Commons Sitting of 25 February 1976

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

    Inner Areas
    Mr. George Cunninghamasked the Secretary of State for the Environment what measures he has taken in the last three months to provide special assistance to inner areas.
    The Under-Secretary of State for the Environment (Mr. Ernest Armstrong): The needs of inner city areas have been recognised in the rate support grant settlement and in the allocation of funds for house improvements, for the acquisition of houses by local authorities, and for local authority lending for house purchase.
    Mr. Cunningham: Are the Government aware that these welcome steps are being partly undone by the London rate equalisation scheme under which this coming year the average inner London domestic ratepayer will be required to pay no less than £14 per family as a straight subsidy to ratepayers in outer London? Are they aware that many of the inner London boroughs which voted for that scheme did so because the ratepayers were unaware of what they were doing, and because they were "conned" into believing that if they did not accept that proposal the Secretary of State would impose an even more penal surcharge on them?
    Mr. Armstrong: The allocation of resources is always difficult. This was a proposal from the London Boroughs Association on which my right hon.
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    Friend the Secretary of State deliberated. He finally agreed that the concentration of heavy rateable value in parts of London should be shared more evenly throughout London.
    Mr. Lane: Does the hon. Gentleman agree that if the Government diverted to the inner cities a fraction of the public money which is to be wasted under the Community Land Act they would give the attack on urban deprivation the extra momentum it needs?
    Mr. Armstrong: The problem of the inner cities is very serious and it is receiving urgent consideration. We are trying to find a way of positively discriminating in favour of the inner cities. It is misleading to suggest for political reasons that there is any easy answer.
    Mr. Welsh: How many inner area study reports have been produced? Will the Government consider producing some kind of analysis or commentary on those reports, drawing them together and producing some immediate results?
    Mr. Armstrong: There have been inner area studies in Liverpool, Birmingham and Lambeth and we hope to have them by the autumn. They will be published as soon as possible.

    Road and Rail Traffic
    Mr. Canavanasked the Secretary of State for the Environment whether he will take steps to transfer traffic from road to rail.
    The Secretary of State for the Environment (Mr. Anthony Crosland): The White Paper on Public Expenditure published last week already shows a large shift in the balance between road investment and rail investment. Comparing 1973–74, the last year of Conservative Government, with the focus year 1978–79, road investment will fall by 24 per cent. while rail investment will rise 41 per cent. The question referred to will be discussed at length in the forthcoming consultative document.
    Mr. Canavan: Does my right hon. Friend accept that a shift from road to rail traffic will lead to better standards of safety as well as to better standards of conservation of the environment and of energy? Is it not the case that the Secretary of State is inhibited by the

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    regulations and policies of the EEC, which advocate the freeing of road haulage from quantity and tariff licensing restrictions and the reduction of railway systems to try to make them pay their way?
    Mr. Crosland: On the first point, I share my right hon Friend's aspiration. The matter will be discussed at length in the consultative document.
    My answer to his second question is "No". We shall not be inhibited by any regulations, because many of the EEC countries are stricter on their road haulage industries than we are in this country and because all of them face the problem of trying to finance transport in economic difficulties.
    Sir John Hall: Does the right hon. Gentleman accept that if the recommendations in the Report of the Expenditure Select Committee dealing with urban transport planning, published in December 1972, were fully implemented, that would go a long way towards dealing with the problem raised by his hon. Friend and it would certainly solve many of our transport problems?
    Mr. Crosland: I have sympathy with the hon. Gentleman and I hope that the consultative document will reflect much of the thinking in the Select Committee's Report.

    Council Tenants (Mobility)
    Mr. Gristasked the Secretary of State for the Environment what plans he has for increasing mobility for council tenants.
    Mr. Armstrong: My right hon. Friend is considering what further steps are needed as part of the general review of housing management.
    Mr. Grist: Would not the hon. Gentleman agree that, with the sad collapse of private rented accommodation, there has been a collapse also in the flexibility of housing? Does he not also agree that the regulations applying to council houses constitute a serious barrier to a mobile, or at least more mobile, work force?
    Mr. Armstrong: We have no evidence to substantiate the hon. Gentleman's first supplementary question, but we are examining the situation urgently to see
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    whether the system could be made more flexible and people who want to be mobile encouraged.
    Mr. Watkinson: Would not my hon. Friend agree that the mobility of the work force is of prime concern to the Government? Would it not be advisable to list on a central register, either at county or metropolitan level, existing properties where people wish to move so that the process of moving could be effected in that manner?
    Mr. Armstrong: I take that suggestion on board. We have indicated by circular ways in which we think tenants who want to move can be helped. But we also have to bear in mind the limits on resources and manpower. We are trying to find a solution.
    Mr. Rossi: Would it not help the manpower problem if the Minister considered setting up a national system of computer-linked exchange centres so that tenants could take up new job opportunities more easily with benefit not only to themselves but to the economy as a whole?
    Mr. Armstrong: It is remarkable how the Opposition keep telling us not to interfere and then demand more public expenditure. We are urgently considering this very important matter.

    Parker Morris Standards
    Mr. Steenasked the Secretary of State for the Environment if he will make a statement about the inability of local authorities to build to Parker Morris standards within the cost yardstick.
    Mr. Armstrong: I do not accept the implication of the hon. Member's Question. It is entirely inconsistent with the substantial increase we have achieved in public sector house building over the last two years.
    Mr. Steen: Will the hon. Gentleman encourage local authorities to purchase privately-built houses which are not subject to the Parker Morris standards? Does he realise that local authorities are falling behind in their building programmes because they have to conform to those standards?
    Mr. Armstrong: I think that the hon. Gentleman found great difficulty in

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    associating what he wanted to ask with the original Question. Public sector building has seen a substantial increase. Far from local authorities falling behind, we are encouraged by their response.
    Mr. Joseph Dean: Is my hon. Friend aware that the people in charge of the local authority building programmes during the lifetime of the Conservative Government spent three years trying to get them to lift the yardstick, and that it took the present Government to do so, thus allowing local authorities to get building contracts into the pipeline?
    Mr. Armstrong: Yes, and that statement is substantiated by the figures we have. All public sector housing schemes have to meet the yardstick discipline, and virtually all are built to Parker Morris standards.
    Sir W. Elliott: Is the hon. Gentleman aware that, because of the yardstick, Newcastle City Council's direct labour force lost no less than £85,000 last month, while six contracts are running at an estimated 18 per cent. above the council's basic estimate? Will he bear in mind that there is a lot of spare capacity in the private building sector and use the maximum encouragement to local authorities to put out tenders to private contract?
    Mr. Armstrong: We are always anxious to consider anything which will help in the provision of suitable housing, but I do not see what the hon. Gentleman's supplementary question has to do with the Parker Morris standards.

    M67 (Denton Bypass)
    Mr. Andrew F. Bennettasked the Secretary of State for the Environment when he expects to announce his decision on the report of the inspector into the public inquiry into the Denton Bypass (M67).
    The Minister for Transport (Dr. John Gilbert): As yet I can add nothing to the reply given to my hon. Friend on 4th February.—[Vol. 904; c. 646–7.]
    Mr. Bennett: Does my hon. Friend appreciate the concern of people in the area about the delay in announcing the results? Does he also appreciate the very great concern in Manchester that
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    there should be completion of the east ring road continuation of the M63 rather than a start on the M67, a second crossing of the Pennines?
    Dr. Gilbert: I am aware of the concern in Manchester about the need to complete the ring road round the eastern side of the city. As far as the M67 is concerned, successive Ministers, including myself, have made it clear that the Denton and Hyde schemes stand on their own feet, independent of any proposals for a trans-Pennine scheme. I have given the Peak Park Authority my personal assurance that I shall visit the area before any final decision is made.

    Building Societies
    Mrs. Ann Taylorasked the Secretary of State for the Environment when he last met representatives of the building societies.
    Mr. Crosland: My Department maintains regular contacts with the Building Societies Association.
    Mrs. Taylor: Will my right hon. Friend tell the House what discussions he has had with the building societies about the high level of funds which they hold? Is there any chance of a reduction in the mortgage rate of interest? If not, will he reconsider asking the building societies to make loans to local authorities so that the local authorities can lend on some of the older properties, since, without this extra help, there would not be enough money available from the local authorities themselves to lend to those who need to buy these older properties?
    Mr. Crosland: There is a later Question about the mortgage interest rate. My hon. Friend asked about lending on older properties—down market generally. Now that the private and public sector house building figures are on a healthy trend and we have an extra £50 million for Section 105, this is my top priority. The building societies and the local authority associations have met to discuss the problem and have set up a joint working party of officials, instructing it to reach conclusions as soon as possible. I assure my hon. Friend that I shall follow the results of that initiative with the closest possible attention.
    Mr. McCrindle: Is not the time approaching when the right hon. Gentleman should consider admitting that the building societies are either unwilling or unable to take over from local authorities as lenders on old property? Will not he consider speaking again to the Building Societies Association with a view to causing the societies to modify their lending terms, because it that is not done he will be accused of misleading thousands of people who want to buy just that type of property?
    Mr. Crosland: We should bear in mind that the provision in the White Paper on Public Expenditure for local authority mortgage lending, which will in the main be directed to this kind of property, will be between £250 million and £350 million, which is a high figure by historical standards. I have sympathy with what the hon. Gentleman has said, but this matter is in play between the local authorities and the building societies, and until I see the outcome of that initiative I do not propose to take a further initiative myself. But this is my first priority.
    Mr. Loyden: When my right hon. Friend next meets the building societies, will he raise with them the subject of making mortgages available in what apparently are now black areas—Liverpool 8, for example—where people are finding it very difficult, in fact almost impossible, to get mortgages?
    Mr. Crosland: That is another question on the same general theme, but I should emphasise that local authority mortgage funds last year ran out after two or three months because it was thought that a quota might be imposed, as it was. But funds will become available again at the start of the next financial year, and by historical standards will be at a very reasonable level. Nevertheless, what my hon. Friend has mentioned is at the top of my list of housing priorities.

    British Railways
    Mr. Crawfordasked the Secretary of State for the Environment what further meetings he plans to hold with the Chairman of British Rail.
    Mr. Cryerasked the Secretary of State for the Environment when he next
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    expects to meet the Chairman of British Rail.
    Dr. Gilbert: I shall be meeting the chairman when the need arises.
    Mr. Crawford: When the hon. Gentleman sees the Chairman of British Rail, will he say to him that what is needed in Scotland is the immediate double-tracking of the Perth-Inverness railway line, which is now carrying double the number of passengers that it was carrying in 1963, before it was made a single track? Will he also press for the immediate electrification of the rapid transit systems in Tayside, Edinburgh and Aberdeen? Will he also ask for a clear and unequivocal statement that there will be no cut-backs and rationalisation in the railway lines north of Glasgow and Edinburgh? Will the Minister accept that we on the SNP Benches will brook no flannelling and equivocation on this issue?
    Mr. Speaker: Order. This is a time not for debate but for asking questions.
    Dr. Gilbert: I am not sure that I should comment on the catalogue of additional public expenditure in which the hon. Gentleman would like us to engage. I am considering the scheme for the upgrading of the Perth-Inverness line in consultation with my right hon. Friend the Secretary of State for Scotland and in the light of the decisions on public expenditure announced on 19th February.
    Mr. Cryer—
    Mr. Bagier—
    Mr. Speaker: Mr. Bagier.
    Mr. Bagier: Will my hon. Friend—
    Mr. Cryer: On a point of order, Mr. Speaker.
    Mr. Speaker: Order. I have noticed the hon. Member for Keighley (Mr. Cryer) and I shall call him. I hope that he will forgive my temporary absent-mindedness.
    Mr. Bagier: Will my hon. Friend the Minister for Transport, when he meets Sir Richard Marsh, ask him whether he believes his fare policy is in accordance with the Government's policy? Even more important, will my hon. Friend ask him whether the Government's policy at

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    the moment is seriously affecting the transfer of freight from road to rail?
    Dr. Gilbert: A great many questions about the distribution of freight traffic as between road and rail will be covered in the consultative document. I ask my hon. Friend to be patient for a little longer.
    As for British Rail's fares policy, British Rail has to deal with a situation in which the deficit has been increasing and at some time a halt has to be called. British Rail has assured us that any reduction in fares would not produce anything other than an increase in the deficit.
    Mr. Raison: Will the Minister confirm that it is the Government's policy to make the railways less of a social service and more a body which pays its way through fares? Will he also repeat to the House what his right hon. Friend the Secretary of State told hon. Members at a Labour Party meeting upstairs yesterday, that there is a great need for internal economies in the running and manning of British Rail?
    Dr. Gilbert: There is no dispute whatever that there is a need for further economies in the internal manning and running of British Rail. I pay tribute to the statesmanship of the leaders of the railway unions when they have seen great reductions in manpower over many years. However, it is difficult to take seriously comments from Members of the Opposition about problems of commuter fares when the hon. Member for Aylesbury (Mr. Raison) only a week ago said that the Government were not taking the public expenditure problem seriously and the subsidy area could have yielded much more.
    Mr. Cryer: Mr. Speaker, I am most grateful to you for calling me. Will my hon. Friend agree that one saving that could be effected by British Rail is in the use of private saloons, which are maintained at some expense, in which the management of British Rail go out and inspect their empire? Will not the Minister agree that that practice is outdated and that the management should ride on the somewhat tatty diesel multiple units which many of their customers have to use? Will he not also agree that the Chairman of British Rail should initiate discussions with the trade unions about industrial democracy? Is not that the
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    sort of policy that the Labour Government should initiate?
    Dr. Gilbert: The subject of industrial democracy is being given close attention, as my hon. Friend will know, not only by British Rail, but by all nationalised industries.
    The only efficient and effective way by which the senior management of British Rail can visit various parts of the country is to use a special car. [HON. MEMBERS: "Why?"] The answer is quite simple: if the management does not use a special car and has to travel solely by scheduled services, it would find itself getting off only at stations. It may have escaped hon. Gentlemen's attention that other facilities on the railways need inspection.

    Ombudsmen
    Mr. Madelasked the Secretary of State for the Environment if he is satisfied with the method by which complaints can be made to local ombudsmen.
    The Under-Secretary of State for the Environment (Mr. Gordon Oakes): Yes, Sir. I believe the present method of referring complaints is working satisfactorily.
    Mr. Madel: Is the Minister aware that it is often difficult for members of the public to make complaints to the local ombudsman through local councillors, especially when they want to complain about water authorities? Will the Minister therefore initiate a change in the system so that a member of the public may make a complaint through an officer of the local authority or the water authority concerned, as that would simplify matters and make things easier for the public?
    Mr. Oakes: I have some sympathy with the hon. Gentleman's remarks. A member of the public would go to a councillor at first, because normally that local authority would be aware of the complaint. However, a member of the public is entitled to approach the commissioner direct.
    Mr. Alexander Fletcher: Is the Minister satisfied with the way in which complaints are handled by his Department? When will he respond to my several requests for him to make a personal investigation into the gross misuse

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    of public funds—£1¼ million—in respect of Trinity Park House in Edinburgh?
    Mr. Oakes: I am very satisfied with the way in which my Department deals with complaints.
    Mr. Madden: In view of recent comments made by the Parliamentary Commissioner about the enormous interest shown by individuals in the service that he provides, will the Minister consider the possibility of complaints being made direct to the Parliamentary Commissioner rather than having to be processed through Members of Parliament?
    Mr. Oakes: That question relates to the local commissioners. It is preferable for questions to be routed via a councillor so that the local authority is aware of the problem. However, the commissioner will have to issue an annual report. I take on board what my hon. Friend has said and what the hon. Member for Edinburgh, North (Mr. Fletcher) said about water authorities, which are now in a different position from when the Act was passed.

    Traffic Forecasting
    Mr. Stephen Rossasked the Secretary of State for the Environment whether he is satisfied that the methods of traffic forecasting adopted by the Transport and Road Research Laboratory accurately reflect future trends of traffic density.
    Mr. Crosland: No forecasts can claim complete accuracy, but the present methods and the forecasts which they produce appear to be the best currently available. However, I greatly welcome any constructive criticism of our methods.
    Mr. Ross: No doubt the Secretary of State will be aware that the vehicle registration figures published for January this year show a drop on those published in January 1975. Does not that indicate that it is time to reconsider the position of traffic forecasting? Does the right hon. Gentleman still hold the view that traffic is liable to double in the next 35 years? That is a forecast of the Transport and Road Research Laboratory. When can this subject be debated, because it is not possible to debate it at highway inquiries? Will it be mentioned in the consultative document?
    Mr. Crosland: I am aware that recently many criticisms have been made of the TRRL forecasts. Therefore, I propose to publish a thorough annex to the consultative document which will set out in the greatest possible detail the basis on which forecasts are made. I hope that that will be the subject of intense public discussion. If I can be convinced that our forecasts are wrongly based, I shall be only too happy to change them.
    Mr. Corbett: Can my right hon. Friend confirm that recent forecasts of likely traffic have shown that they are likely to be substantially under those made two or three years ago? Will he comment on the implications of that on the current motorway building programme?
    Mr. Crosland: The forecasts have not been greatly adjusted as compared with three years ago, partly because the view is taken that the rise in petrol prices will have less effect on car ownership and car traffic than many commentators suppose, and partly because we assume that economic growth will be resumed by 1990 or 2000—[Laughter.] We hope that economic growth will be resumed substantially before then and at a pace which I do not doubt will make the rate of growth under the Conservatives look utterly contemptible.
    Mr. Fry: Even if the lowest forecasts of the Laboratory are true, the recently announced cuts in public expenditure, especially on new road building and maintenance, will only mean much increased congestion and much increased use and waste of energy. If the fore-casts happen to be wrong, why is the right hon. Gentleman a Member of a Cabinet which has agreed to pour millions of pounds into the British motor industry?
    Mr. Crosland: I do not conceal that the cuts in road expenditure which were announced in the White Paper last week will be severe. Comparing 1973–74 with 1978–79, the cuts in total road expenditure will amount to about 24 per cent. in real terms. There will be an environmental cost involved in these cuts because a number of places badly need bypasses which they will not get. Nevertheless, we believe that this is the right balance of transport spending.
    Mr. Raison: Will the right hon. Gentleman give a firm pledge that in the course of his transport review any attempt to cut back on the road programme and to transfer traffic from road to rail will not be at the expense of the economic efficiency of British industry?
    Mr. Crosland: We shall make it clear in the consultation document that the economic efficiency of British industry is an objective of the first importance, but not the sole objective of transport policy. We must also take into account the social effects of transport policy, for example, on those who do not own cars, and the environmental effects. The consultation document will discuss all these separate and not always easily reconcilable objectives.

    M56 and M531 Extensions
    Mr. Peter Morrisonasked the Secretary of State for the Environment what are the proposed dates for starting and finishing the M56 and M531 extension.
    Dr. Gilbert: Subject to the satisfactory completion of the statutory procedures and to the availability of funds, it is hoped to start work on the M56 extension in the financial year 1977–78 with completion about two and a half years later. The programming of the extensions to the M531 is a matter for Cheshire County Council.
    Mr. Morrison: What effect will the proposed cuts in public expenditure have on the completion dates of these extensions?
    Dr. Gilbert: The cuts to which the hon. Gentleman refers relate to the financial year 1978–79 and should not affect this scheme.
    Sir A. Meyer: Can the Minister give any assurance as to whether there is to be an extension of the M56 to the Welsh border, or, if not the M56, at least a dualling of the carriageway?
    Dr. Gilbert: I am not aware of any present plans for extension of the M56.
    Mr. Crowder: Will the Minister be prepared to consult his right hon. Friend the Chancellor of the Exchequer to see whether some tax concession could be given to commuters for their fares, par-
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    ticularly people who of necessity have to live outside London?
    Mr. Speaker: I think that the hon. and learned Gentleman has mistaken the Question. The matter that he raises does not arise on this Question. It arose on the last.
    Mr. Crowder: On a point of order, Mr. Speaker. I asked a question in relation to the Minister's responsibilities, and that covers a very wide field.
    Mr. Speaker: At present, however, we are dealing with the starting dates for road extensions.

    Public Inquiries
    Mr. Flanneryasked the Secretary of State for the Environment if he is satisfied with the arrangements for public inquiries into the circumstances of the siting and building of new factories, roads, etc.; and if he will make a statement.
    Mr. Oakes: Yes, Sir.
    Mr. Flannery: Will my hon. Friend accept from me that there are, despite his monosyllabic reply, very grave misgivings among the general public about the machinery for conducting public inquiries? Will he further accept, for instance, that I took part in an inquiry recently in my constituency about the siting of a factory, to which there was great opposition, at which a group of non-union workers, paid for two days, came down and set up a claque of such abuse that the inspector who chaired the meeting had grave difficulty in presiding? Will the Minister also accept that those men were paid off in the foyer their wages for the week, which caused a certain disquiet? Does he think that there is some—
    Mr. Speaker: Order. This is a very interesting story, but it should be briefer and to the point.
    Mr. Flannery: I accept your guidance, Mr. Speaker. However, does not the Minister consider that there is room for some inquiry into the way in which public inquiries generally are conducted?
    Mr. Oakes: As the inspector's report in that particular case is now being considered, I cannot comment on the merits of the case or on the conduct of that inquiry. The inspector has discretion to

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    allow anyone to make representations at planning inquiries, but it is the planning merits of the case that are important. As my hon. Friend will know, we have had certain difficulties elsewhere in Yorkshire with an inquiry, and my right hon. Friend the Minister for Planning and Local Government gave my hon. Friend the Member for Keighley (Mr. Cryer) an answer on 9th February about our proposals there.
    Mr. Michael Latham: Is the Minister aware that many people are very far from satisfied with the proposals for public inquiries under the Community Land Act, and in particular the fact that people can have their property taken away under that Act without any inquiry at all?
    Mr. Oakes: The hon. Gentleman was a member of the Standing Committee which considered the Bill, and he knows perfectly well that that is not correct.

    Rail Subsidies
    Mr. Moateasked the Secretary of State for the Environment on what calculations he bases his view that the major proportion of the rail subsidies goes to the better-off sections of the community; and if he will make a statement.
    Dr. Gilbert: As I said in reply to a Question from my hon. Friend the Member for Islington, North (Mr. O'Halloran) on 4th February, the information was derived from the National Travel Survey of 1973 and the Family Expenditure Survey of 1974.—[Vol. 904, c. 638.]
    Mr. Moate: Is the hon. Gentleman aware that widespread resentment has been caused by these remarks, particularly when very considerable hardship is being caused to many families by these very large increases in rail fares? If it is not to be thought that the Minister is merely indulging in a new form of class warfare, will he please publish full statistics to show exactly where rail subsidies go?
    Dr. Gilbert: I am very happy indeed to give the hon. Gentleman as much detail as possible in the consultative document as to precisely where the rail subsidies go. However, the hon. Gentleman's remarks ought to be directed towards his own Front Bench as much as to the Gov-
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    ernment Front Bench, because the Opposition's spokesman on the environment has just remarked that he wants a lot more cut off rail subsidies. The Government have doubled the amount going on rail subsidies in 1975–76 over 1973–74.
    Mr. Ronald Atkins: Is it not a fact that the major proportion per capita of all the expenditure on the services provided to individuals goes to the better-off members of the community?
    Dr. Gilbert: If I have understood my hon. Friend correctly, the answer is "Yes".
    Mr. Norman Fowler: Is it not a fact, however, that commuters are paying not only above-average fare increases but higher taxes to pay for the rail deficit? Does not the commuter's position show the overriding need for greater efficiency within British Rail and demonstrate that a new effort must be made to tackle the problem of ever-escalating fares?
    Dr. Gilbert: My right hon. Friend and I have made it perfectly clear that we regard the improvement of efficiency and manning procedures in British Rail as a prime priority. What we should like to know from Opposition Members is how they pretend that they would keep fare increases down and yet at the same time reduce subsidies.
    Mr. Corbett: Does my hon. Friend accept that, particularly in new towns such as that which I represent, Hemel Hempstead, not all constituents are rich and many must travel into London for their work? Will he therefore consider approaching the Chancellor of the Exchequer to seek tax relief on commuter fares, which, if organised properly, would give the greatest relief to those in greatest need?
    Dr. Gilbert: I am sure that the Chancellor of the Exchequer will take note of my hon. Friend's remarks. However, I have to say to my hon. Friend, with a little recollection of my days at the Treasury, that it does not follow that tax relief gives the greatest benefit to those in greatest need. It gives the greatest benefit to those with the greatest income. However, I take my hon. Friend's point about his constituents who have to travel into London. We have never said that

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    the benefit of the subsidy went exclusively to the better-off members of the community. We have merely said that in certain parts of the country and particularly in respect of certain types of travel the benefit goes predominantly to the better-off.

    Warminster (Outer Bypass)
    Mr. Waltersasked the Secretary of State for the Environment if he will give a date for the announcement of a final decision on the Warminster outer bypass.
    Dr. Gilbert: I hope to announce the route chosen for further development in the summer.
    Mr. Walters: I am grateful to the Minister for saying that. Will he bear in mind that there is considerable local uncertainty about the route and that, as the Warminster bypass has been under discussion for many years, the sooner he can make an announcement the better?
    Dr. Gilbert: I am certainly anxious to be as helpful as possible to the hon. Gentleman and his constituents, but he will be the first to recognise that the consultation exercise was completed only about a week ago and that not even all the local authorities, as I understand it, have yet submitted their views. Therefore, it will be a little time yet before we can announce a decision.

    Local Authority Responsibilities
    Mr. Peter Bottomleyasked the Secretary of State for the Environment if he will list the new duties added to the responsibilities of local authorities since February 1974.
    Mr. Oakes: A comprehensive answer to the hon. Member's Question would involve disproportionate cost and effort, but I can assure him that no major changes are introduced which directly affect local government functions without full consideration of the expenditure and manpower repercussions.
    Mr. Bottomley: Will the Minister give an assurance that any new duties that may be placed on local authorities during the next two years have already been taken fully into account in the public expenditure review?
    Mr. Oakes: Yes, indeed. We look very carefully at all legislation in respect
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    of both its cost and its manpower implications for local authorities.
    Mr. Speed: As the Community Land Act will increase net public expenditure by the staggering amount of £312 million over the next four years, how will that make it easier to provide investment and to help exports, as the White Paper on public expenditure predicates?
    Mr. Oakes: For two reasons: first, because of the Community Land Act it will be possible for local authorities, for their own purposes, to purchase land more cheaply; secondly, because of the Act local authorities can invest in land, and that is not a waste of public money but of great benefit to local authorities.
    Mr. Dykes: As greater traffic management powers are already part of the new duties of local authorities, is the Minister satisfied that the local authorities are getting on successfully with preparations under the Heavy Commercial Vehicles (Controls and Regulations) Act for controlling the movement of heavy lorries?
    Mr. Oakes: I think they are, but I shall write to the hon. Gentleman. I do not fully understand the Heavy Commercial Vehicles (Controls and Regulations) Act.

    Council Houses (Improvements)
    Mr. Newtonasked the Secretary of State for the Environment if he will make additional resources available for the improvement of council houses.
    Mr. Crosland: As indicated in the statement of 12th February by my right hon. Friend the Chancellor of the Exchequer, an additional £50 million is being made available for public sector house improvement during 1976–77 as one of a number of measures designed to alleviate unemployment.
    Mr. Newton: Is the right hon. Gentleman aware that I wish that the Chancellor would always respond so quickly to such sensible suggestions? Is he aware that I should be even more grateful if this measure had been achieved by curtailing wasteful expenditure on municipalisation and if there were any sign of an immediate review of a housing policy which seems to result in the misspending of more and more money and

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    the creation of a bigger and bigger problem?
    Mr. Crosland: No doubt municipalisation is not a major issue in Braintree, but if the hon. Gentleman represented a borough in an inner city centre in any of our great cities he would know that it is often the only way of saving property in bad repair and bringing empty houses back to the housing market.
    Mr. Heffer: Will my right hon. Friend get in touch with local authorities in conurbations such as Liverpool and tell them to get on with the job of housing improvements? In particular, will he point out to them that it is a scandal that council houses can be left standing empty up to eight or nine months after the previous tenants have moved out? The excuse made by the council is that it does not have the people to deal with the repairs. In an area such as Liverpool that is an absolute disgrace. Will my right hon. Friend tell the Liverpool Council to get on with the job of getting new tenants into council houses?
    Mr. Crosland: I have a great deal of sympathy with my hon. Friend. However, the problem of council houses standing empty is not anything like as serious as the problem in the private sector.
    Mr. Raison: Oh!
    Mr. Crosland: The national figures indicate that the proportion of the council housing stock that is empty is very much smaller than the proportion of empty houses in the private housing stock. In Liverpool and Merseyside the problem goes wider than my hon. Friend has suggested. New house building in Mersey-side, alone among the conurbations, fell last year as compared with the year before. The total housing situation on Merseyside is a matter of great urgency.
    Mr. Michael Morris: Is the right hon. Gentleman aware that there are thousands upon thousands of empty properties that have been municipalised by local authorities? Would it not be much more sensible if authorities spent their money on repairing and improving those properties before buying further properties?
    Mr. Crosland: Surely the hon. Gentleman knows that the object of Section 105 expenditure is precisely to redirect local authority spending towards the housing
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    that the hon. Gentleman has in mind. I must make that plain. I shall give the House the information in one form or another, but I insist that the problem of empty housing is not solely or primarily a problem of empty houses in the public sector. It is more a problem in the private sector.
    Mr. George Cunningham: Will my right hon. Friend give us an assurance that in distributing the additional £50 million between local authorities, the principal criterion will be to distribute it roughly in proportion to the stock of properties bought from the private sector, properties which are often empty and awaiting rehabilitation by the local authority?
    Mr. Crosland: That cannot be the principal criterion. The money was provided partly, as my hon. Friend knows, as an anti-unemployment measure. There will have to be two criteria. The first must be the housing criterion, which my hon. Friend has mentioned. The second must be the level of unemployment in the construction industry.
    Mr. Stephen Ross: Does the right hon. Gentleman accept that in my constituency, as opposed to Liverpool, some local authority houses have been empty for as long as two years? It is said that these properties have been standing empty because very often there has been delay on the part of the Department of the Environment in approving schemes for modernisation.
    Mr. Joseph Dean: It is a Liberal council.
    Mr. Ross: It is not a Liberal council. Will the Secretary of State remember that the Isle of Wight has an unemployment rate in excess of 8·3 per cent. and that it could do with some of the £50 million?
    Mr. Crosland: All of us in all parts of the House look to the Isle of Wight for guidance in our housing policies. The suggestion that the Isle of Wight has a prior claim in terms of unemployment or housing problems must cause some dispute.
    Mr. Raison: Does the right hon. Gentleman accept that one reason for the appalling housing situation in many inner city areas is the present absurd system of Rent Acts? Does the right

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    hon. Gentleman accept the need for an urgent reform of the system? Will he tell the House that he will look much more kindly than his hon. Friend on the sort of proposals put forward in a Private Member's Bill by my hon. Friend the Member for Cambridge (Mr. Lane)?
    Mr. Crosland: I have already announced that we shall be reviewing the complex Rent Acts in the course of the housing finance review. I must correct the hon. Gentleman and point out that the decline in the private rented sector, contrary to what is constantly said by his right hon. and hon. Friends, proceeded at just as rapid a rate under the Conservative Government as during the past two years.

    Post Office Traffic
    Mr. Ronald Atkinsasked the Secretary of State for the Environment what losses have been incurred by British Rail from the transfer of Post Office traffic from rail to road.
    Dr. Gilbert: The reorganisation of the Post Office parcels service is still in progress. The final effects on British Rail's business will therefore depend on the outcome of the commercial negotiations between the British Railways Board, Freightliners Limited and the Post Office.
    Mr. Atkins: Is my hon. Friend aware that there is no point in this exercise if it results in a net loss to the Exchequer? Does he agree that there is no evidence of the alleged savings from the Post Office or from the Minister because of the unaccountability on day-to-day management—a cocoon in which mismanagers can live happily, safe from criticism from Ministers, Members of Parliament or electors?
    Dr. Gilbert: I listened carefully to my hon. Friend's supplementary question. It seemed that he was addressing his criticism to the management of the Post Office, for which I have no responsibility.
    Mrs. Bain: Is the Post Office in Scotland any more likely to transfer its traffic from rail to road in view of the reports this week that Scottish rolling stock on British Rail is of very poor quality, often being cast-offs from the Southern Region, reports highlighted by the NUR, ASLEF and TSSA?
    Dr. Gilbert: Again I am being asked a supplementary question about the Scottish Post Office, for which I have no responsibility.
    Mr. Spearing: But my hon. Friend has responsibility for the integration of transport. Does he agree that when the Post Office produced its parcels rationalisation scheme it was the deliberate policy of the corporation to site certain of its concentration depots away from rail access? If that is so, will my hon. Friend make representations to the Post Office to change its policy?
    Dr. Gilbert: I must repeat to my hon. Friend that this is a matter of Post Office management and its decisions on what is best for the industry. I fully understand my hon. Friend's concern and that of other hon. Members. The representations that my hon. Friend makes should be addressed to my right hon. Friend the Secretary of State for Industry.

    Local Authority Housing (Allocation of Funds)
    Mr. Kilroy-Silkasked the Secretary of State for the Environment if he will make a further allocation of funds available to local authorities in areas of high unemployment for house building and repair.
    Mr. Crosland: As my hon. Friend knows, local authorities are not subject to expenditure allocations for new house building. So far as the improvement of public sector housing is concerned, an extra £50 million allocation was announced by my right hon. Friend the Chancellor of the Exchequer on 12th February. This will be directed mainly to areas of high unemployment in the construction industry.
    Mr. Kilroy-Silk: Does my right hon. Friend accept that, welcome though the £50 million is, it could be gobbled up in a day by the housing improvement needs on Merseyside, even by those of Kirkby? Does he accept that, given the abnormally high level of unemployment on Merseyside among building workers—14,000 are now unemployed—and the strong need for the improvement of public sector housing in the area of Knowsley Borough Council, there is a case for additional

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    sums to be allocated to that area? Will he take steps to allocate those funds?
    Mr. Crosland: I am conscious that my hon. Friend has quite an exceptional housing problem in at any rate one part of his constituency. The detailed allocation to individual councils will be announced very shortly. I hope that Merseyside will be treated sympathetically as it has exceptional problems. Everyone would like more of the total allocation. The extra £50 million means that there will be a considerably higher allocation than last year and an allocation incomparably higher than the level which was running in the early 1970s.
    Mr. Welsh: What progress has been made with the RIBA moving shelf concept? Will the right hon. Gentleman ensure that resources are made available for these purposes?
    Mr. Crosland: There was, perhaps, a certain ambiguity in that question. The moving shelf concept, as I understand it, has practically nothing to do with public sector house improvement. It is directed to a wider problem in the construction industry, which wants a moving shelf system for reasons going far beyond local authority housing improvement. I am happy to be reminded of the problem by the hon. Gentleman. We are in constant discussion about it with everybody under the sun.
    Mr. Pavitt: May I ask my right hon. Friend to be a little flexible about adopting criteria for what constitutes an area of high unemployment when dealing with the allocation of the £50 million? Will he take into consideration the fact that in London a large increase in unemployment has coincided with urban aid problems? Will he take such factors into consideration as well as the total number of unemployed?
    Mr. Crosland: I am always prepared to be flexible, at any rate with moving shelves. The answer to the substance of my hon. Friend's question is "Yes." As I said earlier this afternoon, there will be two criteria for the distribution of this money. One is the level of unemployment in the construction industry and the other is the need of a particular local authority for this kind of public sector improvement.

    National Bus Company
    Mr. Michael Spicerasked the Secretary of State for the Environment what are his estimates of the losses to be made by the National Bus Company for the year 1975–76.
    Dr. Gilbert: I refer the hon. Member to the answer I gave the hon. Member for Eastbourne (Mr. Gow) on 19th February 1976.—[Vol. 905. c. 795–6.]
    Mr. Spicer: Is the hon. Gentleman aware that that answer showed that a heavy loss was about to be made this year, heavier than last year? Would the hon. Gentleman care to speculate why it is that the bus industry, which is now in heavy deficit, should have been self-sufficient until the passing of the 1968 Transport Act, which created a virtual State monopoly? Do not the Government think it time that we allowed the private operators a greate rôle and made it easier for them to re-enter the business?
    Dr. Gilbert: It ought to be set on the record that the National Bus Company's target of breaking even has been met in four out of the six years of the company's existence. It is open to anyone to apply for a licence. The traffic commissioners judge such applications on statutory criteria. The more common complaint that I hear is not that private operators have difficulty in getting licences but that they cream away the profitable traffic, making it difficult for the National Bus Company to meet its obligation to break even.
    Mr. Les Huckfield: Will my hon. Friend accept that, apart from London and the South-East, where the situation is more rail-dominated, there is throughout the country far more concern about the level of bus fares than there is about the level of rail fares? Will he accept that the Family Expenditure Survey showed that the average level of income of bus travellers was lower than that of rail travellers? Is he aware that consequently there is a good case for continuing the current level of bus revenue support? Will my hon. Friend also accept that the solution to many of these problems is not to relax the licensing laws for buses?
    Dr. Gilbert: I agree with my hon. Friend that outside of London and the South-East the future of bus services is probably giving greater cause for public concern than is the future of the rail service. It is in that context that my hon. Friend should bear in mind that the Government have raised bus subsidies to three times their level in 1973–74 when the Conservatives were in power. My hon. Friend will have seen in the White Paper on public expenditure that the Government have not finally decided how much should be spent under each of the transport heads. This is always open to review and to representations of the sort my hon. Friend has made, which will no doubt be urged upon us—and borne in mind—during the consultative period.
    Mr. Gow: Does the hon. Gentleman expect that the loss made by the National Bus Company in the next financial year will be greater or smaller than the loss estimated for the current financial year?
    Dr. Gilbert: It is impossible to say.

    Local Government Finance
    Mr. Michael Morrisasked the Secretary of State for the Environment when he expects to publish the Layfield Report on Local Government Finance.
    Dr. Edmund Marshallasked the Secretary of State for the Environment whether he has now received the report of the Layfield Committee of Inquiry into Local Government Finance.
    Mr. Oakes: My right hon. Friend expects to receive the Layfield Report very shortly. It will then be published as soon as practicable, but the date of publication will depend on the size and complexity of the Report.
    Mr. Morris: May we have an assurance from the Minister that the Layfield Report will be published before the district council elections in May? Or is this to be another example of inspired and engineered delay?
    Mr. Oakes: I cannot give a specific undertaking but certainly the date of the district council elections does not enter into it. We shall publish the Report as soon as practical when we have received it.
    Dr. Marshall: Can my hon. Friend give us an assurance that when the Report is received the Government will deal with it as urgently and expeditiously as possible, with a view to early legislative proposals being made?
    Mr. Oakes: That depends on what is in the Report. We will certainly deal with the matter urgently.
    Mr. Sainsbury: Can the hon. Gentleman assure us that in considering the Report he will take into account the fact that the rates are a tax burden that bears particularly hard upon elderly people and single-person households? Will he further take into account the fact that the redistribution of rate support grant this year also adversely affects areas with large concentrations of elderly people? Will the Minister take urgent action to alleviate this problem?
    Mr. Oakes: I am well aware of the burden created by the rates. One of the reasons why the Layfield Committee was set up was to advise the Government on this subject. I remind the hon. Gentleman that some areas with high concentrations of old people benefited from the shift of resources in the rate support grant.

    Planning Procedures
    Mr. Terry Walkerasked the Secretary of State for the Environment whether he is satisfied with the statutory procedures relevant to local authorities in dealing with planning applications in England and Wales.
    Mr. Oakes: Yes, Sir. It is the way in which the procedures are operated that both central and local government must keep under continuous review.
    Mr. Walker: More important than that, may I ask my hon. Friend whether he is aware that the rates of individual householders are not always protected by the decisions of planning authorities? Has he any plans to change the procedures as they affect individual householders?
    Mr. Oakes: We have already recommended to local authorities in Circular 9/76 that they should improve their procedures in a variety of ways. The notifying of neighbours is also recommended to local authorities and is the practice adopted by a great many of them.
    Mr. Wells: Is the hon. Gentleman aware of the considerable degree of anxiety created when a borough council is the applicant and the planning authority at the same time? Will he tighten up the procedures in such cases, when the public feel that the council is both the applicant and the judge in its own case? Could all of these cases be called in, 01 else could some new and special procedure be introduced?
    Mr. Oakes: There are already provisions to cover the case when the planning authority is the applicant. It would be an enormous and unnecessary burden ii every application submitted by a council had to be called in by the Department.

    Humber Bridge
    Mr. Wallasked the Secretary of State for the Environment what progress is being made over a northern approach road to the Humber Bridge.
    Dr. Gilbert: This is a matter for the Humberside County Council as highway authority for the scheme.
    Mr. Wall: Is the hon. Gentleman aware that the completion of the Humber Bridge will generate a great deal more traffic in my constituency? In view of the recently announced delay in the completion of the Beverley south-west bypass, does not the hon. Gentleman agree that a northern approach road is essential to prevent Beverley from being overwhelmed and damage being caused to the famous Minster?
    Dr. Gilbert: I understand that traffic predictions indicate that traffic flows will be heaviest in an east-west direction rather than a north-south direction. Be that as it may, it is for the Humberside County Council to accord priorities in this matter.
    Mr. James Johnson: While I do not support any plea in any quarter regarding the opening of the Humber Bridge, may I ask my hon. Friend what is happening to South Docks Road, which traverses the whole length of my constituency—
    Mr. Speaker: Order. Does it go to the bridge?
    Mr. Johnson: Yes. It begins just east of the Humber Bridge. It is essential
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    that action be taken to relieve congestion in Hull.
    Dr. Gilbert: I am much obliged to you, Mr. Speaker, for coming to my aid. Now I know where the road is. I have had muttered information to the effect that the road is already receiving an extremely high priority.
    Mr. John H. Osborn: Is the hon. Gentleman aware that traffic coming from the industrial area—whether it will use the proposed bridge or not—is finding during this transitional period that the signposts are extremely difficult to follow? Will the hon. Gentleman ensure that there is adequate signposting to the other ports of the United Kingdom?
    Dr. Gilbert: If the hon. Gentleman has any difficulties with local signposting, I should be grateful if he would write to me about them.

    Railways (Health and Safety)
    Mr. Dempseyasked the Secretary of State for the Environment how many complaints under the Health and Safety at Work &c. Act have been made to the Health and Safety Commission in respect of the activities of British Rail.
    Dr. Gilbert: None, as far as I know.
    Mr. Dempsey: Is my hon. Friend aware that only recently a train from Glasgow to London arrived four hours late and that toilets, refreshments, water and other facilities were not available on it? Is it not time that British Rail was instructed to implement the provisions of this very important Act?
    Dr. Gilbert: If I judge correctly the incident to which my hon. Friend refers, it was an occasion when transport arrangements over virtually the whole country were in severe difficulties because of very heavy and unprecedented storms. If there are other circumstances of which I am not aware, or other occasions when complaints have been made, I shall be happy to make inquiries if my hon. Friend will supply the details.

QUESTIONS TO MINISTERS
Mr. Joseph Dean: On a point of order, Mr. Speaker. During Questions to the Secretary of State for the Environment,

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we dealt with only one-third of the Questions put down for oral answer. This is not unusual; it is becoming the accepted practice when Questions are put down to the Secretary of State for the Environment because of the huge field covered by his Department.
This is no reflection on you, Mr. Speaker, but as a representative of an English constituency I find myself at a disadvantage compared with my colleagues from Welsh and Scottish constituencies. They have two opportunities a month to question a full battery of their own Ministers and to put down Questions to the Secretary of State for the Environment, with just as much chance of being called as I have. In betting terms, the odds are three to one against my being called at all.
I know that you cannot alter the situation, Mr. Speaker, but hon. Members representing English constituencies are not getting a fair crack of the whip. [HON. MEMBERS: "Hear, hear."] Could you, through the usual channels, see that this injustice is put right as quickly as possible by extending Question Time to allow more English Members to participate?
Mr. Donald Stewart: Further to that point of order, Mr. Speaker. Surely the hon. Member for Leeds, West (Mr. Dean) accepts that the writ of the Secretary of State for the Environment runs in Scotland, much to our regret. Therefore, Question Time to the Secretary of State for the Environment is the only opportunity we have to get our Questions on his responsibilities answered. If the hon. Member for Leeds, West would accept that these responsibilities should be devolved to Scotland, no one would be happier than my hon. Friends and myself. [HON. MEMBERS: "Hear, hear."]
Mr. Speaker: Order. We are having English cheering and Scottish cheering. If hon. Members had co-operated in the request I made and had cut out the preamble and asked their supplementary questions, we would have dealt with nearly twice as many Questions without doing an injustice to any hon. Member. However, I shall bear in mind every point that the hon. Member for Leeds, West (Mr. Dean) submitted to me.
Mr. Dean: I thank you for your answer, Mr. Speaker, but I am afraid that I shall have to pursue this matter through the usual channels. I am totally dissatisfied with the time allocated to the Secretary of State for the Environment with the huge empire for which he is responsible.
Mr. Speaker: This is a question for the hon. Member to pursue through the usual channels.

EUROPEAN COMMUNITY (MINISTERS' MEETINGS)
The Minister of State for Foreign and Commonwealth Affairs (Mr. Roy Hattersley): With your permission, Mr. Speaker, I will make a statement about business to be taken in the Council of Ministers of the European Community during March. The monthly forecast for March was deposited yesterday.
At present, five meetings of the Council of Ministers are proposed for March. Foreign Ministers will meet on 1st and 2nd, Agriculture Ministers on 2nd and 3rd and 15th and 16th, Finance Ministers on 15th and Energy Ministers on 25th March, the latter instead of February as previously forecast.
Ministers at the Foreign Affairs Council will consider a report on direct elections to the European Assembly and preparations for the next European Council on 1st and 2nd April. They will review progress of the work in the four commissions set up following the Conference on International Economic Co-operation. They will also consider the problems for the Community fishing industry which will be raised by the establishment of the 200-mile economic zones; preparations for the Association Council meeting with Turkey; the Commission report on negotiations with Spain; the agreements with the Maghreb; the opening of negotiations with Greece for a second financial protocol; tropical products in the context of the multilateral trade negotiations; and relations with the Council for Mutual Economic Assistance. Ministers are also likely to consider preparations for the meeting of the UNCTAD Trade and Development Board arranged for 8th to 19th March.
Agriculture Ministers will continue their discussions on CAP prices for 1976–77 and on measures to improve the

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Community wine market. They will also discuss amended arrangements for beef imports and a number of measures for improving agricultural structures, and may consider proposals for a Community potato régime and the problems for the Community fishing industry which will be raised by the establishment of 200-mile economic zones.
Finance Ministers will make the first formal review in 1976 of the economic situation in the Community following the convergence decision of 18th February 1974. They will also consider Euratom loans for nuclear power stations and hear a report on the first session of the Financial Commission of the Conference on International Economic Co-operation.
The Energy Council Ministers will have before them the Commission's proposals to meet the guidelines given by the European Council of 1st and 2nd December 1975 for a Community energy policy. These cover mechanisms to protect existing energy resources and the development of alternative sources of energy; also the encouragement of energy conservation. Ministers may also consider other proposals on oil matters which have been submitted to earlier Councils.
Mr. Hurd: What is the procedure in the Community for following up the declaration on Africa about which the right hon. Gentleman told us yesterday? Will he accept that, although it is a good thing to condemn outside intervention in Africa in principle, it may not be much use in practice unless the Community uses all the means of pressure at its disposal to avert such intervention in future? What is the procedure in the Community for considering the request by COMECON for a trade agreement? Is it not essential, as my hon. Friend the Member for Blackpool, South (Mr. Blaker) said yesterday, that this request should not go through "on the nod but should be judged by the Community in the light of the general Soviet policy and attitude towards us?
Mr. Hattersley: It is not within the rules of order for me to comment on the merits of the matters raised by the hon. Gentleman, but I can give categoric answers on the question of procedure. The possibility of extending aid and trade with African countries which might have been affected by recent events in that
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continent is likely to be considered by the Council of Ministers next Monday, when it will also consider relations with COMECON and a report on the subject drawn up by the Commission.
Mr. Thorpe: The House will be delighted that so many Ministers are to be so busy on European affairs, but should there not be a general review of what initiatives the Community could take on the Middle East and Africa following the very helpful statement made recently? In future discussions about direct elections, will the Government be no less enthusiastic for such elections in 1978 than their eight colleagues? Noting how easily we were able to introduce into Northern Ireland a voting system which is generally accepted throughout Europe, will the Government at least reconsider whether they really want to stick to an archaic electoral system which would guarantee an unrepresentative delegation going to Europe?
Mr. Hattersley: Questions on European business are increasingly becoming an opportunity for hon. Members to air their prejudices, so I do not propose to comment on the right hon. Gentleman's final points. There was a general review of the Community's policy towards Africa at the political cooperation meeting 48 hours ago, and in five days' time the Council of Ministers will consider what aid and trade arrangements can make that policy more effective. There is no doubt about what we shall be saying on direct elections. We have said—and this has been reiterated recently by my right hon. Friend the Foreign Secretary—that by Article 138 of the Treaty of Rome we are committed to direct elections, and we shall do our best to implement them at the same time as our colleagues. However, there are some technical difficulties. We hope that we shall be able to overcome them, but we may not be able to do so. If it is possible to do so, we shall fulfil our obligations on time.
Mr. Roper: I did not hear my right hon. Friend say anything about the meeting of Research Ministers. Is it possible for the question of the location of the JET project to be taken up in the Council of Foreign Ministers to enable preparation to be made for the meeting in

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Luxembourg on 1st and 2nd April so that the European Council can make a decision?
Mr. Hattersley: I am not sure that the European Council is the appropriate forum for the JET project discussions. This matter was discussed in Brussels two days ago by the Research Ministers. There is no proposal for it to be discussed in the Foreign Affairs Council next month. I have, therefore, nothing to add to my written statement on the subject.
Mr. Dykes: Is the right hon. Gentleman confident that the Foreign Ministers' Council and subsequently the European Council in April will reach final decisions on the date of direct elections and the number of members for each country, or will there be a further delay after the European Council meeting?
Mr. Hattersley: There may be a further delay, dependent on the wishes and will of this Parliament. I am sure that the hon. Gentleman has read the Green Paper and will know that there are two areas of decision. One area comprises the decisions which must be taken corporately by the Community. The other is the area of decisions which have to be taken individually by nations within the Community. We cannot assume that both those areas of decision can be completed by the next European Council meeting. The House and the parties represented in it must have an opportunity to discuss these matters and make representations to the Government. I am not sure that that can be done by 1st April.
Mr. Spearing: Will the draft Convention on Direct Elections be decided at the Foreign Affairs Council? Will my right hon. Friend, representing Britain, make clear to his colleagues in the EEC that, whatever the Government's commitment may be, there is no mandate from the British people for direct elections?
Mr. Hattersley: I certainly shall not make that final point because I do not believe it to be an accurate statement of the position. I have enough faith in the British people who voted "Yes" in the referendum and all those who wanted them to vote "No" to assume that the British people were made aware of Article 138 and voted in the knowledge
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that it existed. As to timing, I assure my hon. Friend that we have reiterated time after time—indeed, my right hon. Friend the Prime Minister made this point to the Prime Minister of Luxem-bourgh, the President of the Community, this morning—that in these matters we are dependent on the will and wishes of Parliament, and that must continue to be the case.
Mr. Scott-Hopkins: Are any further proposals coming forward from Ministers to discuss the inshore and the deep-sea fleets, and will this matter be discussed at the meeting that the right hon. Gentleman mentioned? Is the Minister satisfied that the Maghreb Agreement, which reduces Maghreb's overall preference from 87 per cent. to 51 per cent is satisfactory?
Mr. Hattersley: Changes in the fishing régime within the Community resulting from the Law of the Sea Conference, the application of the common fisheries policy and the regrettable dispute with Iceland mean that there must be a general reappraisal of our fishing policy. I promise the hon. Gentleman that we are doing that and advancing our interests in the Community.
Mr. Peyton: The extensive bill of fare which the right hon. Gentleman listed for the House raises the question of when the House can expect to hear reports back from Ministers. The European proceedings at present are debated in the House in an ad hoc manner which is unsatisfactory. Will the right hon. Gentleman give a clear undertaking that these important matters will be reported back and that he will discuss the arrangements with his right hon. Friend the Leader of the House, because we cannot continue in this unsatisfactory way?
Mr. Hattersley: Of course, I give that assurance without reservation. I shall draw to the attention of my right hon. Friend the Leader of the House the right hon. Gentleman's wishes, but I shall have to do so against the context of two pieces of background information. The first is that we are observing both the spirit and the letter of the Foster Report, which lays down ways in which we should explain our European policy and offer it for challenge to the House of Commons. The second is the knowledge that when

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we had a general debate on European affairs, which was intended to fill the vacuum the existence of which is implied by the right hon. Gentleman, the debate collapsed before the allotted time because there were so few participants.
Mr. R. C. Mitchell: Did my right hon. Friend say that the Foreign Ministers would discuss the application of Greece to join the Community? If that is so, will he ask his right hon. Friend to do everything possible to facilitate Greece's application?
Mr. Hattersley: There is a parallel answer to that which is given concerning weekly business questions—"Not next month, Sir."
Mrs. Winifred Ewing: Will the right hon. Gentleman answer a simple question? Will the General Election be before the direct elections, or the other way round? If the General Election comes first and the Scottish National Party gets a mandate, as we confidently expect it will, are we to take it that the Minister will attend these meetings without even taking into account this realistic problem? Secondly, in his statement the Minister referred to the 200-mile fishery limit, but will he also discuss coastal State preference?
Mr. Hattersley: In reply to the first question, when I decide to dissolve Parliament I shall not be able to give the hon. Lady advance warning. In reply to the second question, the hon. Lady can be assured that, as a coastal State, we are very conscious of our obligations to the fishing industry of a coastal State. The central element in the policy advanced by my right hon. Friends the Minister of Agriculture, Fisheries and Food and the Foreign and Commonwealth Secretary at the Foreign Ministers' Council is the protection of that industry.
Mr. Alexander Fletcher: Will the right hon. Gentleman reconsider his remark that the arrangements for direct elections are mainly of a technical nature? It cannot be a technical matter that in Britain, France and Germany, for example, it will take three times as many people as in a small member State to elect one Member of Parliament.
Mr. Hattersley: The hon. Gentleman misunderstands the position. If he reads
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the Green Paper, he will discover that the size of the European Assembly when it is eventually elected has yet to be decided. That is not the sort of technical question to which I referred, which is how those elections are organised in Great Britain, the willingness and ability of parties to prepare themselves by 1978, if that is the target date, and the willingness of the House to pass the necessary legislation, none of which it would be right to take for granted.
Mr. Hooley: Judging by the long agenda for the Foreign Ministers, it seems that the Foreign Ministers and the Foreign Office are meddling in a lot of matters which are not that Department's concern. Has any consideration been given to redistributing between the appropriate Ministers the business of the Community so that it is dealt with by the appropriate Department?
Mr. Hattersley: Inevitably, the Foreign Affairs Council discusses a number of topics which might be regarded in the procedures of the House and the organisation of the Government as appropriate for other Ministers, but there is a system for co-ordination which, I hope, avoids the difficulties referred to by my hon. Friend. When appropriate, Ministers other than Foreign Ministers join the Foreign Affairs Council.
Mr. Jim Spicer: The Minister gave an assurance that the affairs of Southern Africa will be discussed at the meeting of Foreign Ministers. Will he go from the general to the particular and give a further assurance that the problems of Zambia will be discussed as a matter of great urgency, because she is virtually under siege and blockade and, unless a move is made to open the Benguela railway quickly, her copper exports and other vital exports and imports will be put severely at risk?
Mr. Hattersley: The hon. Gentleman has made his point but he has slightly misquoted me. I did not give an assurance that these matters would be discussed in the Council of Ministers on Monday. What I said was that the Foreign Ministers, meeting as the political cooperation organisation on Monday, hoped that the Commission or the permanent representatives would be able to make proposals on Monday which would

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enable us to implement then the decisions in principle we had already taken. I am not sure that that is certain. I hope that it is, but, because I hope rather than feel certain, I do not want it to be regarded as an assurance.
Mr. Cryer: Will my right hon. Friend assure the House that in the discussions on the common energy policy the position of the British Government will be maintained—that is to say, that we retain full control over British North Sea oil and its rate of usage? Are the Government considering the adoption of selective import controls in respect of the COMECON countries?
Next, will the Government make it clear that the discussions on direct elections at the time of the referendum in no way gave a mandate to the Government to say that we would accept direct elections, and that the Government specifically reserved their position before the referendum when asked about this, so that it could be included in the referendum arguments? Will my right hon. Friend state categorically that nothing will be done until a decision at least of this House, and preferably of the British people, is taken about direct elections?
Mr. Hattersley: On our established energy policy, the answer is "Yes". As to our relations with the COMECON countries, it is not our policy to discuss the contents of a mandate before it is discussed by the Community as a whole.
On the third point, my hon. Friend and I must disagree as to the amount of information which he and other people wishing to oppose British membership of the Community actually gave to the people they hoped would support them. I believe we explained that the Treaty of Rome would be mandatory upon us if we remained in full membership, and I think it is explicit on this matter.
On the fourth point, even if my hon. Friend does not believe in my good will and that of the Government, there cannot be direct elections until the House of Commons has passed the necessary legislation. Therefore, that check certainly exists.
Sir B. Rhys Williams: Does the Minister agree that the division of the Community into first-class and second-class members through the snake system is an extremely adverse development? Would it not be fruitful for the British representative at the Finance Ministers' meeting to come forward with other suggestions for monetary co-operation which would enable all members to collaborate without this artificial division?
Mr. Hattersley: I am not sure that we ought to see these things entirely in Community or non-Community terms. There may be opportunities for some members of the Community to co-operate in some monetary venture, and to co-operate with one or two countries outside, without having to decide that it is all and exclusively EEC or not EEC at all. I share the hon. Gentleman's belief that a Community divided into first-class and second-class nations is altogether undesirable, and that certainly is the view of Her Majesty's Government.
Mr. Raphael Tuck: Has it ever occurred to my right hon. Friend and the Government that if we have direct elections to the European Parliament a large proportion of those elected from this country may well be former members of the "Get Britain Out" campaign, in which case they will be a bigger nuisance to the European Parliament than the Scottish or Irish nationalists are to this Parliament?
Mr. Hattersley: They did not do very well on 5th June, and I do not know why my hon. Friend thinks that they should do better at some subsequent election. But I am sufficiently democratic to believe that if we have an elected Parliament Britain must be represented by those who get a majority of the votes. I am prepared to rest on that.
Mr. Michael Latham: Do British Ministers intend to put forward any policy proposals on energy at the meeting on that subject? If so, may we be assured that they will not include the proposals of Sir Derek Ezra and Mr. Hawkins to put up gas prices?
Mr. Hattersley: The hon. Gentleman knows that that is a point for another occasion and not for this afternoon.

BILL PRESENTED
  PASSPORTS
  Mr. Ronald Bell, supported by Mr. John Stokes and Mr. Robert Boscawen, presented a Bill to make passports documents of entitlement; and the same was read the First time; and ordered to be read a Second time upon Friday 12th March and to be printed. [Bill 78.]

  STATUTORY INSTRUMENTS, &c.
  Mr. Speaker: In order to save the time of the House, unless there is an objection I propose to put together the Question on the two motions relating to Church of England General Synod Measures.
  Ordered,
  That the Ecclesiastical Judges and Legal Officers Measure be referred to a Standing Committee on Statutory Instruments, &c.
  That the Cathedrals Measure be referred to a Standing Committee on Statutory Instruments, &c.—[Mr. Snape.]

  COMPANIES
  3.54 p.m.
  Sir Brandon Rhys Williams: I beg to move,
  That leave be given to bring in a Bill to make provision for the responsibilities and duties of directors; to require certain companies to appoint non-executive directors; to require such directors to make an annual statement to the shareholders; and for purposes connected therewith.
  This is the eighth occasion on which I have sought leave to bring in a Bill to reform company law, and on each occasion I have enjoyed support in all parts of the House.
  Inside the House, and also outside it, there is a growing body of opinion in favour of reform of the British version of the joint stock company. I worked on a salary for 20 years before I had the honour to be elected to Parliament, and I still have a clear idea of the frustrations and the problems of many of the people who work in joint stock companies in Britain.
  I have always believed and still maintain that there is nothing essentially wrong with British management or with the British work force, but there are serious difficulties arising from the way they are organised. I do not believe that the British version of the joint stock company is by any means ideal.
  People studying this subject are concentrating increasingly on two particular lines of approach. One is to make better arrangements for participation at works level, which I entirely support, although it is quite outside the scope of the Bill which I am seeking to introduce today. The other line of advance is in favour of more effective supervision of top management. With every day that passes, it becomes more obvious how necessary this is.
  The Bill which I seek to introduce would apply to about 1,000 of the largest quoted companies—that is to say, employing at least 1,500 people or with assets of not less than £5 million. It would not, therefore, be a vexatious measures which would harass very small businesses and private companies. On the other hand, these large companies are not all within reach of the observation of the Press or of the institutions or of their own shareholders, and it seems clear

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  that there is a gap in the supervisory structure.
  My Bill would require all these companies to have at least three non-executive directors. That is not a very big step forward, because surveys have shown that for the most part they have at least one as things are, and the majority probably have two or three non-executive directors already.
  What makes the Bill somewhat controversial is my second provision, which is that the non-executive directors must have a specific function. I do not greatly care what that specific function is, provided that it enables them to exercise rights in the board room and to force the attention of management to their inquiries and anxieties. The specific function which I have incorporated in the Bill in earlier years, and which I believe is the best and easiest to define, is simply that the non-executive directors must confirm their confidence in the company's management and the use of the assets annually in the balance sheet. Should a non-executive director feel any anxiety, he would need only to express his intention to withhold his signature from that formal note of approval. I am certain that at that point his colleagues on the board or in the senior management would wish to pay attention to what he had to say.
  Lately there has been a good deal of criticism—whether justified or not I would not like to say—of the performance of non-executive directors in companies which have run into serious difficulties. This seems to me the best reason of all for giving them more status by a change in company law. I should like to expand the rôle of the non-executive directors so as to constitute an effective management audit. A hundred years ago, when the idea of the audit was brought in—that is to say, the introduction of experts in financial affairs to report over the heads of the management directly to the shareholders—company law reform on the Continent took a slightly different turn. This was particularly the case in Germany, where there was the development of the idea of the supervisory board. I am not convinced that we are ready to go straight to the supervisory board in this country: I do not think we yet have enough people
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  who quite understand the etiquette of the operation of the supervisory board. But I think that we can fruitfully build on what we have in the non-executive directors of our larger companies.
  Three objections have been raised on previous occasions to the idea of my Bill, and I should like to deal briefly with them. The first objection is that it would split the board into executive and non-executive elements, which would be bad for the unity and continuity of management. I would not mind if there were a tendency to divide the board into executive and non-executive rôles. I believe that it is a necessary transition and would certainly not be harmful.
  Objection has also been raised that, non-executive directors having no power, to put more responsibility upon them is anomalous because they have no way of carrying out their functions. I do not agree with that. I am sure that if non-executive directors were exposed more openly to criticism when they failed, they would see to it that they did have the power to investigate the way in which the company was operated.
  The third objection is that not enough of the right people are available. I would strongly deny that view. British industry produces every year a large surplus of experienced and highly-qualified people in their forties and fifties who, because of the structure of their companies or through reasons of social or technical change, find that they can go no further in their firms. If such people were to be encouraged to see themselves continuing their career in a supervisory rôle, they could prepare themselves for it and would soon be able to carry it out effectively.
  I have said on many occasions in the past that the British version of the joint stock company can be a sick organism. It behoves us in this House not to leave companies in their difficulties by discussing this subject year after year in a desultory way but at the same time taking no action over the situation.
  I do not think that the Government have the intention of introducing a Companies Bill of their own in the present Session, and I trust that they will give serious consideration to the ideas I am proposing in my Bill. I hope that there will be no objection from the Government Front Bench to my Bill receiving

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  a Second Reading if I obtain leave to introduce it today. I believe that it would be fruitful for hon. Members with experience and a serious interest in company law to hold a Committee stage to discuss the subject of the supervision of top management and that my Bill would provide a useful vehicle for such a Committee. I therefore ask the Government not to oppose the matter on principle at this stage. Even though my humble suggestions may not be ideal, the problem is real and as a House we should be working actively to solve it.
  Question put and agreed to.
  Bill ordered to be brought in by Sir Brandon Rhys Williams, Mr. Sydney Bid well, Mr. John Cope, Mr. David Crouch, Mr. Hugh Dykes, Mr. Robert Edwards, Mr. R. A. McCrindle, Mr. Tom Normanton, Mr. John Pardoe, Mr. David Price, Mr. Tim Rathbone and Sir John Rodgers.

  COMPANIES
  Sir Brandon Rhys Williams accordingly presented a Bill to make provision for the responsibilities and duties of directors; to require certain companies to appoint non-executive directors; to require such directors to make an annual statement to the shareholders; and for purposes connected therewith; and the same was read the First time; and ordered to be read a Second time on Friday 5th March and to be printed. [Bill 79.]
ORDERS OF THE DAY
  POST OFFICE (BANKING SERVICES) BILL
  As amended (in the Standing Committee), considered.
Clause 1

  EXTENSION OF POWER OF POST OFFICE TO PROVIDE BANKING SERVICES
  4.6 p.m.
  Mr. Michael Marshall: I beg to move Amendment No. 1, in page 1, line 5, leave out Clause 1.
  Mr. Speaker: With this amendment we may also take Amendment No. 2, in page 1, line 8, after 'words', insert 'profitable'.
  Mr. Marshall: In considering this Bill we have come to the end of a somewhat remarkable chapter in the annals of this House. Let me first welcome the Minister of State, who is the great survivor—the man who came through the purge of the Department of Industry following the Industry Bill. He is the man who battled single-handedly to guide the proceedings of the Bill upstairs in Committee. We lost his other ministerial colleague after Second Reading and we did not see him in Committee. Now, this afternoon, we have the enigma whether we shall see a Treasury Minister on the Front Bench. I understand that we shall see the Financial Secretary to the Treasury a little later in the debate. Perhaps the Minister of State will now say whether the Financial Secretary will take part in these debates and will be able to answer questions.
  The Minister of State, Department of Industry (Mr. Gregor Mackenzie): Perhaps it is appropriate for me now to say that we have only recently seen the selected list of amendments. Therefore I shall consult my hon. Friend the Financial Secretary when he arrives. I am sure that my hon. Friend will be able to deal with any points that arise.
  Mr. Marshall: I am grateful to the Minister of State for that comment. With his usual bland charm, he has been kind to his Friends and to the Government as

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  a whole in covering up for them. However, it is a disgrace that throughout the proceedings on this Bill we have lacked the voice of the Treasury. It is incredible that in view of the recent developments we have not had the presence of a Treasury Minister until this very late stage.
  I do not want to labour this point, but I shall return to it possibly at a later stage. We must remember that the Treasury is the master of this Bill. Whatever has been said upstairs on the Bill, time and again when we have run into problems, and the Minister of State, valiant though his efforts have been, has not been able to resolve many of our problems. We look forward to seeing the Financial Secretary because we wish to press him strongly on many of the points that arise on these amendments.
  The amendments go to the heart of the Bill, which will give the Post Office extended power to provide banking services. This raises issues relating to structure, resources, fair competition, staffing and certainly the taxpayers' liability inherent in any build-up of the Giro's banking activities. Some of these points will be discussed in detail by some of my hon. Friends. I wish to concentrate on a number of broad principles that stem directly from the clause.
  First, it must be put on record that throughout our proceedings we have had great difficulty in obtaining a clear view of the commercial objectives of Giro. It is these objectives in relation to banking activities that are sought to be extended. We have had a confusing picture as to how far the commercial objectives are in harness or in conflict with social objectives. There has been ignorance on our part because we have not been informed about the Government's approach to supervisory banking legislation.
  We were told at earlier stages that the Department of Industry could not intervene in matters covering commercial judgment by Giro. On the other hand, if we seek to challenge the commercial judgment of Giro we are told that commercial confidentiality is involved which may reveal sensitive information. Therefore, we are in a "Catch 22" situation where nobody is able to give us the answer. Behind the scenes sits the
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  Treasury, the real monitor of this process. We have so far been hamstrung in our proceedings. I mean no disrespect to the Minister of State for we appreciate what he has tried to do. However, the situation has reached the ultimate in absurdity.
  This follows two new developments in the past week since we concluded the Committee proceedings. The first major event was the pronouncement about the control the Government intend to exercise in building up banking operations by Trustee Savings Banks as expressed on Second Reading of the Trustee Savings Banks Bill, when they laid bare their intention to introduce supervisory legislation in respect of both the TSB and Giro. There were also statements by the managing director of Giro last Friday about the rôle he sees for Giro as part of a massive State bank.
  These two important developments are relevant to this Bill. Despite the reservations and arguments of the Minister of State, we should explore these matters in detail. We should consider why Parliament should be asked to give the Post Office additional banking powers, with all the attendant expenditure, including advertising under Clause 1. Let us consider, therefore, how the restrictions imposed by the Treasury on the TSB are relevant to and parallel with the build-up of Giro.
  On Second Reading of the Trustee Savings Banks Bill, the Paymaster-General said that the establishment of the TSB would represent "a third force" in banking, which he described as "mutually owned". He said:
  "The banks will, of course, be subject to quantitative controls by the Treasury on the level of investment and loans."—[Official Report, 17th February 1976; Vol. 905, c. 1209.]
  One immediately asks, if that is so for the TSB, why is it not so for Giro?
  The Paymaster-General also said that the credit services to be provided by the TSB would include facilities for personal loans within the range £150 to £1,500. Clear lines were drawn in respect of the TSB, but our amendments to provide the same limits for Giro were defeated in Committee. Once again, why is this distinction made?
  The right hon. Gentleman also said that reserves were to be built up at the

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  same time as banking services were developed for depositors. In other words, they were to avoid the topping up by the Treasury which in effect is happening to Giro. He said that the Treasury was to determine the amount and proportion of the banks' funds which could be invested in a selected range of assets and in particular the "overall liquidity position" of each bank. Once more, there is a contrast with Giro. Despite our attempts in Committee, despite reservations expressed on all sides about reserve asset ratios and the technical insolvency of Giro, we have had no definite limitations or assurances.
  The Government's view of the TSB contrasts sharply with the open-ended, blank cheque approach to Giro. Towards the TSB a cautious and selective approach is required by the Treasury, but the same scrutiny has not been brought to bear on this Bill. The Paymaster-General said in that same debate that the general policy for the Trustee Savings Banks would be the maintenance of a very high level of liquidity with little expansion. We have had no such clear assurance about the Giro.
  4.15 p.m.
  Finally, and most telling of all, I come to the rôle of the Financial Secretary, whose arrival we shall no doubt welcome. [HON. MEMBERS: "Where is he?"] This is an important matter and I am sorry to have to quote the hon. Gentleman in his absence, but perhaps I can return to this matter when he does appear. As I said, the Minister of State is the great survivor in the Department of Industry. The Financial Secretary could be reasonably christened the Third Man, with all the overtones of the man we need to pin down.
  On Second Reading of the Trustee Savings Bank Bill, the Financial Secretary said that the whole approach to the Trustee Savings Bank had to be looked at in the light of new banking supervisory legislation which would be introduced to deal with both the TSB and Giro. In other words, we are today discussing the extension of banking powers for Giro which we must assume will be overtaken by further legislation.
  That brings us squarely back to the problem we face with Giro, and the totally unqualified, unco-ordinated and piecemeal development—I am quoting
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  the hon. Member for Thornaby (Mr. Wrigglesworth)—that we see in this Bill. To that extent, we are at one with the hon. Member for Thornaby, who called for a clearer view of the Government's intentions in this sphere. I believe that his estimate of the situation on Second Reading of the Trustee Savings Banks Bill would be generally accepted:
  "The Committee stage of the Post Office (Banking Services) Bill has just finished. Its passage has been notable for having taken place in almost total isolation, without consideration being given to the role of the National Giro whose services it seeks to extend in relation to other sections of banking in either the public or the private sector or to various bodies responsible for the supervision of the banking system."—[Official Report, 17th February 1976; Vol. 905, c. 1220.]
  I feel tempted to start again now that T see that the Financial Secretary has finally joined us. [HON. MEMBERS: "Hear, hear."] I am greatly encouraged by the way in which the House has responded to the importance of this moment. The arrival of the Third Man in the shape of the Financial Secretary is a matter of great importance.
  I have been quoting the Financial Secretary. It is important that he should know that we have been particularly concerned with his statement as reported in column 1245 on 17th February, when he confirmed that the Government intended to introduce new banking supervisory legislation to deal with the Trustee Savings Banks and Giro. I have been drawing a parallel between the two. The Treasury has taken a cautious, controlled approach to the development of the TSB, while in this Bill we are asked to support a totally open-ended and uncontrolled development of Giro.
  We hope that the Financial Secretary will intervene in the debate. As the argument develops, I am sure that he will appreciate that we have been hamstrung so far by the lack of a Treasury spokesman. The Minister of State has worked valiantly, but the Treasury is clearly dominant, and we should know its view of the development of Giro's banking services.
  I had been quoting the summary of the hon. Member for Thornaby who considered that this Bill has been dealt with in a totally unco-ordinated way. We entirely agree, but in putting the balance right it was hard for some of us to

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  believe our ears when the hon. Gentleman went on to argue that the TSB should take the greatest care before moving into more abrasive, competitive and inevitably risky worlds.
  The hon. Gentleman impressed on the Government the need for adequately qualified staff. He also sought greater control by the Bank of England. He knows that it was precisely that type of approach which we were pressing the Government to adopt towards the Bill, but it was rejected time and time again when our amendments were defeated.
  There is a quite incredible distinction between the activities of Post Office Giro and those of the Trustee Savings Banks. This prompts the question whether there is a distinction between Government Departments and whether, indeed, the Treasury has sought in some way to avoid extending its interest to Giro for reasons which we hope to hear from the Financial Secretary. However, all these matters highlight that any attempt which has been made by the Opposition to give teeth to the Bill or to take the opportunity to exercise some judgment on the future development of Giro's banking has been denied us.
  Our amendments for ceilings, personal loans, personal overdrafts and corporate overdrafts were turned down in Committee. Our attempt to exclude the development of a credit card business was voted down despite the history of loss-making which credit cards have had in connection with many of the major banks. Our amendments concerning foreign exchange transactions, investment advice and trustee advice were all turned down when we pressed upon the Government the view that they were matters which went far wider than the Giro was qualified to undertake or its history suggested it had adequate resources to tackle.
  Mr. Tim Ronton: My hon. Friend referred to credit cards. I am sure he will agree that there was a considerable area of doubt left when we discussed this matter in Committee. I hope that he will press the Minister to say this afternoon whether Giro intends either to go into the credit card business itself or to enter into a relationship with one of the existing credit card companies. Doubt-
  400
  less, since our debate in Standing Committee, my hon. Friend has read the report in the national Press which indicates that Giro is, at present, in the course of negotiation with one of the credit card companies. It would be most helpful if my hon. Friend would press the Minister for specific clarification on this matter.
  Mr. Marshall: I am grateful to my hon. Friend. He has made an important intervention. I hope that the Minister has hoisted that point on board. I shall certainly press him hard on the matter of credit cards. There is a good deal of worry about this matter. There is also the question of the Eurocard. If we carry the credit card to its logical conclusion there is no reason why Giro should not enter the whole Eurocard system providing access to foreign exchange at any port of call. These are matters which seem to be swept under the carpet in the general line that the Minister has adopted. He said that he could not seek to put any restrictions on Post Office Giro but would expect it to move along a prudent course. I hope that he will take this point on board because it is important that we understand Giro's intentions concerning credit cards.
  I turn to the wider question of the intentions and ambitions of the Post Office Giro itself. Last Friday under the headline
  "Giro chief outlines the basis for massive state bank"
  Mr. Singer, the managing director of Giro, made a number of statements which were reported in The Guardian by Tom Tickell. His comments are most important concerning the way we have to judge what is likely to be the outcome if the Bill, and especially Clause 1, is passed. My first quotation comes from the beginning of the report where it says:
  "The National Savings movement, Giro, and the Paymaster-General's office could beneficially be combined into a state bank the size of Barclays, according to Mr. Alfred Singer, chairman of National Giro".
  Mr. Tim Renton: That is just what we feared.
  Mr. Marshall: Exactly.
  "The overall Barclays Group including its foreign and inurance broking subsidiaries had assets of just over £14 billions in 1974. The total for the bank on its own came to £7·4 billions. Figures for last year are not due until March. The consortium Mr. Singer envisages,

  401
  would be somewhere in between. The National Savings movement on its own has assets of around £7 billions, while the Trustee Savings Banks which are strongest in Scotland and the north-east hold some £3½ billions of investors' money."
  The report concludes:
  "Giro is a minnow in this company. After the reconstruction last year the Government White Paper listed past assets at £9·1 millions, down from the previous total of £16·8 millions."
  I can only say that if Giro is a minnow it is showing great pretensions in seeking to become a whale. If Giro is to be the prime mover in bringing together what The Guardian describes as a massive State bank, this is indeed a matter that we should explore very carefully and fully.
  Mr. Gregor Mackenzie: I too, have read what Mr. Singer said. I have read the fine print of both the articles that appeared in The Guardian last Friday. Mr. Singer is entitled to his point of view just as we all are. However, whatever may lie in the future and whatever hopes individuals may have for the future, they are not written into the Bill. It is the Bill that we are primarily concerned with today. We are not concerned about the union of the Paymaster-General's office and Giro. With great respect, that is not what is contained in Clause 1. I assure the hon. Gentleman that we are only putting forward the Bill. We are not crystal gazing for the future.
  Mr. Marshall: I am grateful to the Minister for his intervention. He has touched on an important point. I do not want to be too legalistic, but the assurance which he has just given is one which perhaps does not fully meet the point. He has anticipated the question I was about to put. Despite the assurances which he gave us in Committee, and the assurance which he has just given us, we need to have a much more clear-cut answer from him. Does the Minister of State not accept that there is nothing whatsoever to stop Giro, under Clause 1, seeking to pursue the concept that Mr. Singer outlined last Friday? I do not see how he can possibly deny that that opportunity becomes open if Giro seeks the extension of banking powers.
  If he believes that there is some mechanism which would prevent that movement, I hope he will make it
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  abundantly clear. I do not see, certainly as Clause 1 stands, that there is any limitation such as he has described. I accept that his view and that of Mr. Singer may differ. However, as I understand the Bill, there is nothing which would inhibit Mr. Singer from pursuing the objective which he clearly spelled out to the Press and which he will no doubt wish to pursue during the months and years ahead.
  Does the Minister of State accept that Clause 1 is nothing short of an empire builder's charter? I believe that the type of banking envisaged is one for which there is no public demand. Indeed, there is no evidence of great movement towards a public need for State banking. We know only too well that moves towards a nationalised bank are more than ever likely to follow the pattern of other nationalised industries where the taxpayer's purse is inevitably at stake in picking up the tab.
  I trust that the Minister of State will return to my basic question because I do not believe that he has been able to set anyone's mind at rest with his brief answer. How can the Minister of State possibly justify the piecemeal legislation which his hon. Friend the Member for Thornaby has referred to, when now there is so clearly a need for a coordinated approach by the Government, the House and indeed the country to the working of the Trustee Savings Banks and Giro?
  Will the Minister of State confirm that whatever the powers proposed under Clause 1, they must be subject to the regulatory powers of the new banking legislation which his hon. Friend the Financial Secretary to the Treasury has promised will follow shortly?
  Mr. Peter Viggers: Where has the Financial Secretary gone now?
  Mr. Marshall: I am sorry to say that this is part of the pattern which we have had to put up with frequently during discussion of the Bill. We get the feeling that the Treasury is with us in spirit but never in the flesh. The precise point here is: when can we expect regulatory powers in new legislation affecting both Giro and the Trustee Savings Banks, legislation which would seem to call into question the whole basis of the Bill now before us?
  4.30 p.m.
  Mr. Ian Wrigglesworth: I may not be able to spirit the Financial Secretary back into the Chamber, but at least I can bring back his words on the Second Reading of the Trustee Savings Banks Bill. He gave an assurance that I should like to repeat for the benefit of the House. He said:
  "… there will be new banking supervisory legislation which will deal with the Trustee Savings Banks and Giro among others."—[Official Report, 17th February 1976; Vol. 905, c. 1245–6.]
  The assurance the hon. Member is seeking was given on that occasion.
  Mr. Marshall: I think that the hon. Member may have misheard me earlier when I quoted precisely those words. I acknowledge that the assurance was in response to points that the hon. Member for Thornaby had put to the Financial Secretary. We have been told that new legislation will be introduced. Is it not absurd for us to consider the extension of the Post Office banking services when we are apparently so close to a decision about the supervisory control of those very banking powers? This approach calls into question the whole background of this Bill, since the Post Office is undergoing a major review and the Treasury is looking into the supervision of banking activities. It seems quite incredible that the Bill should be proceeded with in this fashion.
  Will the Minister of State tell us what effect the future legislation is likely to have on the questions we have raised so far? Will it include a legal definition of banking services? He will recall that this question was raised in Committee by my hon. Friends. It was one of a number of outstanding points which we were unable to discuss then. What advice has the Minister of State had on that score? These are important matters which must be the subject of any future legislation the Government may introduce. Anything the Financial Secretary can say to throw light on that legislation will be helpful.
  We were unable to get answers on other outstanding questions in Committee, but the Minister of State promised to come back to some of them on Report. One concerns the liability of Giro under the Consumer Credit Act. We need further information about that. What
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  are the Government's views on Giro's rôle in financing commercial property development? This point was raised with the Minister of State by the hon. Member for Birmingham, Perry Barr (Mr. Rooker). I do not wish to go into the rights or wrongs of that issue. Would the extension of banking services under Clause 1 allow Giro to move into any kind of fly-by-night activity if—and I do not impugn the motives of those who manage Giro now—it were handled in a less than wise manner? But with the whole history of secondary banking, and the problems which have sprung up there and in property, the Minister of State owes the House an explanation of the Government's attitude to Giro's possible development into these activities.
  My hon. Friend the Member for Howden (Sir P. Bryan) put a series of questions in Committee. His close study of the Bank of England Quarterly Bulletin shows that Giro's progress with Government deposits had been slow in recent months. His researches also brought to light the wide variations in the use of Giro by local authorities. These figures seemed to vary from one quarter to the next. The Minister of State undertook to give the Government's assessment of Giro's progress in this area which we might call traditional business.
  My hon. Friend the Member for Mid-Sussex (Mr. Renton) posed a wide range of questions and focused on Giro's activities in foreign exchange. We were promised more detail on the level of these activities both now and for the foreseeable future. These are some of the many questions—my hon. Friends will wish to develop others—arising from the clause which goes to the very heart of the Bill. It seeks to develop Giro in a wider banking sphere which seems to represent a totally open-ended commitment for the taxpayer.
  The question of the degree of research which has been carried out into this expansion is still unresolved. On Second Reading I asked the Minister of State about market research. At that time we had to rely upon the Financial Secretary to the Treasury, who gave helpful information. He said that the market research had been carried out by Lancaster University, Marplan and others. It is typical of the "Catch 22" situation we face on this Bill that when I sought

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  further information from the Financial Secretary he said, not unreasonably, that this was a matter for Committee. In Committee, however, I was told that it was commercially sensitive information.
  Mr. Viggers: Will my hon. Friend invite the Paymaster-General to take a seat in the Chamber, as this issue very much concerns his Department?
  Mr. Marshall: I am afraid that my hon. Friend will have an uphill task in trying to get the Treasury to do more than stay quietly in the background. It regards this as a dirty dog of a Bill, one in which it wants to play no part. For reasons we are unable to determine, we cannot get them to come to the Dispatch Box to tell us about what appears to be a division within the Treasury which is doing a proper job of scrutiny on the Trustee Savings Banks while, on the other hand, ignoring the real worries of the House and the taxpayer over Giro's banking services.
  We have not had answers from the Minister of State about market research, so I hope that even at this late stage he will be able to give us some assurances. Is it true that the market research has been undertaken by Lancaster University and Marplan? If so, is it relevant to the kind of proposal Giro is putting forward for its extended banking services? Does that market research support Giro by confirming that there is room in the market for its expansion at—and this I stress—a profitable level?
  Given that personal loan business is the very heart of this kind of development, can the Minister of State say categorically, assuming that the market research identified a real need, that it overturned the qualified view put forward from a number of sources recently on banking services and to which we drew attention on Second Reading? I mention in particular the article in The Times of 9th December. It set out quite clearly that about 80 per cent. of the population is the absolute limit of those who can reasonably be expected to go in for personal loans; that at the moment 50 per cent. of the public were already exercising this option through the "clearers"; that of the remaining 30 per cent., 10 per cent. were dividing their business between the Trustee Savings
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  Bank and the Giro. That leaves an apparent available market of 20 per cent.
  Was the market reasearch undertaken for Giro sufficiently optimistic to suggest that Giro could make inroads into that 20 per cent.? The problem with that 20 per cent., according to every estimate we have made, is that the "clearers" are moving very strongly into personal loans at the rate of about 4 to 5 per cent. of turnover each year. In fact, The Times suggested that at the present rate of striking, that market would be totally absorbed within the next 10 years. Yet it is precisely within that period, that Giro will be seeking to build up its business to include a substantial amount of personal loan business.
  Those are some of our questions of detail on the clause. We require answers to them today. If we do not get the answers, we must assume that the vetting machinery is inadequate—and this has been proved to everyone's satisfaction by the failure of the Treasury to make its views on the matter known—or that we are not getting the kind of commercial information necessary to reach a proper decision. It is a commercial decision. It is a suggestion that by taking some £30 million of the taxpayer's money the Post Office Giro should be free to move into wider banking services.
  If that is the case, we must insist that there is adequate commercial justification. We have not had such a justification in Committee or in the House. I invite the Minister of State to give us it today. As the Bill stands there is no proper vetting method, so without that justification, the House would be failing in its duty if it accepted the premiss of the Bill as set out in the clause.
  Giro's background is one of loss in the last six out of seven years. Other businesses would not come to the market with such a background.
  On Second Reading we paid tribute to Giro for its improved management. I do not in any way wish to criticise the ability of the present management, but Giro has a long way to go. We should encourage it to go ahead, as the Trustee Savings Banks are, but its reserves should be built up before it moves into new areas of business. Whatever the ability of Mr. Singer and his Board, we are left with the impression that this is yet another

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  tranche of taxpayer's money being thrown out to meet the pressures of the Department of Industry.
  We find that time and time again the Department of Industry, because of lack of Treasury supervision, is having to take as read what is put to it by Giro, or other parts of nationalised industries.
  I conclude with praise for the Minister of State. Perhaps by now he is becoming embarrassed with our praise, but he has had to carry single-handed the burden of the Bill since Second Reading. He has tried to give us honest answers to the questions which we have raised. He has frankly explained the limitations of what he could tell us. On one hand he has had to accept what Giro told him and on the other there was the failure of communication by the Treasury.
  The Minister of State is like a sturdy Scottish thoroughbred, harnessed to the Giro plough—and I am sure he will appreciate the picture I am painting of him—erratically venturing into new fields, bearing on his shoulders a figure of the Treasury receiving a series of misleading directions from the edge of the field from the Governor of the Bank of England. It is because we want to save him from this dilemma, and to save the taxpayers from throwing £30 million down the drain—and perhaps wasting even more in the future—that we shall press our amendments to a vote.
  4.45 p.m.
  Mr. Viggers: I wish to declare an interest, although I do not regard it as particularly relevant. Before I came to the House I was a director of a merchant bank and I am still on the board. I am also a director of a licensed dealer in the City of London.
  The Bill is the worst and the worst handled with which I have been associated in the two years I have been in the House. It takes excessive powers for that which the Government say is proposed. It is a badly handled Bill because no Treasury Minister took part in the Committee stage. The Financial Secretary and Paymaster-General have been in the Chamber for only about five minutes each. Yet, between the time of the Second Reading and Report, the Financial Secretary to the Treasury stated that there will be new banking
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  supervisory legislation to deal with the Trustee Savings Bank, Giro and others. It is disgusting that the Financial Secretary should make that statement and not give us more information.
  Now that we have the Sex Discrimination Act it is perhaps not possible for me to say that the House is impotent, but I hope the media will note the impertinent manner in which the Government are dealing with the Bill. The Explanatory Memorandum to the Bill says:
  "The Bill will have no direct effect on the number of public sector employees."
  But the Under-Secretary of State on Second Reading said:
  "We believe that there will be no addition to senior management levels. Fourteen additional staff, headed by the loans manager, have been employed to operate the personal loans service."—[Official Report, 20th January 1976; Vol. 903, c. 1261.]
  I hope that there will be no increase in public sector staff. If there has been, then the Explanatory Memorandum is a three-letter word beginning with L, the use of which would have me excluded from the Chamber.
  The Bill is appalling. Our amendments, particularly the first, try to ensure that Giro concentrates on activities which are profitable and to allow Giro make a sensible profit and take sensible risks.
  The concept of Giro is unfair because the capital which it is proposed it should have is inadequate for the services which are proposed. A sum of £13 million is intended to be the public dividend capital and £16·7 million, from memory, is intended to be part of the obligation to the National Loans Fund, which means that from the beginning Giro operates with a deficit of £3·7 million. No bank other than a Government operated institution would be allowed to carry on in that way. Giro has never been intended to stand on its own. It is part of the Post Office and the Minister of State made this clear in Committee when he told us:
  "Giro is part of the Post Office, and the Post Office's resources stand behind the Giro in every respect … the whole of the resources of the Post Office will stand behind the Giro system in its banking operations."—[Official Report, Standing Committee B, 3rd February 1976; c. 91–2.]
  That is directly related to fairness and profitability.
  The clearing banks have a capital base which enables them to sustain losses,

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  which can and do happen, but Giro is to have no such reserve. The picture emerges of a banking operation with a public dividend capital of £13 million and £16·7 million of indebtedness to the National Loans Fund, operating with a negative reserve or deficit of £3·7 million. It will be moving into high-risk areas of banking.
  During the Committee the Opposition moved a number of amendments. We tried to ensure that Giro would not offer unsecured personal loans in excess of £1,000, but the amendment was rejected. We tried to ensure Giro would not give more than £1,000 on personal overdraft, but the amendment was rejected. In both cases, the Government were able to give no indication of the limits they regarded as fair.
  We tried to move an amendment that the banking services should not include overdrafts for Government Departments, public authorities, local authorities or nationalised industries where the overdraft exceeded £250,000 for any period in excess of seven days, £100,000 for any period in excess of one month, or £50,000 in excess of three months. That amendment was rejected. We tried to exclude credit cards, and that amendment was rejected. We tried to exclude foreign exchange operations, and that amendment was rejected. We tried to exclude registration, investment and trustee banking services, but again we were rejected by the Government.
  The point is that Giro apparently will be able to move into all sorts of high-risk areas of banking. Different people will have different opinions about what is intended for Giro. The Minister of State has his own view. He believes that Giro will be extending modestly into certain areas of banking. One accepts that that is his intention. But it appears not to be the intention of the people running Giro. What is the use of passing carte blanche powers when the people running Giro already appear to have the larger intention of giving wide meaning to the powers they have been given?
  The capital of Giro is extremely important. A paper was recently agreed between the Bank of England and the London and Scottish clearing banks spelling out the need for capital in the clearing banks, summarising the conclusion
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  by saying that the clearing banks needed capital, first, to provide for the infrastructure of the business and, second, in order to protect depositors against business risks and to engender confidence of potential depositors and trading partners
  But—and this important question has not been answered—what will happen when Giro incurs massive losses? There is no reason to believe that the people running Giro will be given some kind of omnipotence which will enable them to avoid losses. Clearing banks incur large losses. Lloyds Bank International incurred a loss of £33 million as a result of unauthorised foreign exchange dealings in Lugano, while Barclays only recently avoided a situation which would have meant a loss of £5·5 million. These are huge sums compared with the capital of Giro, and Giro would not be capable of withstanding such loss.
  If Giro were to incur losses, what would happen? With the clearing banks, the first line of defence is the free capital reserves—Giro has none. The second line of defence is the shareholders' funds—and Giro does not have any shareholders' funds. Indeed, Giro fails to fulfil virtually every one of the Bank of England's agreed conditions with the clearing banks.
  Therefore, if Giro were to incur losses, one of three things would happen, because losses must be borne by someone. They could be borne by the depositors in the Post Office, which would be wrong, or the Government could bear them, or the Post Office itself from its own funds would have to bear them. But the Post Office does not have free capital to apply to losses in commercial activities such as Giro, and presumably it would have to go in for some kind of commercial activity, perhaps something like pawning the Post Office tower.
  How, then, would Giro's losses be met? Would the Minister slink into the Chamber late at night to introduce a special Giro enabling provisions Bill to relieve Giro of losses of £5 million or £20 million or £50 million? I suspect that that is the sort of thing that will happen.
  Mr. Tim Renton: It will be seconded by the hon. Member for Thornaby (Mr. Wrigglesworth).
  Mr. Viggars: It is clear that it will not be seconded by the Financial Secretary

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  to the Treasury, because in the short time during which he has been in the Chamber he has been in conversation with the Minister of State, no doubt finding out which Bill we are discussing.
  The word "profitable" would require Giro to concentrate on activities which are profit-making and not loss-making or potentially loss-making. I do not think that the Minister of State and other hon. Members opposite who sat with him in Committee fully understand the possibilities of making losses in, for instance, foreign exchange operations. What would happen if sterling were apparently weakening and if all the foreign exchange dealers of Giro were advising that it should take a short position?
  For the benefit of anyone not involved in these matter, I should explain that that means going short on sterling, selling sterling that one does not have, "doing a bear" on sterling. Would Giro go short on sterling, or would it receive an instruction from its superiors, or perhaps a nudge from the Financial Secretary if he were applying his mind to the matter, conveying that he would be greatly obliged if it did not go short on sterling? If that is the case, will Giro be operating freely as a commercial body, or will it be operating as an arm of the Government?
  These questions need to be answered. If Giro is to be encouraged to go into foreign exchange operations, we need to know whether it is to do so with its hands tied behind its back or whether it is to go in freely. If it is to go in freely, hon. Members should realise that from time to time perhaps Giro will be operating like a gnome of Zurich, going short on sterling and running bear raids on sterling. That is a horrifying thought. We must have a reply on this question.
  There are good friends of the Post Office Giro on this side of the House. We welcome its activities as a money transmission system and note that its expansion has rather lagged behind that of its European counterparts. But there are two schools of thought on the Government Benches about the Bill. One school of thought wishes Giro to have a sensible expansion as a money transmission system and to be in a position to encourage those people who do not have
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  bank accounts to open them for the first time through the Post Office. That attitude has a great deal of sympathy on this side of the House. The other school of thought on the Government benches wants to allow Giro to expand into all areas of banking activity, thereby incorporating a State bank, set up and planned to go into extensive commercial banking activities, thereby helping to bring about the Marxist Socialist dream of nationalisation of the means of production, distribution and exchange. Many hon. Members opposite wish that to happen, but many others want only a modest expansion of the Giro system.
  The Minister of State has consistently emphasised the idea of a modest expansion and of fair competition. I have to say to him and those who think like him that they do themselves and the country a grave disservice by this Bill. They have compromised by bringing in blanket powers for a State bank, linked with assurances that those powers will not be used. But the powers are either needed or they are not. Either they are to be used or they are not to be used. But that we do not know because we are living in a limbo, failing further pearls of disclosure from the Financial Secretary.
  It is wrong and potentially dangerous for this blank cheque to be given to Giro, and I hope that the House, the media and the public will become aware of its menace and that the danger of the Bill will be realised if we cannot vote it down tonight.
  Sir George Young: In Committee, many hon. Members expressed the view that the light of the Treasury could usefully be shed on the Bill. We are sorry to see the Financial Secretary to the Treasury once again leaving the Chamber, because we were hoping that he might be able to enlighten us on one of the many points raised by my hon. Friends. Single-handed, the Minister of State dealt in Committee with many questions which should have been answered by Treasury Ministers.
  I highlight two reasons why we would welcome the Treasury's presence. First, the Minister of State himself told us in Committee:
  "I hope I have said enough this morning for my hon. Friend to see that proposals from Giro will be critically examined by the

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  Treasury."—[Official Report, Standing Committee B, 29th January 1976; c. 50.]
  If a critical examination by the Treasury constitutes one or two fleeting appearances on Report, I do not think that that is an adequate reassurance to the House.
  5.0 p.m.
  Secondly, there was clearly a misunderstanding between the Minister and the Treasury as to what constitutes "public sector employees". My hon. Friend the Member for Gosport (Mr. Viggers) referred to that. The Minister said, quoting the Explanatory Memorandum:
  "The Bill will have no direct effect on the number of public sector employees."
  He continued:
  "Those words refer to employees paid directly by the Exchequer—namely, civil servants."—[Official Report, Standing Committee B, 12th February 1976, c. 239.]
  I expressed some concern at his interpretation of the definition of "public sector employees" and I took the precaution of tabling a Question to the Chancellor of the Exchequer to resolve the matter. Question No. 215, tabled on 16th February 1976 states:
  "… asked the Chancellor of the Exchequer whether his definition of public sector employment includes or excludes employment within nationalised industries."
  The reply was:
  "The public sector is defined to include nationalised industries and other public corporations.—[Official Report, 17th February 1976; Vol. 905, c. 608.]
  I am grateful to the Treasury for clarifying that confusion. I hope that the Minister will apologise for, quite unintentionally, misleading the Committee on the definition of the Bill and its implications on public sector employment.
  Clause 1 of the Bill anticipates the development of National Giro from the money transmission service, which it was originally conceived to provide, to a fully-fledged banking service. I am not yet satisfied that the full potential of a money transmission service has been achieved. I fear that the full benefits will not be achieved if the energy and resources of Giro are diverted towards providing a full banking service.
  I shall give one or two examples of the way in which the money transmission service could be improved. First, it is still difficult to pay by Giro transfer for goods sold by the Post Office. I invite hon. Members to walk into their
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  local post offices and try to buy some premium savings bonds by Giro transfer. They will find it a complicated procedure. I tried this on the intelligent, courteous and efficient gentlemen who staff the Members' post office and it took them some 10 minutes to unravel the procedures involved in buying premium savings bonds by Giro transfer. Postmasters and sub-postmasters outside the House would have even more difficulty.
  Therefore, the Post Office has not resolved the problem of providing an efficient money transmission service. I fear that its resources will be diverted from completing the job which it originally set out to achieve if Clause 1 is passed. I well remember my first day as an employee of the Post Office. I had taken the precaution of opening a Giro account before I joined. I was asked how I would like to be paid and I said by Giro transfer. They threw up their hands in incredulity. They said that they could not do that and asked whether I had not got a proper banking account. That particular problem has now been ironed out but it underlines the point that the Post Office has not yet come to terms with the full potential of the Giro service.
  Secondly, it is still difficult to pay Government Departments by Giro transfer. I have here an application to re-licence a motor vehicle. If one wishes to do so by cheque there are very full instructions about how to go about it. Indeed, there are very full instructions about how to pay by all methods except by Giro transfer, which is the central mechanism of the money transmission service. The form reads:
  "Giro transfers should be made payable to the head postmaster's Giro account."
  However, the form does not give the account number. It is a number which is exceedingly difficult to discover. It is also difficult to pay some other Government Departments and public bodies by Giro transfer. British Rail accepts payment by Barclaycard, which involves it in a discount, but it will not accept payment by Giro transfer.
  Therefore, I am not convinced that the benefits of a computerised money transmission service have yet been achieved. I am concerned that the real national economies that could be made from Giro as originally conceived will be lost if the

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  energies of Giro are dissipated by competing in other areas where it may not have this in-built advantage.
  The question that all hon. Members of the Committee asked was, where exactly is Giro going? The Minister has tried to allay the suspicions of my hon. Friends and myself by saying that Clause 1 does not anticipate massive growth. However, if the clause is passed neither the Minister nor the House could possibly prevent the development of Giro along the lines described in The Guardian last Friday. The question that the Minister has to ask is, if no change is envisaged in Giro, why is the Bill necessary, and if the Bill is necessary, what precisely are the changes envisaged? That question has been posed time and again. We have not received a satisfactory reply. I hope that the Minister will take the opportunity this afternoon of dealing with that basic question.
  Mr. Wrigglesworth: The hon. Member for Ealing, Acton (Sir. G. Young) has had fairly wide experience as an employee of the Post Office and knows a little more about the operations of Giro than he has let on in his remarks. Will he comment on the extension of the money transmission services which now collect millions of rent payments every week efficiently and to the great benefit of local authorities? Will he comment also on the money transmission services that work efficiently collecting cash for major multiple retailing firms round the country, to their benefit and to Giro's benefit? Will he tell us something about the profitability that he and his hon. Friends expect to result from the money transmission business on small accounts?
  Sir G. Young: I am grateful to the hon. Gentleman because he underlined the point I tried to make earlier, that the full potential of Giro may lie in a more extensive money transmission service. Many councils still do not provide the sort of service that my council provides of enabling tenants to pay by Giro. There might be a danger, if the resources of Giro are diverted towards providing banking services, of Giro not capitalising on the in-built advantage it has on the money transmission service. I agree with the hon. Gentleman's remarks. If he intends to intervene in the debate perhaps he will
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  say whether he is satisfied that the full potential of Giro as originally conceived has been effected.
  Mr. Cecil Parkinson: I think I understand why the Minister of State at the Treasury does not find it comfortable to sit on the Government Front Bench next to his hon. Friend the Minister of State, Department of Industry. I believe that the hon. Member for Thornaby (Mr. Wrigglesworth) and I are the only hon. Members who have served on the Committee of this Bill and on the Committee that dealt with the Trustee Savings Banks Bill.
  This Bill is being sponsored by the Department of Industry. The Treasury is sponsoring the Trustee Savings Banks Bill. I have read the report of the Second Reading debates on both Bills. It is most extraordinary that, on the one hand, the Department of Industry advanced a range of arguments for allowing the Post Office to extend its banking services, and, on the other, the Treasury advanced the argument that the Trustee Savings Banks should not be allowed to offer a full range of banking services. Virtually every argument which the Treasury has advanced is directly contrary to that which the Department of Industry has advanced.
  I shall cite some examples. In the Second Reading debate on 17th February the Paymaster-General, introducing the Trustee Savings Banks Bill, went to great lengths to explain just how careful the Treasury would be in supervising the transition from Trustee Savings Banks to ordinary banks. He explained, for instance, that this transition would take place in three stages. The first stage, which would end in November 1976, would see the number of banks reduced from 70 to 17 and would see the creation of a central body which would supervise the new banks. The second stage would take three years, and in that stage, he said,
  "Depositors will begin to see an important extension in the services offered".
  However, it is to take three years after the first stage, during which time the Trustee Savings Banks will start to offer a wider range of services.
  Then, in stage three, which would last Savings Banks would gradually become normal banks offering the full range of for seven years and end in 1986, Trustee

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  banking services. The Paymaster-General said,
  "The Treasury will continue to keep an eye on the banks' operations and development, particularly on the rate on which the banks build up their own reserves."
  The Paymaster-General continued,
  "The building up of the banks' reserves is, of course, a crucial element in the transition, which, indeed, cannot be brought to an end before an adequate level of reserves has been achieved."—[Official Report, 17th February 1976; Vol. 905, c. 1207–8.]
  Therefore, the Treasury are saying this: "We know that the Trustee Savings Banks have been in existence, in some cases, for up to 150 years. We know that they have a quite satisfactory record and that during that time they have built up consumer confidence and have built up for themselves a reputation for knowing how to handle very substantial sums. However, in our opinion, before we can allow this group of very experienced holders of other people's money to move into general banking, 10 years must elapse and the most careful supervision will be placed on these banks at all stages. At the end of 10 years, provided that they have built up considerable reserves, then and only then will it be right for the Trustee Savings Banks to become full commercial banks."
  I think that the Treasury is to be congratulated on its very sensible and careful approach, because the Treasury realises full well that banking is a very quick way of losing very large sums of money and that inexperienced people granting credit can lose money more quickly than almost any other group of people. We know that there are numerous examples of secondary banks in which people who thought that they knew something about banking have lost millions of pounds. The hon. Member for Thornaby always seems to regard the secondary banks which have failed as evidence that Giro should be allowed to lend. I see it differently, and as an example of why we should not allow inexperienced people to lend large sums of other people's money.
  However, in relation to the Trustee Savings Banks, the Treasury says that it is very important that we take care, and that this transition must take place over a period of time and be carefully supervised. The Treasury says that only if they build up the reserves should they
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  finally be allowed to become full-scale banks.
  When we moved a series of amendments in Committee, almost every one of which was designed to bring into this Bill some of the safeguards that the Treasury regards as absolutely essential in its Bill, time after time we were told that we were trying to hamper the development of Giro. The hon. Member for Thornaby has a particularly shameful record in this matter. Anyone who reads his speech on Second Reading of this Bill and then his speech on Second Reading of the Trustee Savings Banks Bill will conclude that he has either a very short or a convenient memory or that he did not believe a word that he was saying in either speech, because the speeches were mutually exclusive.
  Mr. Tim Renton: Perhaps my hon. Friend is being a little unkind to the hon. Member for Thornaby (Mr. Wriggles-worth). I prefer to think that in between the Second Reading of this Bill and the Second Reading of the Trustee Savings Banks Bill the hon. Gentleman underwent the sort of conversion on the road to Damascus that Saul underwent, and therefore, having not seen the light on the Giro Bill, he had seen it realistically by the time he came to the Trustee Savings Banks Bill.
  Mr. Parkinson: As we learned in Committee, the hon. Gentleman is quite capable of speaking for himself. My hon. Friend is probably being charitable and I should like to think that the hon. Gentleman learned something during the Committee stage of this Bill.
  Mr. Wrigglesworth: I do not, even on this occasion, need to speak for myself, because the hon. Member for Arundel (Mr. Marshall) spoke for me and quoted my words exactly. In the debates on the Giro Bill, they were along the lines on which I spoke on the Trustee Savings Banks Bill, so the hon. Gentleman should consult his hon. Friend.
  5.15 p.m.
  Mr. Parkinson: The hon. Gentleman has very easily salved his conscience. I have looked at some of the remarks that he made in Committee. I remember that we moved an amendment that would have limited the amount of money that Giro would be allowed to lend to

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  corporations. The hon. Gentleman made a great speech. He said quite the opposite. He said that there should not be any limit on the lending. He went further, and said,
  "I believe there is a tremendous potential for National Giro which we should encourage it to take."—[Official Report, Standing Committee B, 29th January 1976; c. 40.]
  The hon. Gentleman was saying that Giro should be encouraged to move into the field of corporate lending, and to lend more and more with no limits.
  But what did we find the hon. Gentleman saying on the Trustee Savings Bank Bill? He said that he hoped and trusted that the Trustee Savings Banks would not be allowed to lend money to business and corporate bodies. He welcomed the fact that one of the noble Lords had given an assurance that it was most unlikely that the Trustee Savings Banks would ever lend more than £1,500 to an individual and that at present the Trustee Savings Banks had no plans for going into corporate lending. The hon. Gentleman thought that that was right. He approved of that.
  Again, when we tried in amendments to limit the amount of personal lending that Giro could make to an individual, the hon. Gentleman spoke and voted against us, and yet he is taking great satisfaction in the fact that the Trustee Savings Banks—which, after all, have been in existence for only 150 years and have demonstrated that they are to be trusted with other people's money—ought never to be allowed to lend more than £1,500.
  The hon. Gentleman's speeches were quite convincing, but if one puts them together one finds that they add up to a complete travesty. They highlight the special point that the Government are speaking in Parliament with two voices at the same time. They are saying that one group of people who are going to convert their activities into commercial banking should be allowed to go ahead. The day that this Bill becomes law, Giro will have the power to offer the full range of commercial banking facilities. At the same time, however, in the same House of Commons but in a different Committee Room, the Treasury is arguing that going into banking is a business that needs to be considered extremely
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  carefully and that 10 years is probably the minimum transitional stage that can be allowed, and then and only then, if the reserves have been built up and if these people have proved their worth, should they be allowed to go ahead.
  It is worse than that. Far from the Government insisting on Giro having adequate reserves, they will be allowing Giro to set off with a record, except for one notable year, of unmitigated failure and with an accumulated deficit of £29·7 million. Any directors of any commercial bank which tried to operate with Giro's balance sheet would probably find themselves inside for fraudulent trading. Therefore we have the absurd experience that the House is being treated with the utmost disrespect by a Government who are arguing caution on the one hand but, at the same time, making a wreckless and heedless argument on the other hand.
  We know full well, from listening to the Minister in Committee, that it is never intended that Giro should abide by proper commercial criteria. The Minister knows that it should never be allowed to go into business with the balance sheet that it has at present. Time and again we came back to the argument from the Minister that we must remember that Giro was only a part of the Post Office and that the real security for Giro was the huge reserves of the Post Office.
  In Committee we heard the argument from the Government—it is a Government who make a habit of speaking with two voices—that the Giro did not want any privileges. They said it wanted to be treated like all the other banks. On the other hand, it did not want any disadvantages. The Government said it was wrong for us to put any limitations on its activities. They said that it should be allowed to carry out the whole range of banking activities.
  Having heard that argument, we pressed the matter a little further. We asked how Giro would trade with its present balance sheet as a proper commercial bank. We asked how it could go into business without having any reserves. In fact, its balance sheet displays a thundering great loss. We were told that we must not judge Giro by the criterion of normal commercial banking. It seems that there is not really

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  such a thing as the Giro bank. It seems that Giro is the trade name for a group of the Post Office's services. Behind those services stand the full reserves of Post Office.
  Giro wants to be treated as a commercial bank, but if we seek to apply the commercial banking criteria to it we are told firmly that no one ever pretended that Giro was anything but the banking arm of the Post Office, that it is absurd for us to apply normal commercial banking criteria to its activities.
  It is a serious matter to move an amendment at this stage to delete Clause 1, but the Government have been putting forward arguments on behalf of the Trustee Savings Banks which fully explain the need for caution and which make this Bill a scandal. The Government cannot make all those arguments about the need for caution on the one hand and launch this bank on to an unsuspecting public. Even since Second Reading there have been developments which have proved conclusively that by the Government's own standards the Bill should not be allowed to go on to the statute book and that Clause 1 should be deleted.
  I am not surprised that the Minister of State at the Treasury did not find it convenient to remain in the Chamber. Had he stayed, I reckon that he would have received the fright of his life. I am sure that the Treasury right hand of the Government does not have the slightest idea what the Department of Industry's left hand is doing. If the Minister of State had remained for a few moments he would have either begun to blush or he would have decided that it was necessary to get out. I thought it was wise of the hon. Gentleman to go. I am not surprised that the Treasury does not want to be associated in any way with this appalling Bill.
  Sir Paul Bryan: In the Explanatory and Financial Memorandum it is said that the Bill will
  "Extend the powers of the Post Office to provide banking services …".
  To come to a conclusion about the extra services it requires, we must be absolutely clear in our minds what Giro does today as opposed to what it set out to do some years ago. I say that without sneering.
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  I merely compare what it is doing successfully today with its original intentions.
  That is a matter that was never made clear in Committee. In Committee we had an atmosphere in which the hon. Member for Newcastle-under-Lyme (Mr. Golding) was yearning for Giro's original aspirations—namely, the poor man's bank. That is exactly the rôle it no longer performs. It is the bank of some particularly sophisticated customers. We are told that at least three-quarters of its customers have accounts with other banks. That shows them to be people who are more than capable of judging what is good for them. They have decided that the ordinary bank, or the joint stock bank, performs one task, and they recognise that Giro performs another. We are talking about a sophisticated sort of customer.
  In the early days the pressure for a Giro bank came from the trade unions. The trade unions liked the idea of dealing with a non-capitalist bank. However, the trade unions do not use Giro. In his book, Professor Glyn Davies writes:
  "Judged by this attitude then so far as the country's major trade unions are concerned, with a few notable exceptions, National Giro might just as well not have been founded. Thus contrary to general expectations, National Giro has turned out to be neither the poor man's bank nor the trade unions" bank, despite the fervour of working-class support for the cause of Giro before it came into existence."
  I make these comments not with joy or sorrow but so that we can come to some conclusions about what should be done. Giro is not what many Labour Members thought it would be—namely, the bank which Government Departments would use. In fact, they hardly use it at all. Now that we have seen the aspirations of Mr. Singer we can appreciate that that will not worry them very much—there will be a State bank at their disposal.
  Professor Glyn Davies has written a history of National Giro. It is the only fairly up-to-date history that is available. He has always been a Giro enthusiast. His summary of how the system functions now as a business enterprise is as follows:
  "As a living organism it has been developing in ways not entirely anticipated by its founders. In particular, with three-quarters of its individual customers also having accounts with other banks and who by and large tend to use Giro selectively as part of a rather

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  sophisticated system of managing their personal finances, it is serving a different market in different ways from that which was described in the White Paper of 1965 as being intended 'for many people with simple needs and no bank accounts'. Its immediate future rôle will clearly be to seek profitable custom wherever it can find it, rather than straining to adopt an uncomfortable and unprofitable pose as the poor man's bank. Once full viability is achieved a re-assessment of strategy in favour of the unbanked may then be justified; but that situation lies in the more distant future."
  That is exactly what the hon. Member for Thornaby (Mr. Wrigglesworth) said in Committee. On 29th January he said:
  "It was made clear that the whole concept of the poor man's bank would have to wait until the National Giro had been able to build up sufficient business and profits to be able to extend its operations …"—[Official Report, Standini; Committee B, 29th January 1976; c. 15.]
  There we have it clear that it is now a business operation. Let us see how Giro goes about it. Professor Glyn Davies writes:
  "The outside expertise which was brought in to help form the new marketing strategy confirmed the more selective approach to which the logic of events pointed. The tariff of standard charges as originally proposed illustrates this selectivity in that it penalised the customer whose account fell below £30 by imposing a penalty charge for every debit thereafter. This penalty was not to apply to one section, those who received their pay through Giro. It is obvious simply from a glance at the table of revised charges that Giro management was even more keen to attract these favoured customers than it was to remove the troublesome and loss-making low-balance accounts."
  Giro is going out for that business. It has successfully identified an area of profit, something that everyone tries to do in business. That area of profit is occupied by corporate bodies which are reliable, and by men who receive their pay through Giro. They are likely to be reliable people. Giro has dropped its poor man's accounts. I pointed out to a Giro official that half a million accounts is not such a large number. He replied "But we have dropped a lot. We have dropped 100,000 or so which were not good accounts". It seems that Giro operates in the middle-class area, having decided the sort of business it is trying to transact.
  I concede that certain new services are required but I do not think that we need any legislation for what is proposed. The new Giro customers are worthy of short-term overdrafts. I do not think
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  it is right that their cheques should bounce within seconds of the computer showing them to be overdrawn. Having identified this area of profit, what is quite certain is that it is a large area and that so far Giro has only just touched the fringes of it. If it carries on as it is, without branching out, a profitable period lies ahead.
  5.30 p.m.
  Mr. Wrigglesworth: It is a gross disrespect to this House, after the Opposition made so much of the fact that the Financial Secretary was not present, that there should be no hon. Member present on the Opposition Front Bench. I hope that that situation will be rectified.
  Sir P. Bryan: With respect, that was a most curious intervention, bearing in mind the way that we have been treated in Committee and on the Floor of the House. The Opposition Front Bench has been empty for 25 seconds. I do not think that that was a valuable intervention.
  As I see it, the future for Giro is profitable if it remains on the lines on which it is now operating and is not diverted into expansion. That is what these extra services seem to do, to divert it. We discussed the question of credit cards in Committee. I rather thought that the Minister said that this had been popped into the Bill by some oversight. He had to defend the idea as best he could but I felt that in his heart of hearts he knew that it would never happen. We did not press the matter hard because we thought that it was ridiculous and that it would be impossible for Giro to carry out the scheme.
  At that moment, while the Minister was speaking to us, according to The Guardian Giro was actually negotiating. In fact The Guardian report said:
  "Giro is now in talks with one of the principal credit card organisations in the country, but it is unlikely to reach any decision quickly."
  It is unbelievable that the Minister should be telling us his opinions in Committee yet not revealing what is taking place. Why should we not know? Throughout w have expressed our disgust at the way we have been treated. I have had a certain sympathy with the Minister

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  because he has been let down. He has had no support.
  Mr. Viggers: Perhaps it would help if I quote the words used by the Minister of State in Committee. He said:
  "I do not possess a credit card of any kind and I very much resented being presented by Access, I think, some years ago, with a card for which I had never asked and did not use. I took the only course open to me. I cut it in bits and sent it back to the gentleman concerned."—[Official Report, Standing Committee B, 3rd February 1976; c. 74.]
  Yet we read in the financial section of The Guardian:
  "Giro credit card likely."
  Sir P. Bryan: I know the Minister of State and do not in any way doubt his integrity. He has been disgracefully let down by the Treasury. He has not been kept informed and we have never been granted the presence of a Treasury Minister for more than five minutes at a time. The Minister has been let down by the Giro people, the Government or whoever is responsible.
  Quite apart from the credit card business, we come to Mr. Singer's aspirations, described in an interview published during the debate on the Bill. This is quite fantastic. Something that surprised us as we looked through the Bill was the fact that there was no proposition to ally national savings with the system proposed in the Bill. It stood out a mile that if someone wanted an overdraft and he had £5,000 in national savings it should be possible to use that as some sort of guarantee against an overdraft with Giro. We wondered why this was not so. A few years ago the Page Committee had put forward the same proposal. Now we see why there was no mention of any contact between the two organisations. Mr. Singer has it all in his head. He knows exactly what he intends to do. He said:
  "The national savings movement, Giro, and the Paymaster-General's Office could beneficially be combined into a State Bank the size of Barclays."
  At last it comes out why there was no mention of national savings in the Bill.
  I do not blame the Minister of State. He did not know about this. Mr. Singer knew all about it. I am surprised that Mr. Singer was giving this interview without any reference to the Treasury, the Chancellor or anyone else. I consider
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  this to be disgraceful. We constantly hear about open government but it is not practised. I invite the Minister to let us know of any other secret negotiations or aspirations that may be in the minds of his right hon. Friends or the management of Giro. Not only he but we have been let down.
  Mr. Anthony Nelson: The words of my hon. Friend the Member for Howden (Sir P. Bryan) and those of my colleagues who have preceded me will, I hope, have persuaded the Minister that we have become increasingly concerned during the passage of this Bill that its intent, and this clause in particular, is far removed from the woolly reassurances we have been given. The Bill will undoubtedly enable the Department of Industry to extend its clammy hand into the area of State banking. The House will by now be aware that this Bill is obviously a hangover from the days of "Bennery". This clause is a wolf in sheep's clothing.
  I cannot understand why Clause 1 is necessary or why a Bill encapsulating such a clause was ever brought forward. Under the Post Office Act 1969, the Post Office has the power to provide a banking service. I suggest that such a service could be defined in a number of ways and could reasonably be supposed to include many of the services understood to be authorised by this Bill.
  The Bill changes various words in the Post Office Act 1969 to ensure that the Post Office shall still have the power to provide banking services by means of which money may be remitted. That seems to indicate that the banking services to be offered by Giro shall be related to the remittance of money. This is an important constraint if it is a correctly implied one.
  The greatest fear is that this Bill will provide a launching pad for State banking. I have no doubt that the clamouring from below the Gangway on the Government Benches—and which we heard from some Labour Members in Committee—will be in support of such an extension. The modest amendments tabled by us in Committee were not accepted. We do not seek to prevent Giro from offering any further services but simply to prevent it from extending its services beyond its

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  capabilities, the Post Office's resources or the original purposes for which Giro was formed.
  The White Papers preceding the formation of Giro and the one produced in November 1975 set out clearly the development of Giro and seem to indicate that its primary purpose is the remittance of money. I am prepared to accept that there is some argument in favour of providing a service enabling ordinary people to utilise banking facilities which they might not otherwise be able to afford or be encouraged to use through the private banking or joint-stock banking system. This is desirable and I welcome the success Giro has had in recent years in developing its business.
  The problem is that the losses which have been accumulating, in addition to the debt put up at the beginning as part of the Giro capital, are at such a level that they have led to a review and a capital reconstruction which seems to have been associated in a timely way with some decision to extend the services offered by Giro into the area of general banking. This is not necessarily a logical consequence of the difficulties in which Giro finds itself.
  It is not sufficient to say that because we have Giro we should look towards the profitable business and concentrate less on the original purposes of Giro, namely the money remittance system. On all sides, there will be a welcome for the success of the remittance business, but we are concerned that this will be a launch pad for sponsored and subsidised banking facilities with which the private sector, however efficient, will not be able to compete and which will, in roller-coaster fashion, become a springboard for State intervention in the monetary field.
  Far from improving the money transmission services and attracting new account holders who might not otherwise use banking facilities, the intention seems to be to set up a State bank with no restrictions on its credit policy and no prudential supervision by the Bank of England. The Minister of State has told us:
  "We want it to be a bank. We want Giro customers to be able to obtain from that service exactly the same sort of services that
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  they could obtain from any other commercial enterprise."
  Despite assurances on cross-subsidisation and the back-up of the Post Office against the resources of Giro, it is clear that it will be in a highly preferential position to any bank operating in the private sector and will not be subject to the same restraints. Its competition with that sector will be unfair. Otherwise, why were our reasonable amendments in Committee not accept.
  We were told that the upper limit on personal loans by Giro was £1,000, but our amendment to this effect was rejected. We were told that Giro would not speculate in foreign exchange transactions for its own profit or loss, but our amendment to this effect was rejected. We were told that Giro would not act as an investment adviser or dealer, trustee or nominee. Our amendment to this effect was rejected as being too restrictive. We regret the rejection of these amendments and I am particularly concerned that the Minister did not support the amendment to restrain Giro from entering into foreign currency exchange transactions on its own account.
  It may be necessary to make foreign exchange transactions on the authority or instructions of a customer, but we regret and oppose the ability of Giro, or perhaps an employee acting in an unauthorised or ultra vires capacity, to enter into foreign exchange transactions which we all know, from the terrible experiences of very responsible joint stock banks, can result in tremendous losses. We have a responsibility to ensure that the taxpayer is not on the hook for these sorts of losses. It is wrong that the Bill should enable Giro to speculate in foreign exchange. That is not a desirable venture to be subsidised by my constituents.
  I regret that the Trustee Savings Banks, which are the subject of another piece of legislation before the House, were not scrutinised together with Giro. It is a complete nonsense that the public sector is offering banking services through the national savings movement, Post Office deposit accounts, Trustee Savings Banks and Giro. All these services could easily be aggregated under one head. I will await with interest the recommendations of the Committee which has been set up to scrutinise the operations of the Post Office, because I feel there is a case for

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  rationalisation here. This should act as a restraint on the House from moving too hastily in giving a body such as the Giro wide discretionary and undefined banking services, while seeking in another Bill to restrain those which the Trustee Savings Banks can offer.
  Mr. Wrigglesworth: The hon. Member seems to be saying what Mr. Singer said about the development and closer coordination of banking services.
  5.45 p.m.
  Mr. Nelson: I said that I would not be averse to considering some rationalisation of the different sorts of banking services offered by the State, whether through the Treasury, Trustees Savings Banks or the Giro. That is quite different from suggesting that there should be a State bank or that Mr. Singer or any of his successors should be given powers which would enable them to build an empire and set up a State bank.
  No details were given in Committee about Giro's policy on personal overdrafts. We were told that full details would be announced by Giro when the time came, but that may be too late. No answer was given to my hon. Friend the Member for Mid-Sussex (Mr. Renton) about the relationship between the Mercantile Credit Company and Giro, and this is a matter we should look at in detail. No reason was given to the hon. Member for Perth and East Perthshire (Mr. Crawford), who has not turned up for the debate today, for the extension of these services into Scotland. Given the higher percentage of account holders in that country, it is not necessarily a fait accompli that the provisions of the Bill should apply there as well.
  Inadequate information was given about the credit policy to be adopted—the point raised by the hon. Member for Birmingham, Perry Barr (Mr. Rooker) in regard to loans for property development. To whom will Giro lend? Will it give preference to small account holders or will it operate on purely commercial criteria and lend to clients for any speculative ventures they wish?
  We also have fears about the proposed credit cards and relationships under the Consumer Credit Act. On the cheque cards made available by many joint stock banks, the letters "EC" appear in the
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  corner. They enable one to get credit at other banks in the Common Market. Is this system to be applied to the credit cards issued by Giro? If so, this could open up a potentially far greater area of credit-giving by the State bank which could become a launching pad for further difficulties. The account holders of Giro may well be those with a higher propensity to spend who may seek to utilise all the available credit the Bill offers. We should be concerned to see that the Minister institutes proper restraints on that credit and, in particular, on the ability to use credit cards in this country and abroad under the Eurocard scheme.
  The Government's policy appears to be that if a State business runs into losses, they do not consider closing it or making it pay its way through time and effort. The answer is always the same—to make it bigger, give it more powers and more money, convert a secured investment into risk capital and write off massive losses to give it another false start. The result is invariably the same—the losses get bigger, efficiency declines, the service deteriorates and the taxpayer has an even bigger millstone round his neck. This has been amply pointed out by the Select Committee on Nationalised Industries in its startling findings arising from its discussions and deliberations on the Post Office.
  The Minister of State has said that both the Conservative Party, through my predecessor, and the Cooper Brothers' report were in favour of the expansion of banking services in the White Paper and the Bill. But Giro was clearly seen, under the 1969 Act, as a money transmission service and not as a State bank. Its continued existence was to be tied to its performance and profitability. Furthermore, the Minister told us that
  "on the advice, guidance and report of a well-known and highly respected firm of accountants, it was decided that Giro should continue".—[Official Report, Standing Committee B, 29th January 1976; c. 21–2.]
  I was not privy to the contents of that report, but if it did come down so firmly in favour of Giro's continued existence and expansion, we should now be told the basis on which the recommendation was made. I will await the recommendations of the Carter Committee. However, when we are considering a major expansion of the banking services of the

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  Post Office, it would be proper to have the benefit of the deliberations of the Committee which recommended Giro's continued existence.
  Hon. Members should not forget that in 1971 the Labour Party's Home Policy Committee in its Composite 33 at the annual conference said:
  "The party is already committed to public ownership of the banking system."
  That is a fearful thought indeed, and one which may be made possible by the passage of the Bill and by this clause in particular. I have every confidence in asking my hon. Friends to oppose it.
  Mr. Nicholas Ridley: I must first declare an interest as director of a very small bank. The record of hon. Members entering into banking is not good, and I must be careful, particularly after the examples of the right hon. Members for Walsall, North (Mr. Stonehouse) and Devon, North (Mr. Thorpe). How much more so does that apply to the Minister of State, Department of Industry and the Financial Secretaries to the Treasury, sitting on the Government Front Bench. If they are to go into banking they will need to have great knowledge. I would have no complaint were the Minister of State and the Financial Secretary to leave the Treasury Bench and set up as Mackenzie, Sheldon and Company Limited, Bankers. It would be their own money that they would lose, not mine, and so it would be of no great concern.
  Mr. Peter Rees: I do not know whether my hon. Friend has taken into account that they might lose their depositors' money, which would be a matter of much greater public concern.
  Mr. Ridley: My hon. and learned Friend, for once, is wrong. The rules of the Bank of England are extremely strict about how much can be lent according to the base. All a person can lose is his own equity capital in the banking world. That is a point I wish to develop in relation to Giro.
  Is it true that Mr. Singer wants the size of his bank to be between £7·4 billion and £14 billion? That is what is reported in the Financial Section of The Guardian. According to the Money Resolution, pay-
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  ments from and into the Consolidated Fund will arise, but that does not tell me how big the payments will be. We want to know how big the bank will be. What matters is how much public money is involved in the equity capital base for the Giro bank. I want to know, and Parliament should know, how much money will be in it.
  The problems that the bank will face are well known. If the bank is seeking to break into the big league and do a lot of business, it will presumably be tempted to undercut the joint stock banks. That is a vital point. If it seeks to take business by offering cheaper loans or higher rates for depositors, it will make losses. It will cost a lot of money to refund those losses, either through the Post Office or direct, but, much more important, interest rates in the economy will be affected. If the joint stock banks find that their rates are under competitive pressure from a subsidised public competitor, they will have no alternative but to match those rates, and that will bring down the rate of interest. That could have serious consequences for economic policy and the money supply.
  I would have supposed that that cannot happen, because the Bank of England will be controlling the Giro Bank, but I am told that that is not so. I have not read the entire report of the proceedings in Committee, but I understand that the Minister of State said that the Bank of England would not control this monster to which he is giving birth this afternoon. The Bank of England will not supervise it, because it has a mass of Post Office money behind it. The Government do not mind if it losses money, if it undercuts and does not have the proper solvency and liquidity ratios. What an appalling story. Can it be true? Does the Minister of State wish to intervene and tell me that it is not so? He is unleashing into a sophisticated banking atmosphere an animal that will affect the money supply and will cost the depositors in the Trustee Savings Banks and the Post Office Savings Bank, or the taxpayers who subsidise the Post Office, a huge amount of money.
  Do Ministers believe that it is right to channel £600 million out of education into this sort of venture? Did they stand at the last General Election to do that?

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  Did they stand on platforms in their constituencies and say "I am for a massive cut in education so that I can play around with banking"? That is what they are doing. I hope that it gives them great satisfaction to vote for cuts in public expenditure to do that.
  Mr. Nelson: If I correctly judge the enormity of the words and the allegations that my hon. Friend put to the Minister, he may be interested to comment on these words of the Minister:
  "We question the view that the principles to be applied by the Bank of England in assessing the adequacy of banks' capital are directly applicable to Giro as if it were an independent bank."—[Official Report, Standing Committee B; c. 162.]
  Mr. Ridley: It is an appalling story. I have the highest regard for the Minister of State and have always thought of him as an expert and skilled person. I assume that he has gone into the question of liquidity ratios, solvency margins and all the complex problems that the Bank of England solves through its control of the banks. I take it that he is satisfied on all these counts, and that he will give us a learned dissertation. Perhaps he would like to publish a White Paper setting out his views on the way in which the problems that I have described will be overcome. The quotation given by my hon. Friend the Member for Chichester (Mr. Nelson) causes me some alarm. I wonder whether the Minister's skill in banking is as great as his skill in other directions.
  I ask myself "Why do we need to have the damned thing?" We have too many banks. One cannot walk down any street in the country without seeing banks everywhere. There are too many branches. We have four joint stock banks and many small ones. What is the point of having more? Perhaps the reason is employment. Is it the Government's answer to the 1·4 million unemployed to set up State banks? Will they be manned by the unemployed shipbuilding workers in the Minister of State's constituency? Is that the point of them? Do the Government feel that they increase control over the activities of the financial sector by having this Giro bank? No, they want to reduce control.
  Methinks the answer—a strange one—is that the Labour Party is motivated by envy. For all their lives and for all the lives of the generations which preceded them, members of the Labour Party have
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  been envious of bankers. Bankers are people who drive about in Rolls-Royces, wearing top hats and smoking cigars, looking cynically and cruelly on the starving masses, and they must be overcome. They are part of Socialist demonology—"If you cannot beat them, at least you can have your own back". It comes from playing too much Monopoly when they were children. If they could move blocks of property across the board and pay £1 million here and £100,000 there they felt that they were playing the bosses' game and getting even with the capitalist tycoons they have hated all their lives. This is an opportunity for them to get even.
  6.0 p.m.
  I am reminded of what happened in my own home city of Newcastle-upon-Tyne—and, if I may say so, Mr. Deputy Speaker, yours, too—where there was a beautiful eighteenth century centre housing the offices of the bankers, the shipping companies, the mining companies and the engineering companies, which made this country great in the eighteenth and nineteenth centuries and built up its prosperity.
  The Socialist council, under Mr. T. Dan Smith, was determined to destroy it, and pulled it all down. The council did not put anything in its place. There was nothing left but a heap of rubble, barbed wire and corrugated iron. The point was to destroy, to level, what had made us great before, and what the Socialists had always envied and resented in the mean bitterness of their minds.
  That is the reason for this sordid, squalid, irresponsible little Bill, and that is why I shall have great pleasure in voting against the clause.
  The Financial Secretary to the Treasury (Mr. Robert Sheldon): I had not intended to intervene in the debate but am doing so because so many hon. Gentlemen opposite have referred to a number of banking matters, with exaggerations even wilder than those normally made when banking is discussed. For some reason that I have never fully understood, banking is a very emotional subject in this House. When hon. Gentlemen read the report of the debate they may be rather surprised at the heat engendered and the amount of anxiety they have shown. This is a much more modest Bill than they have claimed.

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  The comparisons between the Bank of England's arrangements with the London and Scottish clearing banks, and the possible way in which the Giro might develop, have been very wrong. Perhaps I can help by at least putting that aspect right. Reference has been made to the state of the capital and liquidity adequacies of the banks in general. I am sure that the briefing hon. Gentlemen opposite have received on this matter has been very good, but I do not think that most of it has been critically examined by them, otherwise we should not have heard the extreme statements that were made. But the concern about assessing the level of adequacy are very justifiable, because of the changes that we have seen in recent years.
  The working party established by the Bank of England and the London and Scottish clearing banks set out to determine what, in current circumstances, ought to be the principles for determining the adequacies of the capital and those of the reserves. Banking, in the same way as any other institution, has undergone a number of changes, due to inflation and other causes. The working party sought
  "to examine the traditional approaches to liquidity in the light of recent changes which have affected the liabilities side of bank balance sheets."
  That is from page 240 of the Bank of England Quarterly Bulletin, September 1975. This was a very necessary task—
  Mr. Viggers: The Financial Secretary has quoted only the second of the terms of reference. The first is important. Paragraph 2 of the paper reads:
  "The terms of reference of the Working Party were: (i) to consider the purposes for which capital and reserves were required; to develop principles for assessing their adequacy for such purposes and to examine the roles of the different components of capital".
  That is followed by (ii), which the Financial Secretary quoted, but I think it will be agreed that (i) makes it much broader.
  Mr. Sheldon: I understand why the Committee took so long over these matters. I was trying to shorten it. When the hon. Gentleman reads what I said first in paraphrasing it I do not think he will find any difference at all, except that one is a little longer than the other.
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  We are concerned with the changing rôle of the reserves and liquidity in the situation following the high levels of inflation—more particularly following the lending by fringe banks to certain of their customers engaged in property deals—and with the relationship between clearing banks and those fringe banks. That is our concern, and the Bank of England was quite properly concerned about it. The Bank of England wanted to find out the extent to which these changes in banking called for any changes in the liquidity and capital adequacies of the banks concerned.
  But when we consider the right level of liquidity and capital for Giro, we are dealing with something completely different. The risks are not the same. Anybody with any understanding of banking would know full well that when we are talking, at the one extreme, of fringe banks lending on property, and of the position of banks generally, with their lending on overdrafts in changing circumstances—the kind of liquidity, the kind of cover, and the kind of capital adequate for that kind of operation is quite different from the kind of capital—
  Several Hon. Members Several Hon. Members rose—
  Mr. Sheldon: I ask the House to remember that I am here not because I have personal involvement in the Bill but because a number of hon. Gentlemen requested a Treasury view. I feel that I am entitled to put the case first. Then I shall be very happy to give way.
  There are no problems about capital adequacies, because the risks are completely different. In the same paper, a little further on, the Bank of England talks about the broad principles, putting the very point that I am making—that it is inappropriate to attempt to quantify precise ratios. Everyone knows that this is because the risks are different. The measures that the Bank of England may consider to be suitable in one case may not be suitable in another. The measure of adequacy depends on the relationship of risks to lending that the particular part of the financial sector bears.
  Let us examine those risks. On 1st April 1975, more than 76 per cent. of Giro assets were risk-free. But the major London clearers, as opposed to

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  that figure of more than 76 per cent. of risk-free assets, had 20 per cent. risk-free, and a further 5 per cent. were virtually risk-free. The remaining three-quarters of their assets were credit risks, or a combination of forced sale and credit risks. The difference in terms of risks carried would still be the same whether Giro were public or private. The type of business is different and therefore the adequacies in relation to capital and liquidity are also different.
  Mr. Michael Marshall: I am worried about the hon. Gentleman's line of argument, although I am glad that he has been able to intervene in the discussion. He is talking about the historical pattern of Giro. We are concerned about its future activities. Can he justify a situation in which no level is put on overdrafts and personal loans in the corporate sector? In taking a figure of 76 per cent. for risk-free business, the hon. Gentleman is speaking about the past. What of the future?
  Mr. Sheldon: I am glad that we have reached accord on the present position. It was not obvious from what was being said by the hon. Gentleman's Conservative colleagues sitting behind him.
  Mr. Ridley: The Financial Secretary was not here earlier.
  Mr. Sheldon: I have read a good deal of the Committee speeches—speeches made at considerable length. Giro's activities rest on the provisions of the 1969 Act. Confidence created by high liquidity and the soundness of customers will still remain in Giro. The point made by the Opposition related to the extensions of credit which were to be offered.
  Mention has been made of the difference between the approach of the Trustee Savings Banks and that adopted by Giro. The legislation relating to the two is the same, as is the principle. In other words, there will be a cautious approach, a high liquidity requirement in both the Trustee Savings Bank and Giro. The investments made will be predominantly in the public sector. Security of that nature will be provided and it will be reflected in a measurement of Giro's capital adequacies.
  Mr. Parkinson: The Paymaster-General made it clear that only after a period
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  of 10 years, in three different stages, was it envisaged that the Trustee Savings Banks would become commercial banks. The Trustee Savings Banks have been in business for up to 150 years. Giro can, overnight, do what the Trustee Savings Banks will be allowed to do only over a period of 10 years.
  Mr. Sheldon: I understand the hon. Gentleman's anxieties, but I remind him that we are speaking of different scales of money. The Trustee Savings Banks hold deposits of over £4,000 million available for investment. In setting up a new body there will be a period of time in which control in terms of money will still be available. However, in considering the Giro system we are not talking of anything like that sum of money. The balances handled by Giro amount to £150 million, which, under the 1969 Act, can be limited quantitatively as regards the investments made with it.
  Opposition Members mentioned the control provided by the Treasury. That is the same control as existed in the 1969 Act.
  Mr. Michael Marshall: No monitoring.
  Mr. Sheldon: The same control. The situation in the Trustee Savings Banks is utterly different and involves a figure of £4,500 million, or whatever the figure might be. It is an important matter when we are setting up a new body and are giving it responsibility to handle sums of money as large as that. We want to see how it acts. We shall release control gradually as we observe its success. In this case, under the 1969 Act we have the powers to limit quantitatively the investment of the £150 million, which is the amount of money involved in Giro.
  6.15 p.m.
  Mr. Tim Renton: Is it not a fact that the managing director of Giro said last week, in an interview, that he saw Giro growing into a bank with something like the combined assets of Barclays? If that is the case, we are talking of assets of £7 billion against the money that Giro can lend. The Financial Secretary said that Giro would handle sums in the region of £150 million. That is a relatively small sum. The Minister of State has constantly stated that Giro is a trading division of the Post Office and that all the deposits

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  of the Post Office should be regarded as standing behind Giro. That will make Giro, in banking terms, a very large concern indeed.
  Mr. Sheldon: The legislation is quite clear. The 1969 Act has worked successfully for the past seven years and there is no attempt to change those provisions. That situation remains. If we had not introduced this Bill, the provisions of that legislation, which the hon. Gentleman now seeks to condemn, would still be on the statute book. In regard to the State bank, I have no responsibility for what an individual might say, but I have responsibility in terms of the Treasury limit and the quantitative restrictions that it can impose on investment. The control about which the hon. Gentleman is anxious is surely satisfied. There has been no change in that regard.
  As for the comparison with the commercial banks, there can be no dispute that the risk element is different. Opposition Members have indulged in a number of bogus points. I hope that I have helped to allay the concern arising in connection with some of them, although I shall be happy to respond to further questions. In a sophisticated Committee stage, I should have thought that some of these matters would be more readily understood. Certainly some of the questions have astonished me. They astonished me when I read them in the Committee proceedings, and they certainly astonished me when I heard them made in the House this afternoon.
  Mr. Ridley Mr. Ridley rose—
  Mr. Sheldon: I give way to the exaggerated claims of the hon. Member for Cirencester and Tewkesbury (Mr. Ridley).
  Mr. Ridley: I was not a member of the Committee. Perhaps I may ask the Financial Secretary a question about the new arrangements. Will the control arrangement over Giro in relation to the Bank of England apply also to banks in the private sector with 75 per cent. assets in non-risk stocks? Will the new arrangement be generally available to anybody who wishes to set up a bank, provided that 75 per cent. of his assets is in non-risk stocks? In other words, is there to be one law for the public sector and another for the private sector?
  Mr. Sheldon: I should be very surprised if many commercial banks had 76 per cent. of their assets in non-risk Government stock—
  Mr. Ridley: But Giro is not a bank
  Mr. Sheldon: This point was answered when I said that the basis of the working party showed that there had to be differences between the capital and liquidity adequacies of banks, depending on the amount of risk they were incurring. It was on that basis that I could show, successfully I believe, that Giro, with its very low risk content, could meet the requirements established by the working party.
  Mr. Michael Marshall: I am torn, in view of the speech that we have just heard. It is true that we have been calling for the attendance of a Treasury Minister, but the Financial Secretary has just done a whitewash job. The Minister of State undertook to reply on Report to questions that we raised in Committee. I accept that our trick has been trumped by the Financial Secretary answering and thus preventing the Minister of State from doing so. The Minister of State said that he would cover many of our questions, but they have not been covered. Instead, the Financial Secretary has given us a general homily about the 1969 Act. We are talking about the future development of Giro banking services and the Financial Secretary did not reply to the fears expressed.
  We have had no answer to the question about the number of public service employees, for instance. In a Written Answer earlier in the week, the Minister of State confirmed to me that three officials in his Department, up to the level of assistant secretary, were monitoring the activities of the Posts and Telecommunications Division, with Giro and other activities. Three officials—I pay tribute to the work that they have done on the Bill—are a tiny number to keep a proper review of Giro's activities in future.
  Mr. Gregor Mackenzie: I appreciate the tribute that the hon. Gentleman pays to the officials. There are about 60 people involved in the Posts and Telecommunications Division, of whom three are directly concerned with this matter. But those three hardworking gentleman have access to all the expertise of the

  441
  Treasury. This is not new. This has been going on ever since the inception of Giro services.
  Mr. Marshall: The right hon. Gentleman makes my point. It is precisely because we are worried about access to this kind of Treasury expertise that we are so concerned about the Bill now. The Financial Secretary tried to reassure us that the 1969 Act will apply, but he was not willing to bend his mind to any of the problems of future development of business. He did not say what size this bank will be if Mr. Singer's ambitions to move between £7,000 million and £14,000 million are to succeed. The Government have given us no idea of the degree to which this bank will be developed. We have simply had a lot of historical chat about limitations applied in the past.
  A contradictory attitude which was revealed in Committee was brought to light again today by my hon. Friend the Member for Hertfordsire, South (Mr. Parkinson). We have had no explanation of why, when the Treasury is doing a proper job in respect of the TSB, we still see in this Bill a muddled attempt to create the opportunity to go into unspecified areas of public and corporate lending.
  It is incredible that we have still had no adequate answers and I hope that the Minister of State will feel free to intervene. We asked earlier for his view of the traditional business, and how Giro would seek to build up business in money transmission among Government Departments. We asked why the record of local authority business appeared to fluctuate so much from quarter to quarter. We have had no answer.
  We have not been told what the size of this bank will be in future and have heard nothing about market research. I mean no disrespect to the Financial Secretary. I am grateful that he has been able to be with us today. He must have felt the pressure in respect of lack of scrutiny by the Treasury. If the Minister of State is not prepared to answer our questions, that will reinforce our worst fears that the Government are seeking to get the Bill through on a "by guess, by God" basis.
  The amendment to delete Clause 1 is not a wrecking amendment. The Bill
  442
  is in four parts and, subject to any other decisions, the rest of the Bill may be allowed to stand. The deletion of Clause 1 would simply reflect reality.
  The Financial Secretary, who bears great responsibility here, is right to advocate cautious expansion in secondary banking, taking a view of the public banking sector as a whole, but it seems ludicrous to suggest that this should not apply simply because only £150 million is involved, compared to a much vaster sum for the Trustee Savings Banks. Should not the Government stick to common principles in this area and not chop and change according to which Department is involved?
  The amendment gives the Government a final chance to come to their senses, without prejudice to Giro operating in other areas. It would be typical of the present Government's thinking that a principle can be bent according to how much public money is involved—that, if a taxpayer's risk is not so large, it can be widely extended. But if that is the basis for reaching decisions, we know what this Government are really about—and it is not what the House and the country want. I urge my hon. Friends to support the amendment.
  Mr. Tim Renton: I had not intended to intervene but I was so shocked by some of the remarks of the Financial Secretary that I felt I must comment. The more I heard of the hon. Gentleman, with his supposed knowledge of financial affairs, the more I liked the Minister of State, who lays no claim at all to knowledge of financial matters.
  The Financial Secretary committed two grave errors. First, he compared a past balance sheet of Giro, which is a non-banking balance sheet, with a banking balance sheet and said that Giro held up well. But there is a world of difference between the two. The present equity structure of Giro does not provide adequate capital structure for an organisation which is setting out to be a bank.
  Because he intends to do nothing about this, the Financial Secretary is destroying the concept that Giro will be going into fair competition with the banks. If it has an inadequate capital structure, there can be no fair competition.
  The second way in which the Minister misled the House was in respect of the

  443
  Bank of England's paper about the financial requirements for banks. He said that different banks required different types of assets and qualifications but he failed to say that this is in relation to a bank's free reserves, particularly its premises. It is on this point that the Bank of England's paper made a clear distinction all along between the clearing banks and the smaller banks.
  6.30 p.m.
  I am amazed that the Financial Secretary, when at last making an appearance
  in the debate, should so conspicuously mislead the House on essentially financial matters of which he at least should have expert knowledge. I therefore strongly support my hon. Friend the Member for Arundel (Mr. Marshall) in suggesting that we vote against the inclusion of Clause 1 in the Bill.
  Question put, That the amendment be made:—
  The House divided: Ayes 222, Noes 244.

  Division No. 68 1

  AYES

  6.31 p.m.

  Adley, Robert

  Fookes, Miss Janet

  Macmillan, Rt Hon M. (Farnham)

  Aitken, Jonathan

  Fowler, Norman (Sutton Cf'd)

  Madel, David

  Alison, Michael

  Fox, Marcus

  Marshall, Michael (Arundel)

  Amery, Rt Hon Julian

  Freud, Clement

  Marten, Neil

  Arnold, Tom

  Fry, Peter

  Maude, Angus

  Atkins, Rt Hon H. (Spelthorne)

  Gardiner, George (Reigate)

  Mayhew, Patrick

  Awdry, Daniel

  Gardner, Edward (S Fylde)

  Meyer, Sir Anthony

  Bain, Mrs Margaret

  Gllmour, Sir John (East Fife)

  Miller, Hal (Bromsgrove)

  Bell, Ronald

  Godber, Rt Hon Joseph

  Mills, Peter

  Bennett, Sir Frederic (Torbay)

  Goodhew, Victor

  Miiscampbell, Norman

  Benyon, W.

  Goodlad, Alastair

  Moate, Roger

  Berry, Hon Anthony

  Gorst, John

  Molyneaux, James

  Biffen, John

  Gow, Ian (Eastbourne)

  Monro, Hector

  Biggs-Davison, John

  Gower, Sir Raymond (Barry)

  Montgomery, Fergus

  Blaker, Peter

  Gray, Hamish

  Moore, John (Croydon C)

  Boscawen, Hon Robert

  Griffiths, Eldon

  Morris, Michael (Northampton S)

  Bottomley, Peter

  Grimond, Rt Hon J.

  Morrison, Charles (Devizes)

  Bowden, A. (Brighton, Kemptown)

  Grist, Ian

  Morrison, Hon Peter (Chester)

  Boyson, Dr Rhodes (Brent)

  Grylls, Michael

  Mudd, David

  Bradford, Rev Robert

  Hall, Sir John

  Neave, Airey

  Braine, Sir Bernard

  Hall-Davis, A. G. F.

  Nelson, Anthony

  Brittan, Leon

  Hamilton, Michael (Salisbury)

  Neubert, Michael

  Brotherton, Michael

  Hampson, Dr Keith

  Newton, Tony

  Brown, Sir Edward (Bath)

  Hannam, John

  Nott, John

  Bryan, Sir Paul

  Harrison, Col Sir Harwood (Eye)

  Onslow, Cranley

  Buchanan-Smith, Alick

  Hastings, Stephen

  Oppenheim, Mrs Sally

  Bulmer, Esmond

  Havers, Sir Michael

  Osborn, John

  Burden, F. A.

  Hawkins, Paul

  Page, Rt Hon R. Graham (Crosby)

  Butler, Adam (Bosworth)

  Henderson, Douglas

  Parkinson, Cecil

  Carlisle, Mark

  Heseltine, Michael

  Penhaligon, David

  Chalker, Mrs Lynda

  Hicks, Robert

  Percival, Ian

  Channon, Paul

  Higgins, Terence L.

  Peyton, Rt Hon John

  Churchill, W. S.

  Holland, Philip

  Pink, R. Bonner

  Clark, Alan (Plymouth, Sutton)

  Hordern, Peter

  Powell, Rt Hon J. Enoch

  Clarke, Kenneth (Rushcliffe)

  Howe, Rt Hon Sir Geoffrey

  Price, David (Eastleigh)

  Clegg, Walter

  Howell, David (Guildford)

  Prior, Rt Hon James

  Cope, John

  Howells, Geraint (Cardigan)

  Pym, Rt Hon Francis

  Cordle, John H

  Hunt, John

  Raison, Timothy

  Corrie, John

  Hurd, Douglas

  Rathbone, Tim

  Costain, A. P.

  Hutchison, Michael Clark

  Rees, Peter (Dover & Deal)

  Crawford, Douglas

  Johnson Smith, G. (E Grinstead)

  Rees-Davies, W. R.

  Crowder, F. P.

  Jopling, Michael

  Reid, George

  Dean, Paul (N Somerset)

  Joseph, Rt Hon Sir Keith

  Renton, Tim (Mid-Sussex)

  Dodsworth, Geoffrey

  Kellett-Bowman, Mrs Elaine

  Rhys Williams, Sir Brandon

  Douglas-Hamilton, Lord James

  Kershaw, Anthony

  Ridley, Hon Nicholas

  Drayson, Burnaby

  King, Tom (Bridgwater)

  Rifklnd, Malcolm

  du Cann, Rt Hon Edward

  Kitson, Sir Timothy

  Rippon, Rt Hon Geoffrey

  Dunlop, John

  Knight, Mrs Jill

  Roberts, Wyn (Conway)

  Durant, Tony

  Knox, David

  Rodgers, Sir John (Sevenoaks)

  Dykes, Hugh

  Lamont, Norman

  Ross, William (Londonderry)

  Edwards, Nicholas (Pembroke)

  Lane, David

  Rossi, Hugh (Hornsey)

  Elliott, Sir William

  Langford-Holt, Sir John

  Sainsbury, Tim

  Emery, Peter

  Latham, Michael (Melton)

  St. John-Stevas, Norman

  Ewing, Mrs Winifred (Moray)

  Lawrence, Ivan

  Scott-Hopkins, James

  Eyre, Reginald

  Le Marchant, Spencer

  Shaw, Giles (Pudsey)

  Fairbalrn, Nicholas

  Lester, Jim (Beeston)

  Shaw, Michael (Scarborough)

  Fairgrleve, Russell

  Lewis, Kenneth (Rutland)

  Shelton, William (Streatham)

  Farr, John

  Loveridge, John

  Shersby, Michael

  Fell, Anthony

  MacCormick, Iain

  Sims, Roger

  Finsberg, Geoffrey

  McCrindle, Robert

  Skeet, T. H. H.

  Fletcher, Alex (Edinburgh N)

  McCusker, H.

  Smith, Dudley (Warwick)

  Fletcher-Cooke, Charles

  MacGregor, John

  Speed. Keith

  Spence, John

  Temple-Morris, Peter

  Weatherill, Bernard

  Spicer, Jim (W Dorset)

  Thatcher, Rt Hon Margaret

  Wells, John

  Spicer, Michael (S Worcester)

  Thomas, Rt Hon P. (Hendon S)

  Welsh, Andrew

  Sproat, Iain

  Thompson, George

  Whitelaw, Rt Hon William

  Stalnton, Keith

  Townsend, Cyril D

  Wiggln, Jerry

  Stanley, John

  Tugendhat, Christophei

  Wilson, Gordon (Dundee E)

  Steen, Anthony (Wavertree)

  Vaughan, Dr Gerard

  Winterton, Nicholas

  Stewart, Donald (Western Isles)

  Viggers, Peter

  Wood, Rt Hon Richard

  Stewart, Ian (Hitchln)

  Walder, David (Clitheroe)

  Young, Sir G. (Ealing, Acton)

  Stokes, John

  Wall, Patrick

  Stradling Thomas, J.

  Walters, Dennis

  TELLERS FOR THE AYES:

  Tapsell, Peter

  Warren, Kenneth

  Mr. Fred Silvester and

  Taylor, R. (Croydon NW)

  Watt, Hamlsh

  Mr. Michael Roberts

  Tebbit, Norman

  NOES

  Abse, Leo

  Ewing, Harry (Stirling)

  McMillan, Tom (Glasgow C)

  Anderson, Donald

  Fernyhough, Rt Hon E.

  McNamara, Kevin

  Archer, Peter

  Fitch, Alan (Wigan)

  Madden, Max

  Armstrong, Ernest

  Fitt, Gerard (Belfast W)

  Magee, Bryan

  Ashley, Jack

  Flannery, Martin

  Mallaiieu, J. p. W.

  Ashtont, Joe

  Fool, Rt Hon Michael

  Marks, Kenneth

  Atkins, Ronald (Preston N)

  Forrester John

  Marquand, David

  Atkinson, Norman

  Fowler, Gerald (The Wrekin)

  Marshall, Dr Edmund (Goole)

  Barnett, Guy (Greenwich)

  Fraser, John (Lambeth, N'w'd)

  Marshall, Jim (Leicester S)

  Barnett, Rt Hon Joel (Heywood)

  Gilbert, Dr John

  Mason, Rt Hon Roy

  Bates, Alt

  Golding, John

  Maynard, Miss Joan

  Bean, R. E.

  Gould, Bryan

  Mellish, Rt Hon Robert

  Beith, A. J.

  Gourlay, Harry

  Mendelson, John

  Benn, Rt Hon Anthony Wedgwood

  Graham, Ted

  Mikardo, Ian

  Bennett, Andrew (Stockport N)

  Grocott, Bruce

  Milien, Bruce

  Bidwell, Sydney

  Hamilton, James (Bothwell)

  Miller, Dr M. S. (E Kilbride)

  Bishop, E. S.

  Hamilton, W. W. (Central Fife)

  Mitchell, R. C. (Soton, ltohen)

  Blenkinsop, Arthur

  Hardy, Peter

  Molloy, William

  Boardman, H.

  Harrison, Walter (Wakefield)

  Moonman, Eric

  Booth, Rt Hon Albert

  Hart, Rt Hon Judith

  Morris, Charles R. (Openehawe)

  Boolhroyd, Mise Betty

  Hattersley, Rt Hon Roy

  Morris, Rt Hon J. (Aberavon)

  Bottomley, Rt Hon Arthur

  Hayman, Mrs Helene

  Mulley, Rt Hon Frederick

  Boyden, James (Bish Auck)

  Healey, Rt Hon Denis

  Murray, Rt Hon Ronald King

  Bradley, Tom

  Hooley, Frank

  Newens, Stanley

  Bray, Dr Jeremy

  Horam, John

  Noble, Mike

  Brown, Hugh D. (Provan)

  Howell, Rt Hon Denis

  Oakes, Gordon

  Brown, Robert C. (Newcastle W)

  Hoyle, Doug (Nelson)

  Ogden, Eric

  Buchan, Norman

  Huckfleld, Les

  O'Halloran, Michael

  Buchanan, Richard

  Hughes, Rt Hon C. (Anglesey)

  Ovenden, John

  Butler, Mrs Joyce (Wood Green)

  Hughes, Robert (Aberdeen N)

  Padley, Walter

  Callaghan, Jim (Middleton & P)

  Hughes, Roy (Newport)

  Park, George

  Campbell, Ian

  Hunter, Adam

  Parry, Robert

  Canavan, Dennis

  Irvine, Rt Hon Sir A. (Edge Hill)

  Pendry, Tom

  Cant, R. B.

  Jackson, Colin (Brighouse)

  Philpps, Dr Colin

  Carmichael, Neil

  Janner, Greville

  Price, C. (Lewisham W)

  Carter, Ray

  Jay, Rt Hon Douglas

  Price, William (Rugby)

  Cartwright, John

  Jeger, Mrs Lena

  Radice, Giles

  Clemitson, Ivor

  Jenkins, Hugh (Putney)

  Rees, Rt Hon Merlyn (Leeds S)

  Cocks, Michael (Bristol S)

  Jenkins, Rt Hon Roy (Stechford)

  Roberts, Albert (Normanton)

  Cohen, Stanley

  John, Brynmor

  Roberts, Gwilym(Cannock)

  Coleman, Donald

  Johnson, Walter (Derby S)

  Robertson, John (Paisley)

  Colquhoun, Ms Maureen

  Jones, Alec (Rhondda)

  Roderick, Caerwyn

  Conlan, Bernard

  Jones, Barry (East Flint)

  Rodgers, George (Chortey)

  Cook, Robin F. (Edin C)

  Jones, Dan (Burnley)

  Rodgers, Wiliam (Stockton)

  Corbett, Robin

  Judd, Frank

  Rooker, J. W.

  Cox, Thomas (Tooting)

  Kaufman, Gerald

  Roper, John

  Craigen, J. M. (Maryhill)

  Kerr, Russell

  Rose, Paul B.

  Crawshaw, Richard

  Kilroy-Silk, Robert

  Ross, Stephen (Isle of Wight)

  Crosland, Rt Hon Anthony

  Kinnock, Neil

  Ross, Rt Hon W. (Kilmarnock)

  Cryer, Bob

  Lambie, David

  Sandelson, Neville

  Davidson, Arthur

  Lamborn, Harry

  Sedgemore, Brian

  Davies, Bryan (Enfield N)

  Lemond, James

  Selby, Harry

  Davies, Denzil (Llanelli)

  Latham, Arthur (Paddington)

  Shaw, Arnold (llford South)

  Deakins, Eric

  Leadbitter, Ted

  Sheldon, Robert (Ashton-u-Lyne)

  Dell, Rt Hon Edmund

  Lestor, Miss Joan (Eton and Slough)

  Shore, Rt Hon Peter

  Dempsey, James

  Lever, Rt Hon Harold

  Short, Rt Hon E. (Newcastle C)

  Doig, Peter

  Lewis, Ron (Carlisle)

  Short, Mrs Renée (Wolv NE)

  Dormand, J. D.

  Lipton, Marcus

  Silkin, Rt Hon John (Deptlord)

  Douglas-Mann, Bruce

  Litterick, Tom

  Silverman, Julius

  Duffy, A. E. P.

  Loyden, Eddie

  Skinner, Dennis

  Dunnett, Jack

  Luard, Evan

  Small, William

  Eadie, Alex

  Lyon, Alexander (York)

  Smith, John (N Lanarkshire)

  Edge, Geoff

  Lyons, Edward (Bradford W)

  Spearing, Nigel

  Edwards, Robert (Wolv SE)

  Mabon, Dr J. Dickson

  Spriggs, Leslie

  Ellis, John (Brigg & Scun)

  McElhone, Frank

  Stallard, A. W.

  Ellis, Tom (Wrexham)

  McGuire, Michael (Ince)

  Stoddart, David

  English, Michael

  Mackenzie, Gregor

  Stonehouse, Rt Hon John

  Evans, Fred (Caerphilly)

  Mackintosh, John P.

  Stott, Roger

  Evans, loan (Aberdare)

  Maclennan, Robert

  Strang, Gavin

  446

  447

  Strauss, Rt Hon G. R.

  Varley, Rt Hon Eric G.

  Williams, Alan Lee (Hornch'ch)

  Summerskill, Hon Dr Shirley

  Waiden, Brian (B'ham, L'dyw'd)

  Wilson, Alexander (Hamilton)

  Taylor, Mrs Ann (Bolton W)

  Walker, Terry (Kingswood)

  Wilson, Rt Hon H. (Huyton)

  Thomas, Jeffrey (Abertillery)

  Ward, Michael

  Wilson, William (Coventry SE)

  Thomas, Mike (Newcastle E)

  Watkins, David

  Wise, Mrs Audrey

  Thomas, Ron (Bristol NW)

  Watkinson, John

  Woodall, Alec

  Thorne, Stan (Preston South)

  Weetch, Ken

  Woof, Robert

  Tierney, Sydney

  White, Frank R. (Bury)

  Wrigglesworth, Ian

  Tinn, James

  White, James (Pollock)

  Young, David (Bolton E)

  Tomlinson, John

  Whitehead, Phillip

  Tomney, Frank

  Whitlock, William

  TELLERS FOR THE NOES:

  Torney, Tom

  Willey, Rt Hon Frederick

  Mr. James A. Dunn and

  Tuck, Raphael

  Williams, Alan (Swansea W)

  Mr. Joseph Harper.

  Urwin, T. W.

  Question accordingly negatived.

Clause 2

  FINANCIAL OBJECTIVE
  Mr. Tim Renton: I beg to move Amendment No. 3, in page 1, line 13, leave out Clause 2.
  Mr. Speaker: With this we may also discuss Amendment No. 4, in page 1, line 15, leave out 'financial' and insert 'profit'.
  Mr. Renton: The amendments provide that instead of "financial objectives" the Post Office would have strict profit objectives when providing banking services. The Opposition are by no means opposed to the principle of the Post Office's having financial or profit objectives, but we would prefer the latter. It certainly should have objectives, however. Having heard the debates on Second Reading and in Committee we are concerned with the way in which those objectives will be realised and monitored, and whether, as the Minister of State spelled them out to us, they are sufficient for the sort of major banking operation upon which Giro will now embark.
  The Minister of State told us in Committee that he had decided that the financial objective set to Giro should be a return of 12½ per cent. per annum, over the next three years, on its public dividend capital and retained profits. It would be much more preferable, in a normal commercial sense, if that objective could be varied annually in the light of changing conditions. I say that to the Minister in a non-partisan spirit—that almost unbelievable mood—because banking profits vary greatly from year to year, depending on conditions in the money market. Banks almost inevitably make higher profits when interest rates are rising and lower profits when they are falling.
  448
  6.45 p.m.
  While I support Giro as a money transmission service I do not support it as a banking service, but if it is to be a banking service it should have realistic and changing objectives, and it would be helpful to the managing director of Giro and his staff if they could have a varying objective which fluctuated in line with what was happening in the banking world and, most particularly, to interest rates. For instance, the financial objective could be 15 per cent. in a year when money was tight and rates were rising, and could drop to 10 per cent. the following year, when money was slack and interest rates were going down. To provide this sort of moving target could be of commercial assistance to Giro.
  We then move on to the question whether, on its capital and reserves, 12½ per cent. is an appropriate target for Giro. The phrase "public dividend capital" is a misnomer, as my hon. Friend the Member for Hertfordshire, South (Mr. Parkinson) said in Committee. It is just another name for a loss. Money has gone out of your pocket and mine, Mr. Speaker, in so far as we are both taxpayers. It is not admitted as being a loss; it is given another grandiose name.
  How was the 12½ per cent. figure arrived at? How was it decided that Giro should have £13 million of public dividend capital? The Minister of State, with that charm and honesty which endear him to us all, gave the game away in Standing Committee when he said:
  "In determining the amount of the write off "—
  as a result of which, of course, the figure of PDC was arrived at—
  "we were guided by the principle of providing Giro with a reasonable prospect of servicing its remaining capital. In other words we aimed to give Giro a capital structure related to its expected earning capacity."—[Official Report, Standing Committee B, 10th February 1976; c. 161.]

  449
  It does not need too much imagination to guess what happened behind the doors in the corridors of power. Presumably the managing director was told by the Minister of State "I have to let you go into banking services. I know that you want to do it, but the Treasury and I are opposed to the idea. However, you will be given the chance. How much money do you think you might make?" The managing director probably said that, at a guess, he might make £500,000. The Minister of State told him that that was not enough and asked what he thought of £1·5 million—and that was the figure finally settled on. The figure of £1·5 million multiplied by eight, which is the equivalent of a 12½ per cent. return, gives £13 million public dividend capital. That is how it probably happened.
  Clearly the chicken came before the egg, because instead of arriving at a proper capital structure, and Giro deciding, with the Minister, the sort of return it might expect to make on the capital structure necessary for a fully-fledged bank, a profit figure was picked out of the air. Working back from that, given a 123½ per cent. return, £13 millions of PDC was deemed to be the appropriate sum. We shall come back to the question of the adequate capital structure of Giro when we consider Amendment No. 8 to Clause 4, but it is right to say straight away that this figure of a 12½ per cent. return as the objective that the Minister has set Giro was arrived at in totally the wrong way.
  The Minister further told us in Committee that he hoped that that figure would rise to 20 per cent. in the third year. Accepting that this was done by the extremely tortuous process that I have described, I hope that the Minister will be able to tell us something that he was unable to tell us in Committee, namely, why he thinks that 20 per cent. can be achieved in three years' time, and what was Giro's own figure for its expected profit.
  I remind the Minister of his words in Committee, that
  "the objective we set is genuinely stretching … There was hard negotiating and pressure from the Government."—[Official Report, Standing Committee B, 10th February 1976; c. 157.]
  I am delighted to hear that, but what did Giro think it could achieve? Why does the Minister feel that Giro will be successful in reaching the target that he
  450
  has set, of rising from 12½ per cent. to 20 per cent.? Over past years Giro has lost about £30 million, and even last year it achieved a profit of only £64,000 on a turnover of £25 million. We would be delighted to welcome Giro as a prodigal son returning to the profitable ranks of the nationalised industries, but so far we have no reason to believe that its conversion is likely to take place, and we hope that the Minister will be able to spell out his reasons for believing that these objectives can be met.
  In declaring my opposition to Clause 2 I move on to a considerable worry about the fact that so far we have not been given any figures relating to the level of advances that Giro expects to achieve over the years immediately ahead. The Minister told us, both on Second Reading and in Committee, that the present ceiling of personal loans was about £2 million, and he also said that there were—I see the Minister looking unhappy; if he wishes to contradict that figure perhaps he will do so, but he said specifically that the present ceiling of personal loans from Giro was about £2 million. We pressed him then, and I should like to press him again, today, to tell us what he expects the level of loans to be after one year, two years, three years and five years. Giro must have a business plan, and this is the time when the House should be taken into the Minister's and Giro's confidence.
  The Minister may say, as he frequently did in Committee, that it is not his wish to interfere in the detailed running of the nationalised industries. I support that principle as a matter of day-to-day government, but we are now talking about something different. We are talking about Giro setting forth as a bank for the first time, and it is important for us to know what its overall objectives are.
  I regret the brief appearance of the Financial Secretary to the Treasury at our debate about half an hour ago. I do not think that he added anything to the proceedings—much to our surprise, because we expected that the weight of Treasury advice would take us out of the jungle in which we have found ourselves. None the less, when debating the Trustee Savings Bank Bill, Treasury Ministers were prepared to be specific. Speaking from memory, I recall their telling us that in the case of the TSB

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  they expected advances of personal loans to be about £30 million by 1977 and, I think, £50 million by 1978, which would be about 1 per cent. of TSB deposits.
  That was useful information for the House and for the Standing Committee studying TSB plans, because hon. Members were able to see that the TSB was setting itself conservative targets. That was a measure of the caution and moderation with which the TSB plans to progress. We have received no such targets and no such business plans from Giro, through the Minister of State, and I am certain that this would be the appropriate time for the Minister to tell us what Giro's objectives are. Let him look at the example of the TSB and realise that it provided the information for which we asked, and give us similar information for Giro.
  We were told by the Financial Secretary to the Treasury that Giro is very modest and very small. These words were used constantly in Standing Committee. The fact remains, however, as the Minister said, that Giro is a trading division of the Post Office. From a consolidated balance sheet point of view it has all the assets of the Post Office behind it. Indeed, that is why the Financial Secretary said that depositors with Giro need not worry, that it will be like lending to the State, and that Giro does not have to have a bank balance sheet because it is all part of the Post Office.
  That is not an argument that I accept, but let us pursue it. If Giro is a subsidiary division of the Post Office it can become an extremely highly-geared animal. It could have a high ratio between its lending, its deposits and its net worth. It is precisely because of its capacity to gear itself up on the basis of the Post Office and, thus, of the State balance sheet that we need to know what its financial objectives are.
  Another point of importance which I hope the Minister will be able to clarify is what would be the proper relationship between the gross assets or balance sheet totals of Giro and its public dividend capital? I do not want to anticipate the debate on Clause 4, but this comes into the class of objectives, and so far, while we have been given a PDC figure and a 12½ per cent. target rate of return on
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  PDC plus retained profits, we have no idea what the objectives are in terms of Giro's turnover in a year or two's time. As the Minister knows, what one looks at in any bank balance sheet are the gross footings at the bottom of the assets column, and at the bottom of the liability column. It is important to know what the objectives of Giro are in terms of the balance sheet assets to which I have referred.
  What concerns us most of all about Clause 2 lies in the first three lines, where one finds that
  "The Secretary of State may from time to time determine, after consultation with the Post Office and with the concurrence of the Trasury, financial objectives …".
  What is becoming increasingly clear—it was made even clearer in the brief, unfortunate intervention of the Financial Secretary this afternoon—is that Giro will be in great danger of serving five political masters. The Department of Trade will be interested because of its present review of the Protection of Depositors Act. The Department of Prices and Consumer Protection will clearly be interested, because banking is one of the operations that is surveyed by the Consumer Credit Act. The Bank of England—the Financial Secretary emphasised this—will have its normal responsibility for supervising the day-to-day activities of Giro, and above the Bank of England will be the Treasury. In addition to these four masters, the Post Office will remain the direct responsibility of the Department of Industry.
  It seems to me that it will be a case of all Chiefs and no Indians, particularly as we are told that there will be no extra Post Office staff when it goes into the banking business. That is one of the most extraordinary comments made in the Explanatory Memorandum, reference to which was made in the debate on the first amendment and to which no answer has been given.
  7.0 p.m.
  Mr. Gregor Mackenzie: I thought that we had made it perfectly clear during the Second Reading debate. I recall the Under-Secretary of State indicating that if we pass this Bill the Post Office would initially take on about 14 people.
  Mr. Renton: I thank the Minister for that intervention, but my understanding is different. No doubt the Official

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  Report will put us right. I thought that Giro had already taken on 14 people to handle its existing volume of banking business, which, after all, has only 3,600 customers involved in personal loans. That works out at one customer for every seven post offices throughout the country—not a large figure. I thought that 14 extra staff had already been taken on. It is astonishing that the Bill will not involve any addition to public service manpower.
  Mr. Viggers: The Under-Secretary said during the Second Reading:
  "Fourteen additional staff headed by the loans manager, have been employed to operate the personal loans service".—[Official Report, 20th January 1976; Vol. 903, c. 1261.]
  That presumbaly means that if one does not have the luck to come across one of the 14, the little girl behind the post office desk, normally serving stamps, will operate the loans facilities.
  Mr. Renton: I am grateful to my hon. Friend for confirming that my memory is correct. How the Post Office is going to go into foreign exchange and the whole field of banking services using the same delightful—but inexperienced in banking—staff that they have at present is a mystery to all of us. It is inconceivable that the Post Office, through its Giro trading division, will be able to develop into a fully-fledged bank without taking on a full staff. But the fact remains that the Explanatory Memorandum says that there will be no addition to the number of employees in the public sector.
  A parliamentary answer by the Chief Secretary to the Treasury makes clear that the public sector, in this context, includes the nationalised industries. It is an Alice-in-Wonderland situation, in which there will be five Ministers, or five Chiefs, all of whom will be responsible and all meddling in Giro. They will all be saying "This is what should happen" or "That is what should happen". The situation is that Giro, with 14 trained executives, is going into the world of competitive banking, seeking to build itself up into a bank the size of Barclays, with assets of £7 billion, without recruiting anyone to do it. It is unbelievable. Where has the Minister found the magic for Giro to do that without any additional staff?
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  Throughout the Committee debates the Minister always replied with great courtesy but with great ignorance. He did not know the answers. Today he must put the record straight. In seeking to delete the clause from the Bill, we are really probing to find out in greater depth what the objectives are, how they are to be set, and who is to be responsible for setting them and seeing that they are achieved. If we do not get an answer on those points, I fear that Giro will be not a four-legged animal but a monster with live heads which will not know where it is going. With the accumulated losses of the nationalised industries, the last thing we want to do is to encourage yet another nationalised industry to go further into debt. We shall listen with care to the Minister's answers before deciding whether or not to vote on the amendment.
  Mr. Nelson: My hon. Friend the Member for Mid-Sussex (Mr. Renton) rightly drew the attention of the House to the importance of setting an adequate objective for Giro and therefore the importance of Giro having an adequate capital structure. The two are related. We listened with interest to the comments of the Financial Secretary at the end of the previous debate. I found his remarks anomalous and out of place. When we are discussing a clause on widening the banking services, it is extraordinary that we should be given a lecture on capital structure.
  I also found extraordinary the Minister's suggestion that the constraints in the Post Office Act 1969—that the capital base of the bank would be limited—were sufficient to prevent Giro from developing into a State bank and accumulating a massive level of deposits. That is a misreading of the Act and it enhances our fears that neither the Treasury nor the Department of Industry has any idea of what they are doing in proposing this massive extension of the Post Office facilities. The Minister did not adequately explain how the existing constraints under the Post Office Act would operate as a limiting factor in enabling Giro to extend advances to various sectors of industry and take on a far higher level of business apart from the money-transmission services to which its traditional business has been tied.

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  In Committee, hon. Members had an opportunity to press the Minister for some indication of how the financial objective which Giro has been set was worked out. Over the next three years, we are told, it is hoped that Giro will be able to achieve an average return of 12½ per cent. per annum on its public dividend capital but by the end of that three-year period it is hoped and expected that the return on the capital will be nearer 20 per cent.
  We have sought to question whether that is an adequate directive and whether the basis on which it is assessed is correct. The Minister said that the return on shareholders' capital was the correct one because a return on the balance sheet total or the turnover of Giro might turn away marginal business which provided a lower rate of return. I question the logic of that argument.
  It seems to me that setting Giro's return on total assets employed, or on turnover, would be a far more meaningful guideline for future operations than a return on shareholders' capital. As my hon. Friend the Member for Mid-Sussex has pointed out succinctly, the capital structure of Giro is wholly artificial, even under the reconstruction set out in the Bill.
  Why, therefore, is it logical to have a rate of return on public dividend capital and to say that that is necessarily the correct figure for Giro to seek to achieve? If a return were to be set on the gross assets or on turnover, although that percentage return per annum would be less than a return on public dividend capital, it would be far more meaningful because it would set those operating Giro a meaningful task of achieving a rate of return. As it is, it is easy to envisage a situation where loan capital will be accumulated debt on Giro and might rise even further, and where 12½ per cent. on public dividend capital will be an inadequate return for Giro to be seeking to achieve, bearing in mind that it has the added job then of reducing the debts accumulated.
  This is a most technical and somewhat dry matter to discuss, but I have no hesitation in doing so because we have a proper responsibility to ensure that the taxpayer's liability is mitigated. We have been told that the Post Office's resources will stand behind Giro, and,
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  indeed, its resources amount to some 10 times the customers' deposits with Giro. There is no doubt that they are adequate. Equally, there is no doubt that the Government would not be prepared to allow a situation to arise in which there was any default on deposits. Therefore, in the last resort, the taxpayer is on the hook, and it is our responsibility to ensure that Giro is self-supporting and that the possibility of such default on its depositors and, therefore, on the taxpayers does not arise.
  Clause 2 allows the Secretary of State to change from time to time the objectives which Giro has to meet. We sought in Committee to ensure that, where such different objectives were set, adequate opportunity would be presented to Parliament to discuss the change in directives and to ensure that they were proper. We regret that there is no procedure in Clause 2 for parliamentary scrutiny of changing directives or the initiation of new ones, although we have received some assurances that the Minister would make Parliament aware of such changes and would announce them to it in the usual way.
  That assurance is inadequate. I would prefer the introduction of an Order whereby such changes in directive could be discussed. At least we should have an undertaking that any changes in objectives which Giro will seek to meet will be the subject of a paper to be laid before Parliament.
  I ask how the financial objectives of Giro relate to those of the Trustee Savings Banks and the other banking activities of the public sector—the national savings movement and the Post Office Savings Bank. These can properly be regarded also as part of the public sector banking services, although they offer rather differing services. It would be interesting to know the basis on which the financial objectives for each of them have been set and whether Giro matches them.
  7.15 p.m.
  It is immensely important that a bank should make adequate retentions out of its earning and profits to ensure that its capital structure keeps up the standards required by the Bank of England. We have explained that this is not necessarily the case with Giro, as the resources of the Post Office and, in the last resort,

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  the Government will stand behind it. If that is so, one questions why any capital reconstruction is necessary, and why any financial objective is being set. It is important that Giro should make adequate retentions, but the financial objective may therefore conflict with the requirement to pay increasing dividends under Clause 3. What solution is to be provided to this conflict?
  We have received inadequate assurances in Committee that the basis on which this important financial objective for Giro was set was adequate. I believe that a return on gross assets employed, or on turnover, would be far more meaningful as a guideline and objective. I hope that the Minister will put his mind to that. In the absence of such reassurance, I hope that my right hon. and hon. Friends will press this matter, but first it is proper to hear what the hon. Gentleman has to say.
  Mr. Parkinson: When one reads Clause 2, one is left with the reassuring feeling that Giro is to be set very businesslike targets. The Secretary of State is to talk to the Post Office and the Treasury and then fix a level of return on the capital employed. We have been told also that the rate of return has been roughly agreed at about 12½ per cent. on public dividend capital, and that Mr. Singer and his colleagues running Giro will do their duty. That sounds brisk and businesslike, and one may well wonder why, in the circumstances, we have moved an amendment to delete Clause 2, because on the surface it appears to be a perfectly businesslike and sensible clause.
  I must admit that I would be horrified if we allowed the Bill to go through without some clause setting commercial objectives for Giro. This is, therefore, a probing amendment. We are not seeking to denude the Bill of the financial protection of Clause 2.
  In the normal way, the essence of a bank is that it must build up its reserves, that it must make provision against all known contingencies, and that it must have substantial reserves of its own. Very few banks would consider paying a dividend if they had a huge accumulated deficit on their profit and loss account, or if they were making a very small profit at the time. Thus, Clause 2, which appears to be so businesslike, is based on the
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  fallacy that the Giro services are now solvent.
  Giro is to have a public dividend capital of £13 million and the balance of the capital will be a loan. But we know already that writing off £16·7 million of accumulated loss will still leave a loss of £16·7 million, so the public dividend capital of £13 million does not, in tact, exist. It has already been lost. So has another £3·7 million of the loan from the National Loan Fund. Therefore, we start straight away by saying that Giro will prove how businesslike it is by agreeing to pay a rate of return on its dividend capital of 12½ per cent.
  However, we know that that dividend capital does not exist. It has been lost and is merely an entry in a book. Therefore, Giro, in its very first action to prove how businesslike it is, agrees to pay a rate of return of 12½ per cent. on some non-existent capital.
  We immediately wonder how we can take seriously Ministers who represent the Secretary of State and those who represent the Post Office who have agreed to set targets which are totally unbusinesslike. Yet we are told that because the clause exists the taxpayers will get more protection and that Giro will operate on a businesslike basis.
  However, no sensible business man would ever have made an arrangement to pay a rate of return of 12½per cent. on capital that has already been lost before he agreed to start rebuilding those reserves. First, the management of Giro should not go to the Department of Trade and Industry and agree to pay 12½ per cent. on some non-existent capital. They should come to the House and agree that they will make every effort to rebuild their capital and to wipe out their losses. The very fact that the Minister is able to tell us that Mr. Singer and his management have accepted the absurd objective of paying dividends on non-existent capital makes one wonder just how seriously we can take the safeguards which are supposed to be built into the clause.
  Giro's first duty should be to recoup the £17 million which it has already lost. It should not be expected to pay any dividend of any kind until that £16·7 million, to be precise, is totally obliterated and until instead of a deficit we have at

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  least the restored position in which Giro's capital has been recouped.
  Our reason for moving this amendment and for having doubts about this clause is that although the clause looks brisk and businesslike, the Secretary of State and, I am sorry to say, the Post Office have already proved how unbusinesslike they are by agreeing to an arrangement which is total commercial nonsense—in other words, the arrangement to pay dividends on non-existent capital. Simply because there is an entry in the books which is called "public dividend capital" does not mean that one has capital. If one's losses exceed one's capital, it is gone.
  I hope that Mr. Singer will read the report of our debates. He should go back to the Department and say "I made a mistake. It is a raging nonsense for me to agree to pay a dividend on capital which no longer exists. You are saddling me and Giro with a great burden of debt, even though you have written off £16·7 million. The other £16·7 million is still like a great stone around my neck. I shall prove just how businesslike I am. My objective will be nothing to do with return on public dividend capital—it will be to recoup those losses which Giro has made to date. When I have done that I shall come back to you, Mr. Secretary of State, and discuss what sort of return you should have on the capital which will then come back into existence."
  We view Clause 2 with a certain amount of alarm. It looks sensible and businesslike but the way in which the Minister has told us that it will operate is exactly the opposite of being sensible and businesslike. We tabled this amendment to give us the chance to express our concern about the approach to date of the three bodies named in the Bill, which are supposed to safeguard the taxpayers' interests.
  Sir George Young: I, too, wish to speak in support of Amendment No. 3, which seeks to delete Clause 2 from the Bill. It might appear strange for me to do that because that clause has already been improved by the only Opposition amendment which we were able to persuade the Committee to accept, which deleted a few words.
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  This is a probing amendment to see whether we cannot at this late stage encourage the Government to stiffen the financial objectives facing Giro. The Minister outlined those financial objectives in the Second Reading debate and he reaffirmed them in Committee when he said:
  "The financial objective is that over the three years 1975–76 to 1977–78 Giro will, after paying interest on its remaining loan capital, earn an average annual return of 12½ per cent. on its public dividend capital plus retained profits."—[Official Report. Standinq Committee B, 10th February 1976; c. 157.]
  In setting that target the Government were faced with a real dilemma. On the one hand Giro is a bank and the Minister has given assurances to the House on Second Reading that
  "Competition with the banks will be fair."—[Official Report, 20th January 1976; Vol. 903. c. 1169.]
  I take that to mean that the Bank of England will expect Giro to have reserves which are equivalent to the reserves expected from a commercial bank undertaking the same scale of business and to adopt comparable ratios as the clearing banks so far as lending as a percentage of capital is concerned.
  I totally reject the argument that the Financial Secretary sought to foist on the House that Giro has been different in the past. That was an argument for giving it a different code of conduct in the future, although the whole object of the Bill is to enable Giro to compete on equal terms with the clearing banks and to provide the same sort of business.
  If Giro is to be a bank, quite clearly it has to build up its cash reserves quickly, together with its capital. As we made clear on several occasions in Committee, Giro is at present under-capitalised and technically insolvent. Therefore, as a bank, Giro requires very ambitious financial objectives in order to generate the funds which it needs to put it on a good banking basis. On the other hand, Giro is also a nationalised industry. The objectives of nationalised industries are traditionally expressed as a percentage return on capital. These objectives are set on a comparable basis to the return achieved in industry.
  In setting a target for Giro the Government have decided that 12½ per cent. would be a fair objective. That is how they have attempted to resolve the

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  dilemma between setting Giro a target as a bank and setting it a target as a nationalised industry. In Committee the Minister said:
  "The form of target chosen, that is a return on shareholders' capital, has similarities to the traditional basis adopted for nationalised industries of a return on net assets."
  Faced with that dilemma, the Government decided to reject the financial object and selected those appropriate for a bank and selected those appropriate for a nationalised industry. The Minister sought to defend this decision when he said:
  "I question whether it is entirely fair to compare the performance of Giro, which is just taking its first tentative steps into banking, with the long-established banks with their large resources."
  That is the argument which the Financial Secretary also used earlier this evening. More worrying is what was also said by the Minister:
  "We question the view that the principles to be applied by the Bank of England in assessing the adequacy of banks' capital are directly applicable to Giro as if it were an independent bank."—[Official Report, Standing Committee B, 10th February 1976; cc. 158–62.]
  In making that comment the Minister was, in part, withdrawing the assurance he gave us on Second Reading that competition with the banks would be fair. He seems to use the argument that Giro is somehow a special case and that the criteria which might apply to the clearing banks may not need to apply to Giro. It is difficult to say that Giro will compete fairly when it does not have to build up the same reserves and when it does not have to have the same capital ratio to its lending as the clearing banks.
  A further complication was when the Minister said that it was not the reserves of Giro which were relevant but the reserves of the Post Office as a whole. If that is so, one wonders why there is any need to have any monetary control over Giro at all if it is absolutely clear that under no circumstances will the Government let the Post Office as a whole go bust.
  I think that the Government are in a terrible muddle about the financial objectives. On the one hand, Giro is a bank, and must be treated like any other bank. On the other hand, it is not really a bank
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  but just a trading arm of the Post Office, with all the resources of the Post Office behind it. On yet another hand, it is a nationalised industry and must, therefore, have a profit target based on its net assets.
  7.30 p.m.
  It is not clear what sort of bank the Government think that Giro is. The longer our Committee proceedings went on, the more confusion and difficulty many of us found in trying to identify what sort of animal Giro was and what sort of targets the Government were setting. The Government should rethink the financial objectives. My concern is that they are not high enough in that they will not allow Giro to generate the extra capital that it desperately needs if it is to be as well founded as I believe a clearing bank should be.
  A totally arbitrary figure of 12½ per cent. has been plucked out of the air. It has been applied to an equally arbitrary figure—namely, the public dividend capital, which was a residual figure and the left-over after negotiations between the Treasury and the Post Office. We are left with this arbitrary return on an arbitrary figure as the financial objective for a bank. It is a totally unsatisfactory state of affairs.
  Another complication to which I should like to refer relates to the obligation of the Post Office to meet its rate of return as that affects the price that it will have to charge. I raised this matter in Committee and asked the Minister whether the Post Office would have to increase the tariffs for Giro if it were to meet the new financial target. The Minister replied:
  "This is a marketing decision influenced in part by competitive considerations. The objective is there to be met and if price rises are necessary for its achievement, they will have to be introduced—subject, of course, to the Price Code."—[Official Report, Standing Committee B, 10th February 1976; c. 158.]
  I am not sure that that is a satisfactory explanation. We know what the target now is and the Post Office should be able to work out whether it can meet this new target without changing its tariffs or whether it will have to change them. If a tariff change is necessary, may we be told whether it is in connection with the Price Code and what the impact on the Post Office's marketing of Giro might

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  be? If the financial objective is beyond the reach of the Post Office because the tariffs are in direct contravention of the Price Code, this puts another complexion on our debate about financial objectives.
  In conclusion, I find the financial objectives to be a rather unhappy compromise. They do not fulfil the criteria of a bank, they may not relate to the marketing criteria of the Post Office, and they may conflict with the Price Code. Over the next few months, I hope that the Minister will have discussions with the Bank of England and other authorities involved to try to derive a more appropriate set of financial objectives for the Post Office, and will set out quite clearly on what basis the objectives have been arrived at and what the implications might be for Giro and, in particular, its tariffs.
  Mr. Viggers: There is a passage in one of Shakespeare's plays in which I think Beatrice says to Benedick,
  "I wonder that you will still be talking, signior Benedick; nobody marks you."
  I sometimes wonder whether we are being marked or noticed by anyone. We have had a passing visit from the Financial Secretary. I passed the Chancellor of the Exchequer outside the Chamber just now. I do not know whether the Financial Secretary has gone to help the Chancellor to look for people with "tiny little Chinese minds" in the corridors of power.
  The capital base for Giro as projected is completely unrealistic. I have just looked at the Second Reading debate. I see that the Minister of State then said:
  "In place of the existing capital, which consists entirely of long-term loans from the National Loans Fund, Giro's new capital of £25·8 million will be half in the form of public dividend capital and half in the form of National Loans Fund loans."—[Official Report, 20th January 1976; Vol. 903, c. 1170.]
  Therefore, it is quite obvious that the way in which the new capital has been worked out is that the Government have thought of a number and halved it.
  The financial objectives of Giro will lead it into commercial fields and away from what could be loosely called the "public duty" sector. We know that the Chairman of the National Giro is a commercial man with a commercial background—and all credit to him that that should be so. However, the more he
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  seeks to enforce a high standard of financial objectives upon Giro, the more likely it is that he will be led into paths for Giro which are commercially profitable and which are not necessarily of public service to the country as a whole. The financial objectives are based on the return on a very artificial capital employed.
  I think that we are entitled to broaden the question slightly and to ask what the purpose of the Bill is anyway. What is the overall objective? The Financial Secretary said that he was shocked by the exaggerated claims made about the Giro. However, it was not from the Opposition side of the House that it was said that,
  "Giro Chief outlines the basis for massive State Bank."
  Mr. Gregor Mackenzie: It was not.
  Mr. Viggers: That was the Chairman of the National Giro. The Minister of State, who holds an office of Government, cannot bring a Bill before the House and deny a statement made by the head of the nationalised organisation concerned. The Minister cannot say that he is not responsible for the statement of the chairman of his own nationalised organisation.
  Mr. Gregor Mackenzie: I have read with great care the remarks attributed to Mr. Singer in the newspapers. I am not certain whether his remarks were interpreted aright. All that I or any Minister can do in the House of Commons in this respect is to present a White Paper, which we have done. On Second Reading I made my comments on the situation. I do not think that the hon. Gentleman is being fair to me. The Government's objectives are quite clearly laid out in the White Paper and in the Bill that we are discussing. I cannot be responsible for remarks published in the newspapers—about which I am not certain, in any event.
  Mr. Viggers: I disagree. That is not all that the Minister of State can do. He can do two things. The first is a narrow thing. He can say on behalf of the Government that he disowns the statement
  "Giro Chief outlines the basis for massive State Bank."
  The Minister can deny that it is the Government's intention to set up a State bank the size of Barclays with overall assets of £7·4 billion. He can deny that if he

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  wishes, and can deny that it is the Government's objective. It would have saved us a lot of time in Committee if he had done it previously. I accept the Minister of State's statement that Mr. Singer has given his own personal view, but he is the Minister responsible.
  The second thing that the Minister can do is to draw the teeth of the Bill. He can take from the Bill the wide, all-embracing powers that it currently contains and he can make it the kind of Bill that he says he wants. At present it is a very much wider Bill and it is a dangerous Bill. It is not good enough for the Minister personally to disown responsibility for such a wide Bill. It is at present the most wide-ranging Bill that one could conceivably imagine, giving the Government power, through Giro, to go into all areas of commercial banking.
  With all respect to the Minister of State—and we of the Opposition do respect him—it simply is not good enough for him personally to disown responsibility, We are very apprehensive about the Bill. It has not been widely understood, I believe, among Ministers, and certainly not by the public at large. I am not reassured by the Minister's comments. We remain deeply apprehensive. The Minister ought to clarify his own views and those of the Government, or bring in a Minister from the Treasury who will listen to the debate and, perhaps, give an informed view.
  We have a confused picture. We have a sort of bank that does not comply with Bank of England rulings. We have a thing which does not have a capital structure and which is quite inadequate. We are told that it is purely the banking arm of the Post Office.
  Of course, we know why this monster is brought before us. We have been saved the words, but on probing I am sure that we should hear the usual parrot cry that this is featured in the Labour Party manifesto. It has been dressed up as if it is a bank but, in fact, it is not. Clause 2 is fairly businesslike but it is out of place. The objective should be to set up an efficient money transmission service by an extension of powers by means of a modest Bill. It would be logical to set a financial objective based on the turnover of the National Giro. The present objective is completely out of place.
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  Although this is a probing amendment, I feel that the Government should take proper note of it. The Government have not faced the problems that they are creating for themselves. The National Giro does not have a proper capital structure or the need to service one as would a proper bank. Normally if a bank were to shelter under the fatherly arm of a parent bank, as the Giro shelters under the fatherly arm of the Post Office, there would be some sort of guarantee charge levied by the parent on the subsidiary. There is no such charge in this case.
  The Government do not seem to understand that they are creating an animal which will either have no staff or an extra 14 staff. We do not know whether the profit objective is based on an increase in staff. I am horrified to find that the Government do not know either.
  Mr. Gregor Mackenzie: First, I want to clarify an issue that has been running through this debate and through many of our earlier deliberations. It is an issue that applies to the articles that I have read which appeared in The Guardian last week.
  Should the Government at any stage wish to move in the way of having a massive State bank—we must be fair to Mr. Singer and acknowledge that that is not a quote but a comment by the journalist who wrote the article—the Bill would not be the appropriate vehicle. Members of Parliament would properly expect a Bill of quite a different nature to be brought before the House.
  We put forward our proposals in the White Paper. We decided to produce the Bill because there had always been an element of doubt about what Giro actually meant. The hon. Member for Ealing, Acton (Sir G. Young) expressed his concern, but he will know from his previous experience that there was an element of doubt about the terms of the Giro banking operations. It was primarily because of that doubt that we introduced what we considered to be a clarifying clause. The clause sets the Bill in keeping with the rest of the 1969 Act.
  I can assure Conservative Members that whenever a proposal comes from the Chairman of the Post Office Board and his colleagues it will be individually

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  and carefully scrutinised by the Department and by the appropriate monetary authorities. I am sure that the Chairman and his colleagues, including Mr. Singer, do not envisage that the Bill, on receiving Royal Assent, will suddenly explode into a massive State bank, or anything of that nature.
  7.45 p.m.
  We see this undertaking as a modest banking enterprise which fulfils a useful function. That is a matter on which I thought we were all agreed. If there is any extension of the services provided by Giro they will have to come before Ministers, before the Treasury, and before the various monetary authorities.
  Mr. Nelson: I appreciate that the Minister has sought to give some assurances, but will he say quite clearly whether he considers there are any limits on the size to which Giro may grow? Under the Bill it can continue accumulating deposits and taking business away from joint stock banks. There is no limit to the amount of business that it can accumulate. If the hon. Gentleman is assuring us that, if appropriate, another Bill will be brought forward, will he say when that will be done and whether an enabling Bill will be introduced?
  Mr. Mackenzie: When referring to the newspaper article that referred to a joining of the national savings movement, Giro, the Paymaster-General's Office, and so forth, I said that the Bill was not the vehicle for anything of that sort. The hon. Gentleman seeks an assurance on how vast Giro will become. That is asking me to take on the role of a fortune-teller. I hope that Giro will succeed. I hope that it will meet with greater success than it did in its early stages. It would not be sensible for a Minister or anyone else to make guesstimates about Giro's position in five or 10 years' time. That will depend entirely on the support it receives from the general public. I hope that they will support it.
  Mr. Tim Renton: The Minister has said that we are asking him to take on the role of fortune-teller. Surely that is not the case. We are asking him to do precisely the same exercise as Treasury Ministers did in relation to the Trustee Savings Banks. They came forward with their plans and told us the level of loans
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  or advances that we could expect in three years' time and four years' time. They said that they would represent under 1 per cent. of deposits, and later around 1 per cent. On that basis the Bill received support from all parties. It went through Committee quickly and easily. We are looking for a similar specific advance business programme. Surely the hon. Gentleman must have that information from Giro. Why is he not prepared to put it before the House?
  Mr. Mackenzie: The hon. Gentleman and his hon. Friends keep trying to compare the Post Office with the Trustee Savings Banks. They are quite different animals. I think that this point was perfectly adequately dealt with by my hon. Friend the Financial Secretary.
  Should we leave out Clause 2? That rather surprises me. Perhaps I take amendments too literally. It appears as though the enthusiasm of Conservative Members for preventing this Bill from becoming law means that they are prepared to relieve Giro of obligations that I am asked to impose in other contexts. It seems that they are saying that we should not have a financial target. That is what the amendment says. It may be tempting to accept the amendment, but I shall put Tory Members out of their misery and say that I cannot do so. A financial target for Giro is a proper concomitant of introducing PDC. We have discussed the issue in Committee. Without it there is a danger that by relieving Giro of interest obligations on National Loans Fund capital we would be giving it a soft option. I do not want to do this.
  Tory Members when in Government saw public dividend capital as respectable when coupled with a financial objective. We could relieve the Secretary of State of his statutory obligations to set an objective and leave it to administrative initiative. That would be very much out of accord with the Opposition's views in other directions. There are precedents for legislative provisions on financial objectives, for example, with British Steel Corporation and British Airways. I cannot accept an amendment that simply wipes this clause from the Bill. We set Giro a demanding target. After negotiation it has been accepted. It is the 12½ per cent. that I mentioned in my Second Reading speech—the annual average

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  return of 12½ per cent. on the PDC and retained profits from 1975–78.
  Mr. Parkinson: Will the Minister of State deal with the point I was making, which was that although we call this public dividend capital it no longer exists? The losses on Giro's books totally extinguish the public dividend capital. We say that it is in no way realistic to suggest that Giro will pay a dividend of £5 million over three years on public dividend capital when it has a huge accumulated loss. Giro would be better employed recouping its losses instead of entering into such agreements to pay dividends.
  Mr. Mackenzie: The hon. Member knows that we have written off or are in the course of writing off part of this loss, and we have put the other part into public dividend capital. When the Conservatives were in Government they spoke fulsomely of the virtues of public dividend capital. The hon. Member for Henley (Mr. Heseltine) praised it when he was a Minister with aviation responsibilities.
  Let me deal now with Amendment No. 4, which we are also considering. It would be a serious mistake to set a profit figure for Giro to attain year after year, as is suggested. We looked at this as a possible type of target, but dismissed it, largely because it would fail to take account of changes in the value of money. We agree with the Opposition that it is necessary to ensure that the objectives are high enough for Giro to make a profit. That does not mean that I can accept the amendment. It is unrealistic to invest with the full majesty of the law duties, obligations and requirements that are susceptible to external and unforeseeable influences. The furthest that nationalisation Acts have gone in this direction is in a requirement to balance the books, taking one year with another. After the write-off of losses coupled with the ability to provide a wider range of services, Giro is expected to be profitable, on the basis of detailed forecasts. We will do all that we can, fairly and without subsidy, to assist it. I do not feel, however, that I can accept the amendment.
  The hon. Member for Mid-Sussex (Mr. Renton) raised the question of Giro's objective. This is expressed in terms of an average over the first three years. That
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  goes some way to meeting the hon. Gentleman's suggestion of a varying target. Apart from that, the objective will be regularly reviewed by the Department and the Treasury. Our aim will continue to be the setting of an objective which does not make life easy for anyone. I am sure that Giro wants to be set an objective that will stretch it.
  The trading services of Giro have shown a steady improvement over the past four years. We must expect this to continue, combined with capital reconstruction. This should enable the target rate of return to be reached. The hon. Member also asked me to clarify the question of public sector manpower, as did the hon. Member for Ealing, Acton. I shall try to clarify what I said earlier. There was no intention on my part to mislead anyone.
  There are no direct effects on the number of civil servants as a result of this measure. The implications for the Post Office as a public sector industry are difficult to quantify. I said that 14 additional staff were being taken on to operate the Giro personal loan scheme. Further increases in Post Office staff must be expected, commensurate with the growth of the scheme. I have emphasised the phased introduction of staff. I can give no numbers, nor details about types of staff, because this will be dependent on decisions taken by the monetary authorities.
  I was also asked about balance sheet ratios and about the liabilities that Giro will have to its customers. The Financial Secretary dealt fairly fully with the question of capital adequacy. I went into the subject in detail in Committee. I remind hon. Members once again of the issues involved. The liability to Giro depositors is that of the Post Office as a whole. The hon. Member for Ealing, Acton made much of this, but with his considerable experience of the Post Office, he must know this to be so.
  8.0 p.m.
  The security for account holders' deposits rests on the credit-worthiness of the whole Post Office whose reserves stand behind Giro. In this situation, we cannot apply the test of capital adequacy to the Giro balance sheet. The fact that the Post Office as a whole has an obligation to Giro depositors does not mean that Giro is given some kind of hidden subsidy. It was established, when

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  Giro achieved the first of the two targets set by previous administrations, that the Post Office is better off with Giro than without it.
  Giro will not go in for speculation in property development, which has led to the establishment of lifeboats funds. Its investment will be limited to Government and local authority securities.
  Mr. Tim Renton: The Minister of State has repeated the point made by the Financial Secretary to the Treasury in an earlier intervention, but the Financial Secretary was referring to the balance sheet of Giro as a money transmission organisation. We have referred to something very different—Giro's future balance sheet, as a banking organisation in competition with the clearing banks. Is the Minister of State prepared to assure us that Giro will continue to keep its assets in the same liquid form and ratios as they were at the end of March?
  Mr. Mackenzie: The matters raised by the hon. Member are subject to constant consultation with Treasury Ministers, as I have said time and again. I can go no further than that. I have looked at the amendments with the greatest care. Perhaps I have taken them far too literally, but I do not feel that I can recommend them to the House.
  Mr. Tim Renton: When the Minister of State waves his bat at the balls which we bowl, he either does so very successfully or seems to have totally failed to see the ball at all. That is why we do not get answers. The ball whizzes past, there is a noise, but the Minister of State wonders what has caused it. He has not seen the ball and he has not dealt with the points we put to him.
  He tried to impale us on the obvious hook of suggesting that we wanted all financial objectives removed from Giro, but I dealt with this in my opening remarks and the point was covered much more adequately by my hon. Friend the Member for Hertfordshire, South (Mr. Parkinson). We made it abundantly plain that we were seeking to draw out the Minister to tell us much more about Giro's objectives than we were told in Committee. That is the point at which he flashed his bat. Perhaps the ball has gone to the leg boundary, but I have
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  not seen it. We had no reaction from the Minister at all.
  Mr. Gregor Mackenzie: If an amendment is put on the Order Paper, the Minister who has to reply must assume that it is what the Opposition mean. I prepared my notes on that basis. It is all very well the Opposition now saying they put down an amendment but did not mean it. It is credited to them on the Order Paper.
  Mr. Renton: I am surprised at the hon. Gentleman. He has a great deal more experience of the procedure of the House than I, but surely he has heard of a probing amendment? With his deep psychological insight, I thought he might have seen what was behind the amendment, and in his wish to approach it in a non-partisan spirit he might have dealt with our points more adequately.
  He said that writing off all the losses, which he had thought of doing, would have given Giro a soft option. However, we believe—and I think that in his heart of hearts the Minister shares this belief—that we have arrived at a compromise structure which does not suit anyone. It does not give Giro an adequate banking balance sheet, but sets it some almost impossible targets. How is it to meet the 12½ per cent. return on capital and how can the figure of 20 per cent. be achieved? None of these matters was dealt with by the Minister of State.
  As my hon. Friend the Member for Gosport (Mr. Viggers) said in his brief and telling speech, what appears to have happened is that the experts sat down with their slide rules but were unable to come up with the answers. Consequently, they cut the losses in two, wrote off half and made the other half public dividend capital. However, they were probably a little more sophisticated than that. Writing off more than 50 per cent. of the losses would have been embarrassing. So slightly less than half were written off. The amount to be converted into PDC is slightly more than the outstanding loans. I suspect this was done for largely cosmetic reasons. Nothing leads me to believe it has been properly thought out. Giro is to become a bank without an adequate banking balance sheet and with targets which are not likely to be achieved.

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  The Post Office would be far better employed using its manifold talents to improve the letter service, to ensure that mail gets to business and private users more efficiently and to ensure that the telephones work, rather than going into banking in this unplanned and disorganised way.
  The Minister of State has still not told us whether the objectives set for Giro are comparable with the Price Code. Nor did he deal with our point that Giro will be a new animal, pulled in different directions by different Government Departments. It reminds me of that strange animal created by Dr. Doolittle the "Pushmi-Pulyu" which, from the drawings in the Dr. Dolittle books, always seemed to be a very uncomfortable animal. Like Janus, it had to face in two directions at once and that is what will happen to Giro.
  The Treasury will exercise credit control and monetary restraint and will put strict limits—which we shall probably never hear about—on Giro's expansion, while the managing directors of the Post Office and Giro, together with the Department of Industry, will be saying that Giro should lend more because it has to make a profit to justify its new activities. The new banking division of Giro will be put in an extremely difficult position.
  My hon. Friend the Member for Hertfordshire, South said that the first duty of Giro should be to recoup the millions that Giro has lost over the years, and that Giro should forget any notion of paying dividend. I suspect that my hon. Friend, with that generosity to the nationalised industries for which he is well known, has been over-optimistic. On a fairly simple reckoning it would take Giro at least 20 years at its initial profit targets to make back the losses of the past few years. If interest is added to the losses it becomes an impossible task.
  My hon. Friend the Member for Hertfordshire, South also raised in detail the definition of public dividend capital. He said that it was perfectly reasonable to start off an enterprise with a balance sheet composed in part of loans that carry interest and in part of equity capital that does not carry interest but that will share in the profits of the business when profits are made.
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  That, surely, is the proper definition of public dividend capital. That is a far cry from dignifying the writing off of losses with the name of public dividend capital. That is a balance sheet nonsense. We are saying "Now you see it, now you do not; you had a loss, but you no longer have a loss; it has become equity capital". That makes chaos out of the basis on which public dividend capital was originally started and on which it should be made available in future to nationalised industries.
  My hon. Friend the Member for Ealing, Acton (Sir G. Young) asked what sort of animal was Giro. He asked whether it was a nationalised industry, a bank or a trading division of the Post Office. He rightly fears that it will fall between all three stools. I regret that in answering the debate on the amendment and in other full debates on Giro the Minister of State has been unable to come forward with some straightforward objectives for Giro.
  When Giro gets going as a bank it should come forward and say openly that the following four standards will be achieved: unfair competition will not take place; management performance will be capable of realistic assessment by Ministers and, through them, by the House; the banking relationship with the rest of the public sector will be assessed and criticised and it, too, will be on a fair basis; and normal prudential oversight of Giro will be conducted and available at all times. Without those four standards Giro will not meet the expectations of the Minister and the Post Office.
  What a contrast to the debates on the Trustee Savings Bank has been our debate on the amendment. The Minister of State has periodically told us not to compare the two, but it is difficult not to do so when both Giro and the Trustee Savings Bank are being encouraged at the same time to go into banking. In speaking of the Trustee Savings Bank Treasury Ministers emphasised the note of controlled and careful growth. The Minister of State used the words "modest growth", but he has not been prepared to quantify that. In moving the amendment I sought for just that quantification.
  The Trustee Savings Bank came forward with forecasts of growth of loans over the next four years. We have had

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  nothing of that kind from Giro through the Minister. The scope of Giro to grow is infinitely greater than that of the Trustee Savings Bank. The Trustee Savings Bank has only 1,500 branch offices and approximately 450 chequeing accounts per branch. The Post Office has 21,000 branches—approximately 15 times as many as the TSB—and everyone is a customer of the Post Office.
  8.15 p.m.
  If every branch of the Post Office were in due course to have the same number of Giro accounts as there are chequeing accounts with every banch of the TSB at present, and if every one of those Giro accounts were to have an overdraft or a personal loan of £500—which is the average figure for personal loans in Giro—the amount of money lent by Giro would be £4,725 million. Once it is known that personal loans and overdrafts are available, it is not difficult to envisage Giro having an overwhelming demand for such facilities which could quickly escalate into billions.
  Mr. Gregor Mackenzie Mr. Gregor Mackenzie indicated dissent.
  Mr. Renton: The Minister shakes his head, but until he tells us the target we must follow on to these conclusions.
  My hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) spoke of the potential danger of this expansion of Giro to the money supply. The potential danger lies not to the money supply but to domestic credit expansion, which is the figure emphasised by the Chancellor of the Exchequer in his letter of application to the International Monetary Fund. Domestic credit should be controlled, but Giro could become the instrument for doing the opposite.
  We fear that Giro through poor management and lack of targets could become the London and County of tomorrow. There are to be inexperienced people—with no addition to the staff—pushing out loans and overdrafts through 21,000 branches. I make no imputation about the honesty and integrity of those people, but there is no easier way of losing money than to have inexperienced people who do not know the business making loans and overdrafts available on an uncontrolled basis.
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  Against that background it is nonsense to attempt to produce an additional profit for Giro by grafting on to a computerised money transmission system wide powers of commercial banking with all the inherent risks that go with it.
  Mr. Gregor Mackenzie: I have said time and again, in Committee and in the House, that when any move is made to expand Giro's services it will be subject to the stringent scrutiny of the monetary authorities—and the hon. Gentleman knows much more about that than I do.
  Mr. Renton: The Minister of State, in saying very politely that I know more about these matters than he does, reminds me that at the outset of the proceedings I failed to declare an interest as a director of a bank whose activities are almost all in overseas banking. I do not think that we are a competitor of Giro, and I have declared my interest both on Second Reading and in Committee. I apologise for not having declared it again at the beginning of the debate. I must have been carried away by my eloquence in moving the first amendment.
  The Minister of State tells us, as he has previously, that any expansion by Giro will be subject to stringent control by the monetary authorities. Why, then, does he not wait until the new supervisory legislation is available, and until the White Paper about the supervision of the banks being prepared by the Treasury, is to hand? Then we could see into what framework Giro will have to fit, who its bosses are to be, and we could accept with much greater readiness the assurances given by the Minister of State.
  I do not propose to suggest to my hon. Friends that we vote for the removal of the clause, and I should like, therefore, to ask permission of the House to withdraw the amendment. I shall do so more in sorrow than in anger. We have not had our questions answered. Objectives have not been defined. I have no doubt that in a few years' time we shall be debating how to write off the losses which will have been incurred by the banking division of the Post Office.
  I beg to ask leave to withdraw the amendment.
  Amendment, by leave, withdrawn.

Clause 4

  REDUCTION OF CAPITAL DEBT OF POST OFFICE
  Mr. Nelson: I beg to move Amendment No. 8, in page 2, line 30, leave out Clause 4.
  This last amendment brings us to the area of the Bill concerned with the debt-equity ratio that Giro will attract after the reconstruction set out in the Bill. This has already received some attention, both in Committee and during our discussion on the last amendment. The eloquence and detailed knowledge of my hon. Friend the Member for Mid-Sussex (Mr. Renton) are an elightenment and assistance to us in passing judgment and discussing this matter.
  There are, however, some important points worth raising here, because it is quite clear that the Government's reconstruction has largely been determined by that of two other State industries. I feel that the guiding line for capital reconstruction of Giro should be that existing or prevalent in the joint stock banking sector and not that which the British Steel Corporation or the British Airways Board has at this moment.
  The White Paper says that about £16·7 million—which is half the past losses of Giro—should be written off, together with public dividend capital amounting to £13 million, or half the Giro's indebtedness remaining after the write-off. These two figures total £29·7 million—the figure mentioned in Clause 4, which the Government are seeking to write off. It is not Conservative policy to write off public debt, because it is not Conservative policy to incur it in the first place, and we deprecate the writing off of public debt, as we do the incurring of it. One cannot make public debt disappear. The taxpayer is still on the hook for this sum.
  The accumulated losses of Giro over past years have had to be financed in various ways, either by the taxpayer paying his taxes or by the Government borrowing money on his behalf. These moneys have been borrowed and paid by the taxpayer in order to subsidise the losses incurred by Giro. Whether one continues to have those losses—the £29·7 million—in Giro's balance sheet, in the Post Office or in the Consolidated Fund, they are still debts for which the tax-
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  payer is on the hook. Therefore it is worth emphasising that we are not making debt disappear.
  The taxpayer has had to suffer the losses of Giro in recent years and will continue to suffer and have to pay the cost of the accumulated deficit. But the basis on which the overall figure for write-off has been struck appears to mean that the loss to the Post Office from the National Loan Fund and the resulting ratio of National Loan Fund indebtedness to public dividend capital is broadly in line with that for the British Steel Corporation and the British Airways Board, two of the bodies mentioned in the White Paper. This is the premise we question.
  The Minister in reply, in Committee, said that while banks usually operated a debt-equity ratio of 20 per cent. to 80 per cent., the debt-equity ratio of the two industries I have mentioned was roughly around 50:50, and that it was decided that this should be the basis of the capital reconstruction of Giro.
  The Minister admitted that
  "the debt-equity ratio of the banks is very different from that of the Giro".
  He added that
  "the best course is not to depart too far from the existing public sector precedents, these being the British Airways Board and the British Steel Corporation."—[Official Report, Standing Committee B, 10th February 1976; c. 223.]
  The Minister obviously believes that public dividend capital must form a substantial element in Giro capital. We said that 50 per cent. seemed to be about right.
  There seemed to be two basic possibilities open to the Minister and the Government in deciding to undertake a capital reconstruction for Giro and therefore to write off an amount of debt as set out in Clause 4. They can accept that any capital reconstruction, any writing-off of debt, any paying-off of public dividend capital, is purely cosmetic—as, indeed, to a certain extent it is, if we look at the whole of the public sector account, with the taxpayer and the Government being on the hook for the liabilities of Giro and the Post Office.
  One can say it does not matter, and that therefore it can be left as it is, allowing the accumulated deficits to remain. Accepting that Giro may not in the future

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  be able to make sufficient earnings to recoup past losses, nevertheless the taxpayer will have to continue to subsidise Giro's operations. But instead of that, as if by a magic wand, it is suggested that £29·7 million be written off and £13 million be converted into public dividend capital, thereby making Giro, as a separate entity or separate banking arm, viable. It is suggested that in some way one is improving the situation for the taxpayer and that this is better overall financial management.
  The fact is that unless it affects the amount of business Giro is able to obtain, or unless it puts Giro in the position where the achievements and aims of its management will be enhanced, there will not be any great difference from such a capital reconstruction.
  The alternative to leaving the capital structure as it is, with its accumulated deficits, is to recognise that Giro is a separate banking arm of the Post Office and should be a large extent be regarded as a separate entity. If that is the case—and to some extent this is recognised, by the publishing of separate accounts for the Giro—it seems to us that one is recognising that it is a separate entity, and that it should therefore be subject to the same rules, requirements and scrutiny as those operating in the private sector, and subject to the commercial constraints and requirements that the Bank of England places on those banks in terms of the capital structure which they have to sustain.
  The Minister of State said in Committee:
  "We question the view that the principles to be applied by the Bank of England in assessing the adequacy of banks' capital are directly applicable to Giro as if it were an independent bank."—[Official Report, Standing Committee B; 10th February 1976, c. 162.]
  Under the proposed capital reconstruction Giro will continue to have negative free capital resources—that is to say, the public dividend capital of Giro will be £3·7 million less than the accumulated deficit. No bank in the private sector would be allowed to trade with a capital structure such as that proposed in the Bill, let alone that which has existed up to this stage. Indeed, Giro is seeking to take on major new banking services to make it, as it were, a general bank.
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  It is proper, having recognised that to some extent it is a separate legal entity, that it should have a capital requirement to conform with the strictures of the Bank of England.
  8.30 p.m.
  We are told that the Post Office will stand behind Giro. On 31st March last year the Post Office had a general reserve of £1,161 million—10 times the Giro's customers' balances. Excluding Giro, the net current assets of the Post Office were £31 million. Is it desirable that Post Office customers—or, in the last resort, the taxpayer—should support Giro when it should be encouraged to stand on its own feet? What is important is that Giro should discharge, and be seen to discharge, its part of the implicit bargain by which its depositors are, in the last resort, to enjoy protection. This must involve behaving prudently in general and maintaining accepted standards of capital adequacy. This is necessary to ensure that relations between the Government and nationalised industry are on a proper footing, and—perhaps more important—to ensure fair competition between Giro and the banks.
  The fact that banks outside the public sector are required, by their own convention and the wishes of the Bank of England, to finance a certain proportion of their banking assets with capital and reserves, rather than deposits or loans, operates as an important commercial constraint. It affects the types and amounts of business that they are able to undertake, and the rates of return which they must seek. These are most important factors to be taken into account when working out the amount of loan to be written off and the capital structure required by Giro for its operation in future.
  The Conservative view—it is certainly my own view—is that the capital write off of the debts of Giro should be the minimum possible. We should seek to put Giro in a position in which it can earn a rate of return to produce net earnings sufficient to accumulate net earnings without paying dividend to the Consolidated Fund. Over a short period of time—no fewer than five years and no more than 10 years—Giro should accumulate sufficient reserves to enable it to comply with the requirements laid down by the Bank of England.

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  At a time of spiralling expenditure and heavy public sector deficit, we should scrutinise further the losses to be written off by the Government. It is worth noting that the present Government have successively reduced the heritage to be enjoyed by future generations. Although it is said that only £27½ million is to be written off, this is yet another example of the way in which massive debts are being incurred by the public sector. It should hasten the day when the operations of public sector industry are put on a more viable footing and when the good intentions of the Government's industrial policy are translated into facts. The Government's deeds are often different from their good intentions. They could make a good start by explaining in full the basis on which they have decided to write off this amount. They should put Giro on a proper footing, so that it can accumulate sufficient reserves to comply with the requirements of the Bank of England.
  We hope that it will not be necessary to take the matter to a Division. However, we shall seek detailed assurances on some of these points.
  Mr. Parkinson: I should like to underline the excellent points made by my hon. Friend the Member for Chichester (Mr. Nelson). The truth of the matter is that under cover of being brisk and businesslike, and in an effort ostensibly to give the public a chance to become owners of a viable commercial bank, the Government are asking us tonight—once again in an empty House of Commons—to write off £17 million of taxpayers' money. At a stroke, we are getting rid of that large sum of money. We are being told to take the view that it is a matter of bad luck that Giro has lost all this money, and that we must straight away write off the whole sum of £17 million.
  Although it has lost another £16·7 million, it will make all sorts of noises about being businesslike and setting objectives, and it will assure us that from now on it will all be different. We are very sceptical about this. The facts speak for themselves. The poor British taxpayer has had written off £7,000 million in deficits on the nationalised industries since nationalisation began, so we might be congratulating ourselves that tonight we
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  are doing the taxpayer a favour and writing off only £17 million of his money.
  Mr. Gregor Mackenzie: I know that the hon. Member always wants to be fair. No doubt he will want to divide that figure and tell us how much was written off by Labour Governments and how much by Conservative Governments. I am sure that we would all find that very interesting.
  Mr. Parkinson: I know that you, Mr. Deputy Speaker, would not like me to stray into a discussion of the range of nationalised industries.
  Mr. Tim Renton: Yes, go on.
  Mr. Deputy Speaker (Sir Myer Gal-pem): Order. I hope that we shall not have a violent row. The debate has been very peaceful so far.
  Mr. Parkinson: I think that with the numbers present tonight, we should find it difficult to have a violent row.
  I accept that the Conservative Party is hardly any better at running nationalised industries than the Labour Party but at least we have learned that Governments do not know how to handle them. We have learned not to create any more until we have worked out how to organise, control and manage them.
  That is a lesson that Labour Members have not learned. They have spent a great deal of time doing exactly the opposite—creating yet more national burdens. In two or three years, perhaps when we are writing off another £20 million of the money in the Post Office because Giro has gone wrong, that figure of £7,000 million will be considerably greater.
  Once again, with a stroke of our legislative pen, we are writing off £17 million of the taxpayer's hard-earned money. What is worse, the clause creates a capital structure that is commercial nonsense. My hon. Friend presented us with this picture of Giro going to the Department of Industry, the Treasury or the Bank of England and saying "We are thinking of setting up a marvellous bank with £13 million of capital. However, we have already lost £17 million, so we will have a minus quantity where the shareholders' funds should be. But I am sure that that will not worry you. You will let us carry on because we have an ideal structure: we are not a genuine commercial bank at all,

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  but yet another loss-making national liability".
  Clause 4 is a further indictment of nationalised industries and a further squandering of the taxpayers' money. In the guise of a businesslike approach, it will create commercial nonsense. I agree that we should not even dignify the clause by voting to remove it. We should just mark it sadly as further evidence that we are right to resist the spread of nationalisation and move on quickly to something more important.
  Mr. Gregor Mackenzie: The amendment would prevent the writing off of half of Giro's accumulated losses. I referred on Second Reading to Giro being allowed modestly and prudently to expand. I want to emphasise that again for the benefit of all those concerned. The present services provided will be modestly expanded. Therefore, we thought it right to let it have a fresh start. There is no point in leaving it to carry on with its present burden of interest debt. I do not relish asking the House for the write-off of losses any more than I am sure Conservative Members did when they were in power.
  The hon. Member for Hertfordshire, South (Mr. Parkinson) did not respond to my invitation, which I thought was fair, to say how much had been written off by previous Conservative Administrations. However, he will recall that it was a great deal of money. If my memory serves me right—indeed it must do so because I have a piece of paper in front of me which tells me the exact figures—it was £1,400 million. That is a great deal of money, by anyone's standards.
  Mr. Michael Marshall: If the Minister is to continue playing this argument would he be willing to apportion blame at the ratio of 80 per cent. to Labour Governments and 20 per cent. to Conservative Governments?
  Mr. Mackenzie: I did not start the argument. I was simply saying that there seemed to be something very wicked, according to Opposition Members, about writing off losses of this kind in the nationalised sector. However, this has been done time and time again.
  Mr. Viggers: Will the Minister tell us who nationalised the industries from which the amounts had to be written off?
  Mr. Mackenzie: We nationalised a great many industries. The hon. Gentleman will recall that the Conservatives nationalised Rolls-Royce. Hon. Gentlemen must remember that they had 13 years in which, if they did not like the way the nationalised industries were running, and did not like the National Coal Board or British Railways, they could have denationalised them. However, at that time they did not think it right to do so.
  Mr. John Golding: Will my hon. Friend remind Opposition Members that the last time they debated the Post Office they could not decide whether Charles II or Oliver Cromwell nationalised it.
  Mr. Mackenzie: The Conservatives were in power for a long time. They had the chance to denationalise the Post Office, but although there were a number of them who at that time were anxious to hive off the telecommunications sector I do not think any of them suggested that the vast postal service should be taken out of public ownership. Perhaps we are taking this matter further than you, Mr. Deputy Speaker, are prepared to permit. All I am saying is that no one likes asking the House for a write-off of this kind.
  Mr. Tim Renton: The Minister has made a point on which I should like to comment. In passing I point out that we are delighted to see the hon. Member for Newcastle-under-Lyme (Mr. Golding) present. We wondered where he had been all afternoon in view of his interest in Post Office affairs.
  Although it is true that my hon. Friends have not suggested that the Post Office letter service should be denationalised, some of us have thought and recently expressed the view that the Post Office monopoly of the letter service should no longer be protected. The Minister must be aware of that matter.
  Mr. Mackenzie: I am conscious that it is the minority view of the House of Commons that the Post Office postal service monopoly should be broken. This is something quite new. It is new to the Conservatives now that they have become the Opposition, but it was never the stand

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  they took when they were in control of our affairs. It is all very well people getting up and making points when they are in Opposition, but it must be remembered that the Conservatives were in power for a long time. Had they wanted to do something about it, they had adequate opportunity.
  8.45 p.m.
  I do not like having to come to the House to ask for write-offs of this kind, but it is the realistic thing to do here. Coupled with the provision of a modest extension of banking services the capital reconstruction gives Giro a capital-backed service and a reasonably secure future. We have set the level of write-off at a responsible level within reasonable margins of error—and by that I mean a level at which Giro will be faced with the challenge of wiping out its past debts.
  The Conservatives are entitled to criticise our measure, but if they believe, as I do, that Giro should remain in being it is unlikely that they would want it to be left with a growing debt of interest which it cannot hope to repay. If they do not, by how much would they seek to reduce Giro's liabilities?
  The hon. Members for Chichester (Mr. Nelson) and Hertfordshire, South have criticised the whole question of public dividend capital as a means of assisting in this respect. PDC was first issued to BO AC in 1966 under the Air Corporations Act. It was transferred to the British Airways Board on 1st April 1972. In addition, £700 million of the British Steel Corporation's capital was converted to PDC by the Iron and Steel Act 1969. The National Enterprise Board and the new shipbuilding and aerospace corporations, should they be set up, will likewise have PDC.
  It was introduced originally
  "to deal with the problems which confronted those nationalised industries which, although basically profitable, nevertheless had to endure fluctuating results because of the cyclical nature of their business or for other similar reasons. If one were to finance those industries solely by the provision of loan capital, that would be a heavy burden on the industries which would have to pay fixed interest charges, and in a downswing period they would land themselves with deficits.—[Official Report, 9th August 1972; Vol. 842, c. 1781.]
  I have used those words because they are not mine. They were the words of the right hon. Member for Wanstead and Woodford (Mr. Jenkin) when he was
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  Chief Secretary to the Treasury. In the same speech the right hon. Gentleman reminded the House that it was the hon. Member for Henley (Mr. Heseltine) who, as Minister for Aerospace, told the House a few months previously that up to £200 million of PDC was to be issued to BOAC over the next few years for the purchase of five Concordes.
  Mr. Parkinson: The Minister is making a very good speech, but he is making it in the wrong debate. The Opposition are not arguing against the concept of PDC. We never have done so. Nobody in this debate has argued against it. We have said that a loss is not turned into something else just by transferring it out of the part of the books which says "Deficit" and into the part which says "Dividend capital". The truth is that the loss exceeds the capital. Therefore, there is no public dividend capital because it has disappeared, it has been lost. It is not until the losses have been recouped that the dividend capital comes into existence again. The Minister is making a grand speech, but he should save it for another occasion because it has nothing to do with this debate.
  Mr. Mackenzie: The hon. Gentleman's comments always puzzled me slightly. He says that PDC is all right but it is not all right in the context of this Bill. If I have paraphrased the hon. Gentleman wrongly, I apologise to him.
  Mr. Parkinson: I am sorry to interrupt again—
  Mr. Deputy Speaker: Order. The hon. Member is entitled to intervene if the Minister gives way, but only to make an intervention, not another speech.
  Mr. Parkinson: I willingly accept your advice, Mr. Deputy Speaker. If I am in business with £100 worth of capital and I make a loss of £105, my capital has disappeared and I have a deficit of £5. I can call what is there whatever I like, but it does not exist any more. I am not saying that we are not in favour of public dividend capital. I am saying that in this case the Minister is describing a deficit as public dividend capital, and that makes a nonsense of the whole concept of PDC.
  Mr. Mackenzie: We tried during the course of the preparation of our White

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  Paper, during the Second Reading debate and in Committee upstairs, to explain the position. We acknowledged the deficit that had been built up. We acknowledged that we were writing off half of it because we did not want there to be any soft options for Giro. We took over half in PDC according to precedents set by the previous Administration. We regarded that as a useful way of tackling the problem with which we were faced. There was a deficit which would have been a tremendous burden to any organisation. Previous Governments have from time to time taken steps similar to those that we are taking now. I listened to the arguments advanced by the hon. Member for Chichester and his hon. Friend the Member for Hertfordshire, South about this write-off, but I do not feel that I can accept the amendment, and I invite my hon. Friends to reject it.
  Mr. Nelson: I fear that yet again a number of balls have whistled past the Minister's ears without his seeing them, and I regard his replies as unsatisfactory.
  Earlier in the debate my hon. Friend the Member for Hertfordshire, South (Mr. Parkinson) and I were talking about the proportion of the PDC to loan stock, the debt-equity ratio. I do not feel that we have received satisfactory assurances about the way in which the figures have been struck. You, Mr. Deputy Speaker, will be the first to recognise that if this clause remains in the Bill, under Clause 3, which is consequential, the Minister will be able to come back and introduce a further element of PDC. He could under Clause 3 from time to time pay up more dividend capital, and therefore write off more public debt.
  We say that it is undesirable to incur this debt, just as it is to have to write it off. We are disappointed that over the years of increasing State intervention and nationalisation we have incurred losses of £1,000 million—£600 million of them under successive Labour Governments. What hypocrisy and profligacy we get from Labour Members. It is with a sense of regret that we have heard the Minister's reply. Nevertheless, we do not intend to take the matter to a Division. I beg to ask leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Motion made, and Question proposed, That the Bill be now read the Third time.
  8.55 p.m.
  Mr. Michael Marshall: The Minister of State's formal moving of the Third Reading typifies the disappointment which we have experienced. He has not taken the opportunity, even at this late stage, of setting our minds at rest on many of our worries.
  The debate has been valuable because it has helped clarify, if clarification were needed, many of the fears which hon. Members on all sides expressed in Committee and which have not been answered from the Government Front Bench. The Minister's speech, and those of his colleagues, further underlines the difficulty we have in reaching a proper judgment on the Post Office Giro banking activities.
  There is inadequate, indeed, unacceptable, parliamentary scrutiny envisaged in the Bill. The three officials in the Department of Industry who are directly involved have faced a massive task, and we have paid tribute to them. It is not good enough for the country to see the effective write-off of £29 million of taxpayers' money, whichever way it is sliced, without some assurances. The lessons should have been learned and some kind of system to vet the future activities of Giro should be introduced. That is the judgment which will be made by anyone who has listened to the debate or who will read the report of it.
  We have had no real answers on many aspects of Giro banking. We have had no comment on the question of market research and no answers on the liability of Giro in terms of consumer credit. The questions which we posed on Second Reading and in Committee still remain unanswered. We have had nothing to suggest that any thought has been given to the practical realities of the work which Giro seeks to extend in the area of personal loans. We are told that the range of £150 to £1,000 is a guideline which is to be applied informally but that is not in the Bill.
  Even if those figures are taken as gospel, we have not heard how Giro will find resources to deal with matters such as the failure to pay, bad debts and repossession of consumer goods. We have had examples. One was the notion of

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  television sets and cars blocking up our post offices and another suggested that Miss Marple will have to take her bicycle and attend to the problems. Such difficulties are bound to arise if the business is to expand. We have had no meaningful answers today.
  We were heartened when we saw the Financial Secretary come into the Chamber today.
  Mr. Tom Pendry: Hear, hear.
  Mr. Marshall: I am glad that the Government Whip thinks that that deserves a cheer. One cheer was all we had time for before the Financial Secretary left us. It was not clear whether it was his blushes or his anxiety to get completely shot of the Bill that kept him out of the Chamber. I suspect it was a combination of both.
  But, in fact, the rôle of the Treasury as revealed by the Financial Secretary has clearly been to do a whitewash job and to imply that this is a minor Bill, that it is only a matter of £30 million of the taxpayers' money, and that we are talking only about £150 million compared with the £7 billion involved in the kind of massive State bank to which I shall shortly refer. This is the sort of broad brush, splendidly "It is only a relatively small sum of money" kind of argument that we have had to put up with from the Treasury.
  It would be wrong to let the Bill go without putting on record that the balance sheet for the traditional Giro activity, which is what the Financial Secretary talks about, has no relationship to the balance sheet for Giro's likely anticipated activities over the next few years. My hon. Friend the Member for Mid-Sussex (Mr. Renton) made this point, but it is important to understand that the kind of myth that the Financial Secretary tried to put—that in some way the stability of Giro as it is stands it in good stead for future banking—is totally to ignore the challenges of the future.
  The Financial Secretary failed to stand by the principles he annunciated only last week on the Trustee Savings Bank Bill. We have had a good debate today in making comparisons between the two Bills, but there is no evidence that the
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  Government have taken on board the obvious need to have consistent principles, particularly if, as we are told, we are to have supervisory banking legislation covering both Giro and Trustee Savings Banks.
  I turn now to the rôle of Giro itself. The Minister of State showed his traditional loyalty to those over whom he has overall responsibility in perhaps letting Mr. Singer down rather lightly on the general question brought out in the report in The Guardian last Friday. It is an important aspect of our thinking to find that, within days before the Bill is likely to receive its Third Reading, we have Press reports that Giro's chief has outlined the basis for a massive State bank. We have quoted the report in full and it has not been effectively challenged.
  The Minister of State sought to play down provisions of the Bill, which, he said, did not amount to a charter for this type of development, but at no point was he able to refute the suggestion that the Bill in any way inhibits Mr. Singer and his colleagues from pursuing precisely the aims that Mr. Singer has set out if they wish. If the Minister now wishes to disown the fact that such an opportunity is open to Giro banking, I will gladly give way.
  Mr. Gregor Mackenzie: The Government's intentions for Giro are clear, I have already said today that they are fully set out in the White Paper. I also made it clear on Second Reading. They are no more, no less, than that.
  Mr. Marshall: I appreciate the hon. Gentleman making his own view clear. I suppose that there is now not much chance to debate the matter further, but it is clear that a divergence of view is emerging between the two parties to this matter. I shall have to leave the hon. Gentleman to continue this dialogue in the appropriate quarter within Giro. Nevertheless, it is important that the House should understand that nothing that the Minister has said tonight in any way refutes the suggestion that, if it is the will and the ambition of Giro to create or be part of a massive State bank, there is nothing in the Bill to inhibit such a development.
  On this whole question we have to make the point that if Giro development into wider banking services is to be

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  regarded as part of the creation of a State bank, bringing national savings, the Paymaster-General's Office and so forth, together, it is the people's savings and Government revenue—the taxpayers' money—with which we are concerned. Those constitute the £7 billion so glibly talked about as making it possible for a massive State bank to compete or to be in the same league with Barclays. Let the word go forth that that is the scale of resources which may well be at risk if such development follows the passage of the Bill.
  I do not want to end on a controversial note. It is customary on Third Reading to pay tribute to the Minister who has guided our proceedings through Committee and on the Floor of the House. The Minister would be the first to admit that he has not been short of tributes from our side of the House because we have had many discussions on these important matters.
  It is only fair to pay particular tribute to the fact that the hon. Gentleman handled the Bill on his own without Treasury help, which we believe he should have had.
  Mr. Tim Renton: Of course he should.
  Mr. Marshall: It was painfully obvious that when Treasury help, if that is what it was, arrived to the beleaguered garrison today, it was the kind of help that it could well do without.
  Mr. Tim Renton: The Minister kicked the ball into his own goal.
  Mr. Marshall: Yes, indeed. The Minister of State has had to take a certain amount of assault by metaphor. He has been painted as a batsman who has not always seen the ball coming at him. My hon. Friend the Member for Mid-Sussex has referred to the football scene and I saw the Minister in a more agricultural setting. The hon. Gentleman must recognise that he does not know who his true friends are. Time and again it is Opposition Members who have tried to save him from himself or, at least, from the ravages of what could happen if Post Office Giro banking goes adrift. In doing that we are not entirely seeking to preserve the Minister's integrity. We are
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  much more concerned with the taxpayers' interests.
  Mr. Dennis Canavan: With preserving bankers' interests.
  Mr. Marshall: I am glad that the hon. Member for West Stirlingshire (Mr. Canavan) has chipped in. It is interesting that he should join us at this late hour. I have no banking interest whatever to declare.
  Mr. Canavan: But the hon. Gentleman's Friends have.
  Mr. Marshall: The hon. Member for Thornaby (Mr. Wrigglesworth), who is sitting behind the hon. Gentleman, can probably put him straight as to what banking interests really are.
  I did not want this occasion to pass without paying tribute to the Minister of State. I am also willing to pay tribute to those Labour members of the Committee who assisted our proceedings. The hon. Member for Birmingham, Perry Barr (Mr. Rooker) raised an important issue which the Minister tried to deal with tonight. The hon. Member for Thornaby made a number of contributions and demonstrated his experience in this area. We are delighted at the remarkable transformation and sea change that the hon. Gentleman underwent between the Committee stage of the Bill and accepting the argument that we have impressed upon him in relation to Trustee Savings Banks.
  I even want to pay tribute to the hon. Member for Newcastle-under-Lyme (Mr. Golding) who from time to time has made a robust effort to protect the Chair. He will note that I am not unappreciative of that. It is fascinating to see him giving the splendid impression of the poacher turned gamekeeper. We welcome him here, even at this late stage of our debate.
  Finally, I pay tribute to my hon. Friends. As I glance behind me I see that six out of the seven hon. Members who served on the Committee are present. Indeed, I might say that the Magnificent Seven, for those of us who follow these matters, are here in force. We have put up a hard fight.
  There is no doubt—and I hope that the House takes this point on board—that the Committee proceedings would have been vastly improved had there been

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  a mechanism in the form of a combined Select and Standing Committee by which to examine the Bill. It would have enabled us to draw on experience from all sides because many hon. Members have substantial experience of banking and the Post Office. I want that on the record tonight.
  We have made it plain that we do not seek at this stage to revive a major opposition to the Bill in its present form. The whole basis of our case was our vote on Clause 1. We took fundamental objection to the concept of Post Office Giro extending its banking services. We have put our objections on the basis of the inadequate capital structure, as we see it, on the insufficient evidence of future marketing prospects, and, indeed, on the whole failure of the Government to satisfy us on this development.
  What we would now wish to do, in view of the lateness of the hour, is to take into account the needs of some hon. Members, from both sides of the House, who are waiting to move on to other important business. That is why, in suggesting to my hon. Friends that we should not seek a formal vote on the Third Reading, we are making this point simply: we want it to be understood that our basic objection was to the very notion of the extension of banking services by the Post Office Giro because of the evidence which was presented to us, which we felt was inadequate and insufficient and which has raised the fears which we have outlined today.
  It is because of the folly and mistakes that we see in the Bill that we felt so passionately in voting against Clause 1. We are content to rest there. However, I warn the Minister of State and the Government that as these follies and mistakes, and the problems that we fear will arise, become more and more apparent over the months and years ahead, we hope that he will realise that it is probably he who is the Flying Dutchman of the uneasy Post Office Giro banking service vessel to whom we shall turn for recompense and retribution.
  9.11 p.m.
  Mr. Wrigglesworth: I should like to make a few brief comments to wish the National Giro well when the Bill becomes an Act. I should also like to comment on the business that has transpired in
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  Standing Committee and on the Floor of the House.
  As I have made clear, on Second Reading and at other times, I am disappointed in many ways by the fact that the Bill does not go further, in the way that has been described, and bring in the other public sector banking organisations, which are already in existence and could be brought together into one large corporate public sector bank. However, I accept that this may be premature at present. I think that it should be looked at again when the Carter Committee has finished its investigations. If the Carter Committee should suggest that the Post Office be split up, perhaps we should look again at the position of National Giro within that set-up, and consider whether it could be linked with other public sector banking organisations in the way that has been described.
  For the purposes of this Bill, however, it was premature of the Opposition and others to suggest that the sort of conditions that they wish to attach to the Bill should apply, because the National Giro has developed very strongly as a part of the Post Office, using all the services that the central part of the Post Office can and does provide for it. With that backing, Giro has been able to develop in the way that it has, providing current account banking facilities for almost 500,000 customers, in a quite successful way, apparently, and latterly in a financially successful way.
  I must not let this occasion pass without commenting briefly on the Opposition's attitude to the Bill and also commenting on the Trustee Savings Banks Bill. I have been accused of having undergone a remarkable conversion. I must say, particularly to the hon. Member for Hertfordshire, South (Mr. Parkinson), that the Opposition's childlike faith in the Trustee Savings Banks compared with their aggressive and, at times, hostile, nit-picking attitude towards Giro has provided a remarkable contrast.
  Mr. Parkinson: I am sorry that the hon. Gentleman finds it difficult to understand my simple point. If Giro were to have 10 years in which to make the transformation from a cash remitting service into a commercial bank, and if it were to use those 10 years to acquire the necessary expertise, under Treasury and Bank of England supervision, none

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  of us would have been making the same argument. The point that I made was that on the day after this Bill is approved by the House of Lords and receives the Royal Assent, regardless of whether or not it has the expertise, Giro can do all the things that the Trustee Savings Banks will not be able to do for 10 years.
  Mr. Wrigglesworth: That may well be the case. But Conservative Members have refused to acknowledge the assurance that is given quite clearly in the White Paper—namely, that the same sort of caution will be exercised with Giro as will be exercised with the Trustee Savings Banks.
  The attitude of Conservative Members, and especially the hon. Member for Hertfordshire, South, is inconsistent. Not one amendment to the Trustee Savings Banks Bill was tabled by the Opposition, despite certain fears being expressed. Conservative Members with banking experience expressed considerable reserves about that Bill, but no amendments were tabled. There is considerable inconsistency on the part of the Opposition in their attitude to the two Bills. They have adopted a nit-picking and antagonistic approach towards Giro and the proposals for minor extensions that are contained in the Bill.
  I welcome the Bill as a modest development of Giro facilities. It will be welcomed by Giro's customers. It will strengthen the services that it can provide and, therefore, its finances. It will provide a base for a much more rapid and successful expansion in future.
  I pay tribute to the way in which my hon. Friend the Minister of State has handled the Bill through all its stages. His knowledge of the Post Office is almost second to none among my right hon. and hon. Friends. As our Opposition spokesman on Post Office matters he did a magnificent job. I pay tribute to him and thank him for the magnificent way in which he has handled the Bill.
  9.17 p.m.
  Mr. Spencer Le Marchant: To speak following the hon. Member for Thornaby (Mr. Wrigglesworth) is a privilege, because I know that he has put a great deal of time into the consideration of the Bill. I realise that
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  many hon. Members on both sides of the Chamber have given the Bill a great deal of their time, care and consideration.
  We must get down to the basics. Is the Post Office right? Has it got its sums right? Is the cost of this whole operation moderate for the taxpayer, or is it not? The Minister has told us that he has a most elaborate computer system—one of the largest and most involved systems in Europe. Is that necessarily right?
  We know that in 1965 the Government of the day got all their sums wrong. We know that the White Paper forecast was absolutely, completely and utterly incorrect. It must not be thought that I am condemning Giro on that score. It would not be right to criticise Giro for what happened in 1965, any more than it has been right for the Minister to criticise Mr. Chataway, a distinguished ex-Member who has served his country well. Some Labour Members say that he is responsible for all that has gone before, but I say to you, Mr. Deputy Speaker—
  Mr. Deputy Speaker: I must tell the hon. Member for High Peak (Mr. Le Marchant) that I have a pocket calculator.
  Mr. Le Marchant: How much longer are we to accept the large losses that are being made by Giro? We know that on Second Reading the Minister said that the small profit of last year should not be taken as a sign that a profit can be maintained. That is important to remember. If we do not think that we can maintain the small profit that was made last year following the vast losses which this Socialist emporium has brought upon us, are we entitled to go on?
  Are we entitled to go on supporting an organisation which has admitted that it cannot compete with private banks? We know that private banks have had their problems. Yet we see that Giro is not capable. Are the people in Giro equipped to do the job which it is being suggested by the Minister they should do? Are we certain that it is right to go on supporting this admitted loss-maker? Should the taxpayers' money go on supporting something that is a proven failure? Do we believe that Giro is capable of operating this business?

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  Is Giro capable of operating not only with an integrated range of personal customers but in the grandiose world of the corporate sector, with only 14 more people? The Minister of State said that he would see that Giro used prudence, tested the market, carried out detailed studies and built up expertise. I do not believe that banking is about that. It is an expertise which is built up over the generations, from the youngest school leaver to the chairman. Yet here the Government are suggesting that 14 extra people will be able to provide that expertise. In my view it will cost the taxpayer as much money in future as it already has cost them. We do not mean to criticise or to do anything other than question. We are entitled to ask whether this will work.
  We know quite well that Giro has not worked so far. We know that it has been a failure. That was admitted by the Minister in his Second Reading speech. He is now saying that in some way it can work. I do not believe that the commercial judgment of the Post Office is to be relied upon when dealing in this specialised area. I am not convinced that we are right. The challenge is enormous. If we could get things right the system could work. I am not certain that we are tackling it in the right way.
  The system for a 12½ per cent. return on capital after retained profits will not work. The investment is not there. How will it be there in the future? My hon. Friend the Member for Howden (Sir P. Bryan) raised the important question of Giro's record. When we look at that, what confidence can we have in the future? We should think carefully about this tonight. There is the most enormous doubt about what the Government are doing. They have made a great mess of Giro, and I have no confidence in it. The Minister of State has worked hard in Committee but has given us no confidence in the future of Giro.
  9.24 p.m.
  Mr. Golding: I wish to declare an interest as Assistant Secretary of the Post Office Engineering Union.
  I congratulate the hon. Member for High Peak (Mr. Le Marchant) on making the first new speech from the Opposition Benches for many weeks. The hon. Member for Arundel (Mr. Marshall) welcomed me to this late stage of the pro-
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  ceedings. I came in to hear his first contribution and decided then that I would hear over and over again the same speech we have had to listen to for weeks on this Bill. The hon. Member for Arundel referred to his seven fighting hon. Friends, but they are seven hon. Members with but a single speech.
  I congratulate the Minister of State on the patience he has shown to a tedious, nit-picking and inexperienced Opposition. I have admired his patience even though, at times, he has tried mine in his attempts to educate the Opposition. I also congratulate him on introducing the Bill. The people who work in Giro and many other Post Office employees welcome the extension of facilities. We appreciate that those who represent bankers will try to deny this extension of public enterprise and we appreciate the motive behind their opposition. But those with the interests of the Post Office and Giro at heart very much welcome the action of the Government.
  I echo just one faint criticism of the Opposition and that is at the lack of interest shown by the Treasury in this Bill. I want the Treasury to support Giro by giving it more Government business and to press for Giro to be included in the clearing banks system. Otherwise, I congratulate and thank the Minister. We in the Post Office strongly support this Bill.
  9.25 p.m.
  Mr. Viggers: In their White Paper, the Government said they had decided upon a number of measures designed to set Giro on a surer foundation. That is the language of people who think a banker is someone who receives money, pays it out and keeps a percentage of the total amount. In fact, banking is a high-risk business. Lending is easy enough, but getting the money back can be very difficult—ask the manager of any clearing bank.
  Credit cards are expensive to launch—ask Access. Foreign exchange operations can result in massive losses even though they are well run—ask Hill Samuel about Herstatt. Commercial lending can cost money, however reputable the borrowers—ask the people who lent money to the Mersey Docks and Harbour Board.
  The more we look at this Bill, the more we come back to one question—why? Why this Bill? Why this measure

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  to extend the State-owned Giro into commercial banking?
  Is it for money, for profit? It is intended that Giro should return 12½ per cent. per annum on £13 million. That is £1,625,000 a year, which is peanuts by the standards of this House. As we all know, we are the last of the big spenders. We know that Giro has made a loss in four out of the last five years. In 1970–71 there was a loss of £6 million, followed by losses of £6·4 million, £5·1 million, £4·1 million and, although a profit of £60,000 was shown for last year, my hon. Friend the Member for Tynemouth (Mr. Trotter) has demonstrated that the adjusted figure gives a £2·5 million loss. We cannot be going into this venture for profit.
  Are we expanding Giro to build on management success? Once again, I am indebted to my hon. Friend the Member for Tynemouth for pointing out that in 1969–70 the auditors of Giro said that a satisfactory system of control of Giro's operations had not been established. The next year, they said that further improvements were necessary. The following year, they commented that weaknesses remained to be overcome before the level of control could be considered satisfactory. The next year, the auditors found that the level of control could still not be considered as satisfactory. Two years ago, they said the Giro accounting and control system had to be improved before it could be said to be working effectively. Last year they talked about reconciliation problems persisting. So it is not to build on management success.
  Perhaps it is to absorb spare capacity in the Post Office. Are the telephone systems and the postal deliveries so good that the Post Office can take on new tasks? I think not. Is it to improve the money transmission service of the Post Office Giro? No, it is not, because the powers now being taken are the powers of a full State bank.
  Why, then, do we have the Bill? The answer is clear. The Socialists are going into banking. I have one regret. The money they will use is ours. This is yet another sad and expensive parliamentary occasion.
  9.30 p.m.
  Mr. Nelson: I was a member of the Standing Committee and I have been present during the interesting debate today. We have heard inadequate replies from the Minister. When we coaxed him to explain the necessity for Giro to extend its arms into the general banking service, we heard the way in which he had decided to write off massive amounts of public debt and the way he had decided to set the Giro objectives.
  The comments made by the hon. Member for Newcastle-under-Lyme (Mr. Golding) are totally uncalled for, and symptomatic of the profligate and ridiculous attitude of Government supporters. To accuse Opposiion Members of being nitpicking when we are seeking to ensure that taxpayers' money is preserved and liability is mitigated is totally irresponsible. To suggest that Opposition Members represent anyone other than their constituents is a grave allegation.
  I share the claims and fears expressed by my hon. Friends that the Bill is the first step towards a State bank. I maintain the firm conviction that it is not part of the Government's responsibility to expend taxpayers' money in providing risk capital for industry, and that where the Government provide such assistance it should be on the shortest terms of expediency and should be returned to the private sector at the earliest opportunity.
  The most significant factor to emerge from the debate this afternoon is that there is to be no limit on the development of Giro over the next few years, there is to be no limit on the amount of business that it may take on, and no limit to the services that it may provide under the umbrella of being a bank. Therefore, it is a State bank.
  I shall be disappointed if my hon. Friends decide not to vote against the Third Reading. Clause 1 goes to the heart of the matter in extending Giro's banking services. The Bill is thoroughly unacceptable and unsatisfactory. It is the first step to a State bank, and, as such, it is totally unwarranted and undesirable.
  9.33 p.m.
  Mr. Peter Rees: It is with great pleasure that I speak following my hon. Friend the Member for Chichester (Mr. Nelson). As I listened to his cogent

  501
  contribution, I wondered whether I was justified in intervening. This small Bill, modestly introduced by the Minister of State, with his usual charm and persuasiveness, raises certain principles and poses certain questions of great importance. The House should not let go of the Bill until those principles and questions have been thrashed through to a conclusion.
  In his speech in the Second Reading debate, the Minister of State justified the measure on the basis that it would introduce an element of competitiveness and stimulate competition in banking. He was rash enough, in advance of his right hon. Friend the Chancellor of the Exchequer, to mention that Giro could also make limited overdrafts available to local authorities and nationalised industries. That possibility opens up an interesting area. I have searched in vain through the White Paper on Public Expenditure to see exactly where these figures are reflected. That is a matter which we must pursue to a conclusion.
  I go back to the initial premise that the measure is designed to stimulate competition in banking. Where does the Minister of State feel that the joint stock banks have failed? The Giro service may have reached certain sections of our community that have not, until now, availed themselves of the services offered by the joint stock banks. I conceive it to be patronising in the extreme to imagine that our fellow countrymen will not in course of time come to appreciate the benefit and value of the services offered by the joint stock banks, and to imagine that they can be fobbed off for all time with a kind of subsidiary fringe banking service. That is what underlies the speech advanced by the hon. Gentleman on Second Reading.
  If it be right to allow the Post Office to compete with private enterprise, surely by the same token it must be right to let private enterprise compete with the Post Office. Perhaps there is a new dimension to the debate—this may be my sole justification for intervening—because since the Second Reading my hon. Friend the Member for Eastbourne (Mr. Gow) has introduced a modest measure to deprive the Post Office of its monopoly.
  I say at once that I recognise that the Post Office, according to its lights.
  502
  performs a very valuable service for the community. I respect individually those I know who work in it—even the hon. Member for Newcastle-under-Lyme (Mr. Golding), who made such a brief, transient and embarrassed intervention in the debate. Where is he? I gather that he is beyond the Bar. Let him come into the body of the Chamber rather than retire into the shadows. We should, I am sure, like to hear more from him on behalf of those for whom he has worked for so long. He has never been modest in our debates. Why, on this occasion, should he be so coy? I am glad that we have now flushed out the hon. Member.
  The point I make—it was most ably deployed by my hon. Friend the Member for Eastbourne—is that competition is fine, but it must not be limited to the private sector. Let us start looking with a sympathetic but critical eye at every field of national endeavour. Let us look at the law, in which, on occasions, I am permitted to practise. A Royal Commission is to consider whether there is sufficient competition there. Let us look at the National Coal Board—
  Mr. Canavan: And the Army.
  Mr. Rees: That is a very interesting suggestion, but I seem to recall that the Home Secretary felt that a certain monopoly should be exercised in this field, and that those—imbued with the spirit of free enterprise—who went out to offer their services in West Africa should not perhaps enjoy the commendation of their fellow countrymen. I happen to disagree with that. I am not saying that a very notable contribution—
  Mr. Speaker: Order. I do not understand how they are connected with Giro.
  Mr. Rees: I stand rebuked, Mr. Speaker. Perhaps I was prompted, encouraged and incited by the hon. Member for West Stirlingshire (Mr. Canavan) to follow a rather interesting sideline that was not exactly parallel with the theme I wish to pursue, although it may well be that those who are fortunate enough to be engaged for service in Angola use the Giro service. I do not know. That is something for the Minister to follow up in his concluding remarks.
  I wish to get to the main theme, which is an important one and could engage us

  503
  for very many hours more were we to thrash it through to a conclusion. If it is right that the Post Office should compete with free enterprise, is it not right that free enterprise should compete with the Post Office? More than that, is it right that the Post Office should compete in this field with unlimited access to public capital?
  I have searched the White Paper on Public Expenditure in vain to see whether the £28½ million is accurately reflected in it. If it be so, there are some very modest amounts indeed left for the Post Office. For 1975–76 I see a mere £60·9 million, for 1976–77, £74 million, and then a drop to £67 million in 1978–79. I ask the Minister whether these figures include the capital that is committed to the Giro service.
  It may be that it was at this point that the "tiny Chinese minds" of certain Government supporters who sit below the Gangway revolted. Perhaps on this occasion I should declare a certain sympathy with them. They may have felt this to be a misuse of public resources. There are many other projects to which public capital could be committed. Perhaps the rules of order do not permit us to compare the relative merits of committing that amount of capital to education rather than to Giro. However, I hope that the Minister will try to deal with that point in his reply.
  Experience in this House, whether individually or collectively, in supporting the Government of the day in the banking area has not been particularly happy. My hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) has drawn attention to individual ventures in this respect which, alas, have tarnished the fair reputation of right hon. Gentlemen who serve in this House. I do not want to explore that point any further. However, it is fair to say that we have debated in the past, and may debate again in future, the role of the Crown Agency. I suggest that that demonstrates that emanations of Government have not so far proved particularly successful in this respect.
  Why are we to suppose that Giro, launched as a fully-fledged fringe or secondary bank, is likely to be any more successful? Why should we assume that
  504
  those who have been blessed with a modest amount of success in the Giro service up to the present are now likely to be more capable of judging the creditworthiness of individuals, local authorities or nationalised industries than the joint stock banks have been? These matters are wrapped in inpenetrable obscurity.
  I have read the debates in Standing Committee. I pay tribute to my hon. Friends who put forward many excellent points without receiving very much in reply from the Minister of State. I hope that on this occasion he is better briefed. His remarks have not ridden easily with the remarks made outside the Chamber by Mr. Singer. It seems that the Minister of State is not aware of what those who may be managing the enterprise are doing and saying in his name.
  Mr. Gregor Mackenzie: With great respect, it was not in my name. My name it attached to the Bill as it appears before the House. I am not responsible for what appears in newspapers.
  Mr. Rees: That was a most interesting intervention. Then where lies the constitutional responsibility? Is the Minister of State disowning Mr. Singer? I hope that he will explore this point in his reply, for he has made a most curious statement. We must surely be told what is the constitutional responsibility for the Giro service. Are we now to understand that Giro is entirely autonomous and that we cannot question anything said by the executive head? That is a curious proposition indeed.
  Mr. A. P. Costain: On that important issue the House is surely entitled to know who is the accounting officer responsible in this respect to the Public Accounts Committee.
  Mr. Rees: My hon. Friend, with his usual clarity, has put his finger on the precise point at issue. The Minister of State sometimes gets carried away on the subject of small industries. Certainly tonight we are dealing, not with a small industry but with a venture that will take £28½ million of our money. But apparently the Minister disclaims responsibility for the statements of Mr. Singer.
  Mr. Gregor Mackenzie: Let me make it clear. I said that I am not responsible

  505
  for any articles that appear in a newspaper. I have read the article with some care. I have not discussed the particular passages, the headline passages, with Mr. Singer or anyone else—
  Mr. Rees: Why not?
  Mr. Mackenzie: These are matters that we have discussed. We have been here much of the day and this point has been gone over time and again. But I cannot be responsible for the Manchester Guardian.
  Mr. Rees: This is the most curious pronouncement that I, in my short career in this House, have ever heard from the Government Front Bench. We are debating an important Bill, and the Minister disclaims any knowledge of or responsibility for a statement by the chairman—not the chairman-designate but the chairman actual—of the organisation whose affairs we are debating. The Minister's officials are not keeping him fully informed. The paper is no longer the Manchester Guardian, but The Guardian. With his regional knowledge, the Minister must appreciate that The Guardian has now become a cosmopolitan newspaper.
  But it is not only The Guardian that is concerned. Let me refer the hon. Member to this quotation from the Financial Times:
  "Giro chief outlines the basis for massive State bank".
  Does that come as a brutal shock to the Minister? We must know more about this. We are well used to the right hand of this Administration not knowning what the left hand is doing, but we are debating a Bill designed to increase the powers and the capital of a "para-Statal"—I believe that that is the "in" term—organisation, and the Minister comes blushingly to say that he accepts no responsibility for what Mr. Singer is saying.
  What does he accept responsibility for? What kind of bank does he foresee this to be—
  Mr. Gregor Mackenzie: It is all here.
  Mr. Rees: It is no good the hon. Member's waving a copy of the Bill at me. I have read the Bill and the debates in Committee. This is something with which we toyed, but how will it develop? I was disposed to believe that the Mini-
  506
  ster, with his characteristic Glaswegian understatement, would launch it as a kind of modest Clydeside Trustee Savings Bank. I was going to compare his approach with the more manic approach of the Secretary of State for Energy. Another twist of the ministerial wheel and the right hon. Member for Bristol, South-East (Mr. Benn) could be in charge of this bank. If he is, in conjunction with Mr. Singer, he will see that it becomes a massive State bank. Then we shall have to look to East Berlin to see what a people's bank can achieve—
  Mr. Russell Kerr: What do you know about it?
  Mr. Rees: The "tiny Chinese minds" of the hon. Members below the Gangway are at last being brought to bear on this crucial point. The debate is livening up. Until now, we have been deprived of the pleasure of hearing what the "tiny Chinese minds"—or rather, big Chinese minds—have to say.
  Mr. Speaker: Order. The hon. and learned Gentleman has a rare gift for raising the temperature, but on Third Reading of a Bill we confine ourselves to what is in the Bill. There is nothing in the Bill about "tiny Chinese minds".
  Mr. Rees: Mr. Speaker, I stand as always chastened and corrected by your adroit touch. May I make it clear, in case any gentlemen from the Chinese Embassy are present, that I have always regarded Chinese minds as capacious and far-seeing? It is only a very special kind of Chinese mind that is represented below the Gangway on the Government side.
  To resume, I had credited the Minister with a very modest intention, but I now see that, sheltering behind the gigantic figure of Mr. Singer, he is launching a financial monster on the world. This monster should be quietly put to rest. That would be an act of infanticide with which the country would entirely agree.
  9.49 p.m.
  Mr. Gregor Mackenzie: I have listened to many speeches today with considerable interest and not least to the speech of the hon. and learned Member for Dover and Deal (Mr. Rees). His was far and away the most entertaining speech I have heard on this subject in many a long day. However, I found it difficult to relate some of the contents of the hon. and

  507
  learned Gentleman's speech to the Bill. It was extremely exaggerated and highly entertaining, and I am sure that from that point of view we appreciated it greatly—but only from that point of view.
  As always, and as we expected, the hon. Member for Arundel (Mr. Marshall) made a very thoughtful speech. He believes, as do many of his hon. Friends, that Giro provides a useful service. Indeed, that was the conclusion reached by the Administration when Mr. Christopher Chataway was the Minister of Posts and Telecommunications.
  When introducing the Bill I adopted the attitude that Giro made a useful contribution. However, in addition to providing a money transmission service it must be allowed to provide for its clients the banking service which many of them require—no more and no less.
  Mr. Michael Marshall: The Minister has just said "the banking service which many of them require". Will he give us some evidence of this? As he knows, we have pressed for this evidence again and again.
  Mr. Mackenzie: Throughout the time I have held my present post, and apart from the exercises done by Marplan and Lancaster University, I have travelled throughout the country and met people associated with Giro. They have constantly asked whether it can provide a modestly expanded service. That is what is proposed in the Bill.
  Hon. Gentlemen have suggested that suddenly as a result of the Bill becoming law—if that is the will of Parliament—Giro will explode into something massive. I want Giro to grow, and I have taken that view for many years. However, I have always wanted Giro to grow surely and soundly. Indeed, that is the way for any organisation of this kind to grow and prosper. That is why we made it clear in the White Paper that the schemes which the Post Office puts to the Department of Industry will be examined with the greatest possible care by the Department, the Treasury, and the various monetary authorities. It will be only on that basis that schemes will be launched. In any event, there will be pilot schemes.
  Many hon. Members have tried to snipe at the managing director of Giro
  508
  through me. As I have already said, I am not responsible for what appears in the newspapers. I am not certain that Mr. Singer was properly reported. All I know is that through the Bill we are trying to ensure that there is a modest growth of the banking services. I believe that such a service will fulfil a number of useful functions.
  About 50 per cent. of the British people do not use banking services of one kind or another. I believe that the provision of this service will encourage these people to save money. Throughout the country there are a great many post offices which are conveniently placed. I believe that many of these post offices could encourage people to use Giro and to bank with it.
  My hon. Friend the Member for Thornaby (Mr. Wrigglesworth) reminded the House that Giro provides a convenient method of conducting business. As the hon. Member for Bridgwater (Mr. King) well recalls, at the end of the review in 1972 it was recognised as a convenient way of doing business and as something which should continue. Either we must allow the continuation of Giro, modestly expanded, or stop it completely as the hon. Member for High Peak (Mr. Le Marchant) would want. He and some of his hon. Friends do not like Giro or the Post Office, but they cannot expect me to support their point of view.
  Mr. Le Marchant: The Minister said that there was no precedent for parliamentary approval of targets set by Government for the nationalised industries. This is an example of vast Government expenditure which will bring no return to the taxpayer.
  Mr. Mackenzie: I am not sure what that has to do with the comments I have been making in my Third Reading speech. The hon. Gentleman criticises Giro, but it is now making a profit. It has met the two objectives which were set by the former Minister of Posts and Telecommunications. I should have thought that that in itself would have been a source of satisfaction for the hon. Member.
  My hon. Friend the Member for New-castle-under-Lyme (Mr. Golding), who is an old and staunch supporter of Giro, has indicated the steps that he hopes it will take in the future. He shares many of

  509
  my aspirations for Giro. The hon. Member for Gosport (Mr. Viggers) puzzled me by his concluding sentence when he said that the Socialists were going into banking now. We have had a banking service of the kind operated by Giro for a long time. It was the subject of a considerable and lengthy review by the previous Conservative Administration. They decided that it should continue, and we are simply clarifying the position—no more, no less.
  I believe that Giro gives an excellent choice. It is competitive with the banks, but I have had no significant complaint from any of the clearing banks that Giro's small operations will be a threat to the Midland, the National Westminster or any of the others.
  The hon. and learned Member for Dover and Deal asked me about the Post Office monopoly. I should incur the wrath of the Chair if I were to deal with that at length. It is not many days since the House decided to look at this question and refused to agree to a Bill which would break up the Post Office monopoly. But, of course, it is open to anyone to make representations to the Carter Committee, which is reviewing the whole question of the Post Office. The whole range of services is now under review, including Giro, the postal service, and telecommunications. The gentlemen who are conducting the review will be prepared to listen to the evidence and will make recommendations to me on that basis. I cannot, however, see what the monopoly of the postal service has to do with this Bill.
  It is a good Bill which allows a modest extension of the service of Giro. I am sure that it will be welcomed by the
  users of Giro, to whom I wish to pay tribute.
  Mr. Tim Renton: My hon. Friend the Member for Gosport (Mr. Viggers) is right. The Socialists are going into banking.
  It being Ten o'clock, the debate stood adjourned.

  BUSINESS OF THE HOUSE
  Ordered,
  That, at this day's Sitting, Government Business may be proceeded with, though opposed, until any hour.—[Mr. Coleman.]

  POST OFFICE (BANKING SERVICES) BILL
  Question again proposed.
  Mr. Benton: The Socialists are going into banking, and it is taxpayers' money that will be used to finance that. This is a brief but thoroughly unsatisfactory Bill, and nothing that the Minister said in winding up the debate leads me to believe that Giro will not expand in an uncontrolled, exaggerated manner that will lead to a massive loss in the years to come.
  I do not propose to waste any more time—[HON. MEMBERS: "Hear, hear."] It is nice to see some Government Members here. Let us waste no more time talking about the Bill. I suggest to my hon. Friends that, in view of the unsatisfactory nature of the Minister's reply, we vote against the Third Reading of the Bill.
  Question put, That the Bill be now read the Third time:—
  The House divided: Ayes 258, Noes 221.

  Division No. 69.

  AYES

  10.1 pm

  Abse, Leo

  Boyden, James (Bish Auck)

  Cook, Robin F. (Edin C)

  Anderson, Donald

  Bradley, Tom

  Corbett, Robin

  Archer, Peter

  Bray, Dr Jeremy

  Cox, Thomas (Tooting)

  Armstrong, Ernest

  Brown, Hugh D. (Provan)

  Craigen, J. M. (Maryhill)

  Ashton, Joe

  Brown, Robert C. (Newcastle W)

  Crawshaw, Richard

  Atkins, Ronald (Preston N)

  Buchan, Norman

  Cronin, John

  Bagier, Gordon A. T.

  Buchanan, Richard

  Crosland, Rt Hon Anthony

  Barnett, Guy (Greenwich)

  Butler, Mrs Joyce (Wood Green)

  Cryer, Bob

  Barnett, Rt Hon Joel (Heywood)

  Callaghan, Jim (Middleton & P)

  Cunningham, Dr J. (Whiteh)

  Bates, Alt

  Campbell, Ian

  Davidson, Arthur

  Bean, R. E.

  Canavan, Dennis

  Davies, Bryan (Enfield N)

  Beith, A. J.

  Cant, R. B.

  Davies, Denzil (Llanelli)

  Benn, Rt Hon Anthony Wedgwood

  Carmichael, Neil

  Deakins, Eric

  Bennett, Andrew (Stockport N)

  Carter, Ray

  Dean, Joseph (Leeds West)

  Bidwell, Sydney

  Cartwright, John

  Dell, Rt Hon Edmund

  Bishop, E. S.

  Clemitson, Ivor

  Dempsey, James

  Blenkinsop, Arthur

  Cocks, Michael (Bristol S)

  Doig, Peter

  Boardman, H.

  Cohen, Stanley

  Dormand, J. D.

  Booth, Rt Hon Albert

  Coleman, Donald

  Douglas-Mann, Bruce

  Boothroyd, Miss Betty

  Colquhoun, Ms Maureen

  Duffy, A. E. P.

  Bottomley, Rt Hon Arthur

  Conlan, Bernard

  Dunn, James A.

  Eadie, Alex

  Leadbitter, Ted

  Rooker, J. W.

  Edge, Geoff

  Lector, Miss Joan (Eton and Slough)

  Roper, John

  Edwards, Robert (Wolv SE)

  Lewis, Ron (Carlisle)

  Rose, Paul B.

  Ellis, Tom (Wrexham)

  Litterick, Tom

  Ross, Rt Hon W. (Kilmarnock)

  Evans, loan (Aberdare)

  Loyden, Eddie

  Rowlands, Ted

  Ewing, Harry (Stirling)

  Lyon, Alexander (York)

  Sandelson, Neville

  Faulds, Andrew

  Lyons, Edward (Bradford W)

  Sedgemore, Brian

  Fernyhough, Rt Hon E.

  Mabon, Dr J. Dickson

  Selby, Harry

  Fitch, Alan (Wigan)

  McCartney, Hugh

  Shaw, Arnold (llford South)

  Flannery, Martin

  McElhone, Frank

  Sheldon, Robert (Ashton-u-Lyne)

  Fletcher, Ted (Darlington)

  McGuire, Michael (Ince)

  Shore, Rt Hon Peter

  Foot, Rt Hon Michael

  Mackenzie, Gregor

  Short, Rt Hon E. (Newcastle C)

  Ford, Ben

  Mackintosh, John P.

  Short, Mrs Renée (Wolv NE)

  Forrester, John

  Maclennan, Robert

  Silkin, Rt Hon John (Deptford)

  Fowler, Gerald (The Wrekin)

  McMillan, Tom (Glasgow C)

  Sillars, James

  Fraser, John (Lambeth, N'w'd)

  McNamara, Kevin

  Silverman, Julius

  Freud, Clement

  Madden, Max

  Skinner, Dennis

  Garrett, John (Norwich S)

  Magee, Bryan

  Small, William

  Garrett, W. E. (Wallsend)

  Mallalieu, J. P. W.

  Smith, Cyril (Rochdale)

  Ginsburg, David

  Marks, Kenneth

  Smith, John (N Lanarkshire)

  Golding, John

  Marquand, David

  Snape, Peter

  Gould, Bryan

  Marshall, Dr Edmund (Goole)

  Spearing, Nigel

  Gourlay, Harry

  Marshall, Jim (Leicester S)

  Spriggs, Leslie

  Graham, Ted

  Mason, Rt Hon Roy

  Stallard, A. W.

  Grant, John (Islington C)

  Meacher, Michael

  Stoddart, David

  Grocott, Bruce

  Mellisii, Rt Hon Robert

  Stott, Roger

  Hamilton, James (Bothwell)

  Mendelson, John

  Strang, Gavin

  Hamilton, W. W. (Central Fife)

  Mikardo, Ian

  Strauss, Rt Hon G. R.

  Hardy, Peter

  Millan, Bruce

  Summerskill, Hon Dr Shirley

  Harrison, Walter (Wakefield)

  Miller, Dr M. S. (E Kilbride)

  Taylor, Mrs Ann (Bolton W)

  Hart, Rt Hon Judith

  Mitchell, R. C. (Soton, ltchen)

  Thomas, Jeffrey (Abertlllery)

  Hattersley, Rt Hon Roy

  Molloy, William

  Thomas, Mike (Newcastle E)

  Hayman, Mrs Helene

  Moonman, Eric

  Thomas, Ron (Bristol NW)

  Heffer, Eric S.

  Morris, Charles R. (Openshawe)

  Thorne, Stan (Preston South)

  Hooley, Frank

  Morris, Rt Hon J. (Aberavon)

  Tierney, Sydney

  Horam, John

  Mulley, Rt Hon Frederick

  Tinn, James

  Howell, Rt Hon Denis

  Murray, Rt Hon Ronald King

  Torney, Tom

  Howells, Geraint (Cardigan)

  Newens, Stanley

  Tuck, Raphael

  Hoyle, Doug (Nelson)

  Noble, Mike

  Urwin, T. W.

  Huckfleld, Les

  Oakes, Gordon

  Varley, Rt Hon Eric G.

  Hughes, Rt Hon C. (Anglesey)

  Ogden, Eric

  Walden, Brian (B'ham, L'dyw'd)

  Hughes, Robert (Aberdeen N)

  O'Halloran, Michael

  Walker, Harold(Doncaster)

  Hughes, Roy (Newport)

  O'Malley, Rt Hon Brian

  Walker, Terry (Kingswood)

  Hunter, Adam

  Orme, Rt Hon Stanley

  Ward, Michael

  Irvine, Rt Hon Sir A. (Edge Hill)

  Ovenden, John

  Watkins, David

  Jackson, Colin (Brighouse)

  Padley, Walter

  Watkinson, John

  Jackson, Miss Margaret (Lincoln)

  Palmer, Arthur

  Weetch, Ken

  Janner, Greville

  Pardoe, John

  White, Frank R. (Bury)

  Jay, Rt Hon Douglas

  Park, George

  White, James (Pollock)

  Jeger, Mrs Lena

  Parry, Robert

  Whitehead, Phillip

  Jenkins, Hugh (Putney)

  Pavitt, Laurie

  Whitlock, William

  Jenkins, Rt Hon Roy (Stechford)

  Pearl, Rt Hon Fred

  Willey, Rt Hon Frederick

  John, Brynmor

  Pendry, Tom

  Williams, Alan (Swansea W)

  Johnson, James (Hull West)

  Penhaligon, David

  Williams, Alan Lee (Hornch'ch)

  Johnson, Walter (Derby S)

  Perry, Ernest

  Williams, Sir Thomas

  Jones, Alec (Rhondda)

  Phipps, Dr Colin

  Wilson, Alexander (Hamilton)

  Jones, Barry (East Flint)

  Price, C. (Lewisham W)

  Wilson, William (Coventry SE)

  Jones, Dan (Burnley)

  Price, William (Rugby)

  Wise, Mrs Audrey

  Judd, Frank

  Radico, Giles

  Woodall, Alec

  Kaufman, Gerald

  Rees, Rt Hon Merlyn (Leeds S)

  Woof, Robert

  Kerr, Russell

  Roberts, Albert (Normanton)

  Wrigglesworth, Ian

  Kilroy-Silk, Robert

  Roberts, Gwilym(Cannock)

  Young, David (Bolton E)

  Klnnock, Nell

  Robertson, John (Paisley)

  Lambie, David

  Roderick, Caerwyn

  TELLERS FOR THE AYES:

  Lamborn, Harry

  Rodgers, George (Chorley)

  Mr. Joseph Harper and

  Lamond, James

  Rodgers, Wiliam (Stockton)

  Mr. John Ellis.

  Latham, Arthur (Paddington)

  NOES

  Adley, Robert

  Bottomley, Peter

  Clark, Alan (Plymouth, Sutton)

  Aitken, Jonathan

  Bowden, A. (Brighton, Kemptown)

  Clark, William (Croydon S)

  Alison, Michael

  Boyson, Dr Rhodes (Brent)

  Clarke, Kenneth (Rushclitte)

  Amery, Rt Hon Julian

  Bradford, Rev Robert

  Clegg, Walter

  Arnold, Tom

  Braine, Sir Bernard

  Cooke, Robert (Bristol W)

  Atkins, Rt Hon H. (Spelthorne)

  Brotherton, Michael

  Cope, John

  Bain, Mrs Margaret

  Brown, Sir Edward (Bath)

  Cordle, John H.

  Baker, Kenneth

  Bryan, Sir Paul

  Corrle, John

  Bell, Ronald

  Buchanan-Smith, Alick

  Costain, A. P.

  Bennett, Dr Reginald (Fareham)

  Budgen, Nick

  Crawford, Douglas

  Benyon, W.

  Bulmer, Esmond

  Crouch, David

  Berry, Hon Anthony

  Burden, F. A.

  Crowder, F. P.

  Biffen, John

  Butler, Adam (Bosworth)

  Dean, Paul (N Somerset)

  Blggs-Davison, John

  Carlisle, Mark

  Dodsworth, Geoffrey

  Blaker, Peter

  Chalker, Mrs Lynda

  Douglas-Hamilton, Lord James

  Boscawen, Hon Robert

  Channon, Paul

  Drayson, Burnaby

  512

  513

  du Cann, Rt Hon Edward

  Lane, David

  Ridley, Hon Nicholas

  Dunlop, John

  Langford-Holt, Sir John

  Ridsdale, Julian

  Durant, Tony

  Latham, Michael (Melton)

  Rippon, Rt Hon Geoffrey

  Eden, Rt Hon Sir John

  Lawrence, Ivan

  Roberts, Wyn (Conway)

  Edwards, Nicholas (Pembroke)

  Le Marchant, Spencer

  Rodgers, Sir John (Sevenoaks)

  Elliott, Sir William

  Lester, Jim (Beeston)

  Ross, William (Londonderry)

  Emery, Peter

  Lewis, Kenneth (Rutland)

  Rossi, Hugh (Hornsey)

  Ewing, Mrs Winifred (Moray)

  Lloyd, Ian

  Rost, Peter (SE Derbyshire)

  Eyre, Reginald

  Loveridge, John

  Sainsbury, Tim

  Falrbairn, Nicholas

  MacCormick, Iain

  St. John-Stevas, Norman

  Fairgrieve, Russell

  McCrindle, Robert

  Scott-Hopkins, James

  Farr, John

  Macfarlane, Neil

  Shaw, Giles (Pudsey)

  Finsberg, Geoffrey

  Madel, David

  Shaw, Michael (Scarborough)

  Fletcher, Alex (Edinburgh N)

  Marshall, Michael (Arundel)

  Shelton, William (Streatham)

  Fletcher-Cooke, Charles

  Marten, Nell

  Shepherd, Colin

  Fookes, Miss Janet

  Mather, Carol

  Shersby, Michael

  Fowler, Norman (Sutton C'f'd)

  Maude, Angus

  Sims, Roger

  Fox, Marcus

  Mawby, Ray

  Skeet, T. H. H.

  Fry, Peter

  Maxwell-Hyslop, Robin

  Smith, Dudley (Warwick)

  Gardiner, George (Reigate)

  Mayhew, Patrick

  Speed, Keith

  Gardner, Edward (S Fylde)

  Meyer, Sir Anthony

  Spence, John

  Gilmour, Rt Hon Ian (Chesham)

  Miller, Hal (Bromsgrove)

  Spicer, Jim (W Dorset)

  Gilmour, Sir John (East Fife)

  Mills, Peter

  Spicer, Michael (S Worcester)

  Godber, Rt Hon Joseph

  Miscampbell, Norman

  Sproat, Iain

  Goodhew, Victor

  Mitchell, Davild (Basingstoke)

  Stainton, Keith

  Goodlad, Alastalr

  Moate, Roger

  Stanbrook, Ivor

  Gorst, John

  Molyneaux, James

  Stanley, John

  Gow, Ian (Eastbourne)

  Monro, Hector

  Steen, Anthony (Wavertree)

  Gower, Sir Raymond (Barry)

  Montgomery, Fergus

  Stewart, Donald (Western Isles)

  Grant, Anthony (Harrow C)

  Moore, John (Croydon C)

  Stewart, Ian (Hitchin)

  Gray, Hamish

  Morris, Michael (Northampton S)

  Stokes, John

  Griffiths, Eldon

  Morrison, Charles (Devizes)

  Stradling Thomas, J.

  Grist, tan

  Morrison, Hon Peter (Chester)

  Tapsell, Peter

  Grylls, Michael

  Mudd, David

  Taylor, R. (Croydon NW)

  Hall-Davis, A. G. F.

  Neave, Airey

  Tebbit, Norman

  Hamilton, Michael (Salisbury)

  Nelson, Anthony

  Temple-Morris, Peter

  Hampson Dr Keith

  Neubert, Michael

  Thatcher, Rt Hon Margaret

  Hannam, John

  Newton, Tony

  Thomas, Rt Hon P. (Hendon S)

  Harrison, Col Sir Harwood (Eye)

  Nott, John

  Thompson, George

  Hastings, Stephen

  Onslow, Cranley

  Townsend, Cyril D

  Havers, Sir Michael

  Oppenheim, Mrs Sally

  Tugendhat, Christopher

  Hawkins, Paul

  Osborn, John

  Vaughan, Dr Gerard

  Hayhoe, Barney

  Page, John (Harrow W)

  Viggers, Peter

  Henderson, Douglas

  Page, Rt Hon R. Graham (Crosby)

  Walder, David (Clitheroe)

  Heseltine, Michael

  Parkinson, Cecil

  Wall, Patrick

  Hicks, Robert

  Percival, Ian

  Warren, Kenneth

  Holland, Philip

  Peyton, Rt Hon John

  Watt, Hamish

  Hordern, Peter

  Pink, R. Bonner

  Weatherill, Bernard

  Howe, Rt Hon Sir Geoffrey

  Powell, Rt Hon J. Enoch

  Wells, John

  Howell, David (Guildford)

  Price, David (Eastleigh)

  Welsh, Andrew

  Hunt, John

  Prior, Rt Hon James

  Wiggin, Jerry

  Hutchison, Michael Clark

  Pym, Rt Hon Francis

  Wilson, Gordon (Dundee E)

  Jones, Arthur (Daventry)

  Raison, Timothy

  Winterton, Nicholas

  Jopling, Michael

  Rathbone, Tim

  Wood, Rt Hon Richard

  Kellett-Bowman, Mrs Elaine

  Rees, Peter (Dover & Deal)

  Young, Sir G. (Ealing, Acton)

  Kershaw, Anthony

  Rees-Davies, W. R.

  King, Tom (Bridgwater)

  Reid, George

  TELLERS FOR THE NOES:

  Knight, Mrs Jill

  Renton, Tim (Mid-Sussex)

  Mr. Michael Roberts and

  Knox, David

  Rhys Williams, Sir Brandon

  Mr. Fred Sylvester

WAYS AND MEANS

  Development Land Tax
  10.15 p.m.
  The Paymaster-General (Mr. Edmund Dell): I beg to move,
  That provision be made—

  (1) for imposing a tax, to be known as development land tax, on the realisation of the development value of land on any occasion where an interest in the land is, or is treated as being, disposed of;

  (2) for requiring certain bodies, to whom are made certain disposals of interests in land giving rise to liability for development land tax, to deduct amounts on account of that tax from the consideration paid for the disposals, for treating amounts so deducted as having been paid in respect of that tax by the persons liable for it, and for securing that those bodies receive the benefit of the whole of the development land tax paid in respect of those disposals;

  (3) for terminating the charges on capital gains from land imposed by Part III of the Finance Act 1974;

  (4) for adjusting the amount chargeable to income tax, corporation tax or capital gains tax in certain cases where the whole or part of the amount so chargeable is or has been chargeable to development land tax on the same or a previous occasion; and

  (5) for other matters incidental or supplementary to the matters specified in the preceding paragraphs of this Resolution.

  This resolution paves the way for the introduction of the Development Land Tax Bill—an essential part of the legislation necessary to give effect to the Community Land Scheme.
  I shall not detain the House with a detailed description of the new tax. Honourable Members will be familiar with its main outlines from the 1974 White Paper "Land" and much of the detail from the publication of the Inland Revenue statement of 4th February 1975 and the White Paper "Development Land Tax" which was presented last August. In framing the legislation we have also had very wide consultations with representative bodies, and these have proved most valuable in the preparation of the Bill. If the House approves this resolution, I hope that hon. Members will be able to see the Bill by the end of the week.
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  There is, of course, already on the statute book, the development gains charge legislated in the Finance Act 1974 on the basis of the proposals put forward by Lord Barber in December 1973. The question may be asked why we should so soon change those provisions even taking account of the fact that the Opposition have since seemed rather less enthusiastic about them than when Lord Barber first announced them.
  We have never disguised our feeling that, though a step in the right direction, these provisions do not provide an adequate long-term solution to the land question—and it is such a solution which we are endeavouring to provide. The development gains charge fails in the necessary criteria in formulating a tax on development gains in three main respects.
  First, it is erratic in its impact, as it can result in a charge at a rate of anything from 0 per cent. to 83 per cent. This is inappropriate for a tax on values created by the community. Development land tax, on the other hand, makes a standard charge on development gains. Secondly, development gains charge is limited in its scope. In particular, it does not deal with development value realised in the form of trading profits, or in any income form, and does not cover non-residents. Development land tax, on the other hand, is comprehensive and covers gains in whatever form they are realised.
  Mr. Graham Page: On a point of order, Mr. Speaker. Some hon. Members are interested in what the Paymaster-General is saying. We are quite unable to hear on this side of the House.
  Mr. Speaker: Order. The House must come to order.
  Mr. Dell: Thirdly, development gains tax does not, and cannot, provide machinery for giving effect to the principle to which we attach importance and which has been expressed also by the Royal Institution of Chartered Surveyors in its paper "The Land Problem—a Fresh Approach", which says:
  "Where a gain stems from the local community's actions or decisions, the benefit of it should be directed to the local community".

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  Development land tax, on the other hand, does make such provision through the net of tax arrangements.
  It is widely accepted that increases in the value of land arising from the community's efforts, activities and decisions should be restored to the community and that the few should not reap large windfall gains at the expense of the community. As I understand it, the wide acceptance of that principle extends to the Opposition, the evidence for that proposition being not just Lord Barber's proposals of December 1973 but the statements of Opposition spokesmen during the discussion of the Government's Community Land Scheme.
  Our proposal for development land tax has, of course, a particular role within the context of this Government's Community Land Scheme. But, in my view, within the context of any serious proposals for recovery for the community of the increases in value created by the community, a tax such as a development land tax must for the present have a role.
  Mr. Timothy Raison: Could the Paymaster-General tell the House how he can possibly support, as a Treasury Minister, a Community Land Scheme that will add over £300 million to the public Exchequer in the next four years?
  Mr. Dell: The effect of the Community Land Scheme over the years will greatly save the cost that the public has to pay for development.
  The rate of tax and the exact scope of the tax are certainly appropriate subjects for debate and controversy, even among those who accept the principle. But I do not see how any hon. Member who holds to the principle of recovery of development values for the community can deny the present need for a tax of the kind we now propose. I know that some people who concede the need and the justification for a tax such as this consider that the proposed rate of 80 per cent. is too high and will dry up the supply of land. I of course accept that the land market has been depressed recently, but it would be quite wrong to lay the blame entirely or even in large part at the door of the proposed new tax. Many factors have contributed towards the present state of affairs, including the general economic
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  climate and the excessive expectations of landowners based on the inflated prices that could have been attained from selling land for development a few years ago.
  Mr. A. P. Costain: Will the right hon. Gentleman clarify one point? This tax having been paid, will capital gains tax be charged in addition?
  Mr. Dell: I think that the hon. Gentleman should wait for the Bill, but I can tell him, in general, that we are not relieving capital gains tax where it applies at present.
  Although, therefore, I would deny that the new tax or its prospect has been a primary factor in contributing towards the present state of the land market, I am sure we ought not now to do anything which might impede or delay its recovery. It is obviously essential that there should be a sufficient supply of land forthcoming in the next few years while local authorities are building up towards their full duties under the Community Land Act.
  In order to assist the process of adjustment by landowners to the new land market, I have already announced two changes in our proposals and I should like to mention them once again.
  First, we propose that the first slice of development value realised in any financial year which is to be exempt from development land tax should be increased from £5,000 to £10,000. Secondly, for the next three years, until 31st March 1979, the next slice of £150,000 of development value realised in any financial year over and above the exempt £10,000 slice will be charged at a rate of 66⅔ per cent. instead of 80 per cent. The 80 per cent. rate will remain for any development value realised in excess of those amounts. In other words, any development value realised in excess of £160,000 will be charged at 80 per cent.
  These two changes will provide some incentive to the release of plots of land for development of a size with which the small and medium developer can cope. A ready market in such plots is important to developers for such purposes as in-filling and comparatively limited schemes of development. The two reliefs thus complement the measures taken by my right hon. Friend the Minister for Planning and Local Government in

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  respect of what is known as "excepted development" under the Community Land Act 1975. As a result of these, local authorities will not have imposed on them the duty, though they will retain the power, to acquire small sites for private development where the development concerned will provide up to 1,000 square metres of floor space for non-industrial purposes and up to 1,500 square metres where the development is to be for industrial purposes. Here again, the intention is to avoid putting obstacles in the way of small development schemes.
  Mr. Walter Clegg: Merely for clarification, will the right hon. Gentleman say when the development land tax will come into operation?
  Mr. Dell: I am coming to that precise point in a moment.
  Mr. Peter Rees: Will the right hon. Gentleman give way?
  Mr. Dell: I think that I had better go on. This is a short debate. [Hon. Members: "No".]
  Mr. Peter Rees: I am grateful to the right hon. Gentleman. May we take it that as the top rate is to be 80 per cent., there is no substance in the rumours current that, in fact, ordinary capital gains will be assimilated to unearned income by a measure in the next Finance Bill?
  Mr. Dell: The hon. and learned Gentleman must wait both for this Bill and for the next Finance Bill.
  Mr. Hugh Rossi: I am sorry to interrupt the right hon. Gentleman, but my hon. Friends and I find a certain amount of confusion here. Did he say that excepted development would be free from development land tax? That was not perfectly clear from his statement just now.
  Mr. Dell: What I said was that development value up to £10,000 would be exempt and the first £150,000 beyond that would be charged at 66⅔ per cent.
  I now turn to the details of the resolution. Paragraph (1) gives general authority for imposing the new tax, and paragraph (2) authorises the inclusion in the Bill of provision for local authorities, and certain other comparable authorities, to acquire land net of tax.
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  Paragraph (3) is concerned with winding up the charges on development gains and also on first lettings which were introduced in the Finance Act 1974. The more comprehensive proposals we are now bringing forward render the continuance of these two charges unnecessary.
  Paragraph (4) will allow the Bill to include provision for giving relief from tax on capital gains, corporation tax and income tax where liability to one of those taxes and to development land tax arises in respect of the same development value. The broad effect of those provisions will be that when there is liability both to development land tax and to one of those other taxes, the amount on which the other tax is charged will exclude the amount on which development land tax is charged.
  There will also be circumstances in which it will be appropriate to give relief the other way round; that is to say, the relief for the other tax paid will be given against development land tax. Although there is not a specific reference to this in the resolution, provision for it to be done will be included in the Bill. Our proposals in this type of case are described in the White Paper "Development Land Tax". Paragraph (5) is supplementary.
  The House will be interested in the Government's intentions regarding the appointed day for the purposes of development land tax. Of course, that date must depend on the passage of the Bill through the House. On the other hand, it is desirable to reduce the uncertainty that currently exists among local authorities and private developers by letting them know when development land tax will begin to operate. It has already been announced that the first appointed day for the Community Land Act will be 6th April 1976 in England. It will be the same date for Wales. My right hon. Friend the Secretary of State for Scotland is consulting the Convention of Scottish Local Authorities as to whether, in the aftermath of local government reorganisation in Scotland, the first appointed day for the Community Land Scheme in Scotland should be a few months later than in England and Wales.
  Our target for the appointed day for development land tax is 1st August 1976. The House will, however, realise that the Inland Revenue will require some weeks of preparation after enactment of the Bill

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  before the tax can operate. We would therefore hope to be out of Committee by the end of May. There will be plenty of time for the various stages of this rather long Bill. Nevertheless, if the acquisition and development of land is not to be impeded, it will be necessary to complete the legislative process some weeks before 1st August, otherwise the appointed day would have to be delayed, with undesirable consequences. I recognise that the Bill comes forward later than we had intended, but the reasons for that include the extensive consultations of which we have taken considerable account in the drafting.
  I commend the resolution to the House.
  10.27 p.m.
  Mr. Hugh Rossi: I shall follow the example of the Paymaster-General and refrain from going into matters of great detail. I do so because we shall in due course have a Second Reading debate on the Bill itself.
  I shall indicate a number of general principles which influence the thinking of my right hon. and hon. Friends. Probably the most important thing to be said is that there is no real difference of opinion between the Government and the Opposition in that we accept that increases in the value of land purely as a result of the grant of planning permission or community activity should be taxed more heavily than other capital gains. I am aware that some of my right hon. and hon. Friends hold the view that planning control artificially depresses land values, and that when land receives planning permission that does no more than readjust the value to its correct level. I do not think that is completely true. Continuing planning restrictions on other land may maintain a supply below demand, thereby raising the value of land with permission beyond that which it might attain in a completely free situation.
  The grant of planning permission can result in a substantial windfall, due to no activity on the part of the owner, which it is right to tax. I go further and say that it is necessary to tax such windfalls. Possibly nothing has caused more public resentment in recent years than the making of what some consider to be unconscionable gains from land speculation, especially at a time when there was restraint on income and difficulty in finding
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  homes to buy at prices that many people could afford to pay.
  The Conservative Administration tried to meet that situation by the development gains tax proposals of 17th December 1973. With hindsight it is fair to say that in those proposals we over-reacted to the situation. It is only fair to say that these were but proposals upon which the then Chancellor was open to receive representations and to which modifications would have been made in answer to those representations. Unfortunately, we were overtaken by the February 1974 General Election, and the new Government implemented our proposals without looking at them critically or heeding outside voices. If they had looked at them critically, in the way we would have done, subsequent events would not have followed.
  Thus, as to both its rate and its level there were fundamental weaknesses in the development gains tax. We would not wish to return to or support, for example, an 80 per cent. rate, or a levy on first lettings.
  In proposing the development land tax in place of the development gains tax the Government are introducing a number of new, objectionable factors, for example, a payment on the commencement of development. Above all, in levying a tax of this nature, a careful analysis has to be made as to the kind of gain which is to be taxed. In our view, the Government have not done this correctly, and here we join issue with them.
  The right hon. Gentleman has mentioned that he has been influenced in preparing his Bill by the paper presented by the Royal Institution of Chartered Surveyors entitled "The Land Problem—A Fresh Approach." If the Bill we are to see relates in any way to the White Paper that we have seen the right hon. Gentleman will not have paid a great deal of attention to this paper, which long pre-dated the Government's White Paper. Where he has signally failed is in analysing the kind of gain that should be subject to a development tax.
  There are several elements to be considered in any gain in the value of land. There is, first of all, the increment in value resulting from inflation or changes in social needs or demands such as commercial and industrial activity, which have nothing to do with central or local

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  government activity. There is no reason why such gains should be taxed any differently from capital gains realised from disposal of other assets. Next, there is the gain in value resulting from the actual development or work carried out on the land. There is no reason why use of skills, capital investment and the taking of financial risks should be taxed any differently from any other commercial or industrial activity. The developer is entitled to a proper reward for his efforts. It is contrary to the economic well-being of our society to discourage or penalise him in any way—as the Government's proposals, so far as we know them, appear to do.
  Thirdly, there is the gain resulting from community activity, such as the construction of new transport facilities or community decisions in the planning sphere. All of these may greatly enhance land value. Here we would agree that a special tax over and above the ordinary capital gains tax should be payable. It is, however, only in this area that we feel that development land tax is properly payable. According to the many discussions we have had with interested bodies, it is the only area in which a special tax is generally acceptable. Consensus, as the right hon. Gentleman knows, is important in all areas of taxation. A tax must be felt to be fair, otherwise there will be wholesale evasion if the law is loosely drafted. If that is not possible because the law is tightly drafted, there will be stagnation in an important activity because of the tax that is imposed.
  Our concern is to seek a level of tax which will be seen to deal effectively with unconscionable land speculation while leaving sufficient incentive for the landowner to bring forward his land for development voluntarily—not compulsorily as provided for in the Community Land Act—and for the developer to use his entrepreneurial skills to go about the business he knows best in his own way.
  Local authorities are not equipped to undertake the tasks of land identification and development. The powers given to them in the Act to suspend planning permission while they consider the acquisition of the land on confiscatory terms will stultify commercial development activity, dry up the supply of land and inhibit housebuilding programmes, especially
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  the building of houses for sale in the private sector.
  On the advice we have so far received, development land tax on windfall gains arising from community activity or decisions should be at the same level as corporation tax for non-closed companies—about 52 per cent.—and not 66⅔ per cent. or 80 per cent. We welcome the de minimis exception of the first £10,000 for tax, but the 66⅔ per cent. for the next three years on the next £150,000 is too much of a disincentive and the 80 per cent. will be totally self-defeating.
  I am grateful to the Paymaster-General for the modest concessions to the original proposals which he announced in reply to a recent question of mine, but I regret they do not go far enough. They will not be of any real value.
  The Paymaster-General also told me recently that excepted development, as a class, would not be exempt from development land tax except when it fell within the minor concessions to which I have just referred. That does not go far enough either. For example, excepted development could include the reconstruction of a destroyed building. That might well be outside the £10,000 development value and could even be outside the £150,000 value, yet it will not be exempt from the tax because excepted development is not being exempted.
  It is not right or productive to treat a development gain as being realised as soon as development is commenced. We would prefer the tax to fall when the gain is realised and the development has been completed. That would reduce the cost of the development, which is particularly important in housing, and no tax would be payable if no gain were realised and the development made a loss, as sometimes happens.
  The attraction to local authorities of the combined Community Land Act and Development Land Tax Scheme is that every one which takes part will retain 30 per cent. of any surplus it makes on the difference between land acquisition and land disposal, essentially out of the tax element after deducting administration, financing and management costs. What remains for the authority to bear outside the land scheme and the community land accounts are the off-site infrastructure costs. Yet the cost of providing the road

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  lighting, sewerage facilities and school recreation centres consequential upon large-scale development frequently deters local authorities from readily granting planning permission, thereby slowing down much-needed development and artificially raising land prices.
  Rather than the elaborate bureaucratic scheme to give developers credit under the Community Land Act, the same purpose would be more readily served by encouraging them to make contributions to the infrastructure costs. That could be either in cash, for small schemes, or in kind, for larger schemes—for example, the provision of sites for public open spaces, schools, community centres and so on. My information is that developers would willingly do that in return for a more forthcoming attitude on the part of planning authorities in the grant of planning permission. Planning delays cost them money, and they would rather make a positive contribution to the community than undergo delays.
  The local authorities would benefit in that they would take no risk of development as they will under the Community Land Act, and they would receive a contribution to the infrastructure costs which they will not under the Community Land Act. Such a scheme would also accelerate the bringing forward of land for development, whereas the Community Land Act will have the reverse effect.
  The Government's approach is totally wrong and will inflict great injury upon development, and for that reason I invite my hon. and right hon. Friends to vote against the motion.
  10.42 p.m.
  Mr. Arthur Blenkinsop: I intervene briefly to make clear the attitude of Labour Members to the speech made by the hon. Member for Hornsey (Mr. Rossi). The hon. Gentleman made clear that the Opposition are concerned for the people who made windfall profits in days gone by. His suggestion that those people regarded the then Conservative Government's reaction as over-reaction is a matter for cynical laughter. As he did during the passage of the Community Land Bill, the hon. Gentleman displayed his determination to deny to local authorities the effective power for positive planning which we believe to be essential.
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  Many of my hon. Friends and I are concerned that the original proposal for the 80 per cent. tax is not being proceeded with, and that the concession to some extent diminishes the value of the proposals to the local authorities. We shall wish to examine the matter carefully before we are satisfied that the concession is necessary. Apart from that, we welcome the motion, which I hope will have unanimous consent.
  10.43 p.m.
  Mr. Graham Page: I offer the Paymaster-General my congratulations, and my commiserations for having entered the elaborate maze of the Community Land Act and the coming Development Land Tax Bill. I declare an interest as director of a property trust company, and I promise the right hon. Gentleman a miserable time.
  The right hon. Gentleman has not had a happy send-off. To start with, he has had to perform an embarrassing climb-down. I am reminded of the old music hall song "Don't come down the ladder, dadda, they have taken it away". The right hon. Gentleman's colleagues took away that ladder.
  For a hundred or more hours of debate on the Community Land Bill, we complained that it would dry up the supply of land, and that was at the time when the right hon. Gentleman's colleagues were advocating an 80 per cent. tax rising to 100 per cent. I would not accuse the Minister for Planning and Local Government of having any sort of mind of some foreign extraction, but he has an obstinate mind, if I may say so in the politest way. He and the Under-Secretary of State obstinately refused to consider that an 80 per cent. tax rising to 100 per cent. would dry up the supply of land. They poured scorn on the idea.
  Then, hey presto! The Paymaster-General comes into the arena and, when asked by my hon. Friend the Member for Hornsey (Mr. Rossi) what representations he has received that a development tax at the rate of 80 per cent. would diminish the supply of land for housing, he replies that he has noted the concern expressed about the subject of land for housing and makes the announcement about the reduction from the 80 per cent. tax rate.
  The Minister for Planning and Local Government (Mr. John Silkin): Does the right hon. Gentleman really think that he

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  is the best person to prophesy about land? Does he not remember that on the occasion of the dissolution of the Land Commission he told us that it was being done in order to stabilise the price of land? We then saw the biggest increase in land prices in the history of the country.
  Mr. Page: I remind the right hon. Gentleman that the last Labour Government introduced the Land Commission and all that paraphernalia in order to reduce the value of land, but that it shot up by 300 per cent. To suggest that the abolition of the Land Commission procedure increased the value of land is entirely wrong.
  Mr. John Silkin: I think that the right hon. Gentleman had better look at the figures. The value of land went down 4 per cent. He never contradicted me when I pointed that out.
  Mr. Page: I have given the figures that I believe to be correct.
  I was congratulating the Paymaster-General on climbing down the ladder from the 80 per cent. rung to the 66⅔ per cent. rung. I wish that his colleagues had taken away the ladder below that 66⅔ per cent. If he had come down to 52 per cent., as my hon. Friend has said, and also kicked away the whole paraphernalia of confiscation of land under the Community Land Act, I would have been full of praise for him.
  As it is, my applause is tempered with a modicum of reserve. First, the climb-down is only temporary, just for a period of years until 1979. If the tax is stopping the supply of land now, why is it so likely not to stop it in 1979? Presumably it is because the Government hope that by that time the Community Land Scheme will have got cracking and have grabbed enough land to distribute it amongst the chosen few.
  But the White Paper on Public Expenditure says that in the year 1979–80 all that this great scheme is going to produce by way of distribution to those who need the land to build homes, factories, offices, and so on, is 5,500 acres. Does the right hon. Gentleman really think that that is going to be sufficient land for one year's development? What is the Government's estimate of the land which will come forward in 1979–80 in addition
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  to the 5,500 acres when the tax has gone up to 80 per cent. of realised development value? The White Paper on Public Expenditure plus the Paymaster-General's recent statement, taken together, really make the situation quite ludicrous.
  My criticism of the Government's scheme, the Community Land Act, and the Development Land Tax Bill that is coming, does not imply that I do not believe in some taxation of realised development value.
  I am convinced that the reasonable and practical way of doing this would be: first, scrap the seizure of land under the Community Land Scheme; second, tax the realised—I stress "realised"—development value within the ordinary tax system, and I put the figure at 52 per cent.; third, have a fairly high exemption figure, say £20,000, and not the £10,000 at present suggested by the Paymaster-General; fourth, not to increase the scale of tax with the size of annual development, because this is a wholly wrong policy, because the result is a sort of toothpaste tube development, squeezing out a small amount each year in order to get the benefits of the lower scale of tax; fifth, allow credits for developers' expenditure on infrastructure, as my hon. Friend the Member for Hornsey has already stated; last, see that the lion's share of the tax goes to the local authorities and not to the Exchequer.
  We cannot amend a Ways and Means Resolution. We have to consider what is before us tonight. We cannot vote upon any such reasonable proposition as I have put to the House. We are asked to give our blessing to a tax
  "on any occasion where an interest in the land is, or is treated as being, disposed of."
  We know what that means from the White Paper, which gives us a draft of the future Bill. One is assumed to dispose of land when one digs a trench in order to develop that land. It really is ludicrous to have to pay a tax when one starts a development, before one has realised any value from it.
  Then we are asked in the resolution to consider "certain bodies" which are to deduct the tax from the purchase money. There is no mention of Church property, charities, pension funds, and so on. There is no mention even of the Paymaster-General's concessions made in

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  a recent statement in answer to a Parliamentary Question.
  I call this a climb-down by the Paymaster-General from what his colleagues have been preaching for the past two years. I might better have called it a somersault. At any rate, it is a very clumsy circus turn, with the clowns at their craziest.
  The Government having found the folly of their levy, I ask them to abandon it at this stage. If they do, I assure them that we shall assist them in devising a modest form of ordinary taxation upon development gains.
  10.54 p.m.
  Mr. Douglas Crawford: I wish to concentrate my remarks solely on the position of small builders, particularly those in Scotland. There are several matters that concern me in this context and I have one or two questions to put to the Minister.
  First, why should there be a liability for tax on the part of a builder when he commences his development? This point was made by the right hon. Member for Crosby (Mr. Page). I ask this because I believe that it could damage the cash flow position of a small builder. It could well mean that if he wishes to build houses he will not have the cash resources to do so.
  Why is it proposed that the tax should be levied as soon as the first trench is dug by the small builder? Is it not possible to delay the point in time at which he is liable for tax, allowing him to sell some houses and to make some profit, so that the positive cash flow can be maintained and he can afford to pay the tax as a result?
  Small builders in Scotland in general, and no doubt in England, are in business not to speculate but to build houses, and I suggest that the present proposals militate against the building of houses. Small builders hold land as "stock in trade" and not, as these proposals suggest, as some kind of volatile currency.
  Is it not possible to introduce a two-tier system? I realise that there is some relaxation for profits under £160,000, but I am suggesting a change in the system so that bona fide small builders—employing, say, fewer than 100 people—can be
  530
  freed from DLT and can pay corporation tax in the normal way on their land purchases and their efforts to build houses. This was implicit in the development gains tax produced by the last Conservative Government in 1973.
  Is it not possible, before the Bill is introduced, somehow to simplify the system? With the workings of capital transfer tax, corporation tax and the Community Land Act, the system has become too cumbersome. Small builders are also facing inflation. There has grown up needlessly a large corpus of specialists and consultants to large building companies and the real speculators. This is inflationary and, for the small builder, prohibitively expensive.
  If the land tax system cannot be simplified, I would say that the Government are using a sledgehammer to crack a nut and are doing nothing radical about those large tracts of Scotland which are used for the sporting pleasures of the few. The Government will do a grave disservice to small builders in Scotland. The Scottish National Party believes that the whole land position of Scotland should be a matter for discussion and decision by the Scottish Assembly.
  10.57 p.m.
  Mr. Tim Sainsbury: I do not want to follow the valid comments of the hon. Member for Perth and East Perthshire (Mr. Crawford) about small builders but simply to put three questions.
  The Paymaster-General referred to consultations with interested bodies. Can he say which professional and expert bodies support the Government's proposals? There is an Advisory Group on Commercial Property. Why has it not been asked specifically to comment on the Government's proposals and their likely effect on the availability of land for commercial and industrial property development?
  As usual, my right hon. Friend the Member for Crosby (Mr. Page) put his finger on the most vital point—the supply of land. Does the Paymaster-General recognise the importance of an adequate supply of land to an adequate supply of houses and the inevitable action of an effective supply of land on the price of houses? If he does, why will he not take the Resolution away, think about it again

  531
  and come back with something sensible rather than doctrinaire?
  10.58 p.m.
  Mr. Michael Latham: I declare an interest as a director of a company building several hundred private houses a year.
  Even the proposed rate of development land tax is too high. In the land market at the moment, land is coming forward with planning permission—much of it from receivers and from builders closing down their businesses—and that will help to keep the programmes going for the next 12 to 18 months. But builders are not buying land without planning permission or land for future stock without planning permission—white land—because they are afraid of having it confiscated under the Community Land Act. In three years there will be no land left at all. As the National House Builders Federation has said, house building will then come to a complete stop.
  There is a simple way of dealing with this. The Government could say that the rate of tax will be 60 per cent.—full stop; with no question of a three years' time limit; and that that will continue. That would be an adequate and satisfactory solution for many people.
  Mr. Graham Page: Too high.
  Mr. Latham: They must drop the idea that the local authorities will be the basic providers of land in the future. There is not one builder in this country who has any confidence that he can look to the local authorities to provide him with land in the future. That is no way to get houses built in this country.
  11.0 p.m.
  The Minister of State, Treasury (Mr. Denzil Davies): I shall deal briefly with some of the points which have been made.
  I hope that I can clarify some of the confusion expressed by the hon. Member for Hornsey (Mr. Rossi). In his opening speech he agreed that unconscionable gains arising out of land speculation should be taxed. Therefore there is common ground and consensus between us on that point. He reverted to Lord Barber's proposal and says now, with hindsight, that the taxation which the Conservatives were proposing was too high. I remind him
  532
  that the rate which was proposed by Lord Barber, and which was implemented by us, was the top rate of 83 per cent. Therefore, if anything has happened in the past two years to dry up the supply of land and if taxation has had an effect—there are many reasons why the supply of land may have dried up—a tax rate of 83 per cent. which was introduced in the proposals of a Conservative Chancellor must have had an effect.
  I do not think that any hon. Member can say that our proposals will dry up the supply of land. Indeed, if any Opposition Members do so, I simply point out that the proposals of a Conservative Chancellor in 1973 did exactly the same thing.
  Mr. Rossi: The Minister has forgotten the passage in which I stated that we were receiving representations and were prepared to make modifications. The hon. Gentleman's Government jumped in with big feet and picked up the cards on the table without looking at them too closely.
  Mr. Davies: We hear about that passage now, but we heard little about it in 1973. I should have thought that if a Chancellor of the Exchequer brought forward proposals specifying a specific rate, those proposals should be taken seriously. It is easy when in Opposition to look back and say "We did not mean it. We want to change it."
  Mr. Raison: Does the Minister believe that this tax rate has played any part in the drying up of the land supply?
  Mr. Davies: No, I do not think so. Many factors are involved, not least, of course, the policy of printing money which the previous Conservative Government adopted. That policy more than anything else has affected the property market, and if Conservative Members were honest they would admit that.
  I turn to the latest Opposition proposals. They plan to drop the rate of development land tax, or whatever we care to call it, from 83 per cent. to 52 per cent. Therefore, if a man or a company made a development gain of £1 million, almost £500,000 would be retained by the vendor. They are prepared to see a situation where almost £500,000—almost half of the £1 million development value—is retained in the hands of the man who has made that profit purely as a result of

  533
  community action and not because of what he himself has done. In fact, the tax rate will be lower than the tax rate on many other activities which are considered to be much more worth while and where people create wealth on their own. The Opposition are now asking for a reduction to 52 per cent. Most people would say that that was too low a rate, and that a rate of 66⅔ per cent. on up to £150,000, rising to 80 per cent., is much fairer.
  Mention has been made of an increase in the development value because of inflation. I do not understand that. I should have thought that development value rises not necessarily because of inflation but because of granting planning permission and various other actions. The hon. Member for Hornsey was not clear. We are not here taxing the profits of the developer. We are not here taxing the profits of a good development or the man who makes the good development. That man will be taxed in exactly the same way as he was taxed previously. If he is an individual who is trading, he pays income tax at the normal rate. If he is a company, he pays corporation tax. The development value—it is different from the profit from development—which is created quite outside and apart from the calibre of the development—
  Mr. Sainsbury: The betterment.
  Mr. Davies: Yes, or the betterment. The development value should be taxed in a different way from the actual profits of a good development. So we are not taxing the fair and honest profits of good development.
  Mr. Rossi: There are two elements to that equation. Any development does two things. First there is the tax on the development actually carried out. But the development in itself enhances the value of land, and under the Government proposals that enhancement of the value will be taxable. That is quite distinct from the tax on the development operation itself. If I am mistaken in that, I hope that the Bill will make the matter perfectly clear and I hope that the Minister will assure us that he will accept such amendments to the Bill as may be necessary to make sure of its effect.
  Mr. Davies: I have made this point clear. It will not be necessary to accept
  534
  amendments. The profits of carrying out a development will be higher if it is a good development and the tax will therefore be higher. We are discussing a profit arising. It may arise to the vendor of the land, or it may arise to the developer who buys it at low cost and therefore secures a part of the value. The ordinary profit of the development itself and the carrying out of the development will be treated as it is at the moment under existing legislation.
  Perhaps I may turn to the point made by the right hon. Member for Crosby (Mr. Page). He said that we should tax realised gains within the ordinary tax system at 52 per cent He has failed to realise that the ordinary tax system would tax those gains by the individual at up to 83 per cent as Lord Barber, when he was Chancellor of the Exchequer, and his right hon Friends provided What the right hon Member for Crosby said is gobbledegook It makes no sense. I wish that the Opposition would get this issue clear in their minds instead of coming forward with these half-baked claims. There is no excuse for not understanding this matter. There has been a White Paper and the subject has been often dealt with in professional journals.
  Mr. Peter Rees: Will the Minister clarify one point? Am I to understand that a sole trader who is a developer in so far as his gain comprises a development gain of that type will pay a rate of 80 per cent. whereas if it were a trading action, a dealing profit, the rate might have gone up to 83 per cent.? Will the sole trader be slightly better off under the Government's proposals?
  Mr. Davies: Yes, exactly. I would expect the hon and learned Gentleman to get that right, and he has.
  I turn to the point raised by the hon. Member for Perth and East Perthshire (Mr. Crawford) who made a plea for the small builders in Scotland. If such a builder makes a development value profit—although very often it might be the farmer who makes the profit because he will sell to the builder—he will not pay tax on the first £10,000, and the balance up to £150,000 will be taxed at 66⅔ per cent. That is not an unreasonable rate of tax on that kind of gain which arises

  535
  to the builder not because of his building skills. It might arise because he has secured a good price in buying from the farmer, and that rate of tax is reasonable for a windfall gain.
  Mr. Crawford: Does the Minister not agree that taxation of 66⅔ per cent. and up to 80 per cent. will cripple the cash flow position of the small builder?
  Mr. Davies: No, I would not agree. There are various rates of tax. The small builder will not be affected in that way, because of the exemptions in the Bill.
  The Bill will make clear the situation over capital gains tax. As I understand the position, basically, the development tax is charged at 66⅔ per cent. or 80 per cent., as the case may be, on the development value. In effect—although possibly this is not the way it might be set out—the capital gains tax will continue on the increase in the current use value. A farmer, therefore, who sells agricultural land with planning permission will pay at development tax rates on the development value. But he will, in effect, pay capital gains tax on the increase in current use value, which may not be very great. It entirely depends on the value when he acquired the land, and it will often be very small for agricultural land. The balance, the development value, will be taxed at the development tax rate.
  Mr. Graham Page: The Resolution says:
  "for terminating the charges on capital gains from land imposed by Part III of the Finance Act 1974".
  Surely that means termination of capital gains.
  Mr. Davies: The right hon. Gentleman is not at his best tonight. The Finance
  Act 1974 carried out the proposals of Lord Barber to turn a capital gain into an income gain and tax these gains as income gains by a cumbersome and complicated procedure. That reference deals merely with that situation. I think that the right hon. Gentleman understands what is meant—that capital gains tax is paid on the current use value and development tax is paid on development value.
  Mr. Sainsbury: It might be helpful if the hon. Gentleman stopped referring to development value and spoke of betterment, the term used by the Royal Institution of Chartered Surveyors in "The Land Problem—A Fresh Approach", to which his right hon. Friend referred. Can he tell us which professional institutions support the Government's proposals?
  Mr. Davies: If the hon. Gentleman wants to refer to it as betterment, he can, and I will refer to it as development. We can probably agree that we mean the same thing.
  A number of organisations were consulted on a number of detailed points, and we often accepted their recommendations. The Bill has possibly taken longer to come to the House because of that consultation, but we thought it right to consult all those bodies.
  We believe that this kind of tax is the coherent way to deal with the problem. The Opposition have put forward no credible suggestions. They want merely to reduce substantially the tax on these windfall gains, from 83 per cent. to 52 per cent. We believe that that is not acceptable to the majority of the British people, who think that most of the gains should accrue to the community—the local community and the central Exchequer.
  Question put:—
  The House divided: Ayes 249, Noes 211.

  Division No. 70.]

  AYES

  [11.13 p.m.

  Anderson, Donald

  Boothroyd, Miss Betty

  Cocks, Michael (Bristol S)

  Archer, Peter

  Bottomley, Rt Hon Arthur

  Cohen, Stanley

  Armstrong, Ernest

  Boyden, James (Bish Auck)

  Colquhoun, Ms Maureen

  Atkins, Ronald (Preston N)

  Bray, Dr Jeremy

  Conlan, Bernard

  Bagier, Gordon A. T.

  Brown, Hugh D. (Provan)

  Cook, Robin F. (Edin C)

  Barnett, Guy (Greenwich)

  Brown, Robert C. (Newcastle W)

  Corbett, Robin

  Barnett, Rt Hon Joel (Heywood)

  Buchan, Norman

  Cox, Thomas (Tooting)

  Babes, Alf

  Buchanan, Richard

  Craigen, J. M. (Maryhill)

  Bean, R. E.

  Butler, Mrs Joyce (Wood Green)

  Crawshaw, Richard

  Beith, A. J.

  Callaghan, Jim (Middleton & P)

  Cronin, John

  Benn. Rt Hon Anthony Wedgwood

  Campbell, Ian

  Crosland, Rt Hon Anthony

  Bennett, Andrew (Stockport N)

  Canavan, Dennis

  Cryer, Bob

  Bishop, E. S.

  Cant, R. B.

  Cunningham, Dr J. (Whiten)

  Blenkinsop, Arthur

  Carter, Ray

  Davidson, Arthur

  Boardman, H.

  Cartwright, John

  Davies, Bryan (Enfield N)

  Booth, Rt Hon Albert

  Clemitson, Ivor

  Davies, Denzil (Llanelli)

  Deakins, Eric

  Kerr, Russell

  Rodgers, George (Chorley)

  Dean, Joseph (Leeds West)

  Kilroy-Silk, Robert

  Rodgers, William (Stockton)

  Dell, Rt Hon Edmund

  Kinnock, Neil

  Rooker, J. W.

  Dempsey, James

  Lambie, David

  Roper, John

  Doig, Peter

  Lamborn, Harry

  Rose, Paul B.

  Dormand, J. D.

  Lamond, James

  Ross, Stephen (Isle of Wight)

  Douglas-Mann, Bruce

  Latham, Arthur (Paddington)

  Ross, Rt Hon W. (Kilmarnock)

  Duffy, A. E. P.

  Leadbitter, Ted

  Rowlands, Ted

  Dunn, James A.

  Lestor, Miss Joan (Eton and Slough)

  Sandelson, Neville

  Eadie, Alex

  Lewis, Ron (Carlisle)

  Sedgemore, Brian

  Edge, Geoff

  Litterick, Tom

  Shaw, Arnold (llford South)

  Edwards, Robert (Wolv SE)

  Loyden, Eddie

  Sheldon, Robert (Ashton-u-Lyne)

  Ellis, John (Brigg & Scun)

  Lyon, Alexander (York)

  Shore, Rt Hon Peter

  Ellis, Tom (Wrexham)

  Lyons, Edward (Bradford W)

  Short, Rt Hon E. (Newcastle C)

  Evans, loan (Abordare)

  Mabon, Dr J. Dickson

  Short, Mrs Renée (Wolv NE)

  Ewing, Harry (Stirling)

  McCartney, Hugh

  Silkin, Rt Hon John (Deptford)

  Faulds, Andrew

  McElhone, Frank

  Sillars, James

  Fernyhough, Rt Hon E.

  McGuire, Michael (Ince)

  Silverman, Julius

  Fitch, Alan (Wigan)

  Mackintosh, John P.

  Skinner, Dennis

  Flannery, Martin

  Maciennan, Robert

  Small, William

  Fletcher, Ted (Darlington)

  McMillan, Tom (Glasgow C)

  Smith, Cyril (Rochdale)

  Foot, Rt Hon Michael

  McNamara, Kevin

  Smith, John (N Lanarkshire)

  Ford, Ben

  Madden, Max

  Snape, Peter

  Forrester, John

  Magee, Bryan

  Spearing, Nigel

  Fowler, Gerald (The Wrekin)

  Mallalieu, J. P. W.

  Spriggs, Leslie

  Fraser, John (Lambeth, N'w'd)

  Marks, Kenneth

  Stallard, A. W.

  Freud, Clement

  Marquand, David

  Stoddart, David

  Garrett, W. E. (Wallsend)

  Marshall, Dr Edmund (Goole)

  Stott, Roger

  Gilbert, Dr John

  Marshall, Jim (Leicester S)

  Strang, Gavin

  Ginsburg, David

  Mason, Rt Hon Roy

  Strauss, Rt Hon G. R.

  Golding, John

  Meacher, Michael

  Summerskill, Hon Dr Shirley

  Gould, Bryan

  Mellish, Rt Hon Robert

  Taylor, Mrs Ann (Bolton W)

  Gourlay, Harry

  Mendelson, John

  Thomas, Jeffrey (Abertillery)

  Graham, Ted

  Millan, Bruce

  Thomas, Mike (Newcastle E)

  Grant, George (Morpeth)

  Miller, Dr M. S. (E Kilbride)

  Thomas, Ron (Bristol NW)

  Grant, John (Islington C)

  Mitchell, R. C. (Soton, Itchen)

  Thorne, Stan (Preston South)

  Grocott, Bruce

  Molloy, William

  Tierney, Sydney

  Hamilton, W. W. (Central Fife)

  Moonman, Eric

  Tinn, James

  Hardy, Peter

  Morris, Charles R. (Openshawe)

  Tomlinson, John

  Harper, Joseph

  Morris, Rt Hon J. (Aberavon)

  Torney, Tom

  Harrison, Walter (Wakefield)

  Mulley, Rt Hon Frederick

  Tuck, Raphael

  Hart, Rt Hon Judith

  Murray, Rt Hon Ronald King

  Urwin, T. W.

  Hattersley, Rt Hon Roy

  Newens, Stanley

  Varley, Rt Hon Eric G.

  Hayman, Mrs Helene

  Noble, Mike

  Waiden, Brian (B'ham, L'dyw'd)

  Heffer, Eric S.

  Oakes, Gordon

  Walker, Harold (Doncaster)

  Hooley, Frank

  Ogden, Eric

  Walker, Terry (Kingswood)

  Horam, John

  O'Halloran, Michael

  Ward, Michael

  Howell, Rt Hon Denis

  O'Malley, Rt Hon Brian

  Watkins, David

  Howells, Geraint (Cardigan)

  Orme, Rt Hon Stanley

  Watkinson, John

  Huckfield, Les

  Ovenden, John

  Weetch, Ken

  Hughes, Rt Hon C. (Anglesey)

  Padley, Walter

  White, Frank R. (Bury)

  Hughes, Robert (Aberdeen N)

  Palmer, Arthur

  White, James (Pollock)

  Hughes, Roy (Newport)

  Pardos, John

  Whitehead, Phillip

  Hunter, Adam

  Park, George

  Whitlock, William

  Irvine, Rt Hon Sir A. (Edge Hill)

  Parry, Robert

  Willey, Rt Hon Frederick

  Jackson, Colin (Brighouse)

  Pavitt, Laurie

  Williams, Alan (Swansea W)

  Jackson, Miss Margaret (Lincoln)

  Peart, Rt Hon Fred

  Williams, Alan Lee (Hornch'ch)

  Janner, Greville

  Pendry, Tom

  Williams, Sir Thomas

  Jay, Rt Hon Douglas

  Penhaligon, David

  Wilson, William (Coventry SE)

  Jeger, Mrs Lena

  Perry, Ernest

  Wise, Mrs Audrey

  Jenkins, Rt Hon Roy (Stechlord)

  Phipps, Dr Colin

  Woodall, Alec

  John, Brynmor

  Price, C. (Lewisham W)

  Woof, Robert

  Johnson, James (Hull West)

  Price, William (Rugby)

  Wrigglesworth, Ian

  Johnson, Walter (Derby S)

  Redice, Giles

  Young, David (Bolton E)

  Jones, Alec (Rhondda)

  Rees, Rt Hon Merlyn (Leeda S)

  Jones, Barry (East Flint)

  Roberts, Albert (Normanton)

  TELLERS FOR THE AYES:

  Jones, Dan (Burnley)

  Robertson, John (Paisley)

  Mr. James Hamilton and

  Judd, Frank

  Roderick, Caerwyn

  Mr. Donald Coleman.

  Kaufman, Gerald

  NOES

  Adley, Robert

  Bottomley, Peter

  Chalker, Mrs Lynda

  Aitken, Jonathan

  Bowden, A. (Brighton, Kemptown)

  Channon, Paul

  Alison, Michael

  Boyson, Dr Rhodes (Brent)

  Churchill, W. S.

  Amery, Rt Hon Julian

  Bradford, Rev Robert

  Clark, Alan (Plymouth, Sutton)

  Arnold, Tom

  Braine, Sir Bernard

  Clark, William (Croydon S)

  Atkins, Rt Hon H. (Spelthorne)

  Brown, Sir Edward (Bath)

  Clarke, Kenneth (Rushclitte)

  Awdry, Daniel

  Bryan, Sir Paul

  Clegg, Walter

  Baker, Kenneth

  Buchanan-Smith, Alick

  Cooke, Robert (Bristol W)

  Bennett, Dr Reginald (Fareham)

  Budgen, Nick

  Cope, John

  Biffen, John

  Bulmer, Esmond

  Cordle, John H.

  Biggs-Davison, John

  Burden, F. A.

  Corrie, John

  Blaker, Peter

  Butler, Adam (Bosworth)

  Costain, A. P.

  Boscawen, Hon Robert

  Carlisle, Mark

  Crawford, Douglas

  538

  539

  Crouch, David

  Knight, Mrs Jill

  Rippon, Rt Hon Georfrey

  Crowder, F. P.

  Knox, David

  Roberts, Michael (Cardiff NW)

  Dean, Paul (N Somerset)

  Lane, David

  Roberts, Wyn (Conway)

  Dodsworth, Geoffrey

  Langford-Holt, Sir John

  Rodgers, Sir John (Sevenoaks)

  Douglas-Hamilton, Lord James

  Latham, Michael (Melton)

  Ross, William (Londonderry)

  du Cann, Rt Hon Edward

  Lawrence, Ivan

  Rossi, Hugh (Hornsey)

  Dunlop, John

  Le Marchant, Spencer

  Rost, Peter (SE Derbyshire)

  Durant, Tony

  Lester, Jim (Beeston)

  Royle Sir Anthony

  Dykes, Hugh

  Loveridge, John

  Sainsbury, Tim

  Eden, Rt Hon Sir John

  MacCormick, Iain

  St. John-Stevas, Norman

  Edwards, Nicholas (Pembroke)

  McCrindle, Robert

  Scott-Hopkins, James

  Elliott, Sir William

  Macfarlane, Neil

  Shaw, Giles (Pudsey)

  Ewing, Mrs Winifred (Moray)

  MacGregor, John

  Shaw, Michael (Scarborough)

  Eyre, Reginald

  Madel, David

  Shelton, William (Streatham)

  Fairbairn, Nicholas

  Marten, Neil

  Shepherd, Colin

  Fairgrieve, Russell

  Mather, Carol

  Shersby, Michael

  Farr, John

  Maude, Angus

  Silvester, Fred

  Finsberg, Geoffrey

  Mawby, Ray

  Sims, Roger

  Fletcher, Alex (Edinburgh N)

  Maxwell-Hyslop, Robin

  Skeet, T. H. H.

  Fletcher-Cooke, Charles

  Mayhew, Patrick

  Smith, Dudley (Warwick)

  Fookes, Miss Janet

  Meyer, Sir Anthony

  Speed, Keith

  Fowler, Norman (Sutton C'f'd)

  Miller, Hal (Bromsgrove)

  Spence, John

  Fox, Marcus

  Mills, Peter

  Spicer, Jim (W Dorset)

  Fry, Peter

  Miscampbell, Norman

  Spicer, Michael (S Worcester)

  Gardiner, George (Reigate)

  Mitchell, Davild (Basingstoke)

  Sproat, Iain

  Gardner, Edward (S Fylde)

  Moate, Roger

  Stainton, Keith

  Gilmour, Rt Hon Ian (Chesham)

  Molyneaux, James

  Stanbrook, Ivor

  Godber, Rt Hon Joseph

  Monro, Hector

  Stanley, John

  Goodhew, Victor

  Montgomery, Fergus

  Steen, Anthony (Wavertree)

  Gorst, John

  Moore, John (Croydon C)

  Stewart, Donald (Western Isles)

  Gow, Ian (Eastbourne)

  Morris, Michael (Northampton S)

  Stewart, Ian (Hitchin)

  Gower, Sir Raymond (Barry)

  Morrison, Charles (Devizes)

  Stokes, John

  Grant, Anthony (Harrow C)

  Morrison, Hon Peter (Chester)

  Stradling Thomas, J.

  Gray, Hamish

  Mudd, David

  Tapsell, Peter

  Griffiths, Eldon

  Neave, Airey

  Taylor, R. (Croydon NW)

  Grist, Ian

  Nelson, Anthony

  Tebbit, Norman

  Grylls, Michael

  Neubert, Michael

  Temple-Morris, Peter

  Hamilton, Michael (Salisbury)

  Newton, Tony

  Thatcher, Rt Hon Margaret

  Hampson Dr Keith

  Nott, John

  Thomas, Rt Hon P. (Hendon S)

  Hannam, John

  Onslow, Cranley

  Thompson, George

  Hastings, Stephen

  Oppenheim, Mrs Sally

  Townsend, Cyril D

  Havers, Sir Michael

  Osborn, John

  Tugendhat, Christopher

  Hawkins, Paul

  Page, John (Harrow W)

  Vaughan, Dr Gerard

  Hayhoe, Barney

  Page, Rt Hon R. Graham (Crosby)

  Viggers, Peter

  Heseltine, Michael

  Parkinson, Cecil

  Walder, David (Clitheroe)

  Hicks, Robert

  Percival, Ian

  Wall, Patrick

  Holland, Philip

  Peyton, Rt Hon John

  Warren, Kenneth

  Hordern, Peter

  Pink, R. Bonner

  Watt, Hamish

  Howe, Rt Hon Sir Geoffrey

  Powell, Rt Hon J. Enoch

  Weatherill, Bernard

  Howell, David (Guildford)

  Price, David (Eastleigh)

  Wells, John

  Hunt, John

  Prior, Rt Hon James

  Welsh, Andrew

  Hurd, Douglas

  Pym, Rt Hon Francis

  Wiggin, Jerry

  Hutchison, Michael Clark

  Raison, Timothy

  Winterton, Nicholas

  Johnson Smith, G. (E Grinstead)

  Rathbone, Tim

  Wood, Rt Hon Richard

  Jones, Arthur (Daventry)

  Rees, Peter (Dover & Deal)

  Young, Sir G. (Ealing, Acton)

  Jopling, Michael

  Rees-Davies, W. R.

  Kellett-Bowman, Mrs Elaine

  Renton, Tim (Mid-Sussex)

  TELLERS FOR THE NOES:

  Kershaw, Anthony

  Rhys Williams, Sir Brandon

  Mr. Anthony Berry and Mr. W. Benyon.

  King, Tom (Bridgwater)

  Ridsdale, Julian

  Question accordingly agreed to.
  Resolved,
  That provision be made—

  (1) for imposing a tax, to be known as development land tax, on the realisation of the development value of land on any occasion where an interest in the land is, or is treated as being, disposed of;

  (2) for requiring certain bodies, to whom are made certain disposals of interests in land giving rise to liability for development land tax, to deduct amounts on account of that tax from the consideration paid for the disposals, for treating amounts so deducted as having been paid in respect of that tax by the persons liable for it, and for securing that those bodies receive the benefit of the whole of the development land tax paid in respect of those disposals;

  (3) for terminating the charges on capital gains from land imposed by Part III of the Finance Act 1974;
  (4) for adjusting the amount chargeable to income tax, corporation tax or capital gains tax in certain cases where the whole or part of the amount so chargeable is or has been chargeable to development land tax on the same or a previous occasion; and
  (5) for other matters incidental or supplementary to the matters specified in the preceding paragraphs of this Resolution.
  Bill ordered to be brought in upon the foregoing Resolution by the Chairman of Ways and Means, the Chancellor of the Exchequer, Mr. John Silkin, Mr. Edmund Dell, Mr. Joel Barnett, Mr. Robert Sheldon, and Mr. Denzil Davies.

  DEVELOPMENT LAND TAX
  Mr. Denzil Davies accordingly presented a Bill to impose a new tax on the realisation of the development value of land; to provide for the termination of the charges on capital gains from land imposed by Chapters I and II of Part III of the Finance Act 1974; and for connected purposes; and the same was read the First time; and ordered to be read a Second time tomorrow and to be printed. [Bill 80.]
  ADJOURNMENT
  Motion made and question proposed. That this House do now adjourn.—[Mr. Stallard.]

  WHISKY
  11.25 p.m.
  Mr. Hamish Watt: I welcome this opportunity to inform the House and the Government of the present depressed state of the Scotch whisky industry.
  My constituency contains approximately one-third of all the malt whisky distilleries in Scotland, and what is happening in Banffshire is indicative of what is affecting the whole industry. It is having an effect on employment throughout Scotland.
  When I point out that one gallon of whisky made and laid down in bond this year is the basis of no fewer than 22 bottles of saleable whisky five to eight years hence, I hope that the unnecessary long-term damage that is being done to one of Scotland's most valuable exports by Government indifference, neglect or just plain greed in the short-term imposition of taxes will be realised.
  It is in the interests of everyone that the exports of Scotch whisky continue to rise. Exports of Scotch have risen in the past 20 years by approximately 9 per cent. per annum, but unfortunately the figure fell dramatically in 1975 for a variety of reasons, not the least of which was shortage of cash throughout the entire whisky industry to spend as liberally on advertising as in the past.
  I shall deal briefly with only one of the markets where a drastic fall-off in the uptake of Scotch occurred—namely, Italy. Towards the end of 1974, in order to
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  protect its wine industry, Italy imposed a discriminatory value added tax on spirits made from cereals. This resulted in a severe fall in shipments of malt whisky to Italy—a drop of 27 per cent. and a loss of £6 million to the British balance of payments.
  As a partner in the EEC, Britain must press the EEC Court of Justice to have this discriminatory tax removed in the interests of parity of alcohol regimes throughout the Common Market.
  I turn from me examination of the overseas market to examine the domestic market, where we find an even more severe discrimination against whisky. The duty charged per degree of alcoholic strength is 6·75p for beer and 22p for whisky, with wines and sherries some way between. I do not wish to overburden my speech with statistics, but surely there is a strong case for a narrowing of that wide gap by bringing the latter down. The tax on whisky being three times higher than the tax on beer is surely discrimination of the worst kind.
  The Scotch whisky industry is no lame duck, and it is not asking the Government for any hand out, but unless it can retain more of its own cash I am afraid that the Treasury's golden goose, the whisky industry, will rapidly go into a moult and will stop laying golden eggs. Every bottle of whisky is a golden egg to the Government, for on a bottle of whisky costing £3·40, the Government get no less than £2·70. From the remaining 70p the industry has to finance the cost of production, warehousing, blending, bottling, transport, advertising and retailers' profit. Surely that is indicative of a thriving industry.
  Already there has been a great retrenchment in the production of malt whisky this season. This has already resulted in loss of jobs in my constituency and elsewhere in Scotland. Distilling is the biggest single employer of labour in Banffshire, and already there have been lay-offs, but many of the worst effects of the recession are hidden by short-time working and longer enforced holidays. Ever since the war there has been virtually no close season in distilling, but this winter it is common practice for distilleries in my constituency to cut out weekend mashing altogether, and to close for long periods

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  over New Year and in the summer. Distillery men and their families have become accustomed to pay packets swelled by overtime and double time pay. Now with short time and flat time the purchasing power of a large section of the community has been badly slashed and every shopkeeper, garage and small business man is feeling the pinch.
  I am fully aware that what I have said in the last minute or so could have been said by virtually any hon. Member about any industry in his constituency, but here ends any similarity between the whisky industry and virtually any other industry one cares to mention.
  The production of cars, washing machines, television tubes and the like can all be compensated for at a later date by factories working overtime when the economy improves. But whisky production that is lost this winter can never be made up. There will be a grave shortage of 1975–76 whisky to put into bond in five years' time, and nothing can fill the gap that will be caused by this year's lost production.
  My party has taken a lot of stick in many quarters for voting with the Government to save Chrysler United Kingdom because of the Linwood factory. But it was not only the Chrysler United Kingdom jobs we were saving. We feared the snowball effect on the steel industry of the West of Scotland and on other ancillary industries throughout the United Kingdom.
  Now, in exactly similar fashion, I fear the snowball effect on many jobs in Scotland because of the 17 per cent. drop in the production of whisky which has occurred this year. There are some 25,000 workers employed in the whisky trade, but this does not take into account the many transport drivers, mechanics and others that all totally depend on whisky transport for a job. Nor does it include the many glass workers in factories throughout the United Kingdom who are also on short time or who are even now being made redundant because of the general downturn in the business.
  Perhaps the most dangerous aspect of the whole situation is that the coopers who make the barrels to hold the whisky while it is maturing are being paid off. Coopering is a highly skilled and highly
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  paid job, but it is also an extremely hard job. Coopers work at a tremendous pace and the noise and bustle in a cooper's store has to be seen to be believed. I would welcome any hon. Member coming to Speyside to see precisely what I mean. I was a working farmer for many years and I am no stranger to hard work, but I would be hard pushed to say that, with the single exception of lambing time, I have ever worked at such a pace as a cooper does.
  If these men get paid off and find a lighter job, even if it is less well paid, they will be extremely reluctant to return to such arduous work, and we could well find that there will be a grave shortage of casks when production of whisky gets into its stride again, as it undoubtedly will. The world is developing a taste for Scotch whisky and the present slowdown in sales will be only temporary. It is vital that stocks are there when the upturn comes.
  The Scotch whisky industry is a wonderful industry with a great future to look forward to, for the best is yet to come. Whenever I am trying to persuade a whisky company chairman to build a new distillery in my constituency I remind him that the best whisky has yet to be made.
  I am confident that the Government have got lots of revenue to come from whisky in years to come, whether it be this Westminster Government or, in the days to come, a Scottish Government. But it is essential that this Government pay heed to the needs of the industry now and leave it with more of its own cash to spend on financing the laying down of stocks now.
  Many Front Bench spokesmen in the past few weeks have spoken of the need for industry to stockpile against the day that trade improves. That is precisely what the whisky industry wants to do at the moment. Incidentally, if the Government have any spare cash—or, indeed, if any company or individual has spare cash—the laying down of whisky this year could well pay handsome dividends.
  I talked earlier of the snowball effect. One side effect of the present downturn and the reduced uptake of malting barley by the maltsters has been that many farmers fear what the future holds for their production of barley of malting

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  quality. If these maltsters go out of the market for malting barley, farmers will turn to growing varieties of barley for feeding livestock—barley of lower quality but capable of higher yield than malting barley. Like the coopers, once lost to the trade—a very specialised trade—these farmers will be reluctant to change back.
  The blenders, the bottlers, the shippers and many other trades throughout the United Kingdom are all dependent on a thriving whisky industry. What I am asking the Government to do to help the industry and to help all my constituents who depend on the industry is, first, to see fair play for the industry and to make representations to all those Governments—such as those of Italy, Brazil, Japan, Australia and the United States—who clap discriminatory taxes on Scotch whisky imports to protect their own alcohol industries or simply to raise extra revenue on a top-selling and top-quality drink.
  I know that the Government will claim that they do not want to be the first to start a trade war, but, as a prominent figure in the whisky business told me only last night, that trade war has already been started, and not by us. It is now up to the British Government to protect their best foreign currency earner. If hon. Members will note the countries that I mentioned they will see that they all export far more to us than we do to them, so we are asking the British Government to use the trump card they hold in their hand.
  The industry is not calling for a temporary bail-out of £162.5 million—the sum that the House saw fit to give another industry some weeks ago; nor is it asking for £2,000 million over 10 years, as was given in the case of yet another industry. It is asking only for that which is its own. The whisky industry urgently needs a derogation of excise duty for 50 days from the day that the whisky leaves the bonded warehouse. The beer industry has this period of credit of duty. Surely the whisky industry is entitled to parity.
  At the present rate of excise duty the industry is at any time financing duty to the tune of more than £60 million. Towards the end of the year, when there is obviously more whisky passing through the trade, the figure nears £110 million. If this money could be released to the
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  industry it could once again afford to finance the laying down of stocks that are so vital to the long-term prosperity of the entire industry and the countryside from which it stems.
  We are all aware of the historic reasons for the Government's insisting on the payment of duty before the whisky is taken from bond, but the days of the illegal distiller and the smuggler of bootleg liquor have long since gone. Mr. Deputy Speaker, in these days I could not find you a drop of moonshine or illicit whisky even if you paid me. The distilling companies are all respectable operators now and have a great deal of money involved in the industry, with highly sophisticated, automated plants, capable of high outputs of top-class whisky. There is no such thing as bad whisky—the only thing is that some whiskies are better than others.
  The whisky companies provide many men with congenial, highly-skilled and well-paid jobs. Strikes are almost totally unknown. If ever an industry was worthy of attention by the Government in its time of need it is surely the whisky industry. So far as I can discover, the last debate on the whisky industry in this House took place on 2nd February 1965. The industry has not asked anyone in this House to lose much sleep and I am sure that all hon. Members will agree that during all those 11 years the judicious use of a wee dram at bedtime has induced a sound sleep for many hon. Members and many millions of satisfied customers all over the world, most of whom have never seen the lovely glens and hills from which fine malt whisky originates.
  In conclusion, I ask the Minister to ask his colleagues in the Treasury carefully to consider this most reasonable request. Indeed, the leaders of the Whisky Association are such reasonable men that they are prepared to see parity come about by a series of steps, say two weeks' derogation this year, two weeks' next year and so on for four successive years until parity is reached with the beer industry. They can hardly be fairer than that.
  This is a sound industry, worthy of attention and support, with a colourful past and a brilliant future—if only it gets a transfusion of its own money now.
  11.42 p.m.
  The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. Gavin Strang): I am grateful to the hon. Member for Banff (Mr. Watt) for giving us the opportunity to discuss this important industry. The fact that we have Members from all the political parties present tonight—and Adjournment debates are often not very well attended—reflects the importance the House attaches to this industry.
  The growth of the Scottish whisky industry must be one of the finest examples of the graceful and gradual development of a traditional cottage industry into a highly sophisticated export-orientated industrial activity which nevertheless retains the unique qualities of the original product. The very fact that Scotch is a premium quality product means that it faces particular challenges in home and overseas markets, especially in the present world economic climate. The industry faces problems of taxation and discrimination, even adulteration and imitation. Fortunately no one has ever found a substitute product which could be mistaken for true Scotch and I doubt whether anyone is ever likely to do so.
  I will deal with the points raised by the hon. Member but before doing so it is important for me to emphasise the significance of this industry to our nation and the immense importance which the Government attach to it. It is a highly successful sector in our economy, responsible for about 2 per cent. by value of the total United Kingdom exports. It is important in providing employment for over 20,000 people, mainly in areas of high unemployment in Scotland. The industry has an excellent record in production terms and in labour relations.
  It is the duty of any Government to see that an industry as important as this is provided with a climate in which it can prosper. Scotch whisky is an important source of revenue to the Exchequer. In our private lives we may regret this, but it is a fact that about half the estimated total revenue of £640 million from spirits in the current fiscal year will accrue from Scotch—well over £300 million. I was interested to hear the hon. Member suggest that one day that revenue will go to an independent Scottish Government. Since we have the hon. Member for Western Isles (Mr. Stewart) with us, may
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  I express the hope that we will make a point of explaining to the whisky industry the implications of those customs posts which he told us he planned to erect at the border with England if he gets his way. In value terms, the English market is a lot more important to the industry than the Scottish market and imposing a big tariff before the product reaches the English market would not help the industry.
  The question of duty rates, to which the hon. Member for Banff referred, is one for the Chancellor of the Exchequer who knows the views of the industry very well. It is somewhat arbitrary to say, as did the hon. Member, that duty should be the same for different commodities in relation to their alcohol content. I do not want to burden the House with too many figures, but the duty increase in the last Budget was 29·8 per cent. for whisky and 46·3 per cent. on beer. There is no implicit reason why the rate of duty on whisky should be the same as that on wine, beer or anything else.
  The hon. Member for Banff spoke at length about deferment of duty, This is a matter on which the industry has been campaigning for some time and the hon. Member indicated how it might be phased in. The industry is basically asking for a tax credit. Arrangements for paying duty in the United Kingdom are linked to our generally available bonded warehouse system. Duty is payable on clearance from the warehouse and thus the bondholders have to finance the duty paid to the Exchequer until they receive payment from their customers, normally the distributors.
  Duty deferment is allowed in other EEC countries, but their bonding systems are generally less widely available than ours. Brewers do rather better in enjoying a modest deferment, but in their case the bonding system is not involved and the duty is levied at an intermediate stage in manufacturing. The hon. Member for Banff might like to consider the tobacco industry where a similar situation arises in that the industry finances, for a period, its part of the duty.
  As a premium product, Scotch has been under considerable pressure throughout the world during the present downturn in economic activity. However, although the United Kingdom bottled product has suffered a slight setback of 2 per cent.

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  in volume terms last year compared with 1974, total exports, including those in bulk, have shown an increase of 3 per cent. in volume and 12 per cent. in value—which indicates the effect of the fall in the value of sterling—over the same period.
  The hon. Member for Banff suggested the setback to Scotch had been caused by the industry's lack of money for advertising, but I think he will agree that a major factor has been the state of the world economy. Sales have been depressed because of the level of economic activity in those countries to which Scotch is exported. We welcome the fact that the industry recently increased the prices charged abroad because that increases our real export earnings.
  We have no reason to believe that any trade setbacks are more than temporary. There are indications that the United States market may be starting to recover and some economic pundits have given this as one of the reasons for optimism about a general upturn in the economies of the West.
  Now that we are in the EEC, we can do more in regard to the question of discrimination by Italy than we can with some other countries to which we repeatedly make representations about discrimination. We have taken this matter up with the Commission and at our insistence the Commission is pursuing it. As we see it, it is a breach of the Treaty of Rome. Just as we use every avenue to pursue this matter in relation to the United States market, and other markets where there is discrimination, we have put pressure on the Commission, and the Commission is pursuing the matter with the Italian Government. In due course, we expect that pressure to be reflected in the removal of discrimination which should not exist between member States of the Community.
  The hon. Gentleman referred to the downturn in the level of employment. He acknowledged that it is not so much a loss of jobs as the effect on earnings of workers caused by the loss of overtime earnings and short-time working because of the depressed demand.
  Mr. Waft: Does the Minister acknowledge that 400 jobs had been lost by July last year and that since that time that number has more than tripled?
  Mr. Strang: I do not necessarily accept that the number has tripled. The hon. Gentleman suggested that 25,000 people were employed in the industry. I do not argue about that. It depends how the ancillary industries are defined, but by any definition the number is well over 20,000.
  The industry is very dependent on factors outwith our control, because it is export-oriented. In the areas where we sell whisky, in the United States—which is far and away the most important market—and in the Community and Japan, the improvement in the economy should be reflected in increased earnings by the industry and thus in increased production and increased employment opportunities.
  The fact that I have paraded the problems and the hon. Gentleman has raised problems shows the involvement we have in the future of the Scotch whisky industry. We do not mask the fact that we are dealing with a highly successful competitive industry.
  To sum up, I repeat what I said on a previous occasion to the hon. Member for Dunbartonshire, East (Mrs. Bain). Whenever possible we take action in the national interest to maintain the viability of this important sector. The industry knows best where it can sell its product and how best to develop the market. What we can do for the industry above all is to reduce discrimination. It is because of the uniqueness of the product that it is so successful and there is such tremendous discrimination against it throughout the world. We make repeated representations to countries which discriminate against Scotch whisky. By being in the Community, we shall be able to make sure at the end of the day, although it may take time, that we remove unfair discrimination within the Community. We raise the matter regularly with Japan.
  We set great store by the forthcoming GATT discussions. The United States is not prepared to consider this matter again until it is raised in the context of the multilateral trade negotiations which will start in the near future. We shall be using those negotiations as another major opportunity to attempt to persuade countries to cease discriminating against Scotch whisky.

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  We recognise the problems raised by the hon. Gentleman, but the outlook for the industry is good. The people in the industry to whom he and we have spoken acknowledge that they are now in a position to pull out of a temporary period of depression in production, and I am sure that we can look forward to a successful industry making an even
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  greater contribution to our national well-being.
  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 Six minutes to Twelve o'clock.

  Second Reading Committee
  Wednesday 25th February 1976
  The Committee consisted of the following Members: Sir Thomas Williams (in the Chair)
  Bain, Mrs. Margaret (Dunbartonshire, East)
  Bennett, Mr. Andrew F. (Stockport, North)
  Corbett, Mr. Robin (Hemel Hempstead)
  Dean, Mr. Joseph (Leeds, West)
  Durant, Mr. Tony (Reading, North)
  Edge, Mr. Geoff (Aldridge-Brownhills)
  Fowler, Mr. Gerry (Minister of State, Department of Education and Science)
  Grylls, Mr. Michael (Surrey, North-West)
  Hampson, Dr. Keith (Ripon)
  Harper, Mr. Joseph (Pontefract and Castleford)
  Kelley, Mr. Richard (Don Valley)
  Loveridge, Mr. John (Upminster)
  Ogden, Mr. Eric (Liverpool, West Derby)
  St. John Stevas, Mr. Norman (Chelmsford)
  Shelton, Mr. William (Streatham)
  Thomas, Mr. John Stradling (Monmouth)
  Woof, Mr. Robert (Blaydon)
  Miss Coussins, Committee Clerk.

  EDUCATION (SCHOOL-LEAVING DATES) BILL [Lords]
  10.30 a.m.
  Resolved,
  That if the proceedings on the Education (School-Leaving Dates) Bill [Lords] are not completed at this day's sitting, the Committee do meet on Wednesday next at half-past Ten o'clock.—[Mr. Gerry Fowler.]
  The Minister of State, Department of Education and Science (Mr. Gerry Fowler): I beg to move,
  That the Chairman do now report to the House that the Committee recommend that the Education (School-Leaving Dates) Bill [Lords] ought to be read a Second time.
  Hon. Members will recall that the Government's intention to introduce this Bill was announced by my right hon. Friend the Secretary of State last July. The effect of the Bill is to bring forward the summer school-leaving date in England and Wales from the end of term to the Friday before the last Monday in May. I shall explain that in a moment. It also provides for my right hon. Friend the Secretary of State for Social Services
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  to make appropriate changes in social security arrangements, which are for certain purposes linked to school-leaving dates. It is a straightforward, practical measure, and I hope it will receive the unanimous support of hon. Members today. Certainly the support it commands in the educational world at large is virtually unanimous.
  As hon. Members will be aware, children being educated in schools in England and Wales must attend until a certain date, which is expressed as their school-leaving date. Attendance after that date is, of course, in no way discouraged, but the decision to remain at school after his school-leaving date rests with the pupil concerned, who is free to leave if he wishes.
  Present arrangements provide, as hon. Members will be aware, for two school-leaving dates in the year, at the end of the Easter term and at the end of the summer term. Pupils born between 1st September and 31st January may leave

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  at the Easter leaving date following their 16th birthdays; pupils born between 1st February and the summer leaving date may leave at the end of the summer leaving date following their 16th birthdays. Pupils born between the summer leaving date and 31st August may leave at the summer leaving date preceding their 16th birthdays.
  Those are the present arrangements. My right hon. Friend has no power to make individual exceptions to the law in this matter, nor may he vary it to meet new circumstances.
  However, new circumstances have arisen, and a minor change in the law is therefore called for. These circumstances stem from the raising of the school-leaving age to 16 from 1973–74. This long-overdue measure, which was foreshadowed in the Education Act 1944 has benefited countless numbers of pupils, and we have no intention of denying its benefits to 16-year-olds in the future. On the contrary, we remain firmly committed to the principle that all children should have a full course of secondary education. It is, however, important to ensure that this principle is applied in a sensible manner. Nothing is gained by compelling pupils to remain at school when their courses and examinations are completed. Existing arrangements have this effect, and the Bill seeks to put the situation right.
  Before the school leaving age was raised to 16, pupils taking GCE and CSE examinations were nearly always over compulsory school age, and it was general practice for those who did not intend to remain in full-time education to leave school as soon as their summer examinations were over. There was no legal objection to their doing so. With the new higher school leaving age, pupils born between February and August are now required to remain at school until the end of the summer term, even if they have already finished their examinations. This requirement has proved unpopular; such pupils are often unwilling to remain at school until the end of term and their parents are reluctant to compel them to do so. Consequently, there was in the summers of 1974 and 1975 a high rate of truancy amongst fifth year pupils. This situation creates all sorts of prob-
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  lems for schools and local education authorities. Widespread truancy inevitably disrupts courses and makes the proper management of staff and physical resources in the schools much more difficult. Under the Education Acts, local education authorities have a duty to institute attendance proceedings in such cases. We all know that is an expensive procedure, but in any case it does not act quickly enough in circumstances such as this to deal with the problem.
  The mere fact that a law is being disobeyed is not, of course, a sufficient reason for changing that law. Otherwise we might wish to change many laws! In this case, it is difficult to see how anyone benefits from the present arrangements. That view is shared by virtually the whole of the education service. Formal consultations with associations representing teachers and local education authorities have revealed almost unanimous support for the proposal to bring forward the summer school leaving date so as to eliminate the difficult post-examination period of compulsory attendance. That is the purpose of the Bill.
  In addition, my right hon. Friend has received many expressions of support from hon. Members and directly from members of the public. It is perfectly true that a few people have expressed fears that the proposal may erode the decision to raise the school-leaving age. I can only repeat what I said earlier, that we have no intention of going back on the decision to raise the school-leaving age. We remain fully committed to the principle that all children shall have a full course of secondary education. This Bill, far from undermining that principle, simply frees pupils—I stress that—from the requirement to attend school when their education is, to all intents and purposes, already complete.
  The purpose of the Bill, therefore, is to make the Friday before the last Monday in May the new summer leaving date, which I will call loosely, for the convenience of the Committee, the Spring Bank Holiday weekend. By that date most courses for fifth-year pupils, examinees and non-examinees alike, have effectively ended. Teachers are absorbed in the task of preparing and marking examination papers and are in

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  no position to devise means of occupying reluctant pupils usefully until the end of term. Most, though not all, CSE examinations will have ended by late May. GCE examinations, on the other hand, continue throughout June; but I think it is reasonable to assume that pupils taking those GCE examinations will be prepared to remain at school voluntarily until they are completed, and similarly those few pupils taking CSE examinations after that date. After all, three quarters of those entitled under existing arrangements to leave school at Easter stay on voluntarily each year, in most cases to take examinations.
  To fix a date later in the term than the end of May would leave unsolved the problem posed by pupils whose courses and examinations have ended by then; and to fix an earlier date would, I suspect, lead many non-examination pupils to see little point in returning to school after Easter. The choice of late May as the new summer leaving date has the added advantage that it coincides with a natural break in the summer term, since the Spring Bank Holiday, which is usually the last Monday in May, is rapidly becoming the date of the half term holiday throughout England and Wales. It is not, however, possible or desirable to link the new summer leaving date directly to the Spring Bank Holiday: it is not possible because that expression is not known to the law, and it is not desirable, since the date of the Spring Bank Holiday may be varied by Royal proclamation and might at some time in the future be moved to a date which would be quite unsuitable as the summer school leaving date. I am not suggesting that it will be, but it could. For those reasons, we propose as the new summer leaving date this perhaps somewhat cumbersome phrase "the Friday before the last Monday in May".
  Hon. Members will wish to know how many young people will be affected by the new law. Not all of those who reach school-leaving age next year—that is about ¾ million pupils—will be affected, but only those who reach school-leaving age at the summer leaving date and who decide to leave then. That in total is about 280,000, but of these, some will leave at the new leaving date and others later in the term as and when their examinations are completed. We are not postu-
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  lating a situation in which 280,000 pupils leave on the Friday before the last Monday in May. Thus, a side effect of the law will be to help to spread the dates on which pupils actually leave school. The Committee will take note of the fact that this may be very helpful from the employment point of view. It will be easier to settle pupils quickly in employment.
  At the same time, hon. Members may question the wisdom of proposing a slightly earlier summer leaving date and hence earlier eligibility for employment in what are difficult times from the employment viewpoint. I submit that the purpose of schools is not to keep young people off the labour market but to provide them with an education, and once that education is complete they should be free to leave—though in no sense am I encouraging them to leave then.
  Furthermore, the alternative to an earlier summer leaving date is continued widespread truancy during the final weeks of the summer term. Such truants may not be employed legally since it is illegal to employ full-time someone of compulsory school age. The only prospect open to them is one of idleness which can benefit neither them nor the community. It is surely better by far that these young people should be permitted to leave and take up employment when their courses and examinations have come to an end.
  Before concluding, I should perhaps say something about Clause 2 which proposes certain amendments to social security legislation. The amendments are necessary because social security legislation is linked for various purposes to school-leaving dates. They involve no significant issue of principle.
  Clause 2(1) provides that summer leavers will count as children for the purposes of family allowances and related child dependency benefits until a date about the end of the summer term or their 16th birthday, whichever is the later. This simply continues existing arrangements for this year. Child benefit is due to replace family allowances in 1977, and that will be related as nearly as possible to the actual dates of school leaving. So we are dealing here with an interim arrangement.
  Clause 2(2) simplifies the wording of the Family Allowances Act 1965, but

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  makes no change in the workings of that Act. Clause 2(3) provides that the date on which a person becomes entitled to injury benefit will continue to be the date when he ceases, for the purpose of family allowance, to count as a child; and, finally, Clause 2(4) simplifies the arrangements for entry to national insurance. Under those arrangements, a person who enters employment before reaching the age of 16 will still not have to pay contributions until his 16th birthday.
  Finally, I should say that the education service expects this Bill to become law in time for this year's summer school-leavers, and the education service asks regularly about the progress of this measure.
  Dr. Keith Hampson: May I check the statement which the hon. Gentleman made about the eligibility to enter employment? As I understand it, at present it is illegal, if under the compulsory school leaving age, for a person to enter employment. Let us say that someone reaches the age of 16 at the beginning of August. Under this legislation he can leave at the end of May. Will he then be eligible to enter into full-time employment, even though he is not 16?
  Mr. Fowler: Yes, he will. The whole point is that we have a sharp cut between compulsory school attendance and eligibility for employment. This will change that situation, too. We shall not have a situation of idleness to which I referred a moment or two ago.
  I trust that the Committee will support this measure which has widespread approval in the education service.
  10.45 a.m.
  Mr. Norman St. John-Stevas: I congratulate the Department of Education on being able to find a Minister to support an Education Bill! We welcome the Minister of State back from his travels. We hope that, like our late sovereign King Charles II, he has resolved not to go upon them again—at any rate, on days when the Committee is sitting.
  As the Minister said, there is no great division in the Committee over the Bill. The Opposition have no quarrel with the
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  Bill. Indeed, we might claim paternity for it since we have been suggesting for some time that there should be a change in the school-leaving date. We have also been arguing for greater flexibility. I hope we shall have an opportunity to put some questions to the Minister of State on the wider issues raised by the Bill, of preparation for adult life and, in particular, for the basic essentials of earning one's own living.
  At present there are two school-leaving dates—at the end of the Easter term and at the end of the summer term. It has been suggested there should be only one. Although that is supported by many educationists, many employers feel that that would not be a change for the better.
  The Bill substitutes mid-May for the end of the summer term as the date by which a child may leave school. We have heard something about the Spring Holiday. I regret the introduction of that secular festival because it has caused great confusion by separating the Bank Holiday from the traditional Whitsun. I hope we may read into the Minister of State's observations some hope that that may be changed subsequently. At any rate, I entirely agree that we do not want to perpetuate that unfortunate memorial of the late Mr. Richard Crossman in this Bill.
  The change of date will enable children to leave almost immediately after they have taken the public examinations, which seems quite sensible. There is, however, one point I should like to raise with the Minister. While the great majority of CSE examinations are finished by mid-May, which is, in effect, half-term, a number of GCE O-level examinations will not have taken place. Is there not a case for the starting dates of these two examinations to be so arranged that they all finish by mid-May half-term?
  The clause dealing with family allowances will enable family allowances to be paid in 1976 until the end of the summer term after the age of 16, even though, under this Bill the child may leave school in the May after his 16th birthday. That also seems reasonable and in accordance with parental expectations.
  In 1977 we are due to move towards child credits, as envisaged in the tax credit scheme, and the Bill leaves the position

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  open. I hope that if any change is to be made, it will be thoroughly explained and publicised before it comes into effect so that parents understand it. Perhaps the Minister would say what the Government's intentions are in that regard.
  There are, however, a number of points of importance which are not covered by the Bill, perhaps understandably, but about which it would be helpful to know something of the Government's thinking.
  Most members of the Committee—and there is no Liberal representation—will agree that there should be no reversal of the raising of the school-leaving age to 16. One reason we took this step was that we saw the wide variations over the country in the numbers staying on beyond 15, getting additional qualifications of one kind or another. It was felt that one means of levelling up and enlarging opportunity was to get the age to 16 everywhere. I still consider that right, and that is the Opposition view.
  The first point is the extent to which we are solving the problem of making the last year at school really worthwhile for those who will not get any further qualifications, at any rate on paper. Can the Minister tell us, for example, the extent to which instruction in civics covers practical information on such matters as buying a home with a mortgage—the most important transaction in the whole of most people's lives—and how the tax and national insurance systems work? Are such practical matters being covered in the civics course?
  Mr. Eric Ogden: I was a little concerned about the hon. Gentleman's use of the word "civics". It is a long time since I took a civics course, but it seemed to me to involve local Government, procedures at elections and national government to an extent. I think the points that the hon. Gentleman raises are valid, but they are essentially practical matters which might come under "home management" and other such terms, but hardly "civics". I think it is merely a matter of nomenclature and a difference of interpretation of the term "civics". No doubt, the hon. Gentleman has other words to describe it.
  Mr. St. John-Stevas: I have never been a nominalist, so let us not quarrel
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  about a name. It is the substance of the course about which the hon. Gentleman and I are concerned.
  Is there a genuine atempt to help pupils on career guidance, to bring in local industrialists so that they can make their views known? At the rate that rail and bus fares are going up at the moment certainly there will be a desire to cut down on travelling to work. Should we not consider getting local councillors, for example, to talk about the work of local government and the services that it provides and—something which is extremely important for young people—how they might help to support voluntary care services for the elderly and disabled? I quote these merely as examples of what might be done in that last year.
  Secondly, there is the special problem of those who have not mastered unhappily, even in their last year at school, the arts of literacy and numeracy. It is no use these children staying on at school for a further year and still not being able to read and write. Should we consider whether they should be taught, not at school, but alongside the many adults who wish to cure their illiteracy? It may, of course, create a problem of resources, but it might be more fruitful. Television, for example, has been performing an extremely useful job recently in advising people how to set about getting help with reading and writing if they have difficulties in that connection.
  Thirdly, there is the particular problem of the small minority who have decided that they are against the whole school setup. They might adopt a different attitude if they were allowed to attend some sort of training course not connected with school. But we must be careful not simply to transplant this problem from school to further education. We on this side of the Committee believe that we could make the application of the school-leaving age more flexible, while retaining the principle. It could be open to children to attend apprenticeship courses. It should also be open to them to join the Armed Forces, provided their education is continued there. The test needed here is: is education being continued? If that test is passed, the spirit of the law can be observed without necessarily clinging to the letter of it.
  If we had sufficient resources, we could consider dealing with difficult children in

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  special units. I accept that this may not be possible at present. However, we could certainly find some practical means of preventing a minority of children from spoiling the chances of the majority who would gain benefit from the additional year at school, if the class room atmosphere was conducive to that purpose.
  This is a point which has been very much in the minds of the National Association of Schoolmasters, amongst others, and I would ask the Minister to make some comment on that. The Minister knows that it takes only a few trouble makers to disrupt a class. It may well be that where a headmaster is prepared to certify that a child of, say 15 is thoroughly disruptive, he should be allowed to leave in the interests of the other children, if not in his own. I appreciate that there are difficulties in such a situation, but it is something to which we should give serious thought. I see nothing wrong in allowing a child to leave school if he gives a guarantee that he will attend some approved course of training. That is the apprenticeship point once again.
  I accept that the real challenge with which we are faced in schools is to make the last year at school a thoroughly worth while year. In all these issues it is better to be positive than negative. This calls for imagination and thought amongst teachers acting in co-operation with parents, local industrialists, councillors and others. We all have an interest in making sure that the coming generations are as fully qualified as possible and will take up jobs to which they are best suited and in which they feel that their abilities and aptitudes are being properly tested and utilised.
  10.57 a.m.
  Mr. Andrew F, Bennett: I very much welcome this measure. Before I came into this House I taught both fourth and fifth year leavers for 13 years, and I am well aware of the problems experienced with those groups.
  In my first year of teaching I remember reaching Christmas and being relieved to find that one third of a rather unruly fourth year class were leaving. When the proposals to do away with Christmas school leaving were carried through, I had some reservations. In my first year
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  after the ending of Christmas school leaving, I was surprised how much better the school year progressed. There was no longer the atmosphere which used to creep round the fourth year classes halfway through the autumn term because it was only a short time before they were "demobbed", when the pranks became wilder, their attention diminished and attendance became worse. Once we got rid of the Christmas leavers, these problems were put off until Easter.
  From my experience, I feel there would be advantages, particularly with reluctant attenders at school, if we had only one leaving date. The atmosphere generated by leavers would spread through the school only once a year.
  I should like to make a few comments on the use of the final year which the hon. Member for Chelmsford (Mr. St. John-Stevas) mentioned. In my experience, before the school-leaving age was raised, a great deal of thought was given to the kind of courses which would be run. The majority of schools now run extremely worth-while courses in their fifth years for non-examination pupils.
  My one reservation is that too often the careers guidance talks are based on the assumption that pupils will get qualifications. I remember the number of careers guidance talks given in the schools in which I have worked, where nice ideas for careers were put forward. The truth was that many of the children leaving would finish up in factories. They were simply told of the kind of jobs they would never achieve because they had opted not to take either CSE or GCE examinations. That is the one reservation I have about the careers guidance given in schools. It is often given to the non-examination pupils because the examination pupils are so busy slogging away at their academic subjects that they do not have any time for guidance.
  For pupils thinking of going into sixth forms, it would be helpful if they could go out and gain some experience of work, if the employment situation allows it, before committing themselves to the sixth form. Many pupils seems to end up in sixth forms because it is traditional; many go on to university and some go into teaching, never having found out what the real world of work is about.

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  So it would be useful, if the job situation permits, if some of those pupils went out and obtained some work experience when GCE examinations ended.
  When I first came into the House I pressed for this measure, and I was most disappointed to find that it could not be put into effect by means of an order, subject perhaps to affirmative resolution of the House, but that it actually required a Bill to be introduced. For that reasons, instead of being able to do this coincidentally with the school-leaving age, we had two years in which most unsatisfactory procedures were carried out and truancy rose. In the summer term the problems of truancy spread to pupils lower down the school. I consider it most regrettable that it was not possible to carry this out to coincide with the raising of the school leaving age.
  I was also concerned at the seeming failure of the Ministers and the Department to appreciate a particular Lancashire problem here. In Lancashire, at least, the summer term varied widely from one education authority to the next. It also varied widely between direct grant schools and local authority schools because of the Lancashire Wakes holidays. Thus some authorities had an early Wakes holiday, and others had a late one. There was also the question of the summer holiday in relation to the Wakes. My experience was that schools within a couple of miles of each other ended their summer terms either early in July or early in August. That caused problems if pupils were competing for the same jobs. One pupil could apply for a job almost a month before another pupil from another school. The formula of "the Friday before the Monday" is much better. It produces a uniform date throughout the country and does away with the anomaly which existed in Lancashire of Wakes holidays and varying summer terms.
  Having pressed for two years to see this little Bill produced, my concern is that we still have an unresolved issue—namely, the question of the Easter leaving date. I was disappointed when the Minister, in reply to a Question of mine last summer, said that he was continuing consultations about the Easter leaving date. For the welfare of schools, it would be far better to have a fixed
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  date, so that there is not this "demob" atmosphere spreading through the schools twice. Pupils taking CSE in one or two subjects are not then torn between choosing whether to go to work at Easter, because they might be able to compete more successfully for a job, or waiting in school to try for their CSE examinations, of which they may be rather proud in future years.
  I realise that the Department of Education would prefer one leaving date, and I am sure most educationists would. The real battle is between the Department of Education and the Department of Employment, which, one suspects, would like pupils to be able to leave each Friday and trickle out into the dead end jobs market, so that every time a petrol pump attendant became fed up with the low wages at 18 and left his job, the garage proprietor could ring up the schools and obtain a replacement of cheap labour.
  That is perhaps being a little unfair on the Department of Employment, but I can appreciate the problems, and it would be unrealistic to expect the Department of Education to win this year. I wonder whether that Department can ever win, but I should have thought it could have looked at the Bill and said, "If the Department of Employment rings this year, we shall not do anything about the Easter leaving date." That would have persuaded the Department to let the Minister have in the Bill a clause allowing him, by order, to vary the dates in the future, and perhaps, to be safe, to vary them only from two to one, so that we could not go backwards.
  Had we done that, and should the employment situation, as we all hope, pick up next year or the year after, it would be simple, by means of a Statutory Instrument, subject to an affirmative order, to introduce one leaving date. As it is, in my understanding is that another Bill would be required. I realise that the Second Reading Committee helps to get measures through the House, but it still takes a lot of time actually to get a Bill through Parliament, as opposed to an order.
  If the consultations which are taking place with all the interested bodies come down in favour of one leaving date, it would be helpful if there were such a

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  clause in the Bill to cover that contingency.
  I should like to press the Minister on one other point. If we are making the effective leaving date the Bank Holiday Monday, we should be looking carefully at induction courses and at the use of FE colleges. Most of these colleges are empty from the Whitsun holiday to some time in late September. We are short of buildings, and this would be an ideal opportunity to run special courses for a period of a few months from Whitsun to September when the colleges have the spare capacity. I hope the Minister will be able to the Committee that linked with this change in leaving date we shall see a much more imaginative use of resources in FE colleges.
  I welcome this measure. It will be welcomed by everyone who works in schools and will do a lot to solve existing problems in the summer term. I ask the Minister to give careful consideration to my suggestions, and perhaps persuade his colleagues in the Department of Employment that if nothing can be done this year, a small amendment could be made to the Bill to allow the Minister in some future year to abolish Easter leaving.
  11.7 a.m.
  Mr. John Loveridge: Most people will welcome this measure. Those who have been connected with education will appreciate how hard it is to interest students after they have taken examinations. It is the end of the term and the vacation is in view. It is possible to run special courses. I have had experience of doing so with adult students, though not in the State education system, which can excite their attention and keep them occupied usefully. There are too few who pass their examinations at the end of their training. Nevertheless I accept that it is wise to allow those who have taken examinations, however few, to go if they want to do so.
  There are 70,000 who leave in the summer unqualified in any way. Are we really to say that we should allow to leave school early those who are most backward, who most need training, and, indeed, those who perhaps cannot even read and write? Surely this is saying that we cannot teach them, that we do not
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  know how. I appreciate that many of these students may be truculent and difficult, and disturb the other students. It may be hard for the staff to handle them. But that problem does not apply to every one of the 70,000. That problem can be solved by giving wider powers to the local education authorities to act in specific cases to remove pupils who really are truculent and frustrated because they are not learning anything. Will not the Government consider putting into the Bill a greater measure of flexibility, as my hon. Friend the Member for Chelmsford (Mr. St. John-Stevas) has suggested? It is not enough to fix a single date six weeks earlier in the summer. It is certainly not enough for those who need more education than they are getting—those who are the most desperately backward after many years in our schools.
  However, it is not only those with which I am concerned. As the hon. Member for Stockport, North (Mr. Bennett) has said, there are the Easter leavers. Most of those go out unqualified. If we are to have two exit periods, surely our examination system can be adjusted so that there is the same measure of effort towards examinations to be set for Easter as for the summer. There should not be an advantage to the summer leaver over the Easter leaver, and there should be no real difficulty in arranging that the Easter pupils have the same full measure of excitement and impetus towards their end-of-school period. I do, however, accept that it would be difficult to have a single date because of the large numbers thrown on to the labour market at one moment.
  What of the teachers? Of course, this provision makes life much easier for them. Those of us who have been connected with education appreciate that teachers like to have their lives made easier. Most of them are tired towards the end of the long year. None the less, the long vacation is approaching and it would not be harmful on behalf of those 70,000 pupils who leave unqualified if they really had to do their utmost at the end of the school year to try to bring those pupils up to a better standard to fit them for modern life.
  There is then the question of apprenticeships. I understand that there was in Northern Ireland a provision at one time that pupils could leave at Christmas

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  instead of Easter if they had proper apprenticeship arrangements made for them. This is not altogether attractive, because it appears to go back on the 16-year-old leaving age. On the other hand I think the Committee would welcome some analysis of how that system worked and what it meant to those pupils to whom it applied. Why did it lapse? There must have been reasons, and they relate to the whole question of dates.
  Therefore, I support the measure, but I hope the Government will give some thought to the qualifications that I suggest, particularly to allowing local education authorities greater discretion. They are mostly vastly experienced and run by sensible people, and I think it would be helpful.
  I should, however, like to ask the Minister one specific question. How does this measure relate to the Education (Work Experience) Act 1973? That Act allowed local authorities to let children leave school during their last year of compulsory education in order to go out to get approved work experience. I do not know to how many this applied. When I asked the Department in 1974, no figures were available, and I expect that is still the case because it is a local authority matter.
  Nonetheless, it has this aspect which I do not quite understand. If a child is leaving school in that last six-week period after the Spring Bank Holiday—or the Friday before the last Monday in May, as we prefer to call it—but is going out under the Education (Work Experience) Act 1973, how different is his situation compared with the pupil who leaves school under the provisions of the Bill? There may be no conflict between the two measures, but it appears to me that in view of the family allowance and social security provisions this might deserve investigation.
  With those observations, I welcome the Bill.
  11.14 a.m.
  Mr. Eric Ogden: I wish to ask two brief questions and I hope to make one brief comment.
  May I direct the Minister's attention to the first four words in line 7, Clause 1,"the end of January ". I plead guilty to some confusion. Why this phrase "the
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  end of January"? Surely it is not because the preceding term is also limited by the phrase "the end of January". In general terms, "the end of January" appears to be a non-date. It is not the beginning of the year or the beginning of the school term, which begins in January. It has no fiscal relationships so far as I know. So why have the words "the end of January" been chosen instead of either 1st January—which has some significance outside education—or the beginning of the school term after the Christmas holidays? I should like the Minister to explain that choice not only for my benefit but for others who are concerned.
  Secondly, may I have an assurance from the Minister that nothing in the Bill will prevent a pupil who wishes to stay at school till the end of term do so if he wishes? I understand that if a pupil wishes to stay on until the end of term, it is common practice to give him every encouragement to do so. But I should not like a situation to arise, after the Bill has become law, in which a pupil who would like to stay on is prevented by law from doing so. The hon. Member for Chelmsford (Mr. St. John-Stevas) used the phrase "to obey the spirit of the law and not the letter '. I have not been before a court, but if I were, I should think I would be judged on the letter of the law although I might hope to be judged by the spirit of the law.
  Those are the two points I wished to raise: Why choose "the end of January"? I should like an assurance that whatever the reason—perhaps a pupil is waiting to take up a job or to begin an apprenticeship—a pupil will be welcome in school, whatever the law happens to say at the time.
  Hon. Members have used this opportunity to say what should be done during the last year's term. It is tempting to follow their example, but I shall resist the temptation. Emphasis has been laid on the fact that the school-leaving date is for the benefit of the pupil at school and for the teachers. However, the Minister must have some regard—although it is not his ministerial responsibility—for the effect of the school-leaving date upon educational employment and upon further teaching. The school-leaving date should not be fixed solely for the

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  benefit of the school, the pupil and the teachers; it must have some regard for the opportunities available to prepare the school leaver for a full life later on. I give the Bill my support.
  11.18 a.m.
  Mrs. Margaret Bain: I hope hon. Members will not find it presumptuous of the only Scottish representative present speaking about a Bill which basically affects people south of the Border. I trust that the Minister, who has just moved from the devolution unit, will not feel that I am impinging on his territory. I am going on the assumption that the same type of legislation will ultimately be implemented in Scotland—thus reversing the Scottish Acts of 1962 and 1969. It will be a very different Bill because examination dates are not the same. Holidays are different; we do not have a Spring Bank Holiday. Our Summer holidays begin at the end of June and they last throughout July and August, which causes Scottish Members of Parliament with families a great deal of concern. It is difficult for them to have a family holiday if Parliament is in session until the end of the first week of August.
  However, I welcome the general principles of the Bill, although there is a strong case for arguing that fixed dates for school-leaving should be abolished altogether. As the hon. Member for Liverpool, West Derby (Mr. Ogden) said, encouragement is given to children to stay on at school. No one forces them to leave. Everything possible is done within education circles to encourage children to stay on. But the problem with fixed dates is that some children will be able to leave when they are 16, but some will have to stay until they are 16 years 7 months. It is the latter group who cause major problems for the teachers.
  It is difficult for a child, who recognises that the school-leaving age is 16, to make the psychological jump and accept that he has to stay on until he is 16 years 7 months, when his friends from the same class are taking up employment or going on to college. Like the hon. Member for Stockport, North (Mr. Bennett), having dealt with children in this age group when I was a teacher, I found them extremely
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  difficult to cope with. They are antagonistic towards the school and the teachers.
  The hon. Member for Chelmsford (Mr. St. John-Stevas) made great play about the kind of work that should be done with these children. I assure him that a great deal is done with these children, not in something vague called "civics" but throughout the school curriculum. In our school we co-ordinated every department and the children were given a great deal of instruction for life and leisure, which was what we called the course. We worked very hard.
  But, even with that kind of work, if the child is antagonistic to having to stay on at school, he will not take advantage of it. It is difficult to give a child of 15 or 16 a crash course in literacy and numeracy. That needs to be done at primary level in the school system. I speak as a qualified remedial teacher in a secondary school. A child coming into secondary school with literacy and numeracy problems will not have the problem eliminated in three or four years in secondary school. The vast bulk of the work should be done at primary level.
  Another problem about forcing children to stay on at school is that we may make them antagonistic to going on to further education and accepting opportunities later in life. I should like to see much more encouragement and instruction given to children about the kind of opportunities available later in life. It is often difficult for people to go back into education because they may have family or financial responsibilities. We must look at the whole system of awarding grants to people who want to come back into full time education in later life.
  I welcome the general principle but I feel we should approach this question in a more flexible way and abolish fixed dates.
  11.22 a.m.
  Mr. Joseph Dean: Like all hon. Members, I welcome the Bill in principle, but I have taken note of one or two matters raised by previous speakers about allowing youngsters to leave earlier after sitting their examinations. The inference of one or two previous speakers was that this may give them a quicker opportunity to obtain a job than the youngster continuing to the

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  end of the term. This is scaremongering, unintentional though it may be, because I have found in my experience in local government that for most children leaving with O levels the intakes are fixed fairly rigidly throughout the country.
  Local authorities will be starting now to discuss their intakes and deciding how many jobs will be available and how many youngsters with O levels will be recruited for those jobs. This also applies in the banking houses and most of the business houses. Despite the high percentage of school-leavers with O levels who go into local government, the business houses and the nationalised industries, the intake is phased fairly rigidly. I cannot see those organisations suddenly deciding to intake earlier. It would mean a double intake to them. Children sit their O levels with the intention of leaving school afterwards. But they still have to wait to take up the positions that they have applied for, because often whether they get those jobs will depend on the results of their O levels. The situation can suddenly change and a double intake can occur in one year.
  The hon. Member for Chelmsford (Mr. St John-Stevas) talked about industrialists and apprenticeships. One of the saddest things that has happened during this past decade is the number of industrialists who have gone backwards and not forwards in providing educational training for youngsters leaving school. I worked in a factory employing 24,000 people which had an excellent school within its curtilage which children could leave with some qualifications and go on to get others. But with rationalisation, on top of 12,000 jobs, the school was completely obliterated.
  So I do not accept lightly that industrialists pay high regard to catering for school-leavers. It has to be done within the educational system. Most of the school-leavers who go into society to try to get some qualifications overwhelmingly have to obtain them with our own Civil Service, local government Civil Service, as one might call it, with local authorities, or with nationalised boards. I only wish that the industrialists—one industry that fell down very badly in the past few years was the building industry—would have more regard to providing technical training for youngsters who leave school
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  with limited qualifications. Unfortunately, they do not do so to any degree. I still think that it has to be done within our education system.
  11.26 a.m.
  Mr. Tony Durant: I welcome the Bill in general principle. It concerns something on which I have been keen for some time. It is nice to be a member of a Committee which is discussing education. We often consider Bills on which we argue about systems, but today we are actually discussing something which goes on in schools, and that is encouraging.
  I have a personal stake in this Bill. When I moved last year, the sixth-formers of the local comprehensive school on their way home smashed a considerable number of my windows. I thought it was a political move, but found that it was not. Apparently it is the standard practice in the last few weeks of the summer term. It was my turn that time; the year before, it was somebody else's. It reflects the boredom within that age group. I do not blame them. If they are fed up and want to express themselves, throwing stones is not a bad way to do it.
  I come to a more serious matter. I am slightly concerned about examinations and the later date of the GCE. I am worried that in more humble families there may be pressure on the child not to take the exam but to take a job. It is a matter that we ought to consider very seriously. A lot of children do not appreciate the importance of an exam, and if there is pressure from the parents we should look at the matter. I also support the view expressed about the one leaving date. Eventually I hope that we shall have that, because I think it is right. I would support any measure to secure it.
  I want to say a word about careers guidance. I did a research project on the subject, and it was the most depressing thing I have ever done. The amount of careers guidance that is provided in all schools—I am not talking only of the State system; I am talking of the private sector, too—is pretty dismal. It is something that we should do a great deal about.
  An hon. Gentleman opposite said that we must remember those who have no qualifications, and that usually their

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  only option is the local factory. I do not agree. The options in life are tremendous, if the opportunities are explained to them. They can get jobs in other parts of the country. There are apprenticeships and all sorts of things which—
  Mr. Andrew F. Bennett: My point was that suddenly people talk to fifth-year children, who have opted to take no exams at all, about the opportunities for them if they get five or six GCE subjects. It is too late then for them to get them. Most of the opportunities being explained to them are ones which require those qualifications. That, I think, is one of the sad aspects of careers guidance.
  Mr. Durant: I was not disagreeing with the hon. Gentleman. I was saying that we should open up options. We do not give children an opportunity early enough to see what the options are. It is not good starting to talk about careers in the last year. That is wasting time, because many are pre-destined. Much more should be done about careers earlier in the school programme. That is something on which I am keen.
  I am glad that we have talked a little about the contents of the syllabus. I should like to see basic economics introduced on a greater scale during the latter part of schooling. Many people do not understand how the subject ticks, and the more we can teach them about what happens in society the better. There is the civics course where the local Member of Parliament goes along and talks about what it is like to be an MP and then a councillor relates what it is like to be a councillor. They call it a civics course. I do not. I call it a bore.
  Mr. Gerry Fowler: It depends on the MP!
  Mr. Durant: I do it quite often and I am asked back, so it cannot be that bad. I think we should teach much more about how our society is structured and how things work, and the financial structure of the country is something I should like to see introduced much more into the school syllabus.
  Another thing which I should like to see in the latter part of schooling is teaching about leisure. If we move into a society which has a shorter working
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  week—and I am all for that—we must teach people how to enjoy themselves in ways other than just kicking a football. We all know about sport, and that is a good thing, but there are many other aspects of leisure which I might never have taken up if someone had not introduced me to them. I might never have appreciated music if someone had not opened up the subject; I might have shut my ears to it.
  Generally, I welcome the Bill. I hope that we shall look carefully at the question of examinations and careers guidance, which needs much more attention in the school syllabus.
  11.31 a.m.
  Mr. Robin Corbett: I hope that the hon. Member for Reading, North (Mr. Durant) will not be surprised if his offer to local 15-year-olds to break his windows is all over the local newspaper next week. I wonder what his wife will say about it.
  I welcome the Bill. I was particularly encouraged that the Minister went out of his way to stress that it was more a tidying-up measure, much demanded by people in education, than an invitation or encouragement to pupils to leave school. Many hon. Members have referred to the fact that it is these pupils more than others who will find it more difficult to find either work or satisfying work, and certainly more difficult to find anything which could be remotely described as a career.
  In my constituency one of the problems of school-leavers is not that of continuing engineering apprenticeships but the fact that a large number of unskilled and semi-skilled jobs have disappeared for ever. I was gratified to hear members of the Committee stress the importance of trying to prepare these pupils, who in many ways—and this must be said—are failures as far as our present education system is concerned, to earn a living and understand the world into which they are going. I agree that the practice of leaving these issues until the last year is far too late.
  I know the Minister has listened carefully to the comments about career guidance, particularly those of my hon. Friend. When the Bill is enacted I hope that local authorities will be encouraged, perhaps on a group basis with help from colleges

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  of further education, to offer special courses to children who choose not to leave at this new date but wish to continue on to the summer term, to try to give them a better introduction to the world of work. It is my belief that this will become a growing problem, with so many unskilled and semi-skilled jobs disappearing, and in this sense we are building up trouble for ourselves.
  I also believe—and I hope I shall not be misunderstood—that perhaps we are discussing this measure because the whole of the education system is geared to examinations and to the achievement of obtaining a piece of paper which, in many respects, becomes either a first-class or a second-class ticket on the journey through life.
  In that sense, we are talking about the failures of the education system which is heavily weighted towards examinations. I would hope that in time we would begin to move to a system which avoided these make-or-break examinations and made continuing assessments. The piece of paper that someone might have would be much more useful even than O levels or A levels and an objective summary of the strength and weaknesses of that particular individual, because whatever is said on that piece of paper may be instrumental in the kind of life that its owner makes for himself. This is tremendously important, and I hope that the Minister will comment on it.
  11.36 a.m.
  Dr. Keith Hampson: I hope it will not be amiss if I bring a slight—I emphasise slight—element of discord into what has been a very stimulating and useful debate about, as my hon. Friend the Member for Reading, North (Mr. Durant) has said, education and what happens in the schools.
  I welcome the Bill. It has been a worthwhile birth but I think we should question the nature of its conception on two counts. The first is that it goes so far but not very far and one has to ask whether this is the right way to bring in this element of flexibility. We have all had examples of students leaving after their examinations, not being of the qualified age and therefore, although offered jobs, often could not take them up simply because they could not obtain their national insurance cards. This
  578
  caused tremendous frustration and annoyance, and often, of course, they missed the chance of a job they were interested in.
  The psychological aspect of the effect on the pupil is most important as well as the aspect of vandalism and damage to the schools themselves. There is also the truancy element and the fact that these people can no longer be held in the schools. Clearly the Bill has been introduced to deal with a difficult situation, notably truancy, although there are other vital aspects, and possibly, therefore, it is too narrow in its conception.
  Another point is the degree of flexibility which the Bill gives. I had some cases in 1974 and I shall quote from a letter written to me by the Minister when he was previously in his present job because it highlighted a situation which is not resolved by this Bill.
  I have an example of a young girl who became 16 two days after the end of the eligible period—in other words, on 2nd September. She wanted to take a pre-nursing course in the local further education college which gave her the chance to take O levels which in that particular secondary modern she had not been able to do. She was most keen to do this because she wanted to be a nurse. She had a valid intention to go into education, but she was denied that chance because she had to stay on to the next school-leaving date, which was at Easter. She could not join the course at Easter. So, again, there is tremendous frustration on the part of the child and her parents.
  The Minister wrote, rightly, at that time and with some sympathy:
  "I am afraid that there can be no individual exemptions from the law governing school leaving dates. …"
  He continued:
  "However, as Ernest said in the last debate, a greater degree of flexibility in operation may well be desirable, particularly where pupils wish to continue their education elsewhere than at school … This is a complex question and any alterations to the existing arrangements will of course involve legislation."
  In no way does this Bill get over that problem. With respect to the civil servants in the Department, one wonders why gestation takes so long before something emerges and then produces such a mouse. Is it not possible that an alternative might have been to give the

  579
  Secretary of State powers under regulations to make exemptions on an individual basis? I accept that we have an immediate problem ahead of us, but I am questioning whether we look far enough ahead and think things through. If the way I have suggested would be too cumbersome, would it not have been possible to draft something which enabled the pupil, or the pupil's parents, or both, to make a submission to the governors of the school, the head, or the local authority on the ground that the pupil was leaving the school to go on to a link course or quasi educational course? That is the kind of flexibility that we should look for rather than the narrow flexibility we have in this Bill.
  The case I have quoted was two years ago. We have not yet heard from the Minister whether this is part of any coordinated strategy concerning this age group. Are we thinking things through? Are the Government doing more than simply responding to pressure?
  When we continually raised this matter in 1974, there was a marked reluctance on the part of the then Under-Secretary and his Department to do anything. The weight of opinion in the profession has certainly built up and there is also pressure on all sides of the House. Consequently the Department has responded.
  Mr. Andrew F. Bennett: Does the hon. Member mean that some blame attaches to this side of the House? It was 1974 when the problem first occurred. If I remember correctly, we had a Labour Government from February of that year. Surely if one were trying to do something which was to become effective in that summer, then it should have been done by the previous administration.
  Dr. Hampson: I was not necessarily blaming the Government side. I was indicating that there was a marked reluctance on the part of Government or their advisers. But this problem has been around a long time in that even when the school-leaving age was earlier people could not get their national insurance cards if they opted out after taking examinations. I opted out after my examinations. Certainly most of the pupils who did not continue to A levels left school after O level examinations
  580
  had finished and tried to get whatever jobs they could. This has been a longstanding problem.
  I wish to turn to the more fundamental question which relates in the first instance to the two school-leaving dates. At most, one would have only eight weeks between these two dates. If we were operating it this year, there would be only six weeks. On educational grounds I must question this. What can one do with this particular age group in a six-week period? It will be a "fag end" of a course. It raises the question of the "in-fighting" between the Employment Department and the Education Department. I should have thought that there was little to justify this on educational grounds. The Minister has said, and I understand full well, that there is a lot of pressure from the employment point of view. There is an argument being put forward that the employment situation is eased, because the staggering of the school-leaving dates helps to slot people into jobs.
  I ask the Minister how far the Government have consulted with the careers advisers and their associations on whether this is helpful. I believe that only a quarter of those pupils entitled to leave at Easter actually do so. Perhaps this number will grow. In other words, the number is about 80,000 to 85,000 out of the entitled 300,000. We could find ourselves with a not small amount to cope with at Easter but a very substantial number. It will depend on the changed situation.
  The other aspect of the school-leaving situation at Easter, as I understand it—and the Minister might be able to enlighten us further on this—is that of the 80,000 or so pupils entitled to leave about 70,000 are leaving without any qualifications. If raising leaving age is to do anything, it must encourage people to take up more skills or prepare them better for the world outside. If it does not give them paper qualifications, it should help with their functional literacy and numeracy.
  We have a serious problem. There is a depressing report out about the Midlands situation, centred on Coventry, which showed disturbing evidence that young people, such as apprentices on the shop floor, were not at the literacy and numeracy levels they should be.

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  11.45 a.m.
  The biggest problem is that, because of home pressures and other demands people are inclined to leave early and not to make the most of the last year, and therefore there is, on educational grounds, a lot to be said for not having the break at Easter. This may appear to clash with what I said earlier about the need for flexibility, because one could argue that to meet my initial point about the desire of people to leave, even if their birthday fell just after the leaving dates, there might be a case for going back to the Christmas leaving date. If there is no way of changing the regulations, possibly there is something to be said for that, but we have seen no evidence as to how far this has been thought through and why we have ended up with the present option.
  In Northern Ireland, when the school-leaving age was raised, the situation was more flexible than in this country. One could leave at Christmas to go into apprenticeship and for the whole of the last year—this is how many of us would have liked to see ROSLA operate here—one could opt out of school provided one could take a further education course.
  Mr. Gerry Fowler: The Northern Ireland scheme was largely concerned with apprenticeship rather than with continuing education specifically. It operated for only two years. The order was not renewed largely because education interests opposed continuation of the scheme.
  Dr. Hampson: It would be very interesting to know the grounds on which the education people opposed it. I suppose we might have problems with the trade unions if we brought in a full flexible system.
  The Minister is one of the foremost exponents of the concept of recurrent education, and what we are aiming to do, I hope, is to encourage people and to motivate them to go into the education system at other stages of their lives—an in-and-out system.
  There is a basic dilemma. It would be better if we did not create a situation which encouraged those who most needed to stay on—that is, those without qualifications—to leave at Easter. Yet it might be useful if we encouraged people to leave school. If this is a hostile environ-
  582
  ment for them, is it right to imprison them in the school system? Would it not be better to encourage them to go into work experiences related to further education, hoping they could be stimulated to return to formal education for training or retraining? This is not the simple and clear-cut question that this Bill tends to imply it is. I would hope we could widen it out and probe Government thinking in this respect. We should like to see some common ground because education is about improving the qualitative aspect of education, particularly for those who are not academically bright—the mass of people who have great difficulty getting qualifications, many of whom are keen to leave, although being totally unskilled and without much functional literacy. That is my major theme, and I hope that the Minister will say something about it.
  Can the Minister give any indication of the number of teachers who will be affected by this change, and what the cost will be for paying teachers' salaries when there are no pupils in the classrooms? We could perhaps use this period at the end of the year from May onwards to gear teachers into some sort of in-service training rather than just allowing them to stay in the schools and be paid. Possibly we should broaden this narrow aspect of the Bill and consider how to use the time to train teachers on an in-service basis.
  Mr. Andrew F. Bennett: At present a fantastic amount of work goes on in schools in the summer into planning courses for the following year. It is no relief to teachers not to teach in the summer term. If they are good teachers, they are fully engaged in organising visits, materials and resources for the rest of the year.
  Dr. Hampson: I accept that to a certain degree. As a result of my brief period in a school, I am aware of the situation in staff rooms. There is much physical time taken in marking. Many teachers are taking in CSE and GCE marking from outside. I should not like to imagine them doing all the forward planning to which the hon. Gentleman has referred. If we are to try to get in-service arrangements going, we should try to gear them into this part of the year, particularly in the light of the

  583
  changes which this Bill will make, which would relieve some of the pressures on the schools.
  This is a worthwhile, though rather slight, Bill. We would appreciate hearing more from the Minister about the context in which the decisions were taken to produce it in its present form.
  Mr. Gerry Fowler: With leave, may I say that I shall not attempt to answer every detailed point raised today. Some were essentially Committee points.
  No member of the Committee in any way resented the hon. Member for Dunbartonshire, East (Mrs. Bain) making available her experience north of the border. England and Wales, and Scotland have separate education systems, and I hope that each of them will continue to learn from the experience of the other, even after devolution. I have a feeling that the hon. Lady is pursuing me, but I also have a feeling that the hon. Member for Chelmsford (Mr. St. John-Stevas) is pursuing me. He will not take it as any slight on him if I say I would prefer being pursued by the hon. Lady. I assure her that there is already in another place a Bill which will make similar provision for the Scottish education system. It will not be exactly the same as this measure because the two systems have always been and, I am sure, will continue to be different.
  One of the major issues referred to today is whether there should be one leaving date. As an educationist, I have every sympathy with this argument. We have to take account of employment interests and these are not simply the interests of employers but the interests of school-leavers in obtaining jobs. My hon. Friend the Member for Stockport, North (Mr. Bennett) suggested that there was a battle between the Department of Education and Science and the Department of Employment. We in the Department would be mistaken if we did not take account of the needs of employers and did not look to the best interests of school-leavers in obtaining jobs without too long delay after leaving school. Having two dates does make this problem somewhat easier to handle. While I sympathise with the thesis of one leaving date, I cannot see us adopting that change in the foreseeable future.
  Mr. Andrew F. Bennett: Does this mean that the consultations referred to in a reply to me last summer have been completed? Has it been concluded that two dates will remain? Or, as I understand, are the consultations still going on? If so, why pre-judge them in the Bill?
  Mr. Fowler: The consultations are complete. But I assure my hon. Friend that we are always open to reconsideration of education policy from the point of view of the best advantage to those being educated within the system. I shall draw the attention of the Secretary of State to the point my hon. Friend has made today and we shall continue to keep an eye on the situation, even after the Bill has become law.
  The hon. Member for Ripon (Dr. Hampson) sympathised with the notion of one leaving date but requested flexibility in the application of that date. The difficulty here is twofold. The hon. Gentleman suggested that we might allow exemption by application to the Secretary of State, but he recognised this would be extremely cumbersome administratively. I fear it would require a substantial number of additional staff in the Department of Education and Science, and I have no desire unnecessarily to add to public expenditure.
  Apart from that, the hon. Gentleman's other suggestion seemed to have a central weakness. He suggested that parents might apply to governors of schools to exempt their child because he or she was proceeding to a given course of further education or training. He must realise the invidium this would cause up and down the country. Governors might exempt one or two children in an age group from remaining at school to the statutory leaving date and others would not be exempted even though their parents had applied. This would be very undesirable and would create a great deal of ill-will in each community. However, although I have sympathy with the object behind his proposal, none of his suggestions is practicable.
  Dr. Hampson: Taking the example of the girl to whom I referred earlier, if we had a one-leaving-date system, and if there was no flexibility, instead of waiting until Easter she would have to wait a whole extra year in the school, with ail

  585
  the consequences for the school, the rest of the children, and herself. Therefore, either one has to go back to a Christmas, Easter or summer leaving date or have a more flexible, individual-oriented system.
  12 noon.
  Mr. Gerry Fowler: I agree entirely that whatever we do about specific leaving dates will leave individual problems. I am suggesting only that there is no obvious practicable way of solving those problems.
  I must re-emphasise one other point that I made earlier. We are determined that everyone should have a full course of secondary education. We do not want to see the attenuation of secondary education for a minority of pupils. It is important that we should not build into the system exemptions for what may prove in the event to be narrow forms of training. I am not suggesting that the case which the hon. Gentleman gave is a narrow form of training. However, if we do that, we are committing ourselves to a policy of permitting certain pupils to exchange too early narrow training for what most of us understand as education. The danger of that is that we are then training them essentially for redundancy as well as for a much less satisfactory life in society. I say "training them for redundancy" because we shall not have given them that broad educational base upon which they can build career changes, learn new job techniques, and undertake further training successfully. I should be loth to go along that road.
  Mr. Loveridge: Like my hon. Friend the Member for Ripon (Dr. Hampson) and, I am sure, many other right hon. and hon. Members, I have had cases come to me of people whose careers have been interrupted by this lack of flexibility in dates. In one case that I remember, a boy could not join the Navy at the proper time. The Minister has explained that it would be difficult, for the reasons he has given, to give power to governors of schools to act in this matter. He has also said how cumbersome it would be to give the power directly to the Secretary of State. Most of us accept that. But he has not covered the suggestion—which would be neither so cumbersome nor so near to the parents on the ground as to cause
  586
  invidious comparisons—giving a power, which could be subject to some form of inspection by the Department, to the directors of education themselves, subject to their own local authority control as well as the inspection.
  Mr. Fowler: I am not sure that that overcomes either of the difficulties. There would be additional administrative costs, without a doubt. The administrative arrangements would impose an additional burden on local education authorities at a time of great difficulty for them. Nor could we give that duty to the directors of education or chief education officers. We should have to impose the duty upon the local education authority specifically, and we might find that in some local education authorities power was delegated to the chief officer but that in others elected members wished to decide such cases in committee, and that would be very time-consuming.
  Moreover, we should not really get over the point about invidium. I do not know the hon. Gentleman's experience, but in my own constituency, where I have had cases of this kind, there would perhaps be even greater resentment were the decisions handed down from the LEA in what is seen as the remote county town of Shrewsbury and from an authority the politics of which are not totally sympathetic to the majority of the electors of my constituency—I seek to put the matter delicately—than if the question were decided purely locally. I can see a great deal of lobbying of county councillors on individual cases, leading perhaps to highly undesirable accusations of bias and the like.
  Therefore, while I am open to practicable suggestions, I do not think that the Committee has yet come up with one. Perhaps I may press on, as we can consider that at greater length in Standing Committee, and no doubt some members of this Committee will wish to do so if they are given the chance of serving on the Standing Committee.
  I turn now to some of the other arguments that have been put forward today. The hon. Member for Chelmsford was keen that children should make the best use of the last year at school. He devoted much of his speech to that subject. I have every sympathy with it. He will know, as well

  587
  as I, that that is not purely or even largely a power available to my right hon. Friend the Secretary of State. It is more a matter for the local education authorities and for the teachers, the other partners in the government of education. We have always said that Ministers do not intervene in the curriculum. Certain qualifications should be entered to that general proposition. I should make that clear because I have said it so often in writing. That is a doctrine to which we have all adhered in general.
  The hon. Member talked about civics. I agree with the comment of my hon. Friend the Member for Liverpool, West Derby (Mr. Ogden). I do not think that "civics" is the right term to use; it has rather old-fashioned connotations. But I have every sympathy with the substance of what the hon. Member for Chelmsford meant by civics—instruction in the important practical matters that an individual is bound to come up against in his life, the operation of the national insurance system, for example, or how to obtain a mortgage. He might also have mentioned the local authority system of determining rents, because that may matter just as much to many pupils.
  Since the decision to proceed with the raising of the school leaving age was announced, much development work has been done in the schools on how to make the best use of that last year. Some of the work is extremely worthwhile. It does not consist simply of getting in the local Member of Parliament. I am sure that the children of Reading are extremely lucky to have the hon. Member for Reading, North (Mr. Durant) visit them so frequently. We have all done that.
  There are well developed courses to help to ease the transition from school to work or from learning to earning. That problem is not one simply of the last year of compulsory schooling; it runs forward into the continuing education of the 16 to 19 age group. I know that many members of the Committee will have noted the intention of my right hon. Friend to hold a conference on that subject next month. I was most impressed by some of the things that I saw yesterday when I was in Nelson and Colne. I strongly recommend the hon. Member
  588
  for Chelmsford to visit the Nelson and Colne College where I am sure he will learn a great deal. I shall not cavil should he choose to be absent on any Tuesday or Thursday.
  We were asked by the hon. Member for Reading, North whether local industrialists or councillors were brought into the schools often enough. All I can do is express sympathy with the objective which underlies his suggestion. I am sure that many schools do this, and they do it well. Other schools perhaps do not do it often enough. As long as, side by side with the industrialists, he includes the local trade union leaders I should be perfectly content.
  It has been suggested that we should include apprenticeships as a substitute for school education. I have alluded to this already. We should find it difficult to define a satisfactory degree of educational content, as opposed to training content, in those courses. On the other hand, I draw attention to the continuing development of linked courses between schools and further education. I am sure hon. Members will agree that this has been a most valuable development in our education system, and that we should go further along that road to bring further education and the schools closer together.
  As for work experience, there was some misapprehension about the operation of the Work Experience Act raised by the hon. Member for Upminster (Mr. Loveridge). The provisions of that Act did not include the provision that children could leave school. The intention was that children could gain work experience by attending, under supervision, a shop or a factory for a brief period, such as a day a week. This was not a period of employment in the normal sense of the word, but it was intended to give experience of different kinds of employment situation. The pupil was still within the education system. It is now a normal provision in many schools. It is essentially a local matter and when the hon. Gentleman asks me whether I can give him statistics, the answer is that I cannot because my Department does not keep such statistics.
  Mr. Loveridge: I was anxious to determine whether there was advantage to the pupil in the last six weeks after the spring date if he went out under the 1973

  589
  Act to get work experience, or whether there was advantage to him if he left school altogether. I wondered whether there was some conflict in the family allowance and social security measures here.
  Mr. Fowler: I do not think that there is any conflict. The crucial matter here is that if the pupil goes out under the Work Experience Act, he remains within the school system and has not left school. That, of course, will have implications in respect of family allowance under the present legislation. Whereas, if he leaves school there will be the transitional arrangements set out in Clause 2 of the Bill.
  As for the future arrangements after the introduction of child benefit allowance, the hon. Member for Chelmsford asked me to ensure that there would be adequate publicity to parents, and I shall certainly draw that request to the attention of my colleagues in the Department of Health and Social Security. I assure him that in the Committee stage of the Bill not only an education Minister but also a Minister from the Department of Health and Social Security will be present. I am sure that that will please the hon. Gentleman. I cannot assure him on this occasion that we shall also have a Minister from the Welsh Office.
  The hon. Gentleman dealt also with the problem of troublemakers. He suggested that perhaps they might leave on the certification of the head teacher. I freely confess that I do not like that idea. I feel that that suggestion would be too great an incentive for head teachers to issue certificates in respect of pupils they wished to get rid of. In any event, just because pupils are troublemakers—I want to make clear that I recognise that such pupils exist and cause great problems to teachers in the schools—that is no excuse for the early termination of their education by society, or for turning them out into the world of work with less preparation than other pupils, who may need less help in any event.
  I was more attracted by what the hon. Gentleman said about the possibility of special units. He will know that some authorities at present are attempting to create such units, and that some schools have separate premises, or accommodation in the normal school premises, for
  590
  such special units. There is a good example in Coventry, which has recently been discussed in the Press. In such cases, we can build up experience of how these units work before deciding whether they should be adopted in any sense as a national policy, or whether we should want to give guidance on their creation. We are thus going along one of the roads that the hon. Gentleman has described.
  At present, however, it is up to the local education authorities and the schools. We must build up considerably more experience before we seek to generalise such arrangements.
  I am well aware of some of the specific points which were raised by my hon. Friends and by hon. Members opposite, but it would delay the Committee were I to deal with each one of them today. Let me, however, assure my hon. Friend the Member for Stockport, North (Mr. Bennett) that I, at least, am conscious—I was in Lancashire yesterday—of the problems of Wakes Weeks, which he called a specific Lancashire problem. I hope that we have effectively dealt with that problem in this Bill.
  There have been references to Northern Ireland. If I may expand upon the intervention I made in the speech of the hon. Member for Ripon (Dr. Hampson), the situation was that in the Education and Libraries (Northern Ireland) Order 1972, provision was made for young people whose normal school leaving date was Easter to leave at the end of the preceding Christmas term in order to enter a course of full-time training in a Government training centre or other centre approved for that purpose. The course had to lead to skilled status in a recognised craft. It was a very narrow provision in any event, though it was part of a much wider package which included the raising of the school-leaving age in Northern Ireland to 16 years. This was an attempt to balance, in that larger package, education interests and the interests of employers. After two years the order was not renewed as there was strong feeling among educationists in Northern Ireland that, for good education reasons, it was desirable that everyone should have the opportunity to complete a full course of secondary education. So it was purely transitional arrangement.

  591
  Hon. Gentlemen may wish to argue that it would have been better if we had some such transitional arrangement in this part of the United Kingdom when we raised the school-leaving age. That is, however, history and I do not think that we should want to go back to such a transitional arrangement at this stage.
  Finally, may I deal with the second point made by the hon. Member for Ripon, who asked whether we would save teachers by this measure, or whether alternatively, we could devise some means of using the time made free more profitably than it had been used hitherto. He specifically mentioned the possibility of in-service education for teachers.
  Many of the pupils who will leave at the new leaving date have, unhappily, over the past two years been leaving early but have done so in defiance of the law. What has happened is that they have made the teachers' work on the organisation of courses and forward planning, much more difficult than it would normally have been. In that sense, I have no doubt that this measure will east the teachers' lot, which is why education interests in general welcome it. But I do not think that it will release a large number of teachers from the schools, nor that it will reduce the forward planning work done by teachers.
  While I am sure that local education authorities will want teachers to make the best use available of any additional free time in the summer created by this measure, I doubt personally whether any free time thus created will be significant.
  Dr. Hampson: In that case, would the Minister think of issuing a circular to local education officers asking them to look at this aspect and to make sure that their colleges of further education have the sort of short-term intensive courses that teachers might be able to make use of if the schools felt that the pressure was so eased that they could let one, two or three teachers attend?
  Mr. Fowler: I will certainly note that point. I have no doubt that when this measure becomes law we shall be communicating with LEAs, so that we will be able to consider whether to draw their attention to the type of opportunity this may create.
  592
  Let me conclude by referring to careers guidance. I share the general concern and hope that we will continue to improve throughout the school system the careers guidance that we offer to every pupil, irrespective of his ability or aptitude and irrespective of his intended job destination. I hope, too, that we shall do it much earlier than we have done in the past, and, further, that this will be seen by every teacher as part of his duty, not simply as a duty for one or two teachers in a school.
  There is everything to be said for integrating education and preparation for work, which is what we have been talking about today. That must include careers guidance. There is little to be said for separating that from normal education. I do not suggest that there is not an expertise in the subject, and that that expertise can be possessed to a high degree only by certain individuals. We cannot ask all teachers to have that expertise to a high degree. But we can ask teachers to take note of the need to guide all their pupils, from the moment they enter secondary education, with one eye upon the pupils' ultimate job destination.
  I am sure that the hon. Lady would tell us that experience in Scotland is somewhat different from ours in England, with different administrative arrangements. That is another area in which we might learn from the Scottish schools' system. I hope that the hon. Lady will agree that my period in devolution was well spent.
  We are all at one on that subject. It is not simply a matter for Ministers. It is a matter for all the partners in the education system. This measure, although a minor one, will bring a great deal of benefit to a substantial number of pupils and many teachers. I commend it strongly to the Committee.
  Mr. Ogden: This has been a happy Committee and I do not want to prolong the proceedings longer than necessary. I should, however, like to ask my hon. Friend whether, having given a great deal of attention to answering questions from Opposition Members, he would for my benefit answer the two questions which I put to him. It is difficult to decide on the dividing line between a Committee point and a non-Committee point. I do not know whether my hon.

  593
  Friend was promising or threatening us with membership of the Committee. I do not know who will be members of the Committee. I do not want it suggested that I should have one of those certificates as a trouble-maker, and whether that would include or exclude me from serving in the Committee. It is certainly a way to reach Cabinet level.
  I should have thought that if we were merely to say that this was a Bill to change the date of the school leaving age it was not necessary to put in the actual date or the end of January. I submit that it is more than a Committee point to know why the date is set at the end of January.
  I should like assurance, too, about the second question, that nothing in this Bill will prevent a pupil from remaining at school if he so wished. I am not asked to approve the Bill on the basis of knowledge I may or may not have in a fortnight's time; I am asked to approve it now. It is at least as important for a Minister to have the support of his hon. Friends as it is to have the tacit approval of the Opposition, no matter how helpful they may be in the future or have been in the past.
  Mr. Fowler: I am sorry about ignoring my hon. Friend's first point. I dealt with his second question when I spoke at the beginning of the debate. Clearly he missed what I said. I gave an assurance then, and I repeat it now, that pupils who want to stay on at school may do so. As I said earlier, far from wanting to encourage pupils to leave school, I want to encourage as many as possible to stay on.
  THE FOLLOWING MEMBERS ATTENDED THE COMMITTEE:
  Williams, Sir Thomas (Chairman)
  Harper, Mr.
  Bain, Mrs.
  Kelley, Mr.
  Bennett, Mr. Andrew F.
  Loveridge, Mr.
  Corbett, Mr. Robin
  Ogden, Mr.
  Dean, Mr. Joseph
  St. John-Stevas, Mr.
  Durant, Mr.
  Shelton, Mr. William
  Edge, Mr.
  Thomas, Mr. John Stradling
  Fowler, Mr. Gerry
  Woof, Mr.
  Hampson, Dr.
  I have been asked specifically about the date of 31st January, the "end of January". The basic point is that, if we are to have two leaving dates, the year must be divided into two parts. At present the divsion is 1st September to 31st January, and 1st February to 31st August. I agree with my hon. Friend that where those dates are placed is a matter of judgment.
  I draw my hon. Friend's attention to the implication of what I have just said, that 1st September to 31st January is a period of five months. If we were to move that date back to 31st December, as I think he was half-suggesting, we should have divided the year unequally into one-third and two-thirds. There is therefore a case for saying that 31st January, which is the present date, should continue. That has been the date since 1962. That is why, in this measure, which seeks to deal with a different problem, we do not propose to change that date. If my hon. Friend serves on the Committee and wishes to table an amendment, naturally the matter will be debated at greater length.
  I do not want to delay the Committee further. There is general agreement that this is a welcome and helpful, though minor, measure. I commend it to the Committee.
  Question put and agreed to.
  Resolved,
  That the Chairman do now report to the House that the Committee recommend that the Education (School-Leaving Dates) Bill [Lords] ought to be read a Second time.
  Committee rose at twenty-six minutes past Twelve o'clock.