Conservative pensions policy. Therefore we must make an effort to reach an understanding on a pensions structure to avoid doing further damage to the occupational pensions interests outside, upon which in our view the future of pensioners depends.
  That also means that we must be careful before we give our consent to a future structure put forward by the Government. We desire a political truce and an end to pensions being used as a political football. However, that can be done only if the Government satisfy us that they have reached a proper structure in which occupational pensions schemes can thrive. There is no point in our reaching an understanding with the Government on a wrong-headed basis for a scheme which will result in the widespread collapse of occupational pensions in two or three years' time. For that reason we express our reservations. In Committee we shall have a genuine desire to try to improve the Bill so that the resulting measure is one of which the Government can be proud and which the Conservative Party, when it returns to office, can accept as a bipartisan basis for a future pensions policy.
  Having said that we place emphasis on occupational funded pensions, there is no need for me to dwell at length upon the reason behind that and upon the reason why the Conservative Party places such reliance on funded pensions as opposed to pay-as-you-go State pension schemes.
  My hon. Friend the Member for Sutton Coldfield emphasised that funded schemes are a great source of real savings and have a distinctly anti-inflationary effect on the economy. The basis of a funded pension scheme is that it invests in British industry. All Governments should be doing what they can to maximise every source of investment and especially such an important source as pensions funds. Private funded pension funds geared to individual industries are much more flexible and can be adapted to meet their needs and those of individual people, and can be adapted more readily to changes which occur over the years. In our opinion, they provide a valuable basis of choice in pension for
  1558
  those who chose to make provision for themselves.
  The other matter which the House must bear in mind is that there are 8 million people in final salary schemes whose interests are at stake in the continuance of what everyone accepts are the good occupational schemes which they are in. We must at the very least aim for those 8 million people to have their schemes continued, and we would like to broaden the area covered by occupational pensions, not least, finally, for the reason that in our opinion it is of considerable advantage to the recipients of those pensions. If they have made provision for themselves it will always be better than any State scheme. Anyone who has been in an occupational scheme over the past 30 years, unless it happens to have been one of the poor ones which we all want to see go, has done better than anything that could have been provided by a State scheme. Even with this new scheme, when we consider that an occupational pension scheme in an industry is based on 40 years of continuous build up. he will do better in the end contracted out into a good occupational scheme than in any scheme that the State could provide for the foreseeable future.
  If we want to see pensioners on a better standard of living, the more who are based on privately-funded pensions financed by their employers and themselves and invested in industry, the better for the long-term future.
  The difference which has led to this party battle over the years is that the Labour Party has always had much more faith in State-based pay-as-you-go schemes which have no invested funds but where the pensions in payment at the moment are provided entirely by the contributions paid by those in work at the moment. It means that no individual pays for his own pension. As it were, he pays for his father's pension, and he relies on his children paying for his pension when he reaches retirement age. That is a faith which we have never shared, and we do not share it with enthusiasm now. We cannot understand the Labour Party's wedded belief that this is the proper basis, given the disappointing record that Beveridge has had over the past few years and given the fiasco that Labour's first attempt under Richard

  1559
  Crossman at a giant pay-as-you-go scheme turned out to be when its details were examined.
  Here we are with a State second pension still based on pay-as-you-go, still based on rosy assumptions about the future. The underlying assumption is that growth in the economy will continue at a satisfactory rate to enable future generations to make the provision anticipated in the Bill.
  Even then, the financing, although tolerable based on the figures in the Government Actuary's paper, could become extremely onerous. Changes in the birth rate and in life expectancy give rise to changes in the costs for the future. The important one which seems to make a large difference to the future cost of the scheme is that the Government Actuary shows that rises in unemployment are extremely expensive in terms of paying for a pay-as-you-go scheme. A rise or fall of a half per cent. in unemployment will mean a rise or fall of a quarter per cent. in contributions. The present basis of the Government's Actuary's estimate is a figure of 2·5 per cent. unemployment, and future generations may go through periods when unemployment is much higher than that.
  Mr. Palmer: The hon. Gentleman made the point that the Labour Party had a bias against funded pension schemes. I remind him that it was the Labour Party which nationalised our basic industries, and that all those nationalised industries have funded pension schemes backed by statute.
  Mr. Clarke: The nationalised industries also have pensions invested in private industry, to the embarrassment of some of the hon. Gentleman's Left-wing colleagues. But I do not accuse him of bias against funded schemes, and I hope that the Minister of State will persuade us that he is not biased against them. But all Labour's schemes have tended to be founded in the main on State pay-as-you-go schemes. Ours was founded on entirely funded investment schemes. We are not ashamed of our positive bias in favour of funded investment schemes, and we hope that we have converted the Labour Party to a much greater extent than ever before.
  1560
  The Minister of State appears to wince at the idea of being converted. I shall not threaten to go into more detail in comparing the Crossman scheme of live years ago with the O'Malley scheme of today. We believe that light is beginning to dawn, and we like to feel that the Coneservative Party's funded scheme of 1973 has had a great deal to do with the changes which have taken place.
  The other matter with which I was dealing bears especially on the State part of this scheme, which remains the essence of it. It is the problem of costs. I have dealt with the assumptions underlying the costs and how they become frightening if one takes a pessimistic view of the present fall in the birth rate continuing or of unemployment rising still further in the future.
  There are also other immediate costs There is the immediate increase in the level of contributions from today's contributors. That will not be popular when the Government try to explain why it is necessary, though it is to be hoped that people outside can be persuaded to pay increased contributions in order to provide for pensioners.
  The Treasury supplement is also being increased, in effect, by these proposals. The use of the 18 per cent. figure, always accepted in the past on both sides of the House, looks very dubious in the Government's figures, and it is by sleight of hand that the 18 per cent. figure is being enlarged with the effect that £200 million more is being paid by way of Treasury supplement in the first year of this scheme.
  Mr. O'Malley Mr. O'Malley indicated assent.
  Mr. Clarke: The right hon. Gentleman nods. We have had many discussions about public expenditure in debates on social security. That £200 million in the first year that the right hon. Gentleman is cheerily acknowledging is involved straight away before we get going. That is more than some of the sums about which he has looked very excited when we have made suggestions that they might be expended on worthwhile improvements in social policy.
  Basically, looking at the cost—it is frightening—the scheme depends on the willingness of future taxpayers and contributors to pay for our pensions. The cost

  1561
  goes up steadily. The scheme has a 20 year build-up to anybody receiving full payments. Indeed, it will not achieve full maturity until the year 2018, on the earliest possible estimate.
  My hon. Friend the Member for Ealing, Acton (Sir G. Young) and the hon. Member for Truro (Mr. Penhaligon) said that we must look at the level of demand that we are making upon our children. We cannot allow this matter to pass without a cautionary word. I understand that my hon. Friend the Member for Ealing, Acton said that, in effect, the Government are going back to the basis of the Crossman scheme of drawing a post-dated blank cheque on somebody else's bank account. We are relying upon our children to finance our pensions to a level which we cannot contemplate affording for present pensioners.
  Mr. O'Malley Mr. O'Malley indicated dissent.
  Mr. Clarke: The Minister of State shakes his head. I shall be interested to hear his defence of this matter.
  We are being cautious in accepting the scheme because we see difficulties ahead in defending and maintaining it. The whole scheme is based on the assumption that there will be a fall in the share of consumption being taken by those in work compared with those who have retired. There is to be a shift in the expected rise in living standards in future away from those in work to those in retirement. The fact remains that those in work will be our children and they will have their expected rise in living standards in some part shifted towards paying for this generation's pensions. We cannot allow that matter to pass without being a little cautious about the cost involved.
  Mr. O'Malley: There is such a shift every time a major employer puts into a final salary scheme a large amount of money to top up the level of the scheme. Therefore, the differences that the hon. Gentleman suggests exist in this area between pay-as-you-go, on the one hand, and funding, on the other, do not apply. In either case, if such lump sum payments are to be made, or as an alternative or in addition there are to be larger contributions in future as a result of the trends about which the hon. Gentleman was talking, into funded schemes, the same objection can be applied to funded schemes as to a pay-as-you-go scheme.
  Mr. Clarke: I do not think that that is a fair analogy. A private employer tops up his funded scheme only in dire economic circumstances where his hopes for his investment have been exceeded by the level of inflation, particularly the salaries that he is paying. No funded scheme began on the clear basis, as this scheme does, of anticipating and planning for an increase at least to an 18 per cent. total contribution, taking the optimistic figures on which the Government Actuary is relying in his report.
  The State part of the scheme is based entirely on the assumption that our children will have to pay more than we are paying and, for all we know, very much more than this generation is prepared to pay for present pensioners.
  Earlier, I indicated to the hon. Member for Bristol, North-East (Mr. Palmer) that there were signs of hope in the Bill. We have given credit to the Minister of State for having made some progress, for having listened very carefully to the representations that have been made to him and for having gone some way to meet them. When comparing the Crossman scheme with the O'Malley scheme, obviously considerable progress has been made.
  The Minister of State said that he wants a thriving private sector, and in this he was supported by his hon. Friend the Member for Bristol, North-East who emphasised the need for such a sector. I agree with my hon. Friend the Member for Somerset, North that the Minister needs that private sector if his hopes of financing the State scheme in the Bill are to have any chance of being realised by our children when they come to pay for it. We hope to convert the Minister still further towards the need to maintain a healthy private sector with occupational pensions in industry, and we thank him for the help and concessions that he has given.
  Where do we go from here? What are we expecting from the Government if we go the whole way and declare a truce and say that we shall accept the Bill as a structure for the future? I agree with my hon. Friend the Member for Wells (Mr. Boscawen) and the hon. Members for Truro and Edmonton (Mr. Graham) that some of the things that we must ask for from the Government

  1563
  go slightly beyond the scope of the Bill. One of the things that will determine whether we have occupational pension schemes still in business in 1980 once the scheme comes into effect is whether there has been some improvement in the present impossible economic climate.
  I must reinforce all that has been said about the absolute impossibility of occupational pension schemes continuing to live in a climate of 20 per cent. inflation for any period of time, and particularly that they cannot survive if there is a negative return when one compares the returns which they get on investment with final salary pensions which they are expected to pay.
  I realise that the Minister of State is not entirely responsible for this aspect of the matter, but the Government have to assure the pensions industry and say that they appreciate that investment is at the root of this. There is a need for the Government to encourage investment. They must go further than the encouraging start they have made on freeing commercial rents and easing dividend restraint. They must emphasise to some Labour Members, including some in the Government, that there is a need for profitability in industry, and that profitability in industry, giving a proper return on investment, is one of the bases of their pensions policy.
  There is one other thing that is slightly outside the Minister's responsibility. No scheme of this kind can survive until something is done about the level of inflation of salaries and wages, because private occupational schemes and employers who finance them will go bankrupt if unlimited increases in salaries and wages far outstrip investment so that their commitment becomes wholly open-ended. The Government's pension scheme requires the acceptance of wage restraint. It is based on the assumption that there will be a shift in purchasing power from those in work to those in retirement. It calls for some improvement in the wage restraint element of the present working of the social contract if there is to be any improvement and if a sense of confidence is to be given to the occupational pension industry. I am sure we all hope that some improvement will come about in the level of inflation. We want to see
  1564
  an improvement in the return on the level of investment, and I am sure that we are all looking for wage restraint.
  I shall not now go into detail on all the points that we hope to raise in Committee. We are grateful to the Government for the movement that there has been, but there are still areas in which it is essential that more movement is made if the Minister wants the pension industry to survive.
  The first item is the reduction of the contribution that is available to those schemes which are contracted out. I acknowledge that the figure has been increased by ½ per cent. to 7 per cent., but I echo what was said by my hon. Friends the Members for Lancaster (Mrs. Kellett-Bowman), Brentwood and Ongar (Mr. McCrindle) and Somerset, North. I doubt whether 7 per cent. goes far enough. Particularly is it not adequate, as my hon. Friend the Member for Lancaster said, for those employers with a high proportion of women members in their schemes. This is also true for those older industries such as textiles with a large proportion of older members. If nothing is done for them, it will have the effect, which I am sure the Secretary of State did not intend, that in future occupational schemes there will be a small proportion of women.
  I am not sure that I like the idea of different levels of contribution reduction for schemes with a given proportion of women, but the case put by my hon. Friend the Member for Lancaster, that there is a difficulty in industries with a high proportion of women members, reinforces what we say about looking at the 7 per cent. figure for all schemes. The Minister's concession is to encourage occupational pensions to opt out in this present difficult time. If we take that half per cent. as encouragement, there is still some more to be looked for to meet the case particularly of those schemes with high costs caused by the number of women and older members.
  My second point relates to inflation proofing of preserved pension rights of early leavers. Again I welcome the fact that the Government have considered this seriously and tried to meet the point. Although the Minister of State dismissed the comments of Mr. Oldfield as a joke, I hope that he will not dismiss the

  1565
  repeated suggestion from this side that he should consider how far he has gone. It is the Government who are insisting that there should be total inflation proofing of these preserved rights and they have to do so in order to be consistent with the requirements of the scheme. When they make that insistence about post-retirement benefits, the Government accept that they have to take upon themselves the obligation to finance it. If the Government then insist, to be consistent, that there shall be full inflation proofing of these preserved rights, there is not a clearly different case for their not taking on the cost of inflation proofing them. They should not have to do so in total, because that would advantage the firm with a large number of early leavers, but an investment manager of a scheme can take on a fixed liability—something like 5 per cent. or perhaps more.
  We are very worried about having a fixed 5 per cent. obligation Plus the payment of a lump sum. I accept that the precise nature of the Government's commitment will become clearer when we have the actuarial tables upon which it is to be calculated, but if the lump sum will vary according to the time when the fund has to decide to buy itself out of that commitment, this is still rather an open-ended commitment that funds could be taking on to inflation proof these preserved rights.
  The next point that we shall raise in Committee relates to widows. Again—I am trying to give credit where it is due—the Government have met the point about lump sum payments to some widows. We are more worried that the provisions are very poor for younger widows. Very little pension or a very small lump sum will go to the younger widow whose husband dies very early in his employed life. Some private occupational schemes go well beyond what the Government are proposing, giving the widow entitlement to half the pension that the husband would have got had he survived to his ordinary retirement age. Whether that is the right formula I am not sure, but we hope that the Government will look at ways of improving the provision for widows.
  The next matter that we hope to take up in Committee is the survival of the money purchase scheme, particularly for
  1566
  industry-wide schemes. This is an important point to this side of the House. We know the Government's objection to money purchase schemes—having made a few remarks about the past when I started, I will not go back to the argument about the State reserve pension scheme from 1973—but there is a. case for industry-wide schemes. That is the only way in which small employers can provide for their employees. After 1973 this was one of the fields in which we had the greatest hopes that pensions provision would improve. The scheme which would have come in, for instance, in the building industry would have been a worthwhile achievement in itself if that Conservative legislation had been allowed to continue.
  Although my hon. Friend the Member for Sutton Coldfield was interrupted at this point by the Minister of State as to how a money purchase can cope with inflation, of course, if the levels of contribution are adequate, most such schemes can hope to compete with other pensions schemes and there can be a worthwhile future for them. My hon. Friend the Member for Wells mentioned the Merchant Navy scheme, which is a perfectly worthwhile scheme. There is no reason why that cannot be accommodated. I do not want to make this point too belligerently. I know that the Minister of State and his right hon. Friend are extremely concerned about these schemes. and I know that the Minister of State has made undertakings and sent me copies of his speeches in which he has offered to try to have a look at meeting this point. We are helping him to try to look at it in Committee, and we hope that some solution will be found.
  My final point in concluding my references to Committee points deals with occupational pensions and their survival, and this is the whole question of the open-ended commitment that any occupational pension fund is to some extent taking on with a final salary scheme if it takes one on at a time of high inflation. That is a calculated risk, and it has always been taken on by funded schemes in the past. But in the present climate of uncertainty, difficulty and danger for the schemes, we would hope that some protection might be given to private occupational schemes against the risk of total disaster if the economic climate should not become right. My

  1567
  hon. Friend the Member for Sutton Cold-field and my hon. Friend the Member for Somerset, North touched on this matter, and this is almost the key point. If we should have—and worried employers and investment managers, after the unfortunate history of Governments in controlling inflation over the last five years, are asking this—Weimar-type inflation because some Government, of whatever political complexion, have totally failed to keep control of the economy, utter disaster will strike pension funds, which will bankrupt themselves and their employers.
  There are various ways in which one can approach this problem. My hon. Friend the Member for Sutton Coldfield mentioned one of them. I would ask the Government to look at the possibility of limiting buy-back terms for a scheme which decides that circumstances have driven it to cease to be contracted out, and to an extent to be determined in advance—to have some fixed limit—so that any scheme might not get itself in the position, if utter disaster swamps it, of finding that the buy-back price which the Government demand is such as to bankrupt the funds and the employers. We should be very much relieved if the Minister of State could reassure us on that matter.
  I have two further points to make on the scheme in general and they touch on the State scheme as well. The first is about the inflation proofing of the existing graduated pension scheme—the Boyd-Carpenter bricks. The Government have decided to do that, and they make a virtue of it. They know very well why we did not do it and why they have held back from doing it in the past. One reason was not only the cost—because £90 million was involved in that—but also that to inflation proof graduated benefits under the existing scheme would be unfair to those who have contracted out of the former graduated scheme, because they would find, having weighed up the pros and cons of contracting out of the then State scheme, that they had contracted out and provided for themselves, but now the rules are being changed by the present Government so that those who stayed in the State graduated scheme suddenly get a back-dated subsidy from the taxpayer to put them in a very much more
  1568
  advantageous position than those who contracted out.
  As the Government have decided to do what they are doing, logic demands that they should inflation proof the equivalent benefit of those who contracted out. It is important not only in this narrow field but because it is this sort of thing which gives rise to complete loss of faith, in the House and outside it, in the activities of Government vis-à-vis the pension industry. It is this sort of change which makes past retrospective decisions seem so unfair and which makes people doubt the future good intentions of Governments of either party.
  Finally, we shall be raising the harassed problem of the married women's option. From my previous exchange with the right hon. Lady, I do not expect that we shall get any nearer to agreeing on the basis of this in Committee than we have in the past, but we shall certainly not allow this abolition to go by without comment. I do not wish to go into great detail now, but our argument is that the married woman's option is the right decision for her to take in her own interests where her marriage is going to last. To make her pay a full contribution, as the Government are now proposing, is to swindle her, because she will not get the same benefit as a man paying the same contributions.
  If a married woman pays the full contribution there is a set limit to the pension she can derive from it and that ceiling is fixed by reference to the benefits she is already getting under her husband's contributions. The result of that has been —and it remains under the Government's proposals—that a married woman who is obliged to pay a full contribution gets a worse bargain than the man paying the same contributions.
  I hope therefore that when we resume this argument in Committee we can get across to the Government that they are perhaps unintentionally discriminating against women if they persevere with their intention to abolish the married woman's option. The Opposition certainly accept that the underlying principle should be equal contributions for equal benefit and that discrimination between men and women in pensions can be totally eliminated.
  Mrs. Castle: How would the hon. Gentleman do it?
  Mr. Clarke: By retaining the married woman's option, because the three out of four who exercise it are probably better off as a result and are right to do so for every sound financial reason.
  Mrs. Castle: They are all on supplementary benefit.
  Mr. Clarke: They are not. These women are right to take the money now in order to deal with the kind of family obligations that result from going out to work. The Government are offering a bad bargain in exchange for the full contributions which will be exacted.
  I hope that I have made it clear that the Committee stage will not be a backslapping exercise at which we shall agree that all that remains is to cross the tťs and dot the iľs. Our efforts in Committee will he made in good faith and I can assure my hon. Friend the Member for Brentwood and Ongar, who will be on the Committee with me, that it is our serious intention to reach an agreement with the Government. We may be at a disadvantage in seeking to reach a truce with the Government when they have declined to reach a truce with us, but we wish to bring certainty into these matters and we hope to work towards an agreed solution.
  If this solution is reached there will be a problem of timing. There will be a scandalous delay after the scrapping of the 1973 Act which means that nobody can acquire extra pension rights now or for at least two years ahead. Accepting that that delay is now inevitable as a result of the Government's decision, we would want to hear sound reasons why the new scheme should not be started before 1978—on balance we would refer it to be 1977, although we would be open to representations from outside the House that we should be causing inconvenience by insisting on an earlier date. We hope from then on to have agreement on a structure which we could work and which future Conservative Governments would be able to improve. This will depend on further concessions being made in Committee on the points that I have indicated. If those concessions are not made the doubts expressed by my hon. Friend the Member for Wells will begin
  1570
  to flood back into our minds and we shall have serious doubts whether we can commit ourselves to the Bill as it stands. We therefore reserve our position on Third Reading on that basis. We are in a minority, and I see that the Minister is amused by my threats. However, even though he has a majority in the House, that majority does not always persist on social security legislation. The Government have had their defeats in these matters.
  The prize to be won here is not a parliamentary majority on Third Reading but the authorship of a scheme which is generally accepted outside this House. If the Opposition can concede, as we hope we shall be able to, that we shall not repeal the Act when we return to power. and if we accept the scheme, that would be a considerable prize to be won. The concessions we are trying to get in exchange for that prize are worth while and would greatly benefit pensioners in the future.
  9.0 p.m.
  The Minister of State, Department of Health and Social Security (Mr. Brian O'Malley)While I shall not attempt now to deal in detail with the levity of some of the comments of the hon. Member for Rushcliffe (Mr. Clarke), I am immensely encouraged by his objections to certain features of the scheme, because if the Government had produced a scheme which was in all its details acceptable to the Opposition I should have felt that there was clearly something wrong with my judgment and that probably the judgment of the Government was very wrong. Therefore, I look forward with considerable anticipation to demonstrating to the hon. Gentleman and his hon. Friends where and how they are wrong in some of the submissions they may be making during the Committee proceedings of the Bill.
  To be more serious, we are about to give a Second Reading to a Bill which can bring about an end to more than a decade of disagreement and lack of progress in comprehensive pensions policy. The tone of the debate in the House and the comments which have been made outside the House, both on publication of the White Paper "Better Pensions" in September and of the Bill only very recently, indicate an acceptance of the

  1571
  general structure of the scheme. What is important is that we are not only determining new and higher levels of benefits and the provision of earnings-related benefits for those who currently have no occupational pension provision, or who have only poor provision, but we are also establishing what I believe will he a viable relationship between a State scheme on the one hand and occupational pension schemes on the other, whether in the public or private sectors of the economy.
  At this stage I would say to the hon. Member for Sutton Coldfield (Mr. Fowler), who spoke of occupational pension provision as being essentially a feature of private enterprise, that of course this is true but only partly true. The hon. Member made no mention of, first, the fact that the earliest developments in occupational pension provision in this country were in the public sector, and secondly, that occupational pension provision has developed apace in both the public sector and the private sector during the whole post-war period.
  This is not, therefore a conventional argument between private provision in the narrow sense on the one hand and public provision on the other hand. I do not want to spend time in repeating the arguments and discussions which we had on the reserve scheme when the hon. Member for Somerset, North (Mr. Dean) was taking the earlier Bill through the House of Commons or at a later stage when the Government decided not to implement the reserve scheme and the recognition conditions.
  I would say, without repeating the merits or demerits, or the advantages or disadvantages of that scheme, that there can be no progress in occupational pension provision in this country, or in establishing a viable relationship between occupational pension provision on the one hand and State provision on the other, unless the two great parties to the pension contract in industry can have a measure of agreement between them. It is significant in this respect that, whatever the merits of the reserve pension scheme and the recognition conditions, trade union after trade union, let alone the Trades Union Congress, roundly condemned aspects of them, for reasons which we need not repeat.
  1572
  What we have achieved this time is of significance in that both the TUC and the CBI welcome the general proposals set out in the White Paper "Better Pensions", and since publication of that White Paper there have been detailed consultations with a wide range of organisations concerned with pension matters. Those discussions and consultations were fruitful. There is detailed understanding and, I hope, trust between the pensions organisations and ourselves.
  As a measure of the importance which we placed on the consultations and the note we took of them—on which hon. Members on both sides have commented —two substantial changes were made in the Bill as opposed to the terms of the White Paper. There is the movement of the contribution reduction from 6½ per cent. to 7 per cent. and the change in the preservation requirements affecting occupational pension schemes. I think that the Bill as it stands is right, but the Government and my right hon. Friend and I are willing to consider in Committee with an open mind the details of the Bill and to conduct our proceedings in Committee and in further discussions with outside organisations in exactly the same manner as we carried out consultations between October and December last year.
  The hon. Members for Sutton Coldfield and for Brentwood and Ongar (Mr. McCrindle) and others spoke of the effect that the scheme will have on dependence on supplementary benefit. Reference was made to the estimates made by Age Concern of the number of people who would be on supplementary benefit as the scheme developed. Those estimates are far removed from accurate estimates, for reasons which I shall detail to the House.
  One of the bases on which the estimates were made was that at April 1973 5 per cent. of men and 60 per cent. of women were earning under £22. Those were rounded-up figures which should have been 4·5 per cent. and 56 per cent. The estimates made no assessment of the effect of the "best 20 years" provision, no assessment of the effect of the relaxation of contribution conditions under the 90 per cent. rule, no assessment of the large increase expected in the number of women who will draw both retirement pensions and/or occupational pensions in

  1573
  future and no assessment of the abolition of the half test as proposed in the Bill.
  It is also significant that the Age Concern estimate suggested that 250,000 self-employed people on flat-rate benefits might be on supplementary benefit well into the future as a result of the operation of the scheme. But since publication of the White Paper and a few days before publication of the Bill my right hon. Friend the Secretary of State said that we were undertaking a fundamental reexamination of the whole position of the self-employed, because our general view is that in return for earnings related contributions there should be earnings-related benefits. Therefore, any estimates of the degree of dependence on supplementary benefit are subject to wide margins of error, and it is clear that year by year with the build-up not on a 40-year maturity period but on a 20-year maturity period there will be decreasing reliance on means-tested supplementary benefit by pensioners.
  The hon. Member for Brentwood and Ongar and my hon. Friend the Member for Glasgow, Maryhill (Mr. Craigen) referred to the difference in retirement ages between men and women. My right hon. Friend the Secretary of State set out the basic difficulties. Any Government, whether now or at the time when the hon. Member for Somerset, North was the Minister responsible for pensions, would clearly be faced with a great difficulty.
  Surely the aim is not to raise the retirement age for women to 65 years, because that would not be a step forward, but to reduce the retirement age for men. However, my right hon. Friend said that to bring down the age of retirement for men would involve, in April 1975 terms, expenditure of £1,400 million. If we brought the retirement age for men down to 64 years it would still cost us a substantial amount of money.
  On the other hand, if we stay within the present public expenditure limits and push the retirement age for men down and the retirement age for women up, in order to match the existing costs of the pension scheme, men would be retiring only a few months earlier than at present while women would be required to retire approximately four years and nine months later. There is quite clearly no way forward there.
  Mrs. Kellett-Bowman: The right hon. Gentleman has mentioned a substantial sum. I understand from a Written Answer he gave me that it would cost £250 million to reduce the age by one year for men in the context of the Bill.
  Mr. O'Malley: I think that that is a substantial sum.
  Mrs. Kellett-Bowman: The Opposition are aiming for a more flexible retirement age, but it would be a step in the right direction to get the age down or to enable people to retire at that age if they wished to do so. It is a vastly different proposition from the sum of £1,400 million to which the right hon. Lady referred.
  Mr. O'Malley: Of course it is, but I hear my right hon. Friend the Secretary of State saying that there are public expenditure implications. However, there are two points that I should like to make in answer to the hon. Lady. First, we must bear in mind that the working population is likely to remain virtually static in the years ahead, except to the extent that there are large numbers of women who will go out to work.
  What has been significant during the whole of the post-war period is the change in the ratio between the working population and the retired population. As recently as the late 1950s there were six members of the workforce to every retirement pensioner. The ratio is now one to approximately three and a half, and it will go below that by the early 1980s.
  Clearly, to bring the age of retirement down, desirable though that would be, would have far more wide-ranging implications than its effect on the national insurance system. It would mean asking a section of the population—the productive working section—to take on an ever-increasing burden. I understand how the hon. Lady has been driven to her conclusions. The logic of the argument is to drive one to look at the problem of flexible ages of retirement.
  Mr. Kenneth Clarke: The Minister knows that I have in the past agreed with him about the impossibility in practice of reducing the retirement age for men. I have quoted some of the laughable examples that arise under this legislation because of the different retirement ages,

  1575
  and he has found them indefensible. When he agrees with his hon. Friends that there is no question of raising the retirement age for women, which may be the political reality, I cannot help feeling that he is giving the whole thing away. I accept that it is the right course for the woman in her 40s and 50s who is making plans for retiring at 60, but—and here I am speculating only—I doubt whether the young emancipated woman who leaves school or university and enters employment will feel that it is right that for all time she should expect to retire five years before her brother, who is going into exactly similar employment. She gets pension rights of the kind proposed in the Bill which are totally different and advantageous vis-à-vis men.
  Mr. O'Malley: Implicit in the hon. Gentleman's remarks is a serious admission, that the Tory Party is considering the possibility of announcing that it will put up the retirement age for women, or at least for some younger women. The Labour Party and the Government have no such proposals to announce or introduce, and we are unlikely to consider such proposals.
  Mr. Kenneth Clarke: The Minister knows perfectly well that my hon. Friend the Member for Sutton Coldfield (Mr. Fowler) puts a drawing pin under my trousers as soon as he says something like that, so that I shall rise to say that the Conservative Party has no such intention. I was only speculating, but when the right hon. Gentleman shouts me down, using a political argument with such ferocity, there seems to be no doubt that what he is doing—perhaps what I or anybody else would be driven to do in the same position—is closing the door to doing anything about these anomalies which are worrying hon. Members.
  Mr. O'Malley: I am saying frankly that the Government see no prospect of bringing down the retirement age for men at this time. I have no doubt that there will be increasing pressure to do this but whenever that matter is under consideration there are broad economic implications which go far wider than the National Insurance Fund. I am glad that at least my interpretation of what the hon. Gentleman said has elicited one
  1576
  further fact—that we and the Opposition are in broad agreement that the different retirement ages which we have inherited from an earlier period cause anomalies. We must minimise them as much as we can.
  Mrs. Kellett-Bowman: There is a fallacy in the right hon. Gentleman's argument. The answer which he gave me was based on the assumption that the retirement pattern during the first five years after the lower age would be the same as it is now between 65 and 70. On the face of it, that is absurd. The pattern of retirement between 60 and 65 is not conceivably likely to be similar to that between 65 and 70. Those receiving the pension at 64 would be likely to add to their pensions, as women can.
  Mr. O'Malley: I am not sure that I understood the hon. Lady, but I shall read in Hansard tomorrow what she said. I hesitate to use the word "absurd"about anything she says. I thought that it was mixed up, but perhaps at this hour I did not follow her too easily.
  There are problems of having a built-in flexible retirement age, in saying, for example, that if a man retires at 60 he should be able to dray an actuarially-reduced national insurance pension. That may well be to the advantage of the man who is on a final-salary scheme, perhaps giving two-thirds of his pay, and who has a high level of salary. He then gets an additional reduced State pension. But that provides no adequate pension in retirement for a man with no occupational pension provision. It could not be said that a person could retire and draw his flexible pension only if he had another pension on which to retire, or had other forms of income. The result could be not a reduction but a massive increase in dependence on supplementary benefits during the whole of retirement.
  I turn to the reservations expressed by the hon. Members for Sutton Coldfield, Rushcliffe and Somerset, North concerning the arrangements. They concentrated their speeches on the occupational pension scheme, whether in the public or the private sector.
  The first thing that needs to be said is that the Government are not asking occupational pension schemes to do anything which manifestly, by their history, they

  1577
  are unable to do. One of the most significant developments in occupational pension provision during the past decade or so has been the growth of final-salary schemes. The percentage of occupational schemes in the private sector on a final-salary basis rose from 12 per cent. in 1963 to 47 per cent. in 1971, and the percentage of members of private sector occupational pension schemes in final-salary schemes rose from 23 per cent. in 1963 to 62 per cent. in 1971.
  If we take public and private sector membership together, we see that 72 per cent. of members of such schemes were in final-salary schemes in 1971. There is a good reason for that. There is a built-in pre-award dynamism on the individual's earning record as a fundamental part of the final-salary type provision.
  The Government took the view that it was that kind of provision which the occupational pension sector, both public and private, had demonstrated that it wanted and demonstrated that it was capable of undertaking. The Government turned to providing the type of pension provision that we want to see developed in occupational pension schemes.
  To assist the managers of the schemes, we have made a significant number of proposals and changes in the Bill to which Conservative Members have not given sufficient weight. First, it should be taken into account—no one has mentioned it today—that the contributions payable by both employees and employers in contracted-out schemes as from April 1977 or 1978, whichever date is taken, will be lower, and in some cases significantly lower, than the level of contributions payable by members as from April 1975. That is when we move to a system of fully earnings-related contributions at a joint rate of 14 per cent.
  Secondly, we acknowledged at the outset that by their very nature private occupational pension schemes could not guarantee complete inflation proofing after award. In the past some schemes have achieved that on an ad hoc basis. Some schemes give a fixed percentage of dynamism and some give no dynamism at all. As I have said, because of their very nature it is not possible for them to give a guarantee.
  1578
  The State scheme, within its parameters, takes over the whole of the post-award dynamism so that in future there will be no liabilities on occupational pension schemes within those Parameters. We have not asked occupational pension schemes to undertake any of the costs of the best 20 years provision which was welcomed by my hon. Friends and by Conservative Members. We did not ask for the comprehensive build-up of earnings-related invalidity provision because we did not feel that the occupational schemes could cope with so many things at one time.
  We considered the position of elderly widows. It is true that six out of every 10 elderly widows have to rely on means-tested supplementary benefit. We therefore provided for elderly widows to receive 100 per cent. of their husband's personal pension entitlement. That is a level of return which I believe is unmatched in any scheme anywhere in the world. We did not ask the occupational pension schemes to do that as part of the contracting-out arrangements, even if they were allowed to do so by the existing Inland Revenue rules. Instead the provision is 50 per cent. That is much the same as was required by the Social Security Act 1973. We have added another ½ per cent. in the contribution reduction to the employer. He is the man who takes a risk because there is an open-ended commitment on the pre-award dynamism in the final-salary schemes.
  Further, throughout the whole of the section of the Bill dealing with these arrangements we have left maximum flexibility to occupational pension schemes to define pensionable earnings for themselves. In the structure of the Bill considerable assistance is given to help occupational pension schemes at any time, and particularly if the managers of the schemes are worried about the prospects of inflation.
  Both the hon. Member for Sutton Cold-field and the hon. Member for Rushcliffe suggested—unless I am mistaken, they posed the matter as a question rather than putting it as a firm proposition—that we might examine in Committee whether there should be some restriction on the amount of pre-award dynamism which should be carried by a contracted-out occupational pension scheme. The

  1579
  Opposition propose a cutback in the traditional area of schemes involving final salary—in other words, a cutback in the arrangements which already exist.
  I appreciate that Conservative spokesmen have not reached a conclusion on the matter, and I put it tentatively. Of course I understand the problems of inflation. The problem is not inflation per se but the difference between the movement of wage inflation and the level of return on investments. If there is a reverse gap for a number of years, there will be problems for occupational pension schemes. In the past, peaks and troughs have tended to even out. Many schemes have been extremely liquid, with income exceeding the demand on resources for some years in the future. But if there were to be a long-term situation in which the investment yield fell below the movement of wages in the country as a whole ment of wages in the country as a whole, or in a particular scheme, again there would be problems.
  I agree with the view expressed on television in "The Money Programme" last week by a senior member of the insurance industry and by Mr. Maurice Oldfield, to whom reference has already been made, that this was an inflationary hiccup after which occupational pension schemes would carry on with their normal type of funding arrangement on a viable basis.
  Funding of occupational pension provision is to do with very long-term planning. It is not affected so much by short-term fluctuation on the Stock Exchange or by peaks or troughs in a particular year. It is planning in the long term. The House will recall that the Government Actuary estimated the difference between wage movements and investment yield to be of the order of 1 per cent. The 7 per cent. contribution reduction does not depend on the assumption of price increases of only 5 per cent. and earnings of 8 per cent. That is not of significance. The significant factor is the margin between wage movement and investment yield. The Government Actuary made a cautions assumption that the difference would be a plus difference of 1 per cent.—in other words, 8 per cent. in respect of wages and 9 per cent. in respect of investment yield.
  1580
  The Prudential Assurance Company currently advises employers, for the purpose of assessing contributions, to adopt a 2 per cent. figure between wage movement and investment yield. That is purely advisory. If the figure was not 2 per cent. but a lower figure, the level of contributions would need to be changed or there would need to be a lump sum payment from the employer into the scheme. When a cautious insurance company makes a long range estimate of that kind for advisory purposes in assessing the rate of contributions, we are not yet at the stage of crying "Woe. This is the end of funded schemes." We have not reached the end of the situation in which private occupational pension schemes can provide final salary provision, with all that it implies for pre-award dynamism. While recognising that this scheme will help occupational pension funds, I believe that in Committee we shall need to consider seriously the problem of inflation.
  I was grateful to the Opposition for raising the question of pre-award dynamism in an interrogatory manner rather than taking a firm position at this stage. Careful consideration must be given before we decide that occupational pension schemes should be cut back.
  Mr. Paul Dean: I understand the arguments of the right hon. Gentleman. One of them is that the State will take the strain in a number of areas, especially in post-award dynamism. This goes so far and no further. It applies only up to the guaranteed minimum pension. There are many schemes in both the public and private sectors which are doing better than that already. They will wish to continue. If the Government take the strain for the first part, they will feel even more obliged to take the strain for the further part. I hope that the right hon. Gentleman will not under-estimate the commitment of occupational schemes to preserve the value of the pension above the guaranteed minimum pension, especially with the current rate of inflation.
  Mr. O'Malley: I take the point.
  It has been suggested that a 7 per cent. contribution reduction is too low. I understand a negotiation position. The Government have moved quite a considerable way with the extra ½ per cent. which goes to employers. We shall, of

  1581
  course, discuss this in Committee. We have to be fair between those members of the scheme who are fully contracted-in and those who are partially contracted-out.
  The hon. Member for Lancaster (Mrs. Kellett-Bowman) mentioned a differential contribution for women. No doubt this can he considered in Committee. Any contribution increase for women would mean a contribution reduction for men. It may be that the generality of schemes would suffer as a result of a two-tier arrangement rather than the Government's one-tier arrangement. I shall leave the hon. Lady to consider that because it is not an easy question to decide.
  The hon. Member for Somerset, North mentioned centralised schemes. I have confined my comments on money-purchase schemes to centralised schemes. I did not range as widely as the hon. Member for Rushcliffe has said. The hon. Member for Sutton Coldfield is mistaken in believing that centralised schemes have to be money-purchase schemes by their nature. They do not. There are some centralised schemes, where there is more than one employer, which are final-salary schemes. The difficulty about money-purchase schemes is that they cannot guarantee inflation proofing. If they can meet the guaranteed minimum pension, which is one degree of dynamism, why cannot they meet the other?
  I recognise the position of the type of scheme to which the hon. Member for Wells (Mr. Boscawen) referred which has a 15 per cent. contribution rate. I would look sympathetically at any propositions put forward on the difficult area affecting centralised schemes.
  Mr. Boscawen: Would not the right hon. Gentleman agree that a certain amount of latitude could be given to the Occupational Pensions Board to judge these schemes in terms of contributions as well as of benefits?
  Mr. O'Malley: I cannot accept that. The Occupational Pensions Beard has to have discretion, but it would be intolerable if the House were to say to the board, "We cannot find a solution to this problem, so we will hand it over to you". Before the Bill leaves the House we have to go into it in detail to see whether we
  1582
  can overcome the problems in some sections of the industry.
  Conservative Members do not like a "pay-as-you-go" scheme. I do not think it is a matter of doctrine. The advantage of a scheme like this for the State in current circumstances is that there is no inherited fund from which to pay retirement pensions to the existing 8 million pensioners. To the extent that we lock away money for 10, 20 or 40 years we are requiring today's contributors to pay a higher level. We know the problems of British industry at the moment which militate against such a proposition.
  The Bill provides an earnings-related pension, irrespective of whether a man or woman is in an occupational pension scheme. It particularly helps the older man or woman because of the 20-year maturity provision. It sets new higher levels. I have to point out, particularly to my hon. Friends acting with the trade union movement, that we are setting a floor and not a ceiling. Pensions are deferred pay and as such are central to the collective bargaining process. Nothing indicates more clearly the need for development in this area than the fact that in 1971 85 per cent. of staff in occupational schemes were in final salary type schemes compared with 25 per cent. of manual workers. There is a great deal of room for negotiation by the trade union movement to improve the deferred pay of their members.
  My hon. Friend the Member for Edmonton (Mr. Graham), asked me about self-investment of pension funds. The Bill does not prohibit that. It leaves the question of the sufficiency of resources to the Occupational Pensions Board. Under Clause 38 the board can make it a condition of contracting out that no part, or no more than a specified proportion, of the scheme's resources shall be invested in any particular way. It is entirely a matter for the board. My hon. Friend the Member for Bristol, North-East (Mr. Palmer) expressed a view on the position of the report of the Occupational Pensions Board. This is something on which the Government have come to no conclusion. We are merely considering the report and will bear in mind the views expressed by the House.
  The Bill is about better pensions. It is designed to end the "two nations" in

  1583
  retirement whereby some people are lucky and have an occupational pension scheme in addition to the State scheme while others have nothing. It bring a new deal to the lower-paid. It provides that women shall be treated equally, not only in terms of long-term benefit but in terms also of sickness and unemployment benefit. It particularly helps manual workers as a result of the provision involving the best 20 years. In view of the generally friendly reception given to the Bill, subject to the reservations which the Opposition have spelt out, I hope that the House will not only give the Bill a Second Reading but will ensure that it can go through all its stages in both Houses before the Summer Recess so that we may have the opportunity of a 1977 start, which I believe is the wish of both sides of the House.
  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)

  SOCIAL SECURITY PENSIONS [MONEY]
  Queen's recommendation having been signified—
  Resolved,
  That, for the purposes of any Act of the present Session to provide for relating the rates of social security retirement pensions and certain other benefits to the earnings on which contributions have been paid and to make other amendments in the law relating to social security and to occupational pensions. it is expedient to authorise—

  (1) the payment out of moneys provided by Parliament of—

  (a) any administrative expenses of the Secretary of State or any other government department under that Act;

  (b) any increase attributable to that Act in the sums falling to be paid out of moneys so provided under any other Act;

  (c) any sums required by the Secretary of State for making payments to the chairman and members of the Reserve Pension Board in consequence of its abolition;

  (2) payments into the Consolidated Fund. —[Mr. O'Malley.]

  PRICES ACT (CONTINUATION ORDER)
  9.40 p.m.
  The Under-Secretary of State for Prices and Consumer Protection (Mr. Robert Maclennan): I beg to move,
  That the Prices Act 1974 (Continuation of Section 2) Order 1975, a draft of which was laid before this House on 4th March, be approved.
  In asking the House tonight to approve this draft order continuing Section 2 of the Prices Act 1974 in operation for a further year, I am doing no more than seeking confirmation of the decision we have already taken in principle during our discussions on the Prices Bill which received its Third Reading on 12th March. Hon. Members will recall that Clause 2 of the Bill enables the price regulation and display powers of Section 2 of the 1974 Act to remain in operation without time limit after the original expiry date of 31st March 1975.
  It may well be asked why, in view of our previous debates on this subject, it is necessary for us to discuss the issue again this evening. The reason is this! Since Section 2 of the 1974 Act is due to expire at the end of this month, early action would in any case have been necessary to ensure its continued availability. It was clearly sensible to take the opportunity of the current prices legislation to achieve this. The Bill was introduced as soon in the present parliamentary Session as was possible.
  We had hoped that, with the Second Reading on 30th January and given the necessary co-operation in the House, the Bill would have received the Royal Assent before the Easter Recess, so obviating the need for a separate continuation order for Section 2. In the event, the pressures on parliamentary time have been such that this goal will clearly not now be attained. In order to avoid any lapse of the prices orders which have been made under Section 2, it was accordingly necessary for the Government to seek parliamentary approval for the present order. The House will understand that the order will inevitably have a very short life since, once Clause 2(1)(c) of the Prices Bill has been passed, it will automatically supersede this order which is being made under the provisions of Section 2 of the 1974 Act which the Bill repeals.

  1585
  Section 2, as the hon. Gentleman knows, provides powers to regulate by order the prices and margins of subsidised and fresh foods and, at retail level, those of other articles which may be regarded as essential parts of the regular expenditure of low income households. This is backed up by a power to require details of the regulated prices to be displayed in shops where the goods are sold. After extensive consultations with interested bodies, we have used these powers to set maximum retail prices for bread, butter and cheese and to control distributors' margins.
  These orders ensure that the requirement to pass through to consumers the full amount of the subsidy on these foods has a statutory basis. The prices of the other two subsidised foods—tea and household flour—will be similarly regulated as soon as our consultations are completed.
  Section 2(5) of the 1974 Act provides that these orders shall apply only to sales during the period up to 31st March 1975 but gives the Secretary of State power, by order, to extend the period for up to a further 12 months. Since the orders which have been made are necessary to ensure that the benefit of the subsidies is passed through into retail prices, they will clearly be required for so long as any food on which subsidy has been paid is available for retail sale.
  The Opposition have somewhat exaggerated the probems which might arise either with regard to the enforcement of the orders or as a result of the display requirements. However, this is not the occasion for a detailed discussion of these matters, which we have debated at length on other occasions.
  I should, however, like to read a letter which my right hon. Friend recently received about the enforcement of the food prices orders from the County Consumer Protection Officer of the West Sussex County Council. I am sure the hon. Gentleman will agree that this is an authoritative source. After reporting the results of nearly 3,000 inspections his staff had carried out, his letter goes on to say,
  "All of these have been dealt with by means of written warnings and follow-up visits have been made to ensure that compliance has been achieved. In addition to direct enforcement,
  1586
  Press releases have been issued as each order has been received, and talks have been given to local chambers of trade and individual companies, in an effort to achieve a high level of compliance with a minimum of disruption of retail trade. You may be interested to know that this work fits very well with our other statutory duties and has given no great difficulty so far."
  This makes it clear that the existing orders are perfectly capable of effective enforcement. But, in the light of experience we have taken steps to facilitate their enforcement still further by providing in the current Bill for orders to be made, subject to prior consultation with representative organisations, requiring traders to keep records of information relating to regulated prices which are needed for the efficient enforcement of price regulation orders.
  The second aspect of these orders which the Opposition have criticised is the requirement for information about controlled prices to be displayed in retail shops. The Government have to maintain a balance between the legitimate interests of the consumer or the housewife in knowing about the top prices she can be asked to pay for subsidised food and the natural desire of shopkeepers to have the task put upon them made as easy and straightforward as possible. We have already considerably simplified the display requirements with the convenience of both shoppers and shopkeepers in mind, and we have provided in the Prices Bill for the information to be kept for production on request as an alternative to public display. This will enable the display notices in future to be limited to a few best selling lines in which consumers are particularly interested and accordingly minimise retailers' additional obligations under the Act.
  With the improvements we have made, the future operation of the prices orders under Section 2 of the 1974 Act will be very much more convenient and effective for traders, enforcement authorities and consumers alike. But quite apart from this, public expenditure considerations alone require that the orders on subsidised foods should continue in force, and the Government are therefore fully justified in asking the House to approve the extension of the Section 2 powers. As I have explained, the particular vehicle for their extension represented by this draft

  1587
  order will be short-lived, given the provisions in the Prices Bill, but it is necessary to ensure the continued safeguard of money spent on the subsidy, and I ask the House to approve the order accordingly.
  9.47 p.m.
  Mr. Norman Lamont: I am grateful to the Under-Secretary for explaning why this order is necessary and for outlining the provisions which flow from Section 2 of the 1974 Act. Our view, which was expressed in our previous discussions on the legislation, was that the orders which flowed under this Section were of dubious relevance and were defective in certain respects. We still take the view that there was no overwhelming need for these orders to be reintroduced pending the order under the Prices Act when it receives the Royal Assent.
  Since the Prayer on the butter order in January, there have been a number of changes which have affected these orders, There have been changes in prices and, secondly, there have been concessions on the display notices, to which the hon. Gentleman referred again tonight. We accept fully that these concessions will improve the situation considerably.
  Our view on this order, however, was that it would have been far better simply to wait until we had the new orders and that there was no good reason why they should not lapse until the Bill now going through the House of Lords had become law, with the changes, which both sides of the House agreed would result in considerable improvements.
  We regarded the original orders as defective, bureaucratic and ineffectual. We regarded the maximum prices as not being of very great use to the consumer when in many cases shops were displaying notices of prices well above those actually being paid in the shops. We felt that that was likely to be of questionable usefulness to the consumer.
  There was also the question of the burden being placed on the small shopkeeper. The Minister referred to the changes and the improvements, which again I welcome. But the existing orders, as was pointed out in the debate, resulted in two prominent notices for bread prices, eight categories of bread and perhaps three
  1588
  prices for each, and two small notices for butter prices.
  The Minister will recall that it was said in the debate how The Grocer magazine estimated that there could be as many as 200 notices required in a small shop—a truly staggering figure—and that, even if the Minister thought that that was exaggerated, in itself it indicated some of the muddle and confusion caused by thee regulations. Incidentally, I understood that there was to be exemption for the smaller shops of 250 ft., but the Minister did not say anything about that matter tonight. We hope to hear something about that matter in the near future.
  This is not the occasion to go into the reasons why we regard many of the provisions as complicated and, for that reason, difficult for the small business man and shopkeeper to understand. Some of the provisions on margins and base periods are very complicated. It is unlikely that many small traders will have kept records of the quantities of goods that they purchased which would be necessary to comply with the order.
  Another point which I will not go into concerns special offers being excluded. We argued that if special offers were excluded from the regulations it would become difficult to calculate the base periods and the base prices under the order. I do not want to go into that matter in detail as that was done in the previous debate. The fact that those arguments were advanced seems a good reason for not renewing the order for such a short period.
  These are bad days for small business men and shopkeepers. I am particularly pleased that the Daily Express has recently given a lot of coverage to the problems of small shopkeepers and business men who now feel that they are being covered by a tangled web of red tape, bureaucracy and regulations of a pettifogging and petty-minded nature.
  We encroach more and more on the time of the business man. We ask him to give up his time to act as the Government's agent. We ask him to give up space in his shop to display the Government's notices. There are all the troubles from the threat of multiple rates of VAT, the increase in national insurance contributions, the administrative problems of butter and beef coupons where again the small business man has

  1589
  to act as the Government's agent. Not least, there are the problems of rates and capital transfer tax.
  One point to which the Daily Express recently drew attention concerned the tremendous number of small businesses which have gone out of operation in the last 10 years. Apparently one-third of our newsagents, grocers and tobacconists, one-quarter of our greengrocers, fishmongers and chemists and one-half of our shoe repairers have gone out of business since the 1960s. We believe that small businesses of that kind fulfil a vital need in our community. They offer services which are in great demand and provide good value for money.
  Many small business men wonder whether their efforts have been worth while and feel very bitter about the whole
  1590
  situation. We read with interest some Press reports about the Secretary of State for Industry wanting to tax small business men even more.
  This order will pile more administrative burdens on the small business man. That is why we have criticised such orders so much in the past. This order is to come in for only a short period and other improvements will be made. Therefore, although we wish to express our reservations about the order, we do not intend to divide the House upon it.
  Question put and agreed to.
  Resolved.
  That the Prices Act 1974 (Continuation of Section 2) Order 1975, a draft of which was laid before this House on 4th March, be approved.

  INDUSTRIAL INJURIES AND DISEASES (OLD CASES) BILL [Lords]
  Order for Second Reading read
  9.55 p.m.
  The Parliamentary Secretary to the Law Officers' Department (Mr. Arthur Davidson): I beg to move, That the Bill be now read a Second time.
  This is a consolidation Bill, purely and simply. It is one of five Bills which will be put before the House tonight, the total effect of which is to consolidate in these five measures all the national insurance, social security and industrial injuries legislation which is at present on the statute book. The main Bill, which I shall introduce later, is the Social Security Bill [Lords] and I shall then deal at some length—not at great length, I am happy to tell the House—with the background to these five Bills.
  This measure consolidates the Industrial Injuries and Diseases (Old Cases) Act 1967, which is itself a consolidation measure, and subsequent enactments which have amended that Act. I do not think that at this stage I need go into further detail about the Bill. It has been before the Joint Committee, it has received careful scrutiny, certain amendments have been made to it, and it has been through the House of Lords. I accordingly commend the Bill to the House.
  9.57 p.m.
  Mr. Daniel Awdry: I do not wish to detain the House on this Bill because, as the Minister said, the main measure in this group is the Social Security Bill, and I shall confine my remarks to that measure when we come to it.
  As the hon. Gentleman said, the Bill seeks to consolidate the 1967 Act and certain related subsequent amendments. There is no question which I seek to raise now, and we fully support the Bill.
  Question put and agreed to.
  Bill accordingly read a Second time.
  Bill committed to a Committee of the whole House.—[Mr. John Ellis.]
  Bill immediately considered in Committee; reported, without amendment.
  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.

  INDUSTRIAL INJURIES AND DISEASES (NORTHERN IRELAND OLD CASES) BILL [Lords]
  Order for Second Reading read
  9.58 p.m.
  The Parliament Secretary to the Law Officers' Department (Mr. Arthur Davidson): I beg to move, That the Bill be now read a Second time.
  I do not think that I need say anything by way of introducing the Bill. It consolidates the parallel legislation for Northern Ireland which was dealt with by the previous Act. This measure, too, has been before the Joint Committee. It was introduced in the House of Lords, it is a creature of the Law Commission, and I accordingly commend it to the House.
  Question put and agreed to.
  Bill accordingly read a Second time.
  Bill committed to a Committee of the whole House.—[Mr. John Ellis.]
  Bill immediately considered in Committee; reported, without amendment
  It being Ten o'clock, Mr. Speaker interrupted the proceedings

  BUSINESS OF THE HOUSE
  Ordered,
  That, at this day's sitting, the Industrial Injuries (Northern Ireland Old Cases) Bill [Lords], the Social Security (Consequential Provisions) Bill [Lords], the Social Security Bill [Lords] and the Social Security (Northern Ireland) Bill [Lords] may be proceeded with, though opposed, until any hour.—[Mr. John Ellis.]

  INDUSTRIAL INJURIES AND DISEASES (NORTHERN IRELAND OLD CASES) BILL [Lords]
  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.

  SOCIAL SECURITY (CONSEQUEN TIAL PROVISIONS) BILL [Lords]
  Order for Second Reading read
  10.1 p.m.
  The Parliamentary Secretary to the Law Officers' Department (Mr. Arthur Davidson): I beg to move, That the Bill be now read a Second time.
  The Bill enables the four consolidation Bills to which I have already referred to take their place on the statute book without their several transitional provisions, savings and repeals, to be set out in each Bill. This would have tended to overload the Bills with purely technical measures, and far from making it easier for the reader to understand, as is the purpose of consolidation legislation, may have made the reader's task much more difficult.
  There are certain amendments to the Bill which are purely consequential on the late passing of the Social Security Benefits Act 1975, an uprating Act, on 13th March—last week. The amendments are purely drafting and reflect the law as it is at the moment.
  Question put and agreed to.
  Bill accordingly read a Second time.
  Bill committed to a Committee of the whole House.—[Mr. John Ellis.]
  Bill immediately considered in Committee.
  [Mr. GEORGE THOMAS in the Chair]
  The Chairman: This again is a consolidation Bill, but in this case there are amendments to the schedules. I would propose first to put the Questions on the clauses together, since there are no amendments to them. Thereafter, I will call the Minister to speak on Schedule 1 to explain the amendments, which I understand are all consequential or drafting. Thereafter, if no one objects, I will put one Question on the schedules and the amendments together. This will save a considerable time, since otherwise nearly a quarter of an hour would be required to put the Questions on the separate amendments under separate schedules. However, I should make it plain that if there is a single objection to taking this course, I will put the
  1594
  Question separately on each amendment and on each schedule.
  Clauses 1 to 6 ordered to stand part of the Bill
  Schedule 1

  REPEALS
  The Parliamentary Secretary to the Law Officers' Department (Mr. Arthur Davidson): I mentioned, Mr. Thomas, that the amendments are purely of a drafting nature or amendments which take account of the alterations in the Bill made by the House of Commons and which subsequently went to the House of Lords.
  Amendments made:
  No. 1. in page 11, line 20, leave out '(4)' and insert '(6)'
  No. 1A, in page 6, leave out lines 15 to 17.
  No. 2, in page 11, line 34, column 3, at end insert—
  'In Schedule 5, paragraphs 1 to 4'—[Mr. Arthur Davidson]
  Schedule 2

  CONSEQUENTIAL AMENDMENTS OF ENACTMENTS
  Amendments made:
  No. 3, in page 14, leave out lines 30 to 33
  No. 3A, in page 15, leave out lines 31 to 35
  No. 4, in page 24, line 4, at end insert—
  'Pensions (Increase) Act 1971 (c. 56)
  46A. In Schedule 2 to the Pensions (Increase) Act 1971, for paragraph 26 substitute—
  "26. A pension payable under Schedule 10 to the Social Security Act 1965 (National Insurance Commissioners)".'
  No. 4A, in page 24, line 43, leave out '15' and insert '16'.—[Mr. Arthur Davidson.]
  Schedule 3

  TRANSITIONAL PROVISIONS AND SAVINGS
  Amendments made:
  No. 5, in Schedule 3, page 40, leave out lines 3 to 6 and insert—
  '(2) Sections 1390), 166(1) to (3) and 167(3) of the new Act (provisions about regulations,

  1595
  including reference to N.I.A.C. and Parliamentary control) apply to regulations under this Part of this Schedule as they apply to regulations under that Act, except that section 139(1) does not apply to such regulations made within a period of 12 months beginning with the appointed day'.
  No. 6, in page 43, leave out lines 31 to 39.—[Mr. Arthur Davidson.]
  Schedules, as amended, agreed to.
  Bill reported, with amendments; as amended, 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 amendments.

  SOCIAL SECURITY BILL [Lords]
  Order for Second Reading read
  10.6 p.m.
  The Parliamentary Secretary to the Law Officers' Department (Mr. Arthur Davidson):I beg to move, That the Bill be now read a Second time.
  This is the fourth time that I have moved a Second Reading this evening. The House will see that this is a gigantic Bill, but despite its size it is, none the less, purely a consolidation Bill. However, it is a massive piece of consolidation and, indeed, it is one of the most elaborate and complicated consolidation Bills that has ever been put on the statute book. It rivals the consolidation of the Income Tax Acts of 1970 which, though equally complex as a consolidation exercise, involved only two Acts as compared with the present five Bills.
  I must repeat, in case the House should be in any doubt, that all five Bills are purely and simply consolidation Bills. They present a scrupulously accurate representation of the existing law—that is, the law as it is after the Social Security Benefits Act passed through Parliament last week.
  I shall be going into some detail about the background to this Bill because, as the House will recall, when I introduced a consolidation Bill and a statute repeals Bill last week in the time-honoured way, which is to do so rather briefly, one or two hon. Members felt that a little more detail ought to have been given. Among
  1596
  them were my hon. Friend the Member for Keighley (Mr. Cryer) and my hon. Friend the Member for Kingston upon Hull, Central (Mr. McNamara). I always listen very carefully to what they say because they are—they know that I mean this sincerely—very diligent about the information which ought to be given to the House, and they are always attenders at the very late sittings of the House. On this occasion, they are true to form. When my hon. Friend the Member for Keighley gets worried, I get worried, too. As he said last week, we have been engaged in many joint exercises in the House, so I feel that I ought to go into slightly more detail than is normal with a Bill of this sort.
  What these Bills do is to consolidate all the enactments relating to national insurance, social security and industrial injuries. It has taken about 10 years for this legislation to be carried out. The last Act on the statute book was the 1973 Act which has been amended by the Social Security Benefits Act 1975. The whole range of legislation consolidated ranges from 1945. This is, therefore, a massive piece of legislation. It will certainly make social security law much more comprehensible to the average person. I am sure that the House will want to see this Bill passed. It was held up by the passing of the latest Act last week. The amendments are all consequential upon the late passing of this Act, or they are purely and simply technical drafting amendments.
  10.11 p.m.
  Mr. Daniel Awdry: In view of the criticism expressed last week when the previous consolidation Bills were discussed that there was insufficient explanation, perhaps I should make it clear that the Opposition support these measure and believe that they will result in an enormous improvement in the clarity and effectiveness of the statute book in this area. As the Parliamentary Secretary said, the Bill is highly technical, and it seems to me slightly absurd that it should come before the House at all, let alone at this hour of the night.
  I had the honour to serve on the Joint Committee on Consolidation Bills. I realise how greatly we depend upon the thoroughness and ability of the officials and servants of the Committee who have had to make all the necessary

  1597
  preliminary and academic researches and recommendations which are brought before us. We are deeply indebted to these officials.
  My criticism of the system, for what it is worth, is that the Committee can meet only at fairly infrequent intervals. We meet once a week. It would be beneficial if a new procedure could be found to speed up consolidation. Everyone realises that consolidation is helpful, and I suggest that before too long a Select Committee might consider this matter and perhaps find a better method of dealing with these non-controversial but highly complicated matters other than on the Floor of the House. I pay tribute to the draftsman who has undertaken this mammoth task of consolidating the law on national insurance and social security.
  I thank the Parliamentary Secretary for his clear explanation of the Bill's provisions. He was slightly unfairly attacked last week by some of his colleagues, but no one is entitled to criticise him tonight. The Bill is complicated and technical, but it has been very carefully considered by the Joint Committee on Consolidation Bills. The last consolidation in this field, which always was a massive task, took place in 1965. In that year three Acts were passed—The National Insurance Act, the National Insurance (Industrial Injuries) Act and the Family Allowance Act. Of course since 1965 a number of entirely new social security benefits have been introduced in several Acts, and a major new Act—the Social Security Act was passed by the Conservative Government in 1973.
  As soon as that Act reached the statute book, work began to consolidate the social security law. The Bill consolidates so much of the national insurance legislation of 1965 to 1974 as remains un-repealed by the 1973 Act, together with the National Insurance (Industrial Injuries) Acts and, in addition, Part I of the 1973 Act and most of last year's Social Security Amendment Act.
  This is therefore a massive Bill of 169 clauses and 20 schedules. I believe that it indicates the great advantages which consolidation can bring. These are clearly seen when one compares the Bill with the garbled text at present available to the public and to those who try to administer the social security pro-
  1598
  visions. I hope that it will be felt that those of us who sat on the Joint Committee week after week—not a very exciting but nevertheless an important task—have done a useful and helpful job of work, and we on this side welcome the Bill.
  10.15 p.m.
  Mr. Kevin McNamara: May I very briefly thank my hon. Friend the Parliamentary Secretary for the explanation which he has given of the Bill this evening. When we objected to the procedure last week we felt that it was quite wrong that massive consolidation Bills should be introduced, by tradition or otherwise, almost on the nod, with no explanation at all given. If there is any justification for the stand which my hon. Friend and I adopted last week it is both the explanation that my hon. Friend has given this evening and the importance of this particular measure.
  Those of us who spend any time trying to thumb our way through "Statutes Revised" and other publications, trying to find the relevant parts of National Insurance legislation in operation at any one time will know that a consolidation measure of this kind is greatly to be welcomed. Not only is it to be welcomed but also what it does should be explained to the House. We have now had this explanation. I am most grateful to my hon. Friend and I hope that he has set a happy precedent if only so that we can in this way see what we owe to the Joint Standing Committee, its servants and the parliamentary draftsmen.
  I thank him, and I am sure that the country as a whole thank him, particularly those in trade unions and others who have to deal with this difficult legislation, who will welcome this consolidation legislation on to the statute book.
  10.18 p.m.
  Mr. Bob Cryer: I, too, am grateful to the Minister for making today the effort that he did not make last week. He was following a pattern which has been set for these consolidation measures in which it was felt that a very short speech would suffice. It was perfectly correct and proper that as Members of Parliament we should ask a Minister who is bringing a Bill like this before us to give us a more adequate explanation.

  1599
  This in no way derogates from the excellent work which I have no doubt the Joint Committee has put in. But no matter how many Committees scrutinise documents in this House, in the last analysis the might and even the majesty of Parliament is centred here in this Chamber, and the opportunity for hon. Members to exercise this scrutiny of a very complicated document is here in this Chamber.
  We have, therefore a right to come here and say that although we were not members of the Joint Committee we felt that the explanation of a measure which might well have a massive amount of diligent work behind it was not entirely adequate to us. This Bill has 169 clauses and 20 schedules. It is an important work, and I believe that it will be an enormously useful work.
  I entirely support the move to consolidate legislation. Our legislation is diffuse and drawn from numerous sources, and where people are not able easily to obtain access to legislation, that in itself can bring legislation into disrepute. Therefore, we welcome this kind of consolidation measure and I would certainly support any measures that would speed up this consolidation process. No one would object to that.
  At the end of it all, however, the final decision about law which is binding on the people, even though it is merely a process of drawing the strands together so as to make the law more easily accessible to the people, must rest in this Chamber. If we, as ordinary back benchers, seek to ensure that scrutiny of legislation by the executive is maintained, we shall have done a reasonable job. If the executive has taken note of our attitude and accepts that though it will take a little extra time it will provide an explanation, then it is worthwhile. If we are not doing that job we are failing in our duty.
  I would like to reiterate our appreciation of the extra trouble the Minister has taken here tonight and I am sure —and this is something which my hon. Friend the Member for Kingston upon Hull, Central (Mr. McNamara) will support—that he will have set a pattern and that in future Ministers will bear in mind that there will always be insomniacs
  1600
  among back benchers who will wander into the Chamber to question and scrutinise the work of the executive.
  Question put and agreed to.
  Bill accordingly read a Second time
  Bill committed to a Committee of the whole House.—[Mr. Pavitt.]
  Bill immediately considered in Committee
  [Mr. GEORGE THOMAS in the Chair.]
  The Chairman: This is a consolidation Bill with amendments to the clauses and two amendments to Schedules 15 and 16. I understand that the amendments are all consequential or drafting and could conveniently be discussed together. I propose to put the Question on Clauses 1 to 18 together and then call the Attorney-General to explain the amendments which begin on Clause 19. Thereafter, on completion of the debate, I propose to put the Question on the clauses and amendments together and the Question on the schedules and amendments together.
  Clauses 1 to 18 ordered to stand part of the Bill
  Clause 19

  LOSS OF EMPLOYMENT DUE TO STOPPAGE OF WORK
  Amendment made: In page 21, line 12, leave out 'section' and insert 'Act'.—[Mr. Arthur Davidson.]
  Clause 30

  CATEGORY A AND B PENSIONS (SUPPLEMENTARY)
  Amendments made: In page 34, line 3, leave out 'the appropriate figure' and insert '£20'.
  In page 34, line 15, leave out from beginning to first '"week"' in line 20 and insert:
  'In this subsection'.
  In page 34, line 23, at end insert:
  '(2) With effect from such day as may be prescribed in the week containing 6th April in a year mentioned in the first column below, subsection (1) above shall have effect with the substitution for "£20" of the amount specified

  1601
  in relation to that year in the second column below—

  1976

  …

  £35

  1977

  …

  £50 '—[Mr. Arthur Davidson.]

  Clause 45

  PENSION INCREASE (WIFE)
  Amendments made: In page 50, line 15, leave out 'the appropriate figure' and insert '£20'.
  In page 50, line 23, leave out from beginning to first '"week"' in line 28 and insert:
  'In this subsection'.
  In page 50, line 31, at end insert:
  '(4) With effect from such day as may be prescribed in the week containing 6th April in a year mentioned in the first column below, subsection (3) above shall have effect with the substitution for "£20" of the amount specified in relation to that year in the second column below—

  1976

  …

  £35

  1977

  …

  £50'—[Mr. Arthur Davidson.]

  Clause 66

    ADULT DEPENDANTS
    Amendments made: In page 62, line 27, leave out '"£13"' and insert '£20'.
    In page 62, line 34, at end insert:
    '(4A) With effect from such day as may be prescribed in the week containing 6th April in a year mentioned in the first column below, subsection (4) above shall have effect with the substitution for "£20" of the amount specified in relation to that year in the second column below—

    1976

    …

    £35

    1977

    …

    £50'—[Mr. Arthur Davidson.]

    Clause 106

    REVIEW OF, AND APPEAL FROM, BOARD'S DECISION
    Amendment made: in page 91, line 20, after 'paragraph' insert 'or paragraph (b) below'.—[Mr. Arthur Davidson.]
  Clause 124

    POWER TO INCREASE RATES OF BENEFIT
    Amendment made: in page 106, line 24, leave out '30(1), 45(3) and 66(4)' and insert
    '30(1) and (2), 45(3) and (4) and 66(4) and (4A)'.—[Mr. Arthur Davidson.]

  Clause 125
    DUTY TO INCREASE CERTAIN BENEFITS
    Amendment made: in page 107, line 8, leave out '1' and insert '1(a)'.—[Mr. Arthur Davidson.]
    Clause 147

      GENERAL PROVISIONS AS TO PROSECUTIONS
      Amendments made: in page 123, leave out lines 36 to 39.
      In page 124, line 7, at end insert—
      '(4A) For the purposes of subsections (3) and (4) above, a certificate purporting to be signed by or on behalf of the Secretary of State as to the date on which the evidence in question came to his knowledge is conclusive evidence of the date on which it did so'.
      In page 124, line 24, leave out 'paragraph' and insert 'subsection'.—[Mr. Arthur Davidson.]
      Clauses,.some with amendments, ordered to stand part of the Bill.

      Schedule 15

        NATIONAL INSURANCE ADVISORY COMMITTEE
        Amendment made: in page 173, line 18, at end insert—
        '11A. Regulations made by virtue of section 30(2) or 45(4) of this Act for the purpose only of prescribing a day.'—[Mr. Arthur Davidson.]

        INDUSTRIAL INJURIES ADVISORY COUNCIL
        Amendment made: in page 174, line 40, at end insert—
        '2A. Regulations made by virtue of section 66(4A) of this Act for the purpose only of prescribing a day.'—[Mr. Arthur Davidson.]
        Schedules, some with amendments agreed to.
        Bill reported, with amendments; as amended, 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 amendments.

        SOCIAL SECURITY (NORTHERN IRELAND) BILL [Lords]
        Order for Second Reading read.
        The Parliamentary Secretary to the Law Officer's Department (Mr. Arthur Davidson): I beg to move, That the Bill be now read a Second time.
        After the pat on the back, for which I am grateful, from my two hon. Friends I feel almost ashamed to move the Bill so briefly. The House will understand that this is the parallel Bill for Northern Ireland and that it would be superfluous for me to go into detail. The Bill has been through the Joint Committee, it started in the House of Lords and the same considerations apply to it as applied to the previous Bill.
        Question put and agreed to.
        Bill accordingly read a Second time
        Bill committed to a Committee of the whole House.—[Mr. Pavitt.]
        Bill immediately considered in Committee.
        [Mr. GEORGE THOMAS in the Chair]
        Clauses 1 to 18 ordered to stand part of the Bill.

      Clause 19
        LOSS OF EMPLOYMENT DUE TO STOPPAGE OF WORK
        Amendment made: No. 1, in page 20, line 39, leave out 'section' and insert 'Act'.—[Mr. Arthur Davidson.]
      Clause 30

        CATEGORY A AND B PENSIONS (SUPPLEMENTARY)
        Amendments made: No. 2, in page 33, line 33, leave out 'the appropriate figure' and insert '£20'.
        No. 3, in page 34, line 1, leave out from beginning to first "week" in line 6 and insert—
        'In this subsection'.
        No. 4, in page 34, line 9, at end insert—
        '(2) With effect from such day as may be prescribed in the week containing 6th April in a year mentioned in the first column below, subsection (1) above shall have effect with the substitution for "£20" of the amount
        1604
        specified in relation to that year in the second column below—

        1976

        …

        …

        …

        £35

        1977

        …

        …

        …

        £50'—[Mr. Arthur Davidson.]

      Clause 37
        INVALID CARE ALLOWANCE
        Amendment made: No. 5, in page 41, line 25, leave out from 'prescribed' to end of line 29.—[Mr. Arthur Davidson.]
      Clause 45

        PENSION INCREASE (WIFE)
        Amendments made: No. 6, in page 50, line 4, leave out the appropriate figure' and insert '£20'.
        No. 7, in page 50, line 12, leave out from beginning to first '"week"' in line 18 and insert—
        'In this subsection'.
        No. 8, in page 50, line 21, at end insert—
        '(4) With effect from such day as may be prescribed in the week containing 6th April in a year mentioned in the first column below, subsection (3) above shall have effect with the substitution for "£20" of the amount specified in relation to that year in the second column below—

        1976

        …

        …

        …

        £35

        1977

        …

        …

        …

        £50'—[Mr. Arthur Davidson.]

      Clause 66

        ADULT DEPENDANTS
        Amendments made: No. 9, page 62, line 27, leave out '£13' and insert '£20'.
        No. 10, in page 62, line 34, at end insert—
        '(4A) With effect from such day as may be prescribed in the week containing 6th April in a year mentioned in the first column below, subsection (4) above shall have effect with the substitution for "£20" of the amount specified in relation to that year in the second column below—

        1976

        …

        …

        …

        …

        …

        £35

        1977

        …

        …

        …

        …

        …

        £50'[Mr. Arthur Davidson.]

      Clause 106

        REVIEW OF, AND APPEAL FROM, BOARD'S DECISION
        Amendment made: No. 11, in page 91, line 3, after 'paragraph' insert
        'or paragraph (b) below'.
        —[Mr. Arthur Davidson.]

      Clause 121

        SUPPLEMENTARY PROVISIONS AS TO UP RATING
        Amendment made: No. 12, in page 101, line 18, leave out from 'altered' end of line 22 and insert—

        '(a) by any Act passed, or Measure of the Northern Ireland Assembly enacted, subsequent to this Act, or by an up-rating order: or

        (b) in consequence of any such Act, Measure or order altering any maximum rate of benefit'

        —[Mr. Arthur Davidson.]
        Clauses, some with amendment, ordered to stand part of the Bill,
        Schedule 14

        PROVISIONS APPLICABLE ON ALTERATION OF BENEFIT RATES
        Amendment made: In page 161, line 26 after 'after' insert—
        'the passing of the relevant Act,'.
        Amendment made: In line 39, after first 'of' insert—
        'the passing of the relevant Act,'.
        —[Mr. Arthur Davidson.]
        Schedules, some with amendments, agreed to
        Bill reported, with amendments; as amended, 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 amendments.

      VIOLENCE IN MARRIAGE
      Ordered,
      That Mr. John Cronin be discharged from the Select Committee on Violence in Marriage and that Mrs. Gwyneth Dunwoody be added to the Committee.— [Mr. Walter Harrison.]

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

      SCOTLAND (UNEMPLOYMENT)
      10.28 p.m.
      Mr. James Sillars: This debate is about one of the greatest problems we face in Scotland today—the massive unemployment rate, which shows over 100,000 Scots without work. It is a state of affairs which cannot go without protest or demands for action by a Labour Government.
      As I develop the argument, I shall explain to my hon. Friend the Minister of State, Scottish Office my full recognition that the Labour Government do not want unemployment, how they inherited an economic situation which left little room for orthodox manoeuvre and how the world situation militates against swift, easy solutions. It will not be part of my argument to suggest that there is a magic wand which can wave over the Scottish economy, linked so intimately as it is to the British economy, and cure the unemployment problem.
      The problems which the Government face are unprecedented in the post-war period. There are severe inflation, heavy unemployment, a huge balance of payments deficit, exceptionally heavy foreign borrowing, a legacy of under-investment in industry, a world economy in recession, if not in actual slump, and the albatross of the Common Market round our neck.
      On top of those problems is the added phenomenon that the world is undergoing a fundamental change in the balance of wealth and political power, arising out of the OPEC countries' actions and the Third World's efforts to find its political footing in the world community. The world is in a state of political and economic metamorphosis. No one can tell the final shape of things to come, but we all know that the old-established order of a United States-led Western hegemony is over.
      All the factors that I have mentioned so far mean that instability and uncertainty are the order of the day. That means that a premium is placed on international agreement and international action on economic and financial affairs. That being the position, there are obvious constraints upon the ability of

      1607
      our Government to act against unemployment with the traditional demand-management boost to the economy.
      No doubt it is this set of unusual circumstances which lies behind the explanation from my right hon. Friend the Secretary of State for Scotland that 100,000 unemployed under him arises out of a different situation from that which prevailed when we last experienced this level of unemployment under a Tory Government with a Tory Secretary of State for Scotland. My right hon. Friend is correct. No doubt that is why the Tory campaign against him fizzled out after only a few days and after a few boyish Questions from the lad who is now the Shadow Secretary of State.
      Of course, it is not good enough to take refuge in the disturbing aspects of economic and political life in the world scene in 1975. No Socialist Government should be surprised that Western capitalism, after years of exploiting the rest of the world including the oil countries, is now having the account squared against it. Nor should a Socialist Government be surprised that Western capitalism manifests the inherent faults of the capitalist system. As a result of its profit motivation, ridiculous situations develop. For example, bricklayers are idle, bricks are stockpiled and people remain without homes.
      Whatever critique we apply to capitalism, I am enough of a realist to know that we cannot opt out of the system with a quick side-step. When I was 17 I thought that we could do it in at least 24 hours. I have learned a wee bit since then. I know that we are locked inside the system for the foreseeable future. That is a view that is shared by many people in the Labour movement, including the TUC. The excellent economic review by the TUC suggests how we can improve the operation of the capitalist system to produce the basis for stability and growth in the long term.
      That does not mean that a Labour Government, elected on the most Socialist-inclined manifesto since 1945, should accept that nothing can be done in the face of the problems we face. There is an urgent need for the Government to do something about unemployment, despite the real constraints imposed
      1608
      by the debilitated British capitalist economy caught in the worst world crisis since before the last war.
      After all, our manifesto, even with its Socialist character, did not promise to extricate us from the sphere of Western economic influence. What was implied was that despite problems created by capitalism—indeed, because of them—a Labour Government would be best able to tackle the fundamental problems that the system poses for working people and their families. That certainly included action on unemployment. I quote from the Labour Party election manifesto for Scotland. In page 8, in the final paragraph dealing with the section headed "Jobs", it states:
      "Labour will do whatever is necessary to bring full employment to Scotland. We shall not rest until everyone in Scotland has the opportunity of a decent, well paid job."
      I pay tribute to the Government's chosen methods of tackling the fundamentals of our economic problems. The Industry Bill, the National Enterprise Board, the British National Oil Corporation, the planning agreements system, the creation of the Scottish Development Agency—I see that my hon. Friend the Member for West Lothian (Mr. Dalyell) is present—and the setting up of a Scottish Assembly with economic teeth represent a comprehensive strategy of recovery and future expansion. But these are middle or long-term policies. I am arguing that we also need short-term policies. Even in the face of the problems involved in managing the United Kingdom economy, there is something in the short term that the Government can do to create jobs and to put people in work.
      Although this Adjournment debate is under the heading of Scottish unemployment, let me say emphatically for the benefit of some Opposition Members that the same problems exist in other parts of the United Kingdom. I hope that the Government will take early action there as well as in Scotland. Today the Scottish unemployment figure stands at 4·7 per cent. In the North of England it is 5·2 per cent. This illustrates that this is not just a Scottish problem.
      I advance three main reasons for demanding Government action. The first concerns the human factor. Unemployment is destructive of self-respect in the

      1609
      individual. It erodes the personality of those who are on the dole for any length of time. Second, if for too long we tolerate unemployment at the 100,000 level it will become the accepted norm. People will become conditioned to believing that such a level is the best that can be achieved.
      Governments will boast, when the figure dips below that magic level, that they have actually done something. They will pat themselves on the back and pretend to the people that they have worked wonders. This is not a flight of fancy on my part. With each successive crisis in the Scottish economy we have seen unemployment rise. When mini-booms took place, the figures never went back to their previous base level. Over the years we have seen the Scottish unemployment rate reach a higher and higher base point. Over the years what was unacceptable in one period became the new base point criterion in another. This is what we must combat with all our political strength and ingenuity. We must take decisive action to push the base rate down so that the words "full employment" start to have a real meaning in the corporate life of Scottish society.
      The third reason why I ask for Government action is that we are faced with the lunacy of the capitalist market system, with labour which could be productive and useful being paid, through unemployment and other benefits, to be unproductive and useless. [Interruption.] I do not expect the hon. Member for Glasgow, Cathcart (Mr. Taylor) to follow the logic of that. He is one of the chief exponents of the craziest system ever known to mankind.
      No one can defend such a system when people sit pat and there is important work to be done for the community lying undone. Whatever difficulties the market economy poses at present, and even though we could not guarantee the fullest of full employment, we should be able to take action that would make a serious contribution to reducing unemployment, especially among the semiskilled and unskilled people who suffer most from unemployment. It is they who become the hard core of the long-term unemployed.
      Each increase in the productive potential of the economy during a period
      1610
      of low growth means that it is more difficult for the semi-skilled and the unskilled to get work. It is estimated that the productive potential at present in the economy is around 3½ per cent. If we get real growth in the economy of only about 2½ per cent., that will mean that unemployment problems for the semiskilled and unskilled will increase and not decrease.
      Also of great concern is the large number of youngsters leaving school in 1975 —80.000 of them. About 64,000 will come on to a depressed labour market. We must be anxious about the social implications of young people, the most physically active and robust section of the community, having no work. Those who will find the greatest difficulty in gaining employment are those who would normally fit into the semi-skilled and unskilled categories. Every family in the country with a young person leaving school this year must be more than ever anxious about the number of O-levels the youngsters will get. Those leavers who for one reason or another will get very few or none at all will find that they face a grim future at a time when there are 100,000 unemployed in Scotland.
      The call is for the Government to "do something". This cry is often made from within and without this House. But few ever suggest to the Government what "do something" means in practice. I suggest that we could get action by using the Manpower Services Commission as the main policy instrument, and therefore we would not need further legislation.
      That idea is not new and it is not mine. The current TUC Economic Review explains in paragraph 117 on page 42 that the problem of unemployment affects those under 24 and over 55 with the greatest severity. In the next paragraph it says:
      "The establishment of the Manpower Services Commission provides an opportunity for the public authorities to act much more effectively in this field."
      It goes on to say:
      "The MSC itself, after its first year of operations, has unanimously agreed that it should have an authoritative role in the formulation and provision of a comprehensive manpower policy and discussions to this end are taking place with the Government. Moreover, at its first meeting, in January 1974, the Commission considered that it needed to prepare plans

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      which could be put into effect if the employment situation deteriorated in 1974 and 1975, and in consequence contingency plans have been prepared in the fields of training and job creation."
      In paragraph 120, the TUC says:
      "The MSC has examined a proposal by the TUC and others that a job creation scheme could help reduce unemployment. It could be directed at the hardest hit groups in the labour force and the most severely depressed regions."
      It goes on to explain that the jobs would be labour-intensive and community-oriented.
      The estimate is that £20 million would help to create 15,000 jobs. When we consider that unemployment benefit for 15,000 people costs up to £13½ million a year and that there is also a loss to the Exchequer because unemployed people do not pay income tax or for insurance stamps, we can see that for a little net extra expenditure the Government could make a significant contribution to the reduction of unemployment, not so much by demand management policies as by resource management policies, by putting the unemployed men and virtually the same amount of money together but for different reasons than to keep people on the dole. We should make much better use of our human and financial resources if we gave people back their self-pride.
      This need for a rational use of resources is hammered home in the TUC Economic Review. It estimates that it would cost £900 million in unemployment and social security benefits if there were 1 million unemployed. Another estimate is that if unemployment rose to1¼ million the Government would need to borrow another £800 million to £850 million to meet the payments. How stupid it is, in a country crying out for things to be done and people anxious to work, to make people idle and then pay them for remaining idle.
      Scotland is seriously affected by heavy unemployment yet there is so much in our communities that needs attention. I suggest to the Government, therefore, that they should use the MSC to set up a direct labour employment agency, perhaps called the Scottish Community Project Agency, into which unemployed people could go, drawing union rates of
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      pay and with proper union coverage of health and safety and conditions.
      The agency should be given the task of undertaking community projects at the direction of the Secretary of State for Scotland or at the request of the local authorities. It could have planning and management teams, a building section and a general work section and it would operate under a directive to undertake specific community projects within the local authority areas. This would provide work for a number of skilled men in management planning and the other trades. The bulk of the jobs created would go to the semi-skilled and unskilled and no doubt a number of school leavers could also be employed. This would assure young people of a useful occupation and allow them to make a valuable contribution to their own lives and to society.
      I said that there is much that needs to be done in Scotland. Let me give a list of headings. There is the rehabilitation of National Coal Board houses. I have a fair number of these houses in my constituency of South Ayrshire. They represent a grave problem to the people living in them. They are very old houses which require urgent modernisation and bringing up to date to meet current living standards. That is not being done. In my opinion, it would be done and it should be done.
      Then there is the urgent need to insulate and centrally heat thousands of council and SSHA houses, many of which in the winter have bedrooms so cold that it is like sleeping in an ice-box. I assure the House that I exaggerate in no way. During the severest parts of the winter in Scotland, for most of the day at least two-thirds of the average council house is uninhabitable because of the cold. Anyone who has lived in the council situation knows that to be the truth. That is an area of work which needs to be done and which could be done. Then there is the modernisation of council houses, especially in relation to electrical re-wiring.
      Next there is the need to clear away remaining pit bings and slag heaps, legacies from our old industrial past. Then we have cities, towns and villages with open spaces which are eyesores and derelict buildings which give an area a depressing environment.

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      I appreciate that much of the environmental aspect of these headings will be covered by the Scottish Development Agency, but it will be some two or even three years before the SDA can effectively discharge that part of its task. That comment is drawn from a reading of the consultative document outlining the ô of the SDA. We need action before the SDA comes to engage in its environmental clearing-up task.
      I do not exaggerate in any way what I regard as the greatest social crime in our society—that is, making and keeping people unemployed. It has never been my personal experience to be unemployed, but I came very near it at one time in my working life. It was the most demoralising experience of my whole life. I do not want to see any individual in Scottish society or in British society put through that hoop for any longer than is absolutely necessary.
      Unemployment is a social outrage. It is a crime against the working people in a capitalist society. It is what my right hon. Friend the Prime Minister some years ago described as "the greatest pollution of all"—that is, pollution of the soul of the individual.
      I know that there is no need to convince a Labour Government of that essential truth. I hope that the Government will at least consider acting in the way suggested. If they do, or if they act in a similar way, it will be a meaningful demonstration to the Scottish people of Socialist concern leading to decisive action on behalf of the working people whom we were elected to govern and to represent.
      10.49 p.m.
      The Minister of State, Scottish Office (Mr. Bruce Millan): My hon. Friend the Member for South Ayrshire (Mr. Sillars) covered a very wide range of points, and with his general analysis of the situation and with his feeling about the waste and human misery involved in unemployment I agree completely. I take right away his point that 100,000 unemployed in Scotland is unacceptable. We have never denied that, and it is one of our major objectives to reduce the unemployment figure as quickly as possible.
      I am glad, however, that my hon. Friend pointed out that the present situation in Scotland cannot be insulated from the position in the United Kingdom as a
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      whole, and the position in the United Kingdom as a whole is inevitably affected by the world economic situation. In fact, the level of unemployment in this country at the moment compares favourably with the levels in a number of our industrial competitors' countries in other parts of Europe. But that is no cause for complacency. It is no justification for complacency in the United Kingdom situation, and certainly it is no cause for complacency in the Scottish situation.
      The answer must rest, as my hon. Friend recognised, not with direct means and action in tackling unemployment but with the whole economic policy of the Government. In that context it is extremely important that the social contract should be maintained. We must curb and reduce the rate of inflation, because the present rate is obviously a contributory factor towards unemployment and the serious economic situation that we face. I think that that has been recognised by my hon. Friend in his comments.
      One of the heartening features of the situation is that, despite a worsening situation—I do not want to diminish my concern about that aspect in any way—the relative position of Scotland has improved considerably over the last 15 months. The relative proportion of unemployment in Scotland compared with unemployment in the rest of the United Kingdom is now at the lowest level since figures were collected in 1954. Unemployment in Scotland is still running at one and a third times the United Kingdom average, but that compares with the situation that we had quite recently when it was at least one and a half times the United Kingdom average. Indeed, for much of the time that I have been a Member of this House the unemployment rate in Scotland has run at more than twice the United Kingdom level. That means that in the present situation the Scottish economy is standing up better than the rest of the United Kingdom to the difficulties facing us.
      One reason must be the effect of the North Sea oil situation. Last Friday, at a meeting of the Standing Conference on North Sea Oil in Dundee, I was able to produce up-to-date figures for employment in the North Sea oil industry. They were higher than we have had before. We are now identifying the jobs in a more detailed way. Our studies take us from

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      firms which are wholly involved in the North Sea oil industry to firms which do North Sea oil and other work, the other work being traditional. We also take account of indirect employment. Therefore, we are getting more substantial figures for North Sea oil employment than we have had before.
      Taking account of direct employment by firms wholly engaged on oil work, direct employment by firms partly on oil work and indirect employment, the total figure was 40,000, and many more jobs are still in prospect. Therefore, North Sea oil activity—part of the Government's policy is to see that the impetus is maintained—is an important factor in the present employment situation in Scotland.
      It is, of course, also part of Government policy to maintain a strong and vigorous regional policy. That is represented by our maintenance of the regional employment premium, which the previous Government had intended to discontinue in the autumn of 1974, and we doubled the REP so that it went back to something like its original value as introduced by the Labour Government in 1967.
      The maintenance of a strong regional policy is a contributory factor to the relatively better performance of the Scottish enonomy over the past year or so, but we must not rely only on traditional regional policy. That is why we are establishing the Scottish Development Agency. I shall not say anything about it this evening because we shall be able to deal with it in considerable detail when the Bill is published and debated, I hope next month. The basic idea of the agency, however, has been warmly welcomed by a wide range of opinion in Scotland. It is recognised that this new initiative, in a sector roughly analogous to the National Enterprise Board and in the environmental sector, together with the basic proposition, have been widely accepted in the Scottish situation.
      There is a special problem which my hon. Friend mentioned—training. He referred to the proposals of the Man-
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      power Services Commission. Some of them are under urgent and active consideration between the commission and the Government. I would not wish it to be felt that nothing has been done by the commission and the Training Services Agency since the agency was established. A considerable number of people in Scotland are undergoing training under the Training Opportunities Scheme of the Training Services Agency Division of the Manpower Services Commission. Of the 3,841 who were undergoing training in the skillcentres, at employers' establishments and so on at 28th February, 70 per cent. had previously been unemployed.
      There is a long way to go to extend the facilities and to see that the available places are fully used. There are still 300 unused places in skillcentres. We want to see those places filled as rapidly as possible.
      My hon. Friend made a proposal, which I assure him I shall examine carefully, for a Scottish community project agency. Many of the matters he mentioned as jobs for that agency can be carried out at present by existing agencies, local authorities and the rest. For example, the clearance of derelict land, slag heaps and so on, which will be a function of the Scottish Development Agency when it is established, is nevertheless open to local authorities and substantial grants continue to be given. We made it explicit in the consultative document on the Scottish Development Agency that we did not wish to see a hiatus or loss of momentum. If the SDA takes a little time to get fully involved, we shall encourage local authorities to keep up and extend their activities in this area—
      The Question having been proposed after Ten o'clock, and the debate having continued for half an hour, Mr. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
      Adjourned at two minutes to Eleven o'clock.