Commons Sitting of 17 June 1976

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
PRIVATE BUSINESS
  GREATER LONDON COUNCIL (GENERAL POWERS) BILL
  Read the Third time and passed.

  COUNTY OF SOUTH GLAMORGAN BILL [Lords] (By Order)
  Order for Second Reading read.
  To be read a Second time upon Thursday next.

ORAL ANSWERS TO QUESTIONS
  NATIONAL FINANCE

    International Monetary Fund
    Mr. Tim Rentonasked the Chancellor of the Exchequer when he next proposes to have discussions with the Managing Director of IMF.
    The Chancellor of the Exchequer (Mr. Denis Healey): I shall, of course, be meeting Dr. Witteveen at the IMF/IBRD annual meeting in October. There are no arrangements for me to meet him before then.
    Mr. Renton: Does the Chancellor of the Exchequer accept that short-term dollar borrowings are no answer to the fundamental problem of sterling? Will he therefore use the few months' time that he has bought in seeking longer-term solutions, perhaps in conjunction with the IMF, which will restore sterling to more fundamental health and involve severe limitation of Government borrowings, as the longer action is put off the worse the cure must be?
    Mr. Healey: Of course, I do not believe that short-term measures are an answer to long-term problems, but I believe that the standby credit arranged last week has already proved its immense value to the economy, and particularly to the strength of sterling. I intend to ensure that our economy continues to progress over the months to come.
    Mr. Atkinson: Will my right hon. Friend confirm that the IMF would raise no objection to the introduction in this country of two-tier borrowing rates? Does he agree that there is no necessity for us to impose upon manufacturers a lending rate that is designed to attract funds from overseas, when the manufacturers themselves are engaged in export activity and are now having to borrow money at between 12 per cent. and 15 per cent., which is a crippling burden on any export-led recovery?
    Mr. Healey: I have not sought the views of the IMF on two-tier borrowing rates. As I explained to the House last week, I do not think that in our circumstances they would answer our problems. On the other hand, they would give speculators and financial experts a chance of making uncovenanted gains at the country's expense.
    Sir G. Howe: Does the Chancellor of the Exchequer think that the IMF shares the view of the Bank of England that positive steps of a budgetary nature may well be necessary in the coming months? Does the Chancellor of the Exchequer share that view? Will he assure the House that he remains entirely free in his responsibility to the House either to raise taxes or to cut public spending, and to do either or both of those things if it turns out to be necessary in his judgment? Does he recognise the Bank for International Settlements point that this country has now reached the limits of taxable capacity, and that the only tolerable way for him to proceed is by cutting public expenditure?
    Mr. Healey: If the right hon. and learned Gentleman had read a front-page article in today's Financial Times he would have seen that he has gravely misinterpreted the views of the Bank of England. If it proved necessary to reduce the public sector borrowing requirement, I would take the necessary steps,

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    whether by raising taxation or by reducing public expenditure. I have already told the House that that is the case.

    European Community Regional Development Fund
    Mr. Martenasked the Chancellor of the Exchequer what was the net receipt of funds from the EEC Regional Fund for 1975.
    The Chief Secretary to the Treasury (Mr. Joel Barnett): The United Kingdom contributes to the budget of the Community as a whole and not to individual funds. Gross receipts up to 15th January, the end of the fund's operating year, were £7·75 million. In the same period the United Kingdom received commitments of £35·9 million.
    Mr. Marten: Is the Minister aware that in a reply to me recently he said that the gross receipts in 1975 were only £307,000, that for 1976 they were estimated to be £10 million, and for 1977, £14 million? These are very small figures compared with what this Government give—and what successive Governments have given—in general regional aid to industry. Will he put this EEC regional aid in perspective, as the European movement is putting out somewhat misleading figures about it?
    Mr. Barnett: There may be some mis-understanding on the part of the hon. Gentleman. The difference is between payments and commitments. The payments will invariably come a considerable time after the commitments have been made. The total availability to this country from from the Regional Fund is £150 million. I agree with the hon. Gentleman, and would like to see it considerably higher. That will be our objective in later years, but for the period we are talking about the commitment is £150 milion.
    Mr. Geraint Howells: Has the Minister any plans to abolish the green pound? If not, will he consider holding an inquiry to see what effect it has on the agriculture industry?
    Mr. Barnett: I have no plans to abolish the green pound. It is not quite within the terms of the Question, but the answer is "No."
    Mr. Wigley: Will the Minister assure the House that the £150 million that we are getting from the European Regional Fund is in addition to the money available from United Kingdom sources and will not replace it, so that the net benefit to the areas that need help will be very low?
    Mr. Barnett: The total expenditure in the regions will be decided separately, and the amount that we receive from the Regional Fund will be taken into consideration in deciding the total amount. The amount that we receive from the fund will enable us to do more in the regions than would otherwise have been the case.
    Mr. Fairgrieve: In spite of what my hon. Friend the Member for Banbury (Mr. Marten) said, does the Minister appreciate how grateful Scotland is for the money we have received from the European Regional Fund, especially in recent years for the fishing industry in North-East Scotland?
    Mr. Barnett: I note what the hon. Gentleman said. That applies not only to Scotland but to other areas of need throughout the United Kingdom.

    £ Sterling
    Mr. Tebbitasked the Chancellor of the Exchequer if he will make a statement on the current level of sterling.
    Mr. Rostasked the Chancellor of the Exchequer what plans he has to stem the external exchange value of sterling.
    Mr. Gwilym Robertsasked the Chancellor of the Exchequer if he will carry out an inquiry into the recent fall in the value of the pound in international trading; and if he will make a statement.
    Mr. Healey: I would refer the hon. Members to the answer that I gave on 7th June to the right hon. and learned Member for Surrey, East (Sir G. Howe).
    Mr. Tebbit: As the pound, even after the welcome recent rise, is only just back to its level of a month ago and is still almost 10 cents below its Budget level, does the Chancellor stand by his recent opinion that sterling is under-valued? If so, has he any further measures in mind to support its value?
    Mr. Healey: I think that sterling is still under-valued, but if the level stabilised at the present rate and was likely to remain stable for the next 12 months, I would not complain if it remained under-valued for a few months yet.
    Mr. Cant: Does my right hon. Friend intend to verify the strength of sterling by permitting nationalised industries to borrow in Eurocurrency markets?
    Mr. Healey: Nationalised industries are free to borrow in that way if they wish. I do not think that there has been a very recent borrowing in the Eurocurrency market, but there was a successful borrowing in the United States market recently by one of the nationalised industries.
    Mr. David Howell: How much of the £5 billion standby credit has now been spent?
    Mr. Healey: None, Sir.
    Mr. Wrigglesworth: Does my right hon. Friend agree that accusations that people are speculating against sterling should be taken seriously? If they are true, should not action be taken to stop speculation? If they are false, should not that fact be revealed, so that the true causes of pressure on the pound can be discovered? Is there not a distinct need for more light to be shed on the subject?
    Mr. Healey: In my answers to Questions on Monday last week I gave the best description that I was able to give of the sources of pressure on the pound. I revealed at that time that speculative pressure, in the pejorative sense to which my hon. Friend referred, played a very small part in it.
    Mr. Rost: If part of the standby credit has already been drawn, and if it carries interest and has to be repaid within six months, how can the Chancellor go on pretending that it is not a loan and that it will do anything to solve our problems, when only a cut in public expenditure can do that?
    Mr. Healey: I fear that the climate has infected the hon. Gentleman with a certain lethargy. The rest of the House heard me say that none of the standby credit has been spent—and none has been drawn, either.

    Customs and Excise Department
    Mr. Adleyasked the Chancellor of the Exchequer if he is satisfied with the powers of, and the current complement of, Her Majesty's Customs.
    The Minister of State, Treasury (Mr. Denzil Davies): Yes. Sir.
    Mr. Adley: Does the Minister accept that it is unrealistic and unfair to expect the current complement of Customs staff effectively to police the coastline against those who seek to break the animal quarantine regulations? If the Chancellor accepts that, does he agree that we need an effective deterrent of stiffer penalties, including the empowering of magistrates to imprison people, the immediate destruction of illegally imported animals and, if possible, the impounding of boats such as the one in Hull today?
    Mr. Davies: I agree that we cannot expect Customs officials to police the coastline and solve this problem. Customs officials will liaise with harbour authorities, police authorities and other bodies asked to cope with the problem. Perhaps at the end of the day the answer will be stiffer penalties, but that is a matter for my right hon. Friend the Minister of Agriculture, Fisheries and Food.
    Mr. Dalyell: Supposing that the hon. Member for Western Isles (Mr. Stewart) and his hon. Friends were to get their ludicrous way, what would be the cost of a 24-hour Customs service at Gretna, Carter Bar, Norham and Berwick? How would the Treasury propose to avoid the queues of cars when there are Glasgow holidays and Blackpool illuminations?
    Mr. Davies: I am sure that my hon. Friend will agree with me that there is no danger of the hon. Member for Western Isles (Mr. Stewart) and his hon. Friends ever taking control of this matter.
    Sir J. Langford-Holt: The Minister will be aware that the House of Commons has always been jealous of its powers, in that it requires the Ministers responsible to it to have ultimate authority. The Home Secretary has ultimate control over all matters affecting people. Will the hon. Gentleman assure the House that in necessary cases the Chancellor has

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    power to instruct Customs officers to waive Custom duties on goods entering the country?
    Mr. Davies: That is another question. There is no general power for Ministers to waive duties. If Customs regulations are broken, the law has to take its course. It would be very dangerous for Ministers of the Crown to be able to waive penalties in the way suggested.
    Mr. Henderson: Following the supplementary question asked by the hon. Member for West Lothian (Mr. Dalyell), does the Minister agree that one of the great attractions to hon. Members who represent English constituencies and English people generally is that, as a result of the imminent events to which the hon. Gentleman referred, English visitors to Scotland will have a generous supply of duty-free whisky to take back to England?

    Value Added Tax (Small Businesses)
    Mr. Hicksasked the Chancellor of the Exchequer how many representations he has received from small businesses asking him to relieve the incidence of VAT by raising the exemption figure based on annual turnover.
    Mr. Denzil Davies: In the 12 months up to 31st May Treasury Ministers received about 40 letters asking for the exemption limit to be raised.
    Mr. Hicks: Will the Minister confirm that a figure of almost £9,000 represents the current value of the £5,000 turnover exemption first introduced in 1972? In view of the contribution made to the economy by small businesses and the self-employed, especially in rural areas, does the hon. Gentleman agree that this exemption figure should be increased?
    Mr. Davies: I agree with the hon. Gentleman that from the point of view of inflation the figure should be between £8,500 and £9,000, but it does not necessarily follow that small businesses would benefit from a higher exemption limit. Many other considerations have to be taken into account. Many businesses would probably not wish to deregister, because of the benefits they get from operating within the registration exemption limit. Most of our friends in the European Community have a much lower exemption limit, and they seem to be able to manage.
    Mr. Fernyhough: As VAT was part of the price that we had to pay for joining the Common Market, does not the Minister think it somewhat objectionable that those who voted for entry should now complain about the effect upon small business people?
    Mr. Davies: I agree with my right hon. Friend that many features of the Common Market that are now part of our law were supported by Opposition Members. I do not think that they can complain too much now if the effects are not entirely beneficial.
    Mr. Marten: Is not one of the factors the Sixth Directive concerning VAT, which is under discussion in the Community? As the Minister said, Community levels are much lower than ours. If the levels are to be harmonised, could not that be one reason why the Government are reluctant to lift the threshold?
    Mr. Davies: No, Sir; these questions are not related to the Sixth Directive. As the hon. Gentleman knows, that directive has been under consideration for a long time. It is still not approved, and no decisions have been taken. The hon. Gentleman is correct in saying that the exemption limits set out in the draft of the Sixth Directive are lower than the present exemptions.

    Inflation
    Mr. Skinnerasked the Chancellor of the Exchequer if he is satisfied with the current rate of inflation; and if he will make a statement.
    Mr. Arnoldasked the Chancellor of the Exchequer if he is satisfied with his progress in achieving his target for reducing the rate of inflation.
    Mr. Teddy Taylorasked the Chancellor of the Exchequer if he is satisfied with the progress being made in tackling inflation.
    Mr. Healey: The retail price index rose by 18·9 per cent. over the 12 months to April—the eighth successive monthly fall in the year-on-year rate of inflation, which now stands at its lowest level since November 1974. Continued observance of the current £6 pay limit and the new lower pay limit for the next round should enable us to achieve our objective

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    of halving the inflation rate again by the end of next year, so as to get it down to the level of our main international competitors.
    The Government warmly welcome the overwhelming support for the new pay agreement at yesterday's TUC special congress. The whole country should applaud the statesmanship and patriotism shown by the trade union movement. The Government will be publishing a White Paper early in the week beginning 28th June setting out the details of the new pay limit and of other aspects of their counter-inflation policy. Meanwhile, the way is now also clear for me to ask the House to amend the Finance Bill so as to implement the conditional tax reliefs outlined in my Budget; the necessary Ways and Means Resolutions will be put before the House early next month.
    Mr. Skinner: Does my right hon. Friend agree that notwithstanding the figures that he gave in the early part of his answer, his attempt to shave off minute proportions in the forthcoming months will be much more difficult than in the past few months, when the rate of inflation has been falling?
    Will he give a guarantee that, based on what happened yesterday at the special TUC congress, where the wages policy was accepted, there will be no cuts in public expenditure and no serious relaxation of the Price Code, so that it can be clearly seen that the Government are honouring their side of the contract with the TUC? This did not happen last year. If my right hon. Friend fails on that account, the decision and the ballot yesterday will be meaningless before the end of the year.
    Mr. Speaker: Order. Several hon. Members this afternoon have been asking very long supplementary questions. There was a long reply from the Chancellor on this Question. I hope that everyone will bear in mind the danger of falling into sin.
    Mr. Healey: I am suitably abashed and terrified by your warning, Mr. Speaker. I would take my hon. Friend's remarks much more seriously if he allied himself with the overwhelming majority of trade unionists who have supported both the £6 pay deal and the 4½ per
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    cent., and were responsible for the triumphant success at yesterday's congress.
    On public expenditure, we have made it absolutely clear that we give priority to the needs of manufacturing industry, and this has been accepted by the TUC. My attitude is governed by the needs of manufacturing industry. As for the Price Code, the trade unions do not want to see it operating in such a way that there is a reduction in jobs or in investment, and my attitude on this is governed by that consideration.
    Mr. McCrindle: Will the Chancellor now deal with the truly important aspect of this matter? How does our prospective rate of inflation this year compare with the rate of inflation of our main industrial competitors?
    Mr. Healey: The rate of inflation in the OECD as a whole in the 12 months to March was 8·9 per cent. and our rate was substantially above that. However, in the last six months the annual rate of inflation in this country has been 13·6 per cent. We have more than halved the gap between our inflation rate and that of our main industrial competitors over the last nine months, and we shall halve it again by the end of next year. By that time, some of our competitors will have higher rates of inflation than we have. This is the view of at least one other country—indeed, it was put forward by Dr. Jelle Zijlstra, Head of the Dutch Central Bank, and Chairman of the Bank for International Settlements.
    Mrs. Castle: Is the Chancellor aware that the £3 billion cuts in public expenditure in the White Paper in February were specifically designed to secure a shift in resources to the exports and manufacturing investment to which he referred? Therefore, may we have an assurance that the Chancellor is not contemplating any further cuts above that figure?
    Mr. Healey: I am grateful for my right hon. Friend's support for the White Paper and her recognition that it was necessary to make these cuts in order to make room for exports and industrial investment. Industrial investment forecasts by the CBI and industry indicate that this should rise at a rate of about 15 per cent. over the next 12 months. It seems possible that exports will rise in

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    volume faster than I anticipated at the time of the Budget. My judgment about the desirable level of public expenditure next year is bound to be governed by the likely rate at which our economy recovers. If it recovers rather faster than we expected, there will be some implications for the public sector borrowing requirement.
    Mr. Arnold: Does the Chancellor agree that the recent 14 per cent. decline in sterling will give price inflation a further push? The push, which will come from imports, will be as much as 65 per cent., and will take some time to work its way through the economy. Given that, the original target of 10 per cent. inflation at the end of this year will not be reached. In fact, is it not the case that the level is likely to be 15 per cent. or 16 per cent., or perhaps even higher?
    Mr. Healey: If, in fact, the level of parity remains as it is now, the total increase in the retail price index by the end of this year resulting from that is likely to be some 3 per cent. But we did expect, when I negotiated with the TUC and made my Budget speech, that the external value of the pound would decline at least in line with the difference between our inflation rate and that of other countries.
    The recent depreciation of the pound in total may add 1 per cent. or 2 per cent. to the level of inflation at the end of this year. That is why the Prime Minister and I have made it clear that we are unlikely to reach our original target of under 10 per cent. by the end of the year. It may be delayed until the spring.
    Dr. Bray: Yesterday's vote at the TUC congress and the recent speeches of Mr. David Basnett and Mr. Jack Jones should convince the Government that they need to prepare in plenty of time for a return to free collective bargaining next year. Does my right hon. Friend accept that the understanding that will then be necessary will be more complicated and will require selling not only to the trade union executive, but to members throughout the movement?
    Mr. Healey: Personally I welcome the statements of Mr. Basnett and Mr. Jones. After the next pay round, we need an orderly return to free collective bargain-
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    ing in order to make certain that we do not have an explosion of wages of the kind that followed the collapse of the last Government's pay policy. I welcome the suggestion that we should begin discussing with the trade unions and industry the requirements of a pay policy to meet these objectives.
    Mr. Teddy Taylor: Does the Chancellor accept that food prices are still rising to an alarming level and are making shopping a nightmare for ordinary families? Will he give us an outlook for food prices?
    Mr. Healey: The hon. Member is somewhat of an expert in these matters. The outlook for food prices depends on the weather over the next 12 months. If the hon. Member can give me accurate forecasts for weather conditions in that period, I shall tell him what food prices will derive from that.
    Mr. Heffer: Since Mr. Hugh Scanlon said at the conference yesterday—in support, incidentally, of the wages policy—that there would be a reduction in the living standards of the workers, will my right hon. Friend give an assurance that a wealth tax will be introduced early next year in order that there can be some measure of equality of sacrifice?
    Mr. Healey: I welcome the fact that my hon. Friend associates himself with the remarks of Mr. Hugh Scanlon yesterday. It is, indeed, the case that a further small fall in real take-home pay is likely over the next 12 months, though it will be a smaller fall than has been seen in the last 12 months. There is a Question on the Order Paper about the wealth tax and it would be quite improper of me to attempt to anticipate an answer to it.
    Sir G. Howe: We welcome the continued recognition of the need for restraint in pay bargaining as a means of checking unemployment and checking the size of public spending, but we regret very much the time wasted in the first year of the Chancellor's term of office when he personally presided over the explosion of public pay to which he has referred, with the explosion of all other forms of public spending. Will he accept from us that the only way to ensure that the sacrifices now being demanded of people are not demanded in vain is for the Government to take the time to put

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    their own policies in order by getting public spending under control?
    Mr. Healey: I welcome with an open heart the fact that the right hon. and learned Gentleman is now in favour of the agreement reached by the Government with the TUC. May I take it that he no longer regards the leaders of the working-class movement as being ageing, doctrinaire, prejudiced Socialist trade union leaders, as he disgracefully described them in the House the other day, confirming that that was still his opinion in a television programme last Friday?

    Subsidies
    Mr. Peter Morrisonasked the Chancellor of the Exchequer what is the total cost expressed in £ sterling per head of the population on an annual basis of: (a) food subsidies, (b) housing subsidies and (c) the deficit in the nationalised industries.
    Mr. Joel Barnett: The cost in 1975–76, in pounds per head, of food subsidies, housing subsidies and subsidies paid to nationalised industries was £10, £20 and £13 respectively.
    Mr. Morrison: Does the Chief Secretary not understand the view that subsidies such as food subsidies are an extravagant use of taxpayers' money? Would it not be better to abolish them now and give real help to those in need?
    Mr. Barnett: No. The underlying cash figure for food subsidies for 1975–76 was £572 million. That is reduced in 1976–77 in cash limit terms to £409 million, and we are planning to reduce it altogether over the next few years.
    Mr. Cryer: Will my right hon. Friend confirm that in 1975, £1,500 million went to industry in the form of grants, subsidies, amortisation allowances, and so on? How much went to farmers in the form of subsidies? Will my right hon. Friend give the figure off the cuff—I know that he is familiar with these things—per head of the population, represented by this massive injection into industry and farming? Is there any private enterprise left these days?
    Mr. Barnett: I am obliged to my hon. Friend for his confidence in my having that sort of figure at my finger tips. I am
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    sorry to have to tell him, however, that the precise figure, to the nearest pound, escapes me, and since I would not want to be even slightly out in answering him I hope that he will table a specific Question on the point.
    The question of transfer payments to industry, or to farming, or of transfer payments generally, is important. Given that a finite amount of resources is available in the nation, any transfer payments that we make limit the amount that we can make available for public services generally. My hon. Friend is correct that we should be looking at transfer payments as a whole.

    Building Societies (Taxation)
    Mr. MacGregorasked the Chancellor of the Exchequer what level for the composite rate of tax in the current year he is proposing to the building societies.
    Mr. Denzil Davies: The composite rate of tax for the current year finally proposed to the building societies will depend on the results of the investigation currently being made into the tax liability of building society investors.
    Mr. MacGregor: Will the hon. Gentleman confirm that the level of the composite rate that the building societies will have to pay is likely to be higher this year? Will he consider varying the composite rate and using it as a regulator, either if the flow of savings to the societies moves sharply downwards or if interest rates generally move upwards, with implications for the rate of mortgage interest that ordinary mortgagors have to pay?
    Mr. Davies: I have no idea whether the composite rate will be higher or lower. The rate is determined after discussions with the Building Societies Association after taking account of tax allowances and the level of income. It is not possible to say what the rate will be. The answer to the second part of the question is "No". That would not be the right way to help people who want to borrow money to buy houses. There are other ways in which one could subsidise house purchase. The hon. Gentleman's suggestion would not be the right way of doing so, because it would impose a burden on other taxpayers, who would have to pay more tax.
    Mr. Horam: There is general dissatisfaction with the behaviour of building societies, particularly over lending on older property. Will my hon. Friend ensure that that sort of point is seriously taken up with the societies in any negotiations?
    Mr. Davies: The question of lending on older property is a matter for my right hon. Friend the Minister for Housing and Construction.
    The general question of the composite rate has nothing to do with the lending of money to mortgagors; it is concerned with the tax liability of depositors with building societies.

    Budget Proposals
    Mr. Lawsonasked the Chancellor of the Exchequer if he will make a further statement concerning his Budget proposals in the light of the special TUC conference of 16th June.
    Mr. Healey: I refer the hon. Member to the Answer that I gave earlier today to the hon. Members for Bolsover (Mr. Skinner), Hazel Grove (Mr. Arnold) and Glasgow, Cathcart (Mr. Taylor).
    Mr. Lawson: Will the Chancellor tell the House whether it is the case that so far from the members of the big trade unions, such as those of Mr. David Basnett and Mr. Jack Jones, having made big sacrifices, the sacrifices that the nation must make in the way of falling living standards bear particularly heavily on higher-paid workers, such as those represented by the unions of Mr. Clive Jenkins and Mr. John Lyons, and above all the bear on middle management, whose lot is made worse by the Budget proposals.
    Mr. Healey: The whole House will be as fascinated as I by the prospect of an alliance between the hon. Member and Mr. Clive Jenkins. I hope that this axis is as durable as the earlier one. Of course, everyone has sacrifices imposed upon him when inflation is at the rate that we have seen in the last few years. What is impressive, however—I hope that the House is as impressed by it as opinion abroad and the overwhelming mass of the British people have been—is that members of the TUC have voluntarily accepted further sacrifices in order
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    to cure inflation, and that the sacrifices they are making will benefit millions of people who are not members of trade unions.
    Mr. Canavan: In view of the TUC's agreement yesterday on the 4½ per cent. wages policy, and in view of the Government's commitment to bring inflation down to just under 10 per cent. at some time early next year, does it not mean that even when we reach that target prices will still be rising twice as fast as wages? Does that not mean that we should have stricter price controls, especially on basic essentials like food, fuel and housing?
    Mr. Healey: It is of course essential that prices should be strictly controlled, but it is also essential that price control should not operate in such a way as to risk employment or damage investment. This matter is now being considered by the Government in their discussions about possible modifications to the Price Code.
    Mr. Grimond: Does the right hon. Gentleman agree that, difficult as it may be, the gap between earnings at the bottom of the scale and those at the top will have to be narrowed, and that we should now all bend our minds as to how that will be done with reasonable fairness?
    Mr. Healey: The right hon. Gentleman must recognise that there has been a remarkable narrowing of the gap in the past 20 years, which has proceeded very much faster in recent years. At the risk of associating myself with persons with whom I do not normally associate, I must draw his attention to the remarks of the hon. Member for Blaby (Mr. Lawson)—namely, that the compression of differentials that has resulted from this has put great strains on pay policy, and has done some damage to the economy. I hope that the right hon. Gentleman will accept that.
    Mr. Watkinson: Does my right hon. Friend accept that although the agreement reached yesterday was most welcome it is only part of the inflation batttle, and that one of the biggest risks now facing the Government is a monetary explosion? Will my right hon. Friend ensure that we do not undertake the process of printing money next year only to fuel inflation?
    Mr. Healey: I have made it clear repeatedly that I do not regard the pay

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    agreement as the answer to all our economic problems. However, I believe—I wish I could feel that the whole House agreed with me—that without such an agreement the solution of our other problems would be totally impossible. As for a monetary explosion, I hope that my hon. Friend will take note of the fact that in the past two years I have'succeeded in keeping the growth of the money supply under strict control. The fact that it grew by only 8 per cent. last year, compared with 28 per cent. in the last year of the previous Government and 23 per cent. in 1972, is a matter for congratulation, and a reason for confidence that I will not permit the monetary explosion of which my hon. Friend spoke.
    Mr. Nott: Is the right hon. Gentleman aware that to prevent that explosion the Bank for International Settlements and the Bank of England have implied that the Chancellor will have either to reduce public expenditure this year or raise taxation? As his party will not allow him to reduce public expenditure, does he agree that a rise in VAT and indirect taxation before the end of the year is now almost inevitable? Will that not be contrary to the spirit of the whole of the TUC conference yesterday and the deal that the Chancellor has worked out with the TUC? Is it not now inevitable that there will be a rise in taxation before the end of the year?
    Mr. Healey: First, I do not agree with the hon. Gentleman. I ask him to adopt the humility urged on the House by his right hon. and learned Friend the Member for Surrey, East (Sir G. Howe), and to recognise that as a member of the Treasury when the money supply was totally out of control and inflation was rocketing to its present heights, this might be a wonderful opportunity for him to keep his mouth shut.

    Capital Transfer Tax and Capital Gains Tax
    Mr. David Mitchellasked the Chancellor of the Exchequer what representations he has received asking him to alleviate the burden of double taxation of capital transfer tax and capital gains tax being payable on the same transaction.
    Mr. Joel Barnett: Representations on this subject have been received from a number of professional bodies, chiefly in the context of lifetime transfers of businesses and farms.
    Mr. Mitchell: Is the Minister aware that this double taxation destroys the motivation of small businesses? Does he realise that he cannot hope to get an expansion of the economy without small businesses with motivation?
    Mr. Barnett: First, I do not accept that it is double taxation. We are talking about two entirely different taxes. But as I told the hon. Gentleman on the last occasion on which we debated these matters, we recognise that there is a problem, especially for small businesses. I promised to look at the matter in the context of the review that we are now undertaking on capital transfer tax both in lifetime and at death. In that context, I shall be happy to consider the matter. However, small businesses are not hurt in the exaggerated way that the hon. Gentleman would have us believe.
    Mr. Fernyhough: Will my right hon. Friend say how many of the representations he received on this subject came from the 635 Labour Party constituencies and the many tens of thousands of trade union branches throughout the country?
    Mr. Barnett: I do not have the full list in front of me, but I doubt whether there are many.

    Exchange Control (Foreign Travel)
    Mr. Hendersonasked the Chancellor of the Exchequer, how much cash travellers are entitled to take out of the United Kingdom on each occasion.
    Mr. Joel Barnett: Travellers are normally allowed to take out of the United Kingdom up to £25 in sterling notes and up to £300 in foreign currency notes on each occasion they leave the country.
    Travellers to the Channel Isles and the Republic of Ireland, who do not touch any other place on the way, are not restricted in the amount of sterling notes that they may take with them.
    Mr. Henderson: I thank the right hon. Gentleman for that reply, but will he confirm that when he uses the term "sterling" he is referring to Bank of

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    England notes? As his Department objected to the Bill that I introduced, to give Scottish bank notes the status of legal tender, will he confirm that the £300 to which he refers in the context of foreign currency would apply to Scottish notes and that Scottish travellers are entitled to take £300 instead of £25 composed of English notes?
    Mr. Barnett: People in Scotland are entitled to exactly the same number of notes as are people in England, Wales and Northern Ireland—namely, £25 worth. These are notes for the benefit of travellers, to enable them to have the small amount of money that they may need on the way, as it were. The £300 is available to people in Scotland as well as everywhere else.
    Mr. Dalyell: Will my right hon. Friend repeat the assurance that he gave me in correspondence—namely, that the report by Mr. William Clark of the Glasgow Herald that Treasury officials spoke to SNP Members about using Edinburgh as a clearing house for the protection of the English pound and about the Scottish debt being paid off by recycling oil revenues is entirely without foundation?
    Mr. Barnett: I think I told my hon. Friend that in answer to a Question yesterday, but I am happy to confirm it today, and on as many days as he asks me.

  HONOURS LIST
  Mr. Skinnerasked the Prime Minister whether he will set up a committee to examine the abolition of the Honours List.
  Mr. Gowasked the Prime Minister what proposals he has to strengthen the Political Honours Scrutiny Committee.
  The Prime Minister (Mr. James Callaghan): I shall keep all aspects of the honours system under review. But I am not at present satisfied that a committee should be established to review the system, or that additional powers are needed to strengthen the Political Honours Scrutiny Committee.
  Mr. Skinner: Does my right hon. Friend agree that perhaps the most sensible and democratic thing to do would
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  be to abolish the Honours system altogether? Does he agree that the last list of the ex-Prime Minister shows that where there is patronage and no accountability it will always be property speculators first and Labour door-knockers last?
  The Prime Minister: The cohesion of our society certainly does not depend upon the Honours system. I do not claim that it is in every way a perfect system, but it is a useful way for society to recognise the contribution that individuals make to our national life. If I may judge from the letters that I receive from hon. Members on both sides of the House making recommendations to me on behalf of others who have performed a service, it is clearly widely recognised as such in the House. I am bound to say that from my own experience it gives a great deal of satisfaction to a great many people who do voluntary service in many ways.
  As regards the list of my right hon. Friend the Member for Huyton (Sir H. Wilson), it is not the custom of the House to comment on individual awards. However, I recommend that my hon. Friend makes a close study of the list. If he does so, I do not think he will find his strictures justified.
  Mr. Gow: Does the right hon. Gentleman accept that the very criteria that he mentioned—namely, a reward to those to whom reward is due—has been breached in the most shameful fashion by his right hon. Friend the Member for Huyton (Sir H. Wilson)?
  The Prime Minister: No, I do not accept that. I doubt whether many of the people making these accusations have read the whole list.

  CHANCELLOR OF THE EXCHEQUER (INTERVIEW)
  Mr. Blakerasked the Prime Minister whether the interview given by the Chancellor of the Exchequer on BBC television on the "Money Programme" on Friday 21st May on economic policy represents Government policy.
  Mr. Norman Lamontasked the Prime Minister whether the interview by the Chancellor of the Exchequer on BBC Television's "Money Programme" on

  733
  The Prime Minister: Yes, Sir.
  Mr. Blaker: How can we expect the world to have confidence in the Chancellor when the Leader of the House and the Secretary of State for Energy have both made it clear in public that they do not regard him as fit to be Treasurer of the Labour Party?
  The Prime Minister: I did not know that they had said such a thing, and the hon. Gentleman is misrepresenting the situation when he puts it in that way. They are entitled to say whom they would like to see as Treasurer of the Labour Party. On the whole, I believe that they would all prefer to see me continue, but as they cannot have that pleasure, in a democratic party such as ours a choice must be made and will be made by the votes of the constituencies and by all the others who make up the Labour Party Conference.
  Mr. Atkinson: Does my right hon. Friend accept that his successor, whoever he may be, will have to show tremendous expertise to gain a balance in Labour Party funds, which show a tremendous debt this year—in fact, almost double the previous year—and that that person will have a great responsibility on his shoulders? Does he also accept that whoever takes on the job of treasurership of the Labour Party will find his job much easier if those trade unionists who yesterday took the decision to sacrifice their living standards to prevent any further cuts in public expenditure—[Interruption.] Will the Prime Minister now say that the Government do not intend to go back on their word, reiterated repeatedly over the last 12 months, that our primary function will be to safeguard the level of public expenditure?
  The Prime Minister: I take note of my hon. Friend's election address. There is in fact no governmental responsibility for the finances of political parties—our own or any others. It is clear from the financial results that have been published that all voluntary organisations have been hit very hard by inflation. It would be a very sad thing if the level of political activity, voluntarily financed, were to be reduced because of the effects
  734
  of inflation. I hope that, in pursuance of his campaign, my hon. Friend will throw his full support behind the Government's successful efforts to reduce inflation, so that whoever succeeds me as treasurer will have a much easier task.
  Mr. Lamont: Is it not the case that in the past there has been a connection between the level of public expenditure and inflation? If so, is not any deal with the TUC, purchased at the price of agreeing not to cut public spending, likely to prove pointless and self-defeating, and to lead to a further weakening of the pound?
  The Prime Minister: No. In economic matters I have never believed in isolating one factor and placing all the weight on it. Other considerable weight should be placed upon issues not of public expenditure but of the level of wage increases in any year. Of course, as the hon. Gentleman knows full well, the level of the money supply under the Government that he supported was at an incredibly dreadful rate, from which this country has not yet recovered.
  Mr. Wrigglesworth: Whilst in no way under-estimating the remarkable achievement of the TUC yesterday, does my right hon. Friend agree, as he seemed to indicate, that there are many other influences on inflation in this country, as was ably demonstrated by the Chancellor of the Exchequer in the last Administration—for example, by the oil sheiks and by the money markets over recent weeks? Does he agree that it might be wise, therefore, to make clear to trade unionists and their wives that despite yesterday's remarkable achievement, there are many other battles to be won before we see the end of this war?
  The Prime Minister: Yes, Sir. I agree with my hon. Friend. Indeed, I think that the Chancellor, both this afternoon, when I heard him answering questions, and on other occasions, constantly reiterated the theme, as I have reiterated it, that voluntary restraint on wage increases is not the only issue that affects the fortunes of this country or the future prosperity of our people. It is upon all factors, not on any single one in isolation, that we have to concentrate.
  Mrs. Thatcher: Is the Prime Minister aware that we would agree with him that

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  too much weight should not be attached to any one factor for economic recovery? It is because we take that view that we think he is putting too much weight on pay restraint alone. May I urge upon him the view urged by my hon. Friends on the Chancellor of the Exchequer, that pay restraint is not enough, that pay restraint plus the standby loan is not enough, and that, until the Government face their responsibility and reduce the Budget deficit, the sacrifices in pay restraint and in increased taxes which have been made will be wasted?
  The Prime Minister: That is a repetition of questions and answers made on many previous occasions. [Interruption.] I have nothing to add to the answers that I have given to similar questions on previous occasions. My view is clearly on the record and will remain on the record.

  CBI
  Mr. Arnold Shawasked the Prime Minister when he next plans to meet the CBI.
  The Prime Minister: I refer my hon. Friend to the reply that I gave to the hon. Member for Blackpool, South (Mr. Blaker) on 27th May.
  Mr. Shaw: In view of yesterday's magnificent response by the TUC to the needs of the nation, will my right hon. Friend, when he meets the CBI, press upon industry the need for an equal response, particularly on investment and prices?
  The Prime Minister: Yes, Sir. I agree with my hon. Friend that the trade unions' response yesterday by such an overwhelming figure is illustrative of the fact that by this policy they are trying to place first not only the national interest, but, as I have constantly pointed out, their own interest.
  I have discussed this matter with the leaders of the CBI and impressed upon them—I think they accept it—that there is now a need for new investment. As the level of wage costs is pretty well known, if this agreement is adhered to until the spring of 1978—because a lot of wage agreements are not negotiated until the spring—they have a considerable period ahead in which to plan new investment with confidence. I believe that
  736
  Lord Watkinson and his colleagues accept this, and discussions are going on to see how it can be achieved.
  I should like to re-emphasise that studies have shown that, apart from shortages of orders, which means that machinery and plant stand idle, still not enough use is made of the plant and machinery that we have. Perhaps we could get a lot more out of our existing investment if we were to plan and use it properly.
  Mr. Paul Dean: When the Prime Minister meets the CBI, will he admit to it that the cost of the Government's expensive nationalisation programme means that they are abandoning their social programmes?
  The Prime Minister: No, Sir.
  Mr. Kinnock: Does my right hon. Friend agree that, unlike the TUC, there is no discipline of solidarity among employers or members of the CBI to ensure that they deliver the undertakings that they give in respect of price restraint and other matters? Does he further agree that that indicates an elementary necessity not for the relaxation of Government control in these matters but for the extension of that control, including major controls over the export of capital, which we need for a reinvestment programme?
  The Prime Minister: The export of capital has been dealt with by the Chancellor of the Exchequer. I have nothing to add to what he said.
  I agree that the CBI does not have the same influence over individual firms and companies as the TUC has over its members. That is inevitable, as individual firms and companies take decisions based on their expectations for the future. It is for us to let them see that in the Government's strategy there is a real prospect of reducing inflation by the end of 1977 to a level that will be no greater than that of our major competitors and that we want to see them prosper in order that manufacturing industry can produce the goods out of which the social dividend will be paid. That is the policy that the Government will follow.
  Mr. Tapsell: As today's issue of the Bank of England Quarterly Bulletin clearly states that this Government must either cut public expenditure or raise

  737
  taxes, which of those alternatives will the Prime Minister suggest to the CBI?
  The Prime Minister: I have nothing to add to the replies that I have given on numerous occasions on this matter. I do not intend to gild the lily. My position on this matter is quite clear.

NEW TOWNS
Mr. MoonmanQ5. Mr. Moonman asked the Prime Minister if he will consider making an official tour of Great Britain's new towns, including Basildon.
The Prime Minister: I have at present no plans to do so, although I hope to visit Redditch New Town in September.
Mr. Moonman: With the passage of the New Towns (Amendment) Bill only yesterday, and as the new towns have proved themselves in so many ways, will my right hon. Friend give some consideration to the question of stimulating the development of further new towns?
The Prime Minister: Yes, Sir, I am aware of my hon. Friend's great interest in this matter. We are at present giving careful consideration to the Thirteenth Report of the Expenditure Committee on these matters. My hon. Friend was a member of the Committee. There has been no doubt about the success of the new towns. We are currently considering their future.
Mr. Tebbit: When the Prime Minister does visit a new town, will he take care to talk to many of the tenants in order to find out how many would welcome a return to the scheme under which, under the previous Conservative Government, tenants were enabled to purchase their houses at advantageous prices, and will he then attempt to persuade his colleagues to reintroduce such a scheme?
The Prime Minister: There is no universal and permanent right and correct ratio between housing for rent and housing for owner-occupation. The ratio will continue to be kept under review in the light of demands and need. The Government's first priority has been to increase the provision of rented housing to meet the very high demand that was apparent when we first took office.

CABINET DOCUMENTS (DISCLOSURE)
The Prime Minister (Mr. James Callaghan): An article appeared in the magazine New Society published today which purports to describe discussions in Cabinet preceding the statement made by the Secretary of State for Social Services on 25th May about the Child Benefit Scheme.
It is clear that the author of the article had either direct or indirect access to Cabinet minutes and Cabinet papers, some extracts from which were accurately quoted in the article. This is a very grave matter. For, on the face of it, it could only have been brought about by theft, or by a betrayal of trust involving a breach of an undertaking voluntarily entered into, by someone with access to the documents. There are stringent rules governing the circulation of Cabinet memoranda and minutes and the persons to whom they may be shown. These rules have been broken.
In the first place, I have directed that an urgent and thorough inquiry should be undertaken. I have asked Sir Douglas Allen, the Head of the Home Civil Service, to do this; he has already begun.
The House will, of course, be kept informed.
Mrs. Thatcher: Is the Prime Minister aware that we fully share his view about the gravity of this matter? It is essential that confidentiality of discussions and documents should be assured.
Secondly, is the Prime Minister aware that, because we take such a grave view, we would think that an internal inquiry is not enough? His own statement refers to the possibility of theft, and therefore it would seem to be a matter for police investigation. In certain other circumstances a betrayal of trust was considered more appropriate for a tribunal of inquiry under a judge.
Finally, I hope that the Prime Minister's initial inquiries are of the nature only of a preliminary inquiry and that he will not, therefore, exclude the further possibilities I have indicated.
The Prime Minister: I am obliged to the right hon. Lady for what she says. The important issue here is that there

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are very stringent rules. These rules are accepted by those who see the papers concerned. They sign an acceptance. There has been, at the least, a betrayal of trust and a breach of an obligation. I think that it is that matter that should be examined first.
I cannot rule out the possibility of theft. Therefore, of course, it could be that the possibility of a police investigation is not excluded. However, as to the need for a further and larger tribunal, I think that I would prefer to wait and see what Sir Douglas Allen has to say in his inquiry.
I cannot emphasise enough that if there are to be good relations between members of the Government there must be absolute confidence that papers and discussions that take place are kept within the circle to whom they are given. That principle has been broken. That is not to say that a member of the Cabinet or of the Government is responsible. These papers go to a limited number, but the people who have some of these papers all sign before they have them. What is more, the number of people to whom access to them is given is known, and names are given. Therefore, a very serious breach has been committed.
Mr. English: Is the Prime Minister able to deny the widespread reports that he is stalling the revision of Section 2 of the Official Secrets Act? Does he not agree with us that, as long as Section 2 is, as it were, a lame duck, anything of this character is liable to happen?
The Prime Minister: No, Sir, I would not deny the rumour that I am stalling it. I certainly have some doubts about Section 2. No doubt they will come out in due course. I gave very full evidence to the Franks inquiry myself. I shall not go into detail on that matter now. This matter must be looked into carefully, and the Government are considering it.
Mr. Grimond: Everyone will share the Prime Minister's anxiety over this question. Rightly, the inquiry is to be confined to this particular situation. However, I think that the Prime Minister indicated, in answer to the right hon. Lady the Leader of the Opposition, that he does not rule out further inquiries. If these were to take place, would be con-
740
sider broadening the inquiry, because there have been other allegations of not only Government leakages but the theft of important documents from important members of the Government?
The Prime Minister: I shall see in the first place what Sir Douglas Allen's inquiry yields. It may be that the person who is responsible for this will indicate that he or she is responsible. I do not know. In my view, that would be the honourable thing to do, and then, in whatever capacity he or she may be serving, to offer his or her resignation. That would be the right thing, because the individual responsible has betrayed the trust that he or she freely entered into. The individual was not asked to do it. Therefore, I hope that whoever is responsible will consider the matter and decide what course of action should be taken.
Several Hon. Members rose—
Mr. Speaker: It has been said that there is to be an inquiry. I shall allow only two more questions on this matter.
Mr. MacFarquhar: Will my right hon. Friend let us know how large is the circle of people outside the Cabinet who normally see or could have access to Cabinet minutes? How many people are involved?
The Prime Minister: No, Sir, I could not give that information without notice.
Mr. Lawson rose—
Mr. Cryer rose—
Mr. Speaker: Mr. Lawson.
Mr. Lawson: I am sorry for the hon. Member for Keighley (Mr. Cryer).
While wholly associating myself with what my right hon. Friend the Leader of the Opposition has said and with what the Prime Minister has said, may I ask the Prime Minister to give an assurance that in his opinion it would be wholly inappropriate for there to be a prosecution of New Society under Section 2 of the Official Secrets Act?
The Prime Minister: It is certainly not for me to comment on the question of prosecutions. That would be a matter for the Attorney-General to consider in due course.

BUSINESS OF THE HOUSE
Mr. Speaker: Business Statement—the Lord President.
The Lord President of the Council and Leader of the House of Commons (Mr. Michael Foot): The business for next week will be as follows:
MONDAY 21ST JUNE—Supply [25th Allotted Day]. There will be a debate on employment opportunities for young people, which will arise on a motion for the Adjournment of the House.
Motions on financial assistance to the Lindsey Oil Refinery Limited and on the Weights and Measures (Sale of Wine) Order.
TUESDAY 22ND JUNE and WEDNESDAY
23RD JUNE—Remaining stages of the Development Land Tax Bill.
THURSDAY 24TH JUNE—Second Reading of the Supplementary Benefit (Amendment) Bill.
Motions on the Supplementary Benefit (Determination of Requirements) Regulations and the Social Security Uprating Order.
Resumed debate on Second Reading of the Public Lending Right Bill [Lords].
FRIDAY 25TH JUNE—Remaining stages of the Road Traffic (Seat Belts) Bill.
MONDAY 28TH JUNE—Supply [26th Allotted Day]: subject for debate to be announced.
Mrs. Thatcher: As legislation which once was very urgent no longer appears to be urgent, may I express the hope that some of it has been dropped and that we might go home early in the school holidays for the parliamentary recess? Secondly, shall we be having a White Paper on pay policy, and when does the Leader of the House expect to have a debate on that and on economic policy generally? Thirdly, will the right hon. Gentleman reconsider taking the Road Traffic (Seat Belts) Bill on a Friday?
Mr. Foot: I should have thought that a Friday was an appropriate day when we could discuss that Bill. After all, it is a Bill that has passed through the House on its Second Reading, and I should have
742
thought that for the remaining stages a Friday was satisfactory.
As to the right hon. Lady's second question, I cannot give her the precise date but I hope that the White Paper on pay policy will be published by the end of the month. A White Paper will be published and I trust that it will be by the end of the month, and a debate will follow soon after then.
On the first matter that the right hon. Lady mentioned, I assure her and the House that none of the Bills concerned has been dropped by the Government. I appreciate her concern that we should bring them forward as speedily as we can, and if we can reduce the difference between us to one of comparative degrees of impatience about seeing these Bills I think that we shall make progress.
Mr. Jay: May we be told when the House is to debate the proposals in respect of eviscerated chickens?
Mr. Foot: Not next week, so far as I can see, but one never knows what will happen in regard to eviscerated chickens.
Sir David Renton: Will the right hon. Gentleman consider giving the highest possible priority to legislation to strengthen the law on the prevention of rabies? Will he give an undertaking that such legislation will take priority over controversial nationalisation and other Socialistic Bills?
Mr. Foot: I cannot give the right hon. and learned Gentleman that undertaking, because we have stated to the House the measures which we think are necessary to deal with rabies. We do not underrate the importance of doing everything possible to deal with the situation, but we do not believe that legislation on the lines that the right hon. and learned Gentleman seems to indicate is the best way of going about the matter.
Mr. John Mendelson: Although I do not wish to question the decision to publish a White Paper on pay policy, would it not be advisable and much more to the point for the House to debate the economic situation in general, with perhaps more emphasis on employment policies?
Mr. Foot: My hon. Friend will see that the White Paper covers the whole range of policies. We shall not seek to exclude any particular item. The publication will cover the whole economic field.
Mr. Dudley Smith: Is the Leader of the House aware of the rather pathetic but nevertheless calculated stand being taken by a constituent of mine, Mr. Robert Relf, who is now languishing in prison on hunger strike because of contempt of court for a race relations offence? Will the right hon. Gentleman agree to provide time for a short emergency debate on the subject next week, which would be very much in the interest of better race relations? If in view of the time factor such a debate cannot be held, will it be possible for him to arrange for the Home Secretary to make a statement on the subject?
Mr. Foot: I cannot promise a debate on the subject, but I shall report the hon. Gentleman's comments to my right hon. Friend the Home Secretary.
Mr. Palmer: What steps are being taken to fill the gaps in Select Committee membership? The present situation is not conducive to the efficient conduct of the proceedings of the House.
Mr. Foot: I shall do what I can to assist in that respect.
Mr. David Price: When do the Government propose to publish their discussion paper on devolution in England?
Mr. Foot: I am not sure whether we will publish it as a paper—[Interruption.] Is it being suggested that we should not publish anything of the sort? We shall have to sort out this discrepancy, but this enters into the general debate about devolution.
Mrs. Hayman: Is my right hon. Friend aware that we are grateful to him for having found time so quickly for the Supplementary Benefit (Amendment) Bill at a time when many one-parent families are becoming concerned at the party political parlour game being played with their incomes by the Opposition?
Mr. Foot: I, too, am glad that we have been able to provide time for that legislation and that the House will now have an opportunity to discuss it.
Rear-Admiral Morgan-Giles: As the Government Chief Whip and a number of Ministers, including Cabinet Ministers, voted yesterday for the abolition of the House of Lords, will the Leader of the House ask his right hon. Friend the Prime Minister to inform the House of the Government's policy on this vitally important matter at the earliest possible moment?
Mr. Foot: My right hon. Friend the Prime Minister has other important matters on his mind, and I think we should allow him to get on with them.
Mr. Dalyell: In view of the fact that the cost of adapting the Royal High School in Edinburgh to an Assembly seems to have trebled in a period of three months, in view of the fact that the school hall which is to be the main debating chamber has also to be used as a corridor from one part of the building to another for officials, in view of the fact that the proposed tunnel to St. Andrew's House looks like not being able to function because of difficulties in rock formation, and in view of the fact that there are grave problems in adapting the boys' toilets, should we not have a statement as to whether it is acceptable to use the Royal High School as a proposed Assembly?
Mr. Foot: Since I understand that my hon. Friend's enthusiasm for devolution and the use of this building falls somewhat short of being ecstatic, I feel that his prejudices may have entered into the account which he has given to the House as to the way in which the building is being prepared. I think that work on the building should go ahead. We want it to be ready soon so that it will be available for the time when the devolution measure has gone through the House.
Mr. Tebbit: Will the right hon. Gentleman say whether next week's business is an indication of the priorities set by the Government in their legislative programme? If that is the case, how far down the list has he now dropped the shipbuilding and aircraft industries nationalisation measure?
Mr. Foot: I have already said to the right hon. Lady the Leader of the Opposition that all anxieties should be removed from people's minds on that subject. We

745
are determined to proceed with all those Bills. We do not intend to drop any of them. I hope that the House and the country will fully understand this.
Mr. Donald Stewart: May I draw the right hon. Gentleman's attention to Early-Day Motion No. 439 concerning the imminent closing of the Remploy showroom in Glasgow? Will he ask the Secretary of State for Employment to intervene urgently, because there is some Government financial backing for that organisation and the closing of that establishment will affect the work prospects of 600 disabled people in Scotland?
[That this House notes with regret that Remploy Ltd. is to close its Scottish showroom and sales office in Glasgow; notes that the Church of Scotland and many Scottish firms use this office to view Remploy goods; that one representative estimates a loss of up to £50,000 worth of business through closure of the showroom; that goods will now have to be ordered from London; and hereby requests the Secretary of State for Employment, whose department partly finances Remploy Ltd., to help the firm keep the Scottish showroom open.]
Mr. Foot: I understand the hon. Gentleman's feelings about the importance of the work of the Remploy organisation. Of course, it is a matter of concern if any closures take place. It is a matter for the directors to decide on commercial grounds. My right hon. Friend the Secretary of State for Employment appoints the board of directors of Remploy and exercises general financial control, but he does not interfere in the running of the company as a business.
Mr. Cryer: Will my right hon. Friend consider as a matter of urgency initiating a debate on the commitment to open government, because some of us believe that the ballyhoo about Cabinet secrets is to be welcomed? Surely we want more, rather than less, information to be given in order to get rid of the dead hand of the Civil Service. Will my right hon. Friend confirm that the idea of industrial democracy is being seriously pursued and that a Bill will be brought forward at the earliest opportunity?
Mr. Foot: I wish to discount any rumour to the effect that we have altered the arrangements for the introduction of
746
a Bill relating to industrial democracy. We are committed to introducing a Bill of that nature in the next Session and we wish to proceed in that direction. The Bullock Committee is now reporting on that subject, and we must await that report before we can proceed with legislation. However, we have made no alteration in the commitment to introduce that measure in the next Session.
I do not accept my hon. Friend's comments about the ballyhoo in regard to Cabinet secrets. Furthermore, I do not accept that that issue is concerned with open government. It is a matter, as my right hon. Friend the Prime Minister said earlier, concerned with a betrayal of trust, and such a matter must be dealt with.
Mr. Mayhew: May we have an early debate on the curious circumstances in which the Secretary of State for Wales confirmed the Blaenau-Gwent District (Rassau North Industrial Estate) Compulsory Purchase Order of 1974 relating to land in his constituency, and the even more curious circumstances in which the Government dealt with the motion relating to petitions arising out of that Order last Monday?
Mr. Foot: We had a full debate on that subject and the House pronounced its view by a very creditable majority.
Mr. Sandelson: When may we debate the Devlin Report on identification in criminal cases, which the general public regard as an urgent matter for consideration?
Mr. Foot: I do not think there is any possibility of an early debate on that matter, but I have no doubt that discussion will proceed on it and that my right hon. Friend the Home Secretary will take account of that discussion in preparing the legislation which we hope to have next Session.
Mr. Peter Bottomley: May I draw the right hon. Gentleman's attention to the child benefit legislation and the Early-Day Motion dealing with its non-implementation and ask whether we may have an early debate on that subject, so that we can make a judgment as to whether the question of betrayal of trust or breach of voluntary undertakings applies equally to the Labour Party's manifesto pledge on child benefits?
[That this House calls upon Her Majesty's Government to honour its com-

747
mitment to implement the Child Benefit Scheme in full from April 1977.]
Mr. Foot: The merits of the child benefit arrangements and the announcement which the Prime Minister made about the declaration are two quite separate questions. I cannot promise an early debate upon the child benefit position, although there may be opportunities over the next month or so for the matter to be raised in other debates.
Mr. Fernyhough: Has my right hon. Friend seen Press reports of a paper which the bureaucrats in Brussels have prepared in relation to European shipbuilding which would, if put into effect, substantially reduce the number of jobs in the shipbuilding and ship-repairing industry in Britain? This is causing grave dissquiet in the North-East. Can my right hon. Friend say when that paper will be available and when we shall be able to discuss it?
Mr. Foot: I am sorry, but I cannot tell my right hon. Friend what the position is about any such document which has come from Brussels. In view of the fact that he has raised the matter, I shall make inquiries and discuss it with the Secretary of State for Industry and get in touch with my right hon. Friend.
Mr. Bowden: Is the Leader of the House aware that throughout many organisations in the National Health Service debates are taking place about fluoridation? Many people feel that it is wrong that this House has not debated fluoridation, particularly as fluoride can now be forced upon us by people who are not directly-elected representatives. As the right hon. Gentleman is looking for things to fill up the parliamentary timetable, will he be good enough to initiate a debate on this subject?
Mr. Foot: The hon. Gentleman is under a misapprehension if he thinks that I am simply looking for matters which I can use to fill out the parliamentary timetable. There will be great pressure on business up to the end of July, and I am sorry that it will not be possible to have a debate on this subject or on many other subjects. The House must not be under any misunderstanding. Far from there being a lack of subjects, there is a plethora.
Mr. Ron Thomas: I thank my right hon. Friend for what he said about the Aircraft and Shipbuilding Industries Bill. Those of us who represent aircraft factory constituencies have received shoals of letters from Tory trade unionists as well as trade unionists who support the Labour Party condemning the actions of the Opposition in their delaying tactics. Can my right hon. Friend assure us that, irrespective of when the grouse shooting begins, it is his intention to get this Bill on the statute book this Session?
Mr. Foot: I made an earlier statement to the House and I stand by it. I agree with my hon. Friend that there is very strong feeling on this subject in the shipbuilding and aircraft industry areas. I myself have received numerous representations on the subject, as I believe all hon. Members from those constituencies have done.
Mr. Marten: Is the Leader of the House aware that in respect of the third item on today's business—employees' rights and company law—there are 12 documents which amount to 780 pages? Is it not wrong to put this business on after 10 o'clock on a Thursday? Will he consider whether those documents ought to go before a specialised Committee—not the Scrutiny Committee—so that it can look at these important things, after which we could have a debate?
Mr. Foot: I think we must proceed with the debate today as we have announced. I appreciate what the hon. Gentleman says about the difficulty of the House being able to give proper time to discuss these matters. I fully appreciate that a huge number of matters are listed for discussion and that not all of them will be covered in the debate. We shall have to see what the situation is following that and whether we can provide some further time. As the hon. Gentleman knows, this is a perpetual problem which we have to face, and yet we have not yet discovered the best solution.
Mr. Skinner: Can my right hon. Friend tell me whether we could have a debate in order to discuss the subject of leaks? The Prime Minister today answered questions about a matter relating to the Child Benefit Bill which has been leaked in New Society, yet only a few weeks ago an important leak was reported in this

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House by the right hon. Member for Down, South (Mr. Powell) about a civil servant who had leaked a report to him presumably, and there was no fuss or bother about it. Is it not time we looked at all these matters and perhaps came to the conclusion that it does not matter a toss how many of these things are leaked and that open government is the best way of all?
Mr. Foot: As I have already said, I do not believe that this is a question of open government or non-open government. I believe that it is a question of whether, where an agreement is made on the basis of trust that matters will not he revealed, such agreement is adhered to. That is a principle of great importance. However, I do not think it is right for me to comment on the details of the matter any further.
Mr. Gow: How does the Lord President reconcile the statement he made three weeks ago that the Aircraft and Shipbuilding Industries Bill was desperately urgent with his failure today to announce a date for further debate? Would we be right in considering that his failure is, to use his own words, because the Government are less than ecstatic about the Bill?
Mr. Foot: I can assure the hon. Gentleman that the Government's view about getting the Bill on to the statute book has not altered. I have nothing further to add on the subject to what I said to the Leader of the Opposition earlier and to my hon. Friend the Member for Bristol, North-West (Mr. Thomas).
Dr. Phipps: Would my right hon. Friend consider having an early debate on the consultative document which has been placed in the Library by the Secretary of State for Energy concerning the fifth round of licensing in the North Sea? Is my right hon. Friend aware that this document has gone to the CBI, the companies and the trade unions and that the only group which has not been consulted or had the opportunity of discussing it is the House of Commons?
Mr. Foot: This is an important subject. A conference is taking place organised by my right hon. Friend the Secretary of State for Energy, which will provide an opportunity for the matter to be discussed. In addition, the Energy
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Bill [Lords] was introduced in the House this week and some of the matters were debated then. I cannot promise a further, fresh debate, but that does not mean that we do not accept the great importance of the subject.
Mr. Biggs-Davison: Since the right hon. Gentleman has said, in reply to my hon. and learned Friend the Member for Royal Tunbridge Wells (Mr. Mayhew), that the constitutional and statutory rights of petitioners can be extinguished by the vote of a whipped majority of one House of Parliament late at night, should we not have an early debate, preferably next week, on the growth of arbitrary powers at the expense of the liberty of the subject under the present Socialist Administration?
Mr. Foot: This mater was fully and properly debated in the House on Monday evening. What was proposed, and what the House did on that occasion, was in accordance with precedents.
Mr. Bryan Davies: Can my right hon. Friend give an assurance, as far as it lies within his power, that there will be no changes at short notice to the business before the House next week, because on the evidence of the past week, even when changes were desired by the Opposition, they rarely managed to have more than 35 Members present?
Mr. Foot: We shall do our best to stick to the programme so that everyone will know what is happening.
Sir Derek Walker-Smith: Further to the question raised by my hon. Friend the Member for Banbury (Mr. Marten) in respect of tonight's business, is the position that, after a reasonable time has been spent on consideration of these esoteric and important subjects, the Minister will move to adjourn the debate so that further and more adequate time can be given to their consideration on another and more suitable occasion?
Mr. Foot: As I said last week when announcing business, there are a considerable number of matters to be discussed at the same time. This is part of the undertaking given to the House to have six debates on general EEC matters throughout the Session; but some of the individual matters are also covered in the general report. I understand that

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there may be difficulties in covering so many subjects, and after we have carried through the business on the basis on which it appears on the Order Paper we shall have to consider whether some further time would have to be provided at a later date. I would not specify on any particular items whether that should occur.
Mr. Ovenden: Will my right hon. Friend bear in mind that, whatever the Cabinet is reported to have been told about the opinions of Labour Back Benchers, the majority of Labour Back Benchers have shown by their support for Early-Day Motion No. 408 that they wish the Government to proceed with their commitment on child benefit?
[That this House calls upon Her Majesty's Government to honour its commitment to implement the Child Benefit Scheme in full from April 1977.]
Will any right hon. Friend reconsider his decision about a debate on this matter? If the abandonment of a major election commitment is not important enough to justify a debate in the House, when can we discuss the Government's half-baked scheme to replace child benefits?
Mr. Foot: There were discussions at the meeting of the Parliamentary Labour Party on this subject and I have, of course, seen the Early-Day Motion signed by large numbers of my hon. Friends. Of course, the Government must take into account the representations which are made through that motion, but I am sorry to have to say that I cannot see the possibility of an early debate exclusively on that subject. However, I have no doubt that there will be opportunities in the next few weeks to debate these matters.
Mr. Prior: May I support what has been said by my right hon. and hon. Friends about the third item on today's Order Paper, particularly in view of what the Leader of the House used to say about Community legislation when he was on this side of the House? Will he give an undertaking either that the debate will be given plenty of time or that it can be adjourned and resumed on a fresh day?
As for the industrial democracy Bill, the right hon. Gentleman has made the
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important statement today that the Government will introduce legislation next Session. Will he bear in mind the fact that the Bullock Committee is not due to report until Christmas, that there will then have to be a White Paper and then discussions with all sections of industry, as well as with the House of Commons, before the Bill can be introduced, and that his statement today can only give rise to a further loss of confidence in industry because of the belief that Parliament will not have time properly to consider the wishes of industry? Would it not be better for the right hon. Gentleman to say straight out today that the Government will not introduce such a Bill next Session?
Mr. Foot: On the first question, if the right hon. Gentleman had been present—I am not complaining because he was not—at our discussions on EEC procedure on two occasions over the past couple of months, he would not subscribe to the view that I am treating this matter in a fashion not designed to accommodate the House. I am seeking to see how far we can carry into operation the same kind of views as I expressed in Opposition about the need for the House to discuss these matters, but I cannot on that account say that a particular item should be removed from the Order Paper today. I repeat, as I have said, that we recognise that at the end of the debate some subjects may not have been covered and that we may have to return to them.
On the subject of the industrial democracy Bill, so far from thinking that it would assist confidence I believe that the right hon. Gentleman's suggestion could have the opposite effect. The Government have made it clear that we wish in the next Session of Parliament to introduce a Bill on the subject of industrial democracy. That is still the Government's intention. Of course, we know that we must take fully into account what the Bullock Committee reports. We know that we shall have to work very hard to get it through and forward in time, but we attach the highest importance to getting such a Bill before the House as soon as we can manage.
Mr. Flannery: In view of the flagrantly racialist statements recently made by members of the so-called National Front, does my right hon. Friend agree that it is

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time that this House forthrightly condemned racialism? Will he, therefore, seriously consider organising a method in the near future by which the House has an opportunity in debate to do so?
Mr. Foot: At the earliest opportunity in the light of some of these appalling recent events, the Prime Minister made a declaration to the House on this subject.
Mr. Flannery: With no support from the Opposition.
Mr. Foot: It was fully accepted by all my right hon. and hon. Friends that that was the right way to deal with the matter. That is the way in which I think all hon. Members should deal with the matter.
Mr. John Davies: Irrespective of whatever view the Government may take about the adequacy of the debate tonight, does not the Leader of the House agree that the Scrutiny Committee would not have fulfilled its task unless it too had considered the adequacy of that debate and consequently made such report as it felt was appropriate about what is due to transpire tonight?
Mr. Foot: I assure the right hon. Gentleman, as I think he will confirm, that I take the fullest account of what the Scrutiny Committee says to us on these matters. Following our debate on the subject, we are preparing proposals which I hope will go far to meet many of the individual proposals which the right hon. Gentleman and his colleagues have made on the subject. No doubt these matters will arise again in the debate today.
Mr. Edward Lyons: In view of the grave effect of suspect and ruthless Japanese trade practices on the ravaged and devastated British consumer electronics industry, and particularly since in monochrome television sets the Japanese share of our market has jumped from 25 per cent. to 67 per cent. in the first four months of this year, will my right hon. Friend consider arranging an early debate on the consumer electronics industry?
Mr. Foot: I cannot promise a debate, for the reason that I have given so many times before on other matters, but shall discuss this matter with my right hon. Friend the Secretary of State for
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Trade to see what response he would wish to make to my hon. and learned Friend.
Mr. Grylls: Will the right hon. Gentleman be frank about the Aircraft and Shipbuilding Industries Bill and tell us the truth? If, as he claimed three weeks ago, it is very urgent, either something miraculous has happened in the industries in the intervening three weeks to make it not so urgent or else the right hon. Gentleman was not telling the truth three weeks ago.
Mr. Foot: The hon. Gentleman is trying to raise again a subject on which I have already replied. I repeat that the Government are determined to proceed with this Bill and to put it on the statute book this Session.
Mr. Kenneth Lewis: Is the right hon. Gentleman aware that, although I agree with him and the Prime Minister that it is right to have an inquiry into the leakage of Cabinet documents, this Government have a reputation for being a leaky sieve indeed? Is he aware that this is the kind of situation which arises when a Secretary of State for Energy, for example, is openly on the record as having said that he disagrees—
Mr. Speaker: Order. Will the hon. Gentleman relate his question to next week's business? It is getting late.
Mr. Lewis: I am asking the Leader of the House to say—perhaps this could be discussed next week with the Prime Minister—whether it is not on record that the Secretary of State for Energy has more than once said that he has differed from his colleagues in the Cabinet. What is the difference between the kind of leak which is verbal and that which is written?
Mr. Foot: I am not answering further questions on the subject of the leakage, but I repudiate entirely the hon. Gentleman's intepretation of the views of my right hon. Friend.
Mr. Christopher Price: Does my right hon. Friend accept that the desire on this side of the House for a debate on the sort of racialist episodes that we have seen recently is not so much so that the Government can make their position clear as that the Leader of the Opposition and Conservative Members can also

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make clear their position on a matter on which they were equivocal earlier this week?
Mr. Foot: I am sure that that point will have sunk in.
Mr. Whitelaw: Is the right hon. Gentleman aware, in view of what his hon. Friend has just said, that both my right hon. Friend the Leader of the Opposition and I have consistently stated the firm fundamental principle of our Conservative Party that all British citizens are equal before the law and that, therefore, we utterly condemn all acts of racial intimidation and incitement?
Mr. Kinnock: We want the organ grinder, not the monkey.
Mr. Foot: I am most grateful to the right hon. Gentleman for that statement.
Mr. Costain: In relation to next week's business, when does the right hon. Gentleman propose that the House should discuss the Horticulture Capital Grant (Variation) Scheme 1976, which is twenty-sixth on the Order Paper?
Mr. Foot: I am afraid that I cannot give the answer to the hon. Gentleman, but I shall examine the matter and get in touch with him.
Mr. Forman: Will the Leader of the House assure us that time will be found to debate the consultative document on transport before we rise for the Summer Recess?
Mr. Foot: I am not sure when the discussion will take place, but obviously it is a matter of paramount importance which will have to be debated at some stage.

SOUTH AFRICA (CIVIL UNREST)
Mr. Ioan Evans: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
"the outbreak of civil unrest at Soweto, the African township outside Johannesburg, following the protest march by students."
You will be aware, Mr. Speaker, that the worst outbreak of civil unrest for
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15 years has occurred in South Africa. In fact, this is the worst event since the time of Sharpville in 1960. It took place yesterday in the African township of Soweto, and the events have been widely reported in the world's Press, including our own. They are the real results of the fundamental policy of the Nationalist Government of South Africa in enforcing their apartheid system, known more recently as their "separatist policy"—a policy which has been denounced by the United Nations Organisation from its formation and particularly condemned by all nations which have sought to legislate against racial discrimination but which have seen South Africa increasingly imposing legislation to enforce racial discrimination.
The matter which I seek to raise is the specific question of the decision to introduce Afrikaans as the medium of instruction in the so-called Bantu schools and the explosive situation which has followed that decision.
As well as being specific, it is essential that this vitally important matter is considered by the House of Commons so that right hon. and hon. Members can play their part in the world condemnation of these events.
The issue is urgent. Already 23 people have been killed. As this morning's editorial in The Times puts it.
"All the elements of a major explosion—pent-up resentments, white aggravation, a casus belli and police desperation—were present. The pattern is ominous, the scale is secondary."
I urge that this urgent and important matter should be debated in the House because the wind of change in South Africa is building up to hurricane force. The implications of racial disharmony will not be confined to the township of 1 million racially segregated people of Soweto but will have world-wide repercussions.
Mr. Speaker: The hon. Member for Aberdare (Mr. Evans) asks leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that he thinks should have urgent consideration, namely,
"the outbreak of civil unrest at Soweto, the African township outside Johannesburg, following the protest march by students".
As the House knows, under Standing Order No. 9 I am directed to take account

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of the several factors set out in the Standing Order but to give no reason for my decision.
I have given careful consideration to the representations that the hon. Gentleman has made, but I have to rule that his submission does not fall within the provisions of the Standing Order and, therefore, I cannot submit his application to the House.
Mr. Michael Latham: On a point of order, Mr. Speaker. Is it not the case that applications under Standing Order No. 9 should have some relevance to matters for which British Ministers are responsible?
Mr. Speaker: I looked into the question whether this was in order. It was in order.

IMMIGRATION
Mr. Stokes: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
"the increase in the number of immigrants admitted for settlement in this country last year as published yesterday in the Government's White Paper."
I consider the matter specific because the actual rise in the number of immigrants was published yesterday, even though the figures may well understate the true position. I submit that the matter is important because it affects the whole future of the English people and nation. I claim that the subject is urgent because, unless we in this House take action now to reduce immigration, there is a grave risk of the public taking matters into their own hands and of acts of lawlessness being committed—
Mr. Kinnock: The hon. Gentleman is stirring them up.
Mr. Sandelson: He is encouraging them.
Mr. Stokes: I respectfully point out that ordinary English people have no redress for these grievances except in this place and that, when we fail here to take heed of their views, I am fearful of the consequences both for this House and for democracy in this country.
Mr. Speaker: The hon. Member for Halesowen and Stourbridge (Mr. Stokes) asks leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that he thinks should have urgent consideration, namely,
"the increase in the number of immigrants admitted for settlement last year as published in yesterday's Government White Paper."
As the House knows, under Standing Order No. 9 I am directed to take into account the several factors set out in the Standing Order but to give no reason for my decision.
I have given careful consideration to the representations that the hon. Gentleman has made, but I have to rule that his submission does not fall within the provisions of the Standing Order and, therefore, I cannot submit his application to the House.

GAS AND ELECTRICITY CHARGES
Mr. Loyden: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
"the Oakes Report, otherwise known as the report on the payment and collection of gas and electricity charges."
The reason for the urgency of this matter will be made clear after my brief explanation. The report indicates quite clearly that, for example, disconnections should be abolished. What is more, I hope tomorrow to be introducing a Ten-Minute Bill dealing with the disconnection of electricity supplies. It does not need me to say that if this matter is left until after the Summer Recess we shall once again be running into the winter period without any decision being made about disconnection. The absence of any decision by this House could be a matter of life or death for large numbers of people.
It is my view that both the report and my Bill should be submitted to a Select Committee as soon as possible so that the necessary legislation arising from the recommendations of the Oakes Report might be implemented.
Mr. Speaker: The hon. Member for Liverpool, Garston (Mr. Loyden) asks leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that he thinks should have urgent consideration, namely,
"the Oakes Report—that is, the review of methods of payment and collection of charges for gas and electricity."
As the House knows, under Standing Order No. 9 I am directed to take into account the several factors set out in the Order but to give no reason for my decision. I have given careful consideration to the representations that the hon. Gentleman has made, but I have to rule that his submission does not fall within the provisions of the Standing Order and, therefore, I cannot submit his application to the House.

BUSINESS OF THE HOUSE (18th JUNE)
Mr. Spearing: On a point of order, Mr. Speaker. I wish to raise a point about tomorrow's business.
The Divorce (Scotland) (No. 2) Bill and the Sexual Offences (Amendment) Bill have been on the Order Paper all week for consideration tomorrow. Informal notices that circulate among hon. Members and are published in the Press, which prints the timetable of the House, also indicate that those two measures are to be considered tomorrow. But early today the Standing Committee dealing with the Licensing (Amendment) (No. 2) Bill reported. It will be open, under Standing Orders—and I understand that it is intended—to present it to the House for consideration and Third Reading tomorrow.
Such a Bill would take precedence over the Sexual Offences (Amendment) Bill and the Divorce (Scotland) (No. 2) Bill, which is a short measure, and we do not know how long it will take to consider. It is possible that the Licensing (Amendment) (No. 2) Bill could be discussed for three or four hours tomorrow and reach its final stages.
The Bill is important, because it provides powers for justices to allow licences up to midnight and also gives permission for children under 16 to enter certain bars until 8 p.m. The House can, there-
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fore, understand that it is a controversial measure covering the whole of England and Wales. I understand that there are different legislative arrangements for Wales, although no Welsh Member sat on the Committee.
No hon. Member will or could receive notice of the business if it is put down. That is an important matter of principle, particularly to those hon. Members from Welsh constituencies. As long as the matter is within the Standing Orders of the House it will mean that no hon. Member who wishes to attend the debate will have notice of it. It may not be possible for hon. Members to put down amendments, and the Official Report of the proceedings of the Committee from 10.30 a.m. yesterday to 4 a.m. today will not be available to us. The protection of the House, the protection of hon. Members, and the protection of the public is at risk. Unless there are Standing Orders which can stop that consideration being taken it is possible that it will be taken without any notice other than that which I am now giving to the House.
I ask you, Mr. Speaker, to tell the House whether Standing Orders will permit that, and if they do I ask the Leader of the House, through you, if he will refer this procedure to the Sessional Committee on Procedure. If such a procedure is possible, matters arise which are of great importance for the House, for our legislative procedures and for the British public.
Mr. Kenneth Clarke: Further to that point of order, Mr. Speaker. I understand that we shall need your ruling and guidance today, and probably tomorrow, on the proper conduct of the House towards this legislation. The main reason for the Bill reaching Report at this late stage is the prolonged and successful filibuster conducted by the hon. Member for Newham, South (Mr. Spearing) and a handful of other hon. Members, which finally petered out at 4 a.m. today. You, Mr. Speaker, should not allow procedural moves, made by hon. Members relating to delays, which they themselves caused, to deprive the Bill of its position in the queue which Standing Orders would otherwise give it.
Mr. Beith: Further to that point of order, Mr. Speaker. Will you bear in mind the position of hon. Members who

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were not members of the Committee on that Bill? I went to the Vote Office at 2 o'clock today in an attempt to obtain a copy of the amended Bill, but I was unable to get it. It was not available until 4 o'clock, and from a quick and cursory look at the Bill it is apparent that children will be allowed into the bars of public houses when they are unaccompanied by adults. That is only one of the many problems in the Bill.
Will you guide hon. Members who were not members of the Committee but who may wish to table amendments on specific points? Such amendments are bound to be starred and therefore not taken in the way that they would have been had we had more time to consider the Bill. In addition, hon. Members must put down amendments before the House rises today.
The Lord President of the Council and Leader of the House of Commons (Mr. Michael Foot): Further to that point of order, Mr. Speaker. I can tell my hon. Friend the Member for Newham, South (Mr. Spearing) that I shall consider whether the matter and the difficulties to which he referred should go to the Sessional Committee on Procedure.
No one would ask the Government to interfere with tomorrow's business. That would be improper, because it would interfere with the sequence of Private Members' Bills and the arrangements laid down by the House. There may still be time for the other Bills, to which many hon. Members attach great importance, to be taken, even if they are not taken tomorrow.
Mr. Hooley: On a point of order, Mr. Speaker. Not only does the situation mean that hon. Members have had no notice that the matter will be discussed tomorrow; many important medical and social organisations have strong views about the grave social consequences of passing the Bill. Hon. Members can now hardly put down amendments and debate the matter to express the views that important bodies outside the House hold.
Mr. Speaker: The hon. Member for Newham, South, (Mr. Spearing) has raised an important point of order, and I am not without sympathy with it. It is unusual for hon. Members not to have adequate notice that a Bill is to be discussed, especially when it is controversial, but it is within the rules of the House.
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The House has not vested in me, any more than in the authorities, power to change the order of Private Business. The situation is within the rules of the House. I can only say that since the first opportunity for tabling amendments to the Bill will be tomorrow morning. I shall treat starred amendments as though they were not starred. I am sorry for the Department that will have to answer points on amendments that they will not be sure will be called. I shall look with sympathy at starred amendments.
Mr. Spearing: On a point of order, Mr. Speaker. I am grateful to you for clarifying the matter. I want to follow up the remarks made by the hon. Member for Rushcliffe (Mr. Clarke). I think that I heard him say that I was responsible for, or participated in, a filibuster.
Mr. Kenneth Clarke Mr. Kenneth Clarke indicated assent.
Mr. Spearing: The hon. Gentleman nods his head and confirms that that is what he said. For the record, I wish to state categorically that on the main group of amendments to Clause 1 the Closure was called and carried before I could speak. On the main group of amendments to Clause 2 the Closure was called and carried before I could speak. When a significant manuscript amendment was moved and I called a Division on it, I was not able to speak. In those circumstances, I hope that the hon. Member for Rushcliffe will withdraw his remarks.
Mr. Kenneth Clarke: Further to that point of order, Mr. Speaker. I said that there was a handful of hon. Members who conducted the filibuster. I intended no disrespect to the hon. Member for Newham, South. He was one of the more silent participants in the filibuster, thanks to the ingenuity of the sponsors of the Bill, rewarded by the appointment of our unofficial Whip as a Government Whip at midnight, shortly before the conclusion of our proceedings.
Sir Bernard Braine: Further to the point of order, Mr. Speaker. I am sure that the whole House will be grateful to you for the sympathetic way in which you have accepted the submission of the hon. Member for Newham, South (Mr. Spearing). There is a further consideration, which applies to both sides of the argument, namely, that even now the printed copies of the Official Report of

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some of the later sittings are not available to members of the Committee, who at least sat through the discussion, or to other hon. Members. It is not merely inconvenient; it is a positive frustration of the business of Parliament in arriving at a cool and correct judgment on the Bill if the Official Report of the proceedings is not available by the time the Report stage is reached. Therefore, I hope that it will be possible to defer a debate tomorrow, for the convenience of the House and of the promoters of the Bill, who cannot even now know what amendments, either starred or unstarred, have been put down.
Mr. Cryer: Further to the point of order, Mr. Speaker. I accept your difficulty, in that you cannot alter the order of the business of the House. But Back Benchers look to you for some protection. There are many occasions on which the order of business provides some difficulties to Back Benchers, and we look to you for guidance. Therefore, although you cannot alter the order of business, can you state whether you would deprecate as sharp practice and something that you would in no way encourage any attempt to put the Bill on the Orders of the Day for tomorrow?
Although it is within the Standing Orders and is possible, there are times when Mr. Speaker deprecates a certain attitude.
I recall that I was once the subject of such deprecation. What I did was done very smoothly, and the then occupant of the Chair said that I did it very well. But in a case like this, when the Bill is controversial, when many hon. Members want to be involved in the debate, when inadequate information is provided, and when amendments are starred and cause you difficulties, Mr. Speaker, I believe that there are sufficient grounds for you to say that, whilst you recognise that the Standing Orders permit what is happening, you would frown on such a practice. That would then give hon. Members more time to prepare adequately to debate this important measure.
Mr. Mike Thomas: Further to that point of order, Mr. Speaker, is it not a familiar and regular practice of the House that the first notice of a motion appears on the Order Paper on the morning of
764
the day on which it will be debated? Is it not also the case that the majority of hon. Members who have consistently supported the Bill are entitled to your protection against the collaboration of a small group of hon. Members who have sought to filibuster throughout the Committee stage, precisely in order to arrive at our present position and to be able to put to you the suggestions that are being made?
Mr. Speaker: Let us bring this matter to a close now.
First, it is an old custom in the House to accuse hon. Members of filibustering when we do not like what they are saying, and if they go on saying it at length. Hon. Members would be surprised to know how often I think it to myself as I sit here. But the hon. Members in question must have been in order, or the Chairman would have corrected them. Therefore, no charge of filibustering can be sustained.
Secondly, it is not sharp practice to use the rules of the House. That is also a very old custom. The group has been able to ventilate its feelings. I hope to be in the Chair in the morning to begin the debate.

BUSINESS OF THE HOUSE
Ordered,
That, notwithstanding the provisions of Standing Order No. 3(1)(b), the Motion relating to Employees' Rights and Company Law may be proceeded with at this day's sitting, though opposed, until any hour.—[Mr. Snape.]

GRENADA (GIFT OF PRESIDING OFFICER'S CHAIR)
4.35 p.m.
The Lord President of the Council and Leader of the House of Commons (Mr. Michael Foot): I beg to move,
That an humble Address be presented to Her Majesty praying that Her Majesty will give directions that there be presented on behalf of this House a gift of a Presiding Officer's Chair to the Houses of Parliament of Grenada and assuring Her Majesty that this House will make good the expenses attending the same.
The gift to the Houses of Parliament of Grenada follows an established and happy tradition that we sent gifts from this House to other legislatures within the Commonwealth. On 24th January 1974,

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in reply to a Question from the then Leader of the Opposition, my right hon. Friend the Member for Huyton (Sir H. Wilson), about independence gifts to Grenada, the then Prime Minister, the right hon. Member for Sidcup (Mr. Heath), said that Her Majesty's Government would propose that the House should offer a parliamentary gift to the legislature of Grenada. It is that undertaking that we are now pleased to honour.
The Speaker of the Grenada House was consulted about the form of the gift and welcomed a proposal to present a presiding officer's chair. I should explain that the Grenada legislature is bicameral, with both Houses using the same Chamber on different dates. Therefore, we have accepted a suggestion of the Grenada authorities that the gift should be referred to as a presiding officer's chair rather than as a Speaker's chair. The chair has now been manufactured and has been on display in the Upper Waiting Hall of the House since 7th June for hon. Members to inspect.
If the House accepts the motion, as I am sure it will, I hope that arrangements will be made by you, Mr. Speaker, to send a small delegation from the House to present the gift early in the new year.
I commend the motion to the House in the expectation that it will be accepted as an expression of friendship and goodwill towards the Parliament of this sister Commonwealth country. In doing so, I
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know that I shall speak for the whole House in expressing our good wishes for the future to the Parliament of Grenada.
4.37 p.m.
Mr. William Whitelaw: On behalf of my right hon. Friend the Leader of the Opposition, I should like to associate my right hon. Friends and myself with what the Leader of the House has said and warmly support his motion. We are sure that this is a wise and helpful move. We hope that the presiding officer's chair will long remain a symbol of the friendship between the peoples of our two countries.
Mr. Neil Marten: Was the design of the chair, which I have seen upstairs, approved or agreed in any way by the people or Parliament of Grenada?
Mr. Foot: I am not sure whether that was done or, if it was done, how, but I am sure that the proper processes were gone through.
Question put and agreed to.
Resolved,
That an humble Address be presented to Her Majesty praying that Her Majesty will give directions that there be presented on behalf of this House a gift of a Presiding Officer's Chair to the Houses of Parliament of Grenada and assuring Her Majesty that this House will make good the expenses attending the same.
To be presented by Privy Councillors or Members of Her Majesty's Household.

EUROPEAN COMMUNITIES (DEVELOPMENT)
[Commission documents: Commission Report on European Union (RI/1815/75),s Greek Application—Commission opinion (S/227/76), Textile Imports—EEC/Macao (S/334/76), Textile Imports—EEC/Korea (S/383/76), Textile Imports—EEC/Malaysia (S/504/76), Textile Imports—EEC/Singapore (5/384/76), Textile Imports—EEC|Japan (S/644/76), Financial and Technical Aid to Non-Associated Countries (S/438/76), Arrangements for the Community Imports of New Zealand Butter (Unnumbered), Food Aid Programme in dried skimmed milk (R/534/76) and Ministry of Overseas Development Report on Food Aid (Unnumbered).]
4.38 p.m.
The Minister of State for Foreign and Commonwealth Affairs (Mr. Roy Hattersley): I beg to move,
That this House takes note of the Report on Development in the European Communities, November 1975-April 1976 (Command Paper No. 6497).
Mr. Deputy Speaker (Mr. Oscar Murton): Mr. Speaker has selected the amendment in the name of the hon. Member for Southampton, Test (Mr. Gould) and other right hon. and hon. Members.
Mr. Hattersley: The six months covered by the White Paper we discuss today have been widely represented as a period of failure for the Common Market. In fact, the problems of that period have been grossly exaggerated. Inevitably, they have been overstated by those who looked for stagnation, hoped to see disintegration, and chose to describe disappointment as if it were disillusion. That we must face as bravely as we can. More important, the difficulties of 1976 have been magnified by some of the Community's most passionate supporters, who have continued to expect the EEC to achieve unrealistic goals at unreasonable speeds, and who despair when their aspirations have proved unattainable. In fact, over a wide range of practical policies the Community has made progress.
Let me give one example. The Regional Development Fund made its first grant during the first month covered by the White Paper. By April, commitments to Britain from the fund
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totalled more than £56 million. This assistance is being used for industry as well as infrastructure—for die casting machines at Pontypool, for an access road from the A96 to the Dyce airport industrial estate, for the construction of sewers in County Antrim, and for chemical production in the East Midlands. I admit at once that that is not part of the grand design for European unity. But it is a real practical benefit of British membership, which seems to me to be a great deal more important.
Certainly during the last six months there have been areas where we might have proceeded at greater speed—notably in the organisation of direct elections. But even there, the success of the Community should not be judged by its ability to move as rapidly as the Community's most passionate ideologues believe to be right.
We cannot be either guided or judged by those who see the EEC exclusively in terms of the heroic vision. In my view, they do the Common Market cause no service. Their unhappy habit of setting the Community impossible goals began in Paris in the autumn of 1972, when the European Summit committed the EEC to monetary union by 1980. No doubt they intended to add an extra impetus to the drive towards an integrated Community. In fact, they did much damage to the Community's morale and reputation.
Attempting the impossible is a certain prescription for failure. The Community will not be revitalised by eloquent declarations. Its real success will be measured by its achievements on behalf of the citizens of the Community. That is a practical—indeed, perhaps a prosaic—test. But it is the one the Government intend consistently to apply. It is against that criterion that the last six months must be judged. Our judgment is that there has been no spectacular progress but much important work.
By the establishment of that criterion I do not intend to minimise the need to make progress on the institutional reforms with which the White Paper deals in Section XII. But they have to be practical and desirable institutional reforms
The Commission's Report on European Union does not come into this category. An amendment has been proposed to the

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motion before the House today, calling on the Government to disagree with the Commission's report on European Union. This report was one of those which the institutions of the Community were asked to submit by the end of June last year, so that the Belgian Prime Minister could take them into account in the preparation for his report on European Union. The Commission's report sketched out a frankly federalist view, which we, the British Government, regard as wholly unacceptable. For that reason the Government are, therefore, perfectly willing to accept the amendment tabled on that subject.
Direct elections and the Tindemans Report, on the other hand, raise issues of practical reality and crucial importance. The House debated direct elections in March. Following that debate, a Select Committee was set up to examine the whole question. Within the Community there is still considerable dispute about how and when direct elections should be organised. But we hope that before the summer agreement will be possible on at least the major questions of the Assembly's size and the distribution of seats among the member nations.
On these matters Parliament is bound to have the last word. Direct elections cannot be held in Britain until a Bill has been passed by the House, but we, the Government, are anxious for Parliament to possess a more creative influence than the simple right to reject what the Government propose. The Select Committee's report and the reaction of the House to it—which I hope will be debated—will obviously influence the position taken up by the Government during future negotiations on direct elections within the EEC.
Mr. Neil Marten: On the point of timing, when is the crunch meeting of either the Foreign Ministers or the Prime Ministers of the Community on this question supposed to be? We are always being told that it must be done by a certain date and that if it is not all agreed by a certain date, 1978 will be a lost cause, and so on. Will the Minister address us on that point?
Mr. Hattersley: I am not sure who told the hon. Gentleman that. I certainly did not. In the last five minutes I have addressed myself to the unwisdom of
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making such declarations. To put it in rather less dramatic terms, the Heads of Government and the President of France will be meeting on 12th and 13th July, and it is hoped that on that occasion it will be possible to achieve agreement on the two crucial questions I have described—the number of seats and the distribution of the seats between the nations of the EEC. I do not believe it is certain that we shall achieve success then. I certainly hope we shall, but I do not regard it as a cataclysmic occasion. We shall achieve success if we can, and if there are national interests that cannot be preserved, we look forward to a future occasion. It is important to be comparatively relaxed about these things.
The White Paper deals with a second major institutional question — the Tindemans Report. I know that many right hon. and hon. Members are anxious for the Government to make precise judgments on each of the report's many recommendations. I fear that it is not possible to go through the report proposal by proposal, endorsing some and rejecting others. Our final view on each of the paragraphs will be determined by a number of factors—not least the recommendation on each paragraph made by this House. I can, however, describe the Government's general reaction both to the tone and spirit of the report and to the main areas of policy with which it deals.
I begin by commending to the House Mr. Tindemans' general approach. He has not offered a vision of distant political union, but has attempted to focus our attention on practical steps which could bring us closer together during the next five years. He makes no proposals for radical constitutional change. He does not seek to create the first steps towards a federal State or an incipient European Government. He accepts the reality of our condition. We are nine individual States. We are committed by treaty and mutual self-interest to increasing our common action. But we are nine individual States, nevertheless.
The Tindemans Report lays particular stress on the need for the Community to take up common positions on foreign policy. That recommendation is wholeheartedly endorsed by the Government. During the last year the EEC has established common attitudes in the United

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Nations, during the North-South dialogue, and towards the Middle East and Cyprus. Clearly there are occasions when national interests prevent complete agreement on international matters. But the British Government will consistently work towards achieving common policies on external relations.
The Community as a whole can speak with greater force and greater authority than any of its constituent members. Where the Community has spoken with one voice it has spoken with great effect. Our obvious ambition is to influence the course of EEC foreign policy and then see it implemented with the strength that comes from support by nine member nations, representing 250 million people.
Mr. Christopher Price: My right hon. Friend has mentioned the EEC taking foreign policy initiatives, and has specifically mentioned Cyprus. Has he seen the sentence in the consultative document, Mr. Ortoli's letter, which says that
"The European Community is not and should not become a party to the disputes between Greece and Turkey."?
Is that a piece of infelicitous translation, or what exactly does it mean in the context of what my right hon. Friend has just said?
Mr. Hattersley: It means that it is the view of President Ortoli, and certainly of Her Majesty's Government, that the Community should not take a partisan position on one side or other of that dispute. All nine members of the Community—this is what I meant by co-ordinated action—have worked consistently towards the reorganisation and the continued operation of the inter-communal talks. In that we have a common foreign policy, and the other eight members of the EEC share our view. We have operated in concert in these matters.
I applaud that co-operation, and therefore endorse, on behalf of the Government, the section dealing with it in the Tindemans Report, but I fear that the Government cannot welcome Mr. Tindemans' paragraphs on economic, monetary and social matters with the same degree of enthusiasm.
We cannot see the "snake" as an essential or, indeed, an ideal instrument
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for the movement towards economic and monetary union. Perhaps I am understating our criticisms if I say that the success that the "snake" has enjoyed during the last few months has done nothing to increase our enthusiasm for participation within its organisation. Nor can we support the idea of a two-tier Community within which the prosperous nations move more quickly towards economic union than their poorer partners.
The concept of a two-tier Community has been unanimously—or virtually unanimously—rejected within the EEC. But in my view it is not enough simply to reject the unacceptable policies of further economic integration. Our hope is that the Community will become committed to a different sort of economic co-operation. If the Community is to make progress towards political integration, it must concentrate its efforts on ironing out the great disparities in wealth and prosperity between different parts of the EEC.
Mr. Tindemans recognises the need for transfers of resources from the more prosperous to the less prosperous regions within the Community. That has to be done through the Social and Regional Fund, through the more effective operation of the European Investment Bank and through a more positive attempt to make agricultural policy benefit the least prosperous areas. It cannot be done if the richer nations within the EEC forge ahead towards economic integration at a speed which is beyond the less prosperous countries.
Of course, I admit that I have an ideological enthusiasm for a redistributive Community in which the wealthy nations make increasing contributions to the poorer areas. But even those politicians within the Community who do not share my general political belief must understand that a more integrated Europe is only possible when the regions of the Community enjoy approximately equal economic prospects. It is towards that objective that the British Government will constantly turn the Community's attention.
Mrs. Gwyneth Dunwoody: I agree absolutely with what my right hon. Friend said. Perhaps he will direct his attention urgently to the fact that the

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intervention appropriations are such that agriculture gets about 5,000 mua, social affairs 185 mua and regional affairs 500 mua. That is an imbalance that is totally unacceptable.
Mr. Hattersley: My right hon. Friend the Minister of Agriculture and I understand exactly my hon. Friend's point. What I said a moment ago was intended to imply that in some particulars the agricultural fund is not working in the same direction towards equalising prosperity within the Community. I hope that she, in the European Parliament, and my right hon. Friend and I in the Council of Ministers, will do our best to remedy that imbalance. My right hon. Friend and I do not disagree with her on that fundamental judgment.
Mr. Tindemans has properly included in his report a section entitled "A Citizens' Europe". Certainly, the Government endorse the title, which implies the concept that Europe must mean something to the ordinary voters within its boundaries.
Let me give two examples of areas in which the Community can respond immediately to the real needs of its members—both are items about which the House has specifically asked for information during the debate.
The first is textiles. During the period under review the Community has negotiated textile agreements with a number of countries under the International Multi-Fibre Arrangement. The object of those agreements is to establish control over Community imports of foreign textiles. I know that some hon. Members are dissatisfied about the effectiveness of these controls. However, under the terms of the Multi-Fibre Arrangement we have been able to maintain most of our previous restrictions on imports from the major low-cost countries and also to extend them to textiles on which there were no previous restrictions. To act outside the terms of this generally beneficial agreement would expose us to the risk of retaliation, which could cause serious damage to the prospects for British industry generally.
Mr. Max Madden: Does my right hon. Friend agree that the penetration of cheap textile imports to this country is far higher than it is in other
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member States and, therefore, the base year figure is unrealistic? Will my right hon. Friend explain why all the quota ceilings in the agreement we are discussing have been substantially increased for the United Kingdom, whereas reductions have been achieved by member States whose textile industries are not undergoing the difficulties of our textile industry?
Mr. Hattersley: I can answer my hon. Friend only in terms of the statement I have already made. Within the terms of the agreement we are free to operate the sort of restrictions that we operated before we entered the Community. We are free to make the national judgments that we think right about the general trading condition of this country and the protection of individual areas. I have no doubt that the balance that my right hon. Friends have struck between those two interests is right.
I take a second example of the way in which the EEC can, and we hope will, operate in the interests of member nations and the individuals who live therein. The example I take is of the common fisheries policy. There is no item on the EEC's future agenda which has a greater importance for the United Kingdom. The needs of the British fishing industry are now well known to the Community. Were the Community to fail to respond to those needs it would be a denial of the spirit on which the Community is based and would strike such a severe blow at the British fishing industry that the Community's reputation could not easily recover.
The difficulty that we face results from one simple fact. The present common fisheries policy is not a proposal that we can prevent by veto; it is an established policy which was accepted by the Conservative Government shortly before they signed the Treaty of Accession. A revision of that policy requires the unanimous agreement of our eight partners. Any one of them could block every proposal for change that we make. It is not legally within our power to refuse to operate the common fisheries policy. I must make it absolutely clear that the British Government cannot see a revision of the common fisheries policy in isolation. Certainly we need the support of our colleagues to achieve its

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improvement. Equally certainly, we are well aware that as the months wear on each one of them will need our support in some other way, and the two things must be matched together.
Mr. John Prescott: My right hon. Friend has made clear the exact legal position about the changing of treaties to achieve the Government's objective of a 50-mile fishing limit. If I understand him correctly, he is saying that we depend on the bargains that we can make in the trade-off. The evidence of the past 12 months has not convinced me that we are doing too well in trade-offs. Will my hon. Friend confirm that we shall not move from that requirement of a 50-mile limit, come what may, and that that will be our position or there will be no common fisheries policy?
Mr. Hattersley: I cannot promise, under any circumstances, that there will be no common fisheries policy. There is a common fisheries policy, and we are legally committed to it. The Government that my hon. Friend supports, and of which I am a member, discovered the common fisheries policy on our accession to power. I can promise my hon. Friend that we shall do our best to revise it within the terms of my statement to the Council of Ministers two months ago. That statement was precise about our needs, it appears in detail in the Council's minutes, and is obtainable in the Library of the House. I made clear to the right hon. Member for Saffron Waldon (Sir. P. Kirk) when he asked me, that that is not our negotiating position, it is the position that we need. I promise my right hon. Friend that were we not to obtain that position, our judgment about the behaviour of the Community would be such that it would result in a great deal of difficulty in the Community as a whole during the months that follow.
I move from that to talk about the extension of the Community. I have spoken so far of a Community of nine nations. But I know it is the wish of the House that part of the debate should deal with the Greek application for membership.
The United Kingdom Government are in wholehearted support of Greek member-
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bership of the EEC. The case for Greek membership is primarily and overwhelmingly political. Two years ago, Greece—the State that conceived and first practised democracy—returned to democratic government after seven years of tyranny. The preservation of democracy, no less than the extension of prosperity, is an essential objective of the EEC. All the judgments confirm that membership of the Community will add to the strength and permanence of democracy in Greece.
Were membership to be denied simply because the admission of Greece might cost the EEC a few million units of account we would not be simply breaking the Treaty of Rome, which welcomes all European democracies into membership. We would be denying the fundamental spirit of European unity, and we would be operating against our own best interests.
There are, of course, two arguments advanced against Greek membership. The first is that it will cost the existing members money. The second is that it will divert the EEC from its remorseless pursuit of a closely-knit homogenous Europe, with each virtually contiguous State working away to build a common European identity. [Interruption.] I knew that the second argument would not be altogether attractive to my hon. Friends behind me.
Both these arguments, irrespective of the weight which we attach to them, are to some degree true. But, despite their validity, the case for Greek membership is so strong that to deny it inclusion would be short-sighted as well as selfish. All Europe will benefit from a strong and stable Greece. EEC membership will help to create that condition. The British Government hope that a formal opening of the negotiations for Greek membership can start during the summer. We saw no merit in the Commission proposal for a pre-accession period when Greece hovered in a half-world, a part in, part out of the EEC. But we do not pretend that the months, indeed, perhaps, years, which follow will be easy. The accession negotiations between the EEC and Greece will be invariably complicated and occasionally painful.
Greece will pay a substantial short-term price for Community membership. Existing members of the Community will have

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considerable cost to meet if the price to Greece is not to be intolerably high. If we talk as if Greece can slip effortlessly into the EEC, we deceive ourselves and delude others. Worse, we pursue a policy that can end only in disillusionment in Athens and resentment in Community capitals.
The conversion of Greek agriculture to conditions suitable for Common Market membership will not be easy. The industrial benefits that Greece will enjoy will not be equally spread throughout the Greek economy. Some sectors will thrive and grow, others will dwindle and decline.
The Community offers Greece the prospect of expansion, not the certainty of improved prosperity. To take advantage of the prospects that Community membership can provide there will have to be substantial adjustments in the Greek economy. None of that seems to me a reason for rejecting the Greek application. But it is obviously an argument for beginning the access negotiations at the first reasonable opportunity, and pursuing them with a thoroughness which is indicative of both our wish to see Greece become a Member and our determination that she should join on the right terms.
Mr.IanGrist: Earlier in his remarks the Minister said that one of the aims of the EEC as at present constituted was not to take one side or the other in the dispute on Cyprus. How on earth is that maintained if Greece is a member of the EEC?
Mr. Tam Dalyell rose—
Mr. Deputy Speaker: I think it is difficult for the House if we have intervention upon intervention.
Mr. Dalyell: I am in the impeccable company of the Dutch Socialists when I express concern on this matter. My worry is not the social cost of Greek membership. But those of us who went as delegates from the European Parliament to talk to the Greeks felt very uncomfortable about the way in which those people seem determined to pursue their difficulties with Turkey. Some of us had the impression—indeed the terrible suspicion—that any resources that go to the Greeks to help farmers and agriculture will be used to free other resources to
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put yet more money into the creation of armaments for a possible war with Turkey. Before any undertakings are given I would like to see a clear policy on the relationship between Greece and Turkey.
Mr. Hattersley: Replying first to the hon. Member for Cardiff, North (Mr. Grist), I said that the access negotiations could last many months, and perhaps several years. Even the most pessimistic hon. Member would hope and expect that there would be an end to the Cyprus dispute by then. We hope that the inter-communal talks will begin again and will make progress. My fear about the Greek application is very different from that of my hon. Friend the Member for West Lothian (Mr. Dalyell). When I talked to the Prime Minister of Greece 10 days ago I saw no disposition to transfer to the EEC the difficulties between the Greeks and the Turks, or to use resources from the Community to further that dispute. My fear is that membership of the Community might be achieved too easily for the Greeks. I think they might believe that they can pay any price, enter, and then make adjustments afterwards. Greece will have to pay a considerable price for entry, and that involves a long negotiating period.
Mr. Mike Noble: The Minister outlined at great lengths the difficulties that will arise for industry and agriculture in Greece. Are these observations based on the direct experience we have had since we entered the Common Market?
Mr. Marten rose—
Mr. Hattersley: I have been reproved already for taking two interventions at once, and I do not propose to do it again. I accept the point put by my hon. Friend the Member for Rossendale (Mr. Noble). I told the Greek Prime Minister that we were in a strong position to advise him to take entry negotiations seriously. I pointed out that we had to do it twice because the terms we got in the first place were not good enough to justify continuing our membership. We made quite sure that the terms were acceptable to our people and we demonstrated this on 5th June 1975.
Today's debate is intended to provide the House with an opportunity to examine

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the report on "Six Months in the Life of the Community" and to express its opinion on a number of Community documents that are listed on the Order Paper. To deal with each of the listed items would require me to make an intolerable intrusion into the time of the House, and I have therefore dealt with only some of the most important themes of today's debate. I recognise the omission and apologise for it.
I cannot conclude without saying a word about the subject of the importation of New Zealand butter into the Community. If the Under-Secretary captures your eye, Mr. Deputy Speaker, later tonight he will deal in more detail with this matter. However I will put the position on the record. My right hon. Friend the Minister for Agriculture, Fisheries, and Food told the House on 19th May that the EEC Commission had put forward a new proposal for the 1978–80 period and that proposal would be put forward at the May meeting of the Agricultural Council of Ministers. It will give New Zealand assurances that fixed quantities of butter will find a market here but it provided that some would be sold for non-retail market purposes if the retail market declined. My right hon. Friend has not accepted or rejected these proposals. It was not possible to consult New Zealand about them or to make an adequate assessment until more details were available. Further details are now available, and the proposals will be available to hon. Members in the Vote Office.
The Government have not yet had time to study them or to consult our New Zealand friends, though we hope to do both as a matter of urgency. We certainly hope that it will be possible for this matter to be settled at the June Council meeting in the light of our resolve to fulfil our obligations to New Zealand. Because of that resolve and because of that obligation we are able to accept the second part of the amendment put down in the name of my hon. Friends, which not so much makes our position over New Zealand clear as reaffirms the position of the Government of the last 18 months.
I simply conclude by—
Mr. Douglas Jay: Does my right hon. Friend intend to say
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nothing today about the control of this Parliament over EEC legislation, in view of the discussions that we had here after the fiasco on the skimmed milk order?
Mr. Hattersley: We have had a debate on procedures since what my right hon. Friend described as the fiasco. If my memory serves me correctly we have had two debates. No doubt my right hon. Friend would like a third, but if that is his wish he must press that earlier on a Thursday afternoon, not during a debate on the substance of EEC policy.
I believe that there are now five major targets that we should set ourselves in the EEC, and each of them is practical. The first is to achieve more common positions within the area of external relations. The second is, through a thorough and constant revision of agriculture policies, to make our agricultural decisions more clearly represent the needs of the consumers. Third, through the Social and Regional Fund, through the more effective operation of the European Investment Bank, and through a more positive attempt to make agricultural policy help the poorer areas, we must even out the great disparities of regional prosperity. Fourth, we need to provide aid and preferential trade for those developing countries on whom the Community has not concentrated in the past—among them some of the poorest countries in the world. Fifth, through the coordinated action of our Governments we need to conceive and implement a strategy to combat unemployment—a disease which affects all of us to a greater or lesser degree.
I believe that all these things are within the Community's power, and whether the EEC exercises that power depends on the individual member States, Great Britain no less than the rest. We in Britain have passed from the time when we could view the EEC with the detached impotence of the interested outsider. We are part of the Community, and the Community is part of us. Its successes are our successes, and its failures are our failures. I believe that the most passionate critic of the EEC now has nothing to gain from either its stagnation or its immobility. If the Community is to move forward, Great Britain must supply some of the motive power and give a clear and precise indication of the direction which the Community must take. I promise the

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House that the Government believes that the Community must commit itself to a practical, pragmatic and, perhaps occasionally, prosaic course. That is the policy we will endeavour to establish, and that is the policy that we shall consistently pursue.
5.14 p.m.
Sir Peter Kirk: There was an exchange before this debate began between the Leader of the House and a number of hon. Members about the form that the debate is to take. I do not wish to reopen that argument except to say that I think the House will be in some difficulty if it is to have to debate Community papers in this quantity on what in effect was one of the six "Foster" days promised for general discussion of European legislation. Surely it would be better if a better procedure had been adopted.
If the Minister of State had gone into all the matters that stand on the Order Paper today, or even all the matter in Cmnd 6497, which is the first of the documents that we are to discuss, he would have spoken for an intolerably long time, and so would all other hon. Members who wished to discuss all those matters. I realise that this is a matter for the Leader of the House and not for the right hon. Gentleman, and I hope that it will be taken on board that this is not a satisfactory procedure and that it will not be repeated in future.
The White Paper and the other documents cover so wide a field that it is really open to almost any hon. or right hon. Member to choose what he wants to talk about in the debate. I hope that the Minister of State will not take it as a reflection upon him if I refer to one or two things that he did not mention, and if I do not refer to one or two things that he did.
The right hon. Gentleman warned in stern terms that we must not be ideologues, that dewy-eyed emotionalism must be no part of our thoughts, and he elevated pragmatism to an ideology of its own. No doubt that is the correct way of examining the Community and a dewy-eyed ideologue like myself can be regarded as out of place in a debate of this kind. But we must not forget that the purpose of the Community is not just to deal with the bread and butter issues which, quite rightly, the right hon. Gentle-
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man dealt with; it is also to make progress in a considerable and great experiment in creating an international democratic Community, and it is in the light of that as well as of the individual programmes to which he drew attention that we have to judge the past six months and progress generally since we entered the Community.
The most disappointing area is that of political co-operation. I realise, of course, that this is the most difficult area, and although the right hon. Gentleman cited one or two instances I do not think that anyone can really be greatly pleased with the progress of the Community in, for example, the recognition of Angola, which showed that national self-interest still plays a considerable part in the foreign policies of the nine member States.
I wonder whether the Under-Secretary will say something about the proposal, made some years ago and now forgotten, for the creation of a political secretariat. It does not seem to me that much progress will be made in this matter as long as it is left to the presidency of the Council and the national Foreign Offices to co-ordinate. I am not suggesting a major and enormous new bureaucracy. I have always maintained that, if handled properly, it could be done through the present services of the Commission. But it will be necessary to do it, and for one major reason. The question of political co-operation will impose itself on the Community fairly soon because of the network of external economic arrangements being made by the Community on behalf of the member States.
In looking at this document and at events that have taken place since it was published, we can see what these developments are. We have had the approach from Comecon. The Minister of State did not refer to it, and I can understand that the Under-Secretary may not want to either. This matter is still under discussion in the Council of Ministers and is not one on which we may wish to make speedy progress at the moment. Nevertheless, after 15 years in which those countries have rigorously tried to pretend the Community did not exist, we find for the first time in response to a visit by a Corn-mission official some two years ago to Moscow that they are now approaching us.

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We have had initialled—I hope, to be ratified—the agreement with Canada. All hon. Members will welcome that. We called for a Euro-Arab dialogue, and I hope that something may be said about this at a later stage, because it represents a significant development in the Community's relations. The general Commission met only a few weeks ago and there were difficulties here as there are in dialogues of this kind between the Community and Arab States on the one hand and the Community and Israel on the other. This is a further development in the representation of the Community in economic and, therefore, eventually, in political terms with the outside world.
Unless we are prepared to back that up with some kind of political infrastructure I believe that we may find that in a year or two we shall be in considerable difficulties as to the best way in which we can handle the political overtones of the economic relationships we are creating. I hope that this is sufficiently pragmatic for the Minister of State. It seems to me something which will emerge of itself and is not an ideological and federalistic viewpoint of mine. It is something that I think will impose itself on the Community as such, and on the members of the Community. If it is to impose itself, we should look at it as carefully as we can. I see a great need for action to be taken in political co-operation. That may need a secretariat or a different method of working. I hope that we shall be told something about the Government's thinking in that regard before we finish the debate.
My second theme, to which the right hon. Gentleman referred in his four priorities for action, is agriculture. The hon. Member for Crewe (Mrs. Dunwoody) rightly pointed out that Community action is totally unbalanced in the social sphere in favour of agriculture, agriculture taking 73 per cent. of the total Community budget. That can be justified only on the ground that the agricultural sector is far further advanced in integration than any other sector. The hon. Lady, had she been in Strasbourg—her hon. Friend the Member for West Lothian (Mr. Dalyell) was in Strasbourg earlier this week—would have realised that agricultural matters caused a certain amount of anxiety to my hon. Friends.
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There were moments in the course of this week when I never wanted to hear the words "skimmed milk" spoken again. I am sure that that applies to a number of other hon. Members. I take the skimmed milk question as being illustrative of what is wrong with the common agricultural policy. I think there are two things that are wrong that must be cleared up.
Commissioner Lardinois has said that we cannot go through another price review such as the one that took place this year. I am sure that the Minister of Agriculture, Fisheries and Food would agree with him. Under those circumstances, we must look at what is wrong.
One matter that is wrong has nothing to do with agriculture—namely, the monetary problem. We all know that it exists and that inevitably it will undermine any sort of agricultural policy. Whatever our view about economic and monetary union, until the monetary problem is solved it is unfair to blame the agricultural sector for many of the troubles that fall upon it.
The other and possibly more important matter that is wrong concerns the structural problem. That is something that should be tackled now. Skimmed milk is a large part of the problem. The fact that dairy production within the Community is constantly in surplus, and the fact that the restructuring measures taken by the Council of Ministers and the Commission will do nothing to reduce the surplus—in fact, they will increase it—are matters that must be tackled straightaway.
Mrs. Dunwoody: In some respects I am totally in agreement with the hon. Gentleman, but will he explain why he and his group voted for an increase in the milk price, which will contribute to an even greater skimmed milk mountain, if he feels so strongly that we should do something radical by way of reorganisation?
Sir P. Kirk: Because we believe that structure and not price is at the root of the problem. The problem will remain for as long as the existing structure is condoned.
It is as long ago as 1967 since Dr. Mansholt called for urgent reform in the dairy sector, but as yet nothing has

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been done. However, we must provide those operating within the structure with a reasonable been done. However, we must provide those operating within the structure with a reasonable income. If we are prepared to undertake structual reform, we must compensate those who are affected by a reduction of the dairy herd within the Community. Only then are we entitled to deal with the price problem. Until the structural problem has been satisfactorily resolved the price problem will not be solved. If we do not have regard to the structural problem while tackling the price problem, we shall have a further social problem in that many small farmers will be thrown out of business and will land on the Community for compensation.
Mr. Marten: I remember being told in 1971 and 1972 that once we joined the Community we should get things altered and sorted out, yet yesterday, or the day before, when there was a vote, according to the Press only 18 of the 198 people in the Common Market assembly seemed to want to make this alteration. Will my hon. Friend explain what has happened?
Sir P. Kirk: That is a question that should be addressed to Labour Members. My hon. Friend should ask them why they did not turn up, or why they preferred that their vote should not follow their voice, rather than address the question to me.
Mr. Prescott: In fairness to the argument, the hon. Gentleman must concede that the European Conservative group wrongly addressed its criticism. It wanted to attack the Council of Ministers, but it seems that it wanted to strengthen the power of the Commission against the Council of Ministers. That raises the concept of a federal Europe, which is objected to much more fundamentally than the CAP itself.
Sir P. Kirk: The motives of the hon. Gentleman, who left Strasbourg before the vote and cannot be blamed for anything that happened, may have been mixed. It is true that we wished to strengthen the power of the Commission, but that is not why we put down a motion or voted upon it. We did so because we believed that the scheme produced by the Commission, with the blessing of the Council of Ministers, was wrongly conceived in the first place, and resulted in
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such maladministration as to be worthy of censure.
I was making a more general point that went wider than what happened earlier this week. Until some effort is made both by the Commission and the Agricultural Council to make a structural reform of the CAP, we shall get problems of this kind that will bedevil progress in the Community, especially in agriculture.
I agree that that is only half the problem. The Minister of Agriculture, Fisheries and Food would be right to say that until we solve the monetary problem he will still be in difficulty in negotiating with his colleagues. But he is creating difficulties for himself by agreeing to schemes of a kind which do not work, which cannot work and which merely make the situation worse.
I now say a word about the budget, which also appears in the White Paper. I understand that agreement has now been reached on a new budgetary timetable. Perhaps it will be confirmed that we shall be having a debate on the budget between now and the House rising at the end of July. If so, there is little need for me to go into detail on budgetary problems today.
The whole point of the reform was to enable us to have a debate in the House. I hope that, despite pressure of business we shall have an undertaking from the Government that time will be made available for a debate on the budget.
It has been pointed out that the proposals that have emanated from the House, from the Opposition as well as rather belatedly from Government Members, for control over the budget by Parliament are now being implemented. Perhaps they are not being implemented as satisfactorily as we should like, but a sub-committee on control has been set up, with the hon. Member for West Lothian as one of its vice-chairmen, my hon. Friend the Member for Scarborough (Mr. Shaw) being the other. The committee has a good element of British PAC sense in it, but it will not work until ratification of the budget treaty of last year. I understand that the United Kingdom and Denmark have ratified, but when shall we have further information on the process of ratification of the other member States? We are all anxious to move ahead with the ratification. If

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there is delay because of dilatory ratification procedures in other countries we shall be in something of a problem.
There is a notable gap in the White Paper on page 12, where reference is made to transport. There are two short paragraphs, one dealing with drivers' hours and one with the operation of the freight market. The fact that there is still no common transport policy is totally ignored, although the treaty has called for one. May we have some information as to the progress of negotiations in that sector? That is a vital part of the integration of the Community as a whole.
The right hon. Gentleman referred to the Tindemans Report. I agree that it is essentially a pragmatic report, which in the right hon. Gentleman's eyes, at any rate—he being the master pragmatist of all of us—is a great advantage. In my humble submission, that is so. It is not in any way a federalist concept, although my hon. Friend the Member for Banbury (Mr. Marten) is fond of quoting the introductory letter in which Mr. Tindemans puts forward his personal belief that the problems of European integration will not be solved without federalism.
I think that Mr. Tindemans is taking roughly the same view as many others would take. Many would like to see a federal solution at the end of the day, but we are not working for it now, merely seeking to improve the present system. I think that that is what the report is designed to do.
I think that in one respect the report has been misunderstood. The right hon. Gentleman referred to the suggestion of a two-tier Europe in monetary matters. What Mr. Tindemans put in his report was not a proposal for a two-tier Europe but a recognition that such a Europe already exists. I think he recognised that there are States within the "snake" and outside it that seem to move backwards and forwards inside and outside with bewildering rapidity.
Some States are prepared to go at a faster speed towards monetary integration and monetary and economic union than others. If they are prepared to do so, surely it is to the benefit of the Community as a whole that they should be encouraged in that direction, provided—this was the point that Mr. Tindemans
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made—that at the end of the day we all end up at the same place at roughly the same time.
I come back to the agriculture point, which involves a number of other points. The problems of the Community, like the problems of the economy of the western world as a whole, will not be solved until the monetary problem is solved. If the Community can help, either at two-tier or one-tier speed, towards solving the monetary problem, it should be allowed to do so.
Another problem that arises from the Tindemans Report and from the practice of the Community is the inauguration of the European Council, or the meetings of the Heads of Government as I think they are called. M. Giscard d'Estaing, the French President, accepts that on those occasions he meets as the Head of Government rather than the Head of State.
The original idea—the Minister will correct me if I am wrong—was that the only way in which progress could be made within the Community was by the Heads of Government meeting informally from time to time and injecting a little punch behind the progress of the other councils. What seems to have happened is that, instead of acting as a spur, they are acting as a brake. Ministers now find it almost impossible to take decisions. Everything must be put back until the Heads of Government meeting every four months or so.
A classic example was the question of direct elections. We are none of us told how much progress was made at Senningen last weekend. We have had a report in the European Parliament from M. Thorn and a few hints from the right hon. Gentleman. We are told that everybody is optimistic that a solution will be found at the meeting of the European Council on 12th and 13th July. There was certainly a suggestion at one point that, even if agreement had been reached at Senningen last weekend, it would not have been announced until the Heads of Government had been able to meet and ratify it. This could be a dangerous development.
According to my last calculation, there are 12 different councils of the European Community—the Foreign Affairs Council, the Economic Council, the Budget

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Council, the Social Council, and so on. That is too many to begin with. If, as top hamper, we add to that a European Council which, by its nature, because it is a meeting of Heads of Government, can meet only rarely and insist that any business of prime importance is put back until the meetings of that European Council, progress, which is already slow enough, will slow down and come to a grinding halt without much difficulty. Therefore, I hope that the Heads of Government will be able to revert to the original concept of the European Council as put forward in 1974—namely, that essentially it should be a body of review rather than of decision and that its job should be to see how the other councils are getting on and to urge them to make further and quicker progress.
That is clearly Mr. Tindemans' view in his report. I should have thought that view would commend itself to the Government.
On direct elections, as such, the position on the Opposition side of the House remains roughly the same as the Government's position. I hope that we shall have the support of the Select Committee when it reports, as I understand, shortly. We hope to achieve the target date of 1978. We believe that it can be done. We believe that the Parliament should consist of between 350 and 400 seats to give the necessary representation to all the regions and areas involved. We should be prepared to expedite as fast as possible any legislation that the Government may bring forward on that issue. Indeed, we should be prepared to see the Government drop other issues in order to expedite it even faster than we would otherwise do. [Interruption.] My hon. Friend the Member for Banbury will be slowing things down. but he normally does.
I do not want to delay the House any further—we were rather late starting—but I should like to mention the Greek application and the enlargement of the Community. Whilst I must accept the right hon. Gentleman's arguments—I do not think that hon. Members on this side of the House would wish to delay the Greek application in any way—there are considerations which go wider than the purely short term political considerations put forward by the right hon. Gentleman.
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The question of Cyprus has been raised by Back Benchers on both sides. The right hon. Gentleman, at the beginning of his speech, said that the Community will not get involved in the Cyprus problem. It is a little too innocent to pretend that if Greece joins the Community and Turkey does not we are not involved in the Cyprus problem. Of course we are. We are bound to be involved. It may be that will contribute to a solution. It may be a reasonable argument to put forward if the right hon. Gentleman can back it with the necessary evidence, but to try to pretend that it does not reflect upon the whole question of the Greek application is expecting us to be a little more naive than most of us are.
Another point has to be borne in mind. It is not just Greece, After all, Turkey has shown an interest in joining the Community. Spain, we hope, is now on the road to democracy and is in a much better economic state to join the Community than is Greece. Portugal, happily now rescued from a Fascist dictatorship after 45 years, will probably be knocking on the door fairly shortly. Being late joiners ourselves, we should not complain about others wishing to join the Community. However, it needs a bit more than the kind of piecemeal policy that the right hon. Gentleman appeared to be reflecting today.
Mr. Dalyell: Some of us are a little disconcerted because, when pressing the Greek politicians informally late at night and asking "Why not Turkey?", they stumbled a bit and then said "All right, Turkey, too." When we then said "Why not Syria?", they said "If Syria joins the Community that will help to solve the problem of the Ba'athist Party and its opponents."
Sir P. Kirk: That must have been a conversation very late at night, judging by the sound of it.
I hope that, as the Greek negotiations proceed—I accept the Minister's assurance that nothing will be rushed—we shall have time to reflect, both in this House and within the Government, on the general concept of enlargement and the type of Community that may bring with it. I do not wish to say anything more on that subject this afternoon, because many differing points of view

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must be considered in approaching the question of the Greek application.
I should like to end by endorsing what the Minister said at the beginning of his speech. Although it is customary to decry the Community as a stagnating organisation, a quick look at the White Paper is enough to show that progress is being made in many areas. That progress may not be fast enough to suit some of us and it may be too fast to suit others. Nevertheless, it is happening. The Community is progressing and changing. I have been devoted to the concept of Britain in Europe throughout the whole of my political life, and I welcome it. However, it is essential that we in this House, particularly those who represent this House in the European Parliament—
Mr. Prescott: Why?
Sir P. Kirk: I shall come to that point. It is essential that we should be concerned with ensuring that progress is made.
I come to the last small point made by the hon. Member for Kingston upon Hull, East (Mr. Prescott). Why? Even the French Government are prepared to talk about the European Parliament. If a delegation from the European Parliament goes to the Council of Ministers, it sits at a table behind a label "European Parliament". Why do the Government go on calling it the European Assembly?
Mr. Prescott: Because it is in the Treaty of Rome.
Sir P. Kirk: It is not dependent on or part of the treaty. If the Council of Ministers is prepared to call it the European Parliament, why cannot the British Government? Let them take their courage in their hands, defy the hon. Member for Kingston upon Hull, East, and take this modest step—
Mr. Prescott: It is not modest.
Sir P. Kirk: —towards progress in realism and democracy.
5.39 p.m.
Mr. Bryan Gould: I beg to move, at the end of the Question to add:
"calls on the Government to ensure that the EEC fully honours the Dublin Agreement of
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March 1975 on imports of New Zealand butter into the United Kingdom, and disagrees with the Commission Report on 'European Union' (R/1815/75)".
There are some simple souls, amongst whom I number The Times and members of the European Movement, who seem to think that it is possible to make a proper and adequate assessment of the effects of our membership of the Common Market by listing the various loans and grants that have been made by Community institutions to this country. They exclaim with surprise and delight at the fact that last year we made a modest surplus on direct payments of £54 million. The £54 million is welcome, but let us try to get it in perspective. It would build about two miles of urban motorway.
While the Government placed great emphasis in the renegotiations on the issue of direct payments, no serious critic of Common Market membership has ever argued that the real costs lie in direct payments. If we draw up a proper balance sheet, we see that the real costs lie in indirect costs, which arise from the distortion which Community membership means for our most natural and advantageous trading patterns.
Mr. Nick Budgen: Will the hon. Gentleman comment on the view that many of those innocent souls to whom he refers have put forward the view that there is now something for nothing that can be got in Europe? The idea of the bottomless pit here has, unhappily, now evaporated, and there is a belief that there is a new bottomless pit in Europe from which we can gain material benefits without paying for them either in other material benefits or in political disadvantages.
Mr. Gould: I am happy to agree on that point. The same argument applies to monetary compensatory amounts in agricultural matters. If we are to draw up such a balance sheet, we must take account of the fact that we are now paying, by virtue of Community membership, far more for a range of basic foodstuffs than we need have done if we had stayed out. Even the Commission recognises the fact that a vast range of basic foodstuffs is far more expensive now inside the Community than it is in the world outside.

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If hon. Members are not content to accept the statements made by the Commission, let them ask the British Government. They will find, for example, that we are simply not allowed to import beef from cheap producers abroad: that we pay a duty of 16 per cent. on imports of New Zealand lamb, which duty will rise to 20 per cent. next year; and that on imports of New Zealand butter and cheese we pay import levies amounting to 9p a pound for butter and 12p a pound for cheese. That is the figure that applies to the special regime that was negotiated for New Zealand. It applies only part way through a transition period, and it is a figure that is net of monetary compensatory amounts.
Let us dispose once and for all of the ridiculous argument that monetary compensatory amounts are a net gain. They are a small discount on a substantially increased price which we do not need to pay.
The real importance of these increased food costs is not merely the burden that it places on the housewives' shopping baskets but its effect on our competitiveness as a trading nation. They raise our costs quite unnecessarily. They make the Government's task of trying to deal with inflation far more difficult. It means that the Government are engaged in a battle with one hand tied behind their backs, because a major area of the economy, the structure and level of food prices, is simply beyond their control—as my right hon. Friend the Minister of Agriculture demonstrated when he returned from Brussels in March this year.
In case hon. Members are still tempted to believe their own propaganda—that we need to pay these high prices in order to ensure stable supplies—let them look for a moment at the way in which our traditional suppliers constantly express their willingness and, indeed eagerness to continue to supply us on a long-term basis. In that context, let me mention particularly the situation in regard to New Zealand butter. Two points are perhaps not always understood. From my recent conversations with New Zealand officials, it is perfectly clear to me—and to them, I need hardly say—that New Zealand remains very substantially dependent on her exports of
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agricultural products and that in that trade she remains still substantially dependent on this market.
There was a comfortable myth that had gained some currency that somehow or other the New Zealanders had managed to diversify their production and had found new markets. However, that is not so. New Zealand desperately needs this market and that trade, both in dairy products and even more so in the case of sheepmeat.
Secondly, that dependence on our market means that New Zealand's negotiating ability is very greatly diminished. She has no bargaining counter save that of rational argument, since she can only sit and watch as an observer a bargain that is struck by parties committed to an irrational system. Therefore, we cannot expect New Zealand, which depends solely on the good will of these parties, to jeopardise that good will by speaking out too loudly in her own interests. There is a special responsibility on this House and the Government, in New Zealand's interests and our own, particularly that of our consumers, to make sure that the Dublin Agreement is properly implemented.
I should like to ask a specific question about negotiations. I hope that my hon. Friend the Under-Secretary will be able to answer it or to get someone from the Ministry of Agriculture to provide the answer. In the context of any agreement that may emerge, I want to know whether the principle of "degressivity"—one of the horrible words that seem to abound in Community affairs—has been simply accepted as the basis for all future imports of New Zealand butter. If that is so, it is simply a matter of time before that trade is choked off.
Mr. Nicholas Winterton: Is the hon. Gentleman aware that last year we imported about £528 million worth of dairy products, a great deal of them from New Zealand? Is he also aware that successive Governments have urged us to rely less upon imports and to produce more ourselves? Bearing in mind that we shall have to continue to pay certain moneys into the European situation, does he not feel that we should try to reduce our vast dependence upon imported dairy products?
Mr. Gould: I am grateful to the hon. Gentleman. It may be somewhat surprising to him, but I am happy to agree. I shall come to the point about our dairy industry shortly. However, so far as we are to import dairy products—I do not think anyone would seriously suggest that that will not happen—it is important both in our own interest and in that of New Zealand that we should implement the Dublin Agreement. We ought to recognise the pressures that the New Zealanders are under. For example, they are under great pressure to reduce the volume of their exports if they are to get anything on the question of price. It is that sort of ruthless exploitation of their dependence on our market that we ought to understand.
Mr. Dalyell: What is degressivity?
Mr. Gould: Degressivity is the principle which has so far characterised our trade with New Zealand, whereby the total permissible quota decreases year by year.
Butter is one of the items which show the way in which the common agricultural policy works against our interest. Time and again we see proposals within the context of that policy which are totally in appropriate to our situation, either by virtue of the quite different structure of our agriculture industry or by virtue of the quite different patterns of our trading in agricultural products.
I understand that the problem with regard to sheepmeat has arisen because of a decision by the European Court of Justice, which tells the French that their import restrictions on English and Irish lamb must be dismantled; and then we are told by the French that as the price for obeying that decision we must accept a Common Market regime on sheepmeat which will raise prices to consumers by 50 per cent. and choke off all trade with New Zealand in that important commodity.
Can we not tell the French that, if it is a matter of being Communautaire on this question, surely we are entitled to expect the French to obey the simple obligation of membership, which is to recognise and abide by a decision of the European Court.
The distortion is true of European dairy products as well. The European industry
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is constantly in surplus. Ours is not. Our White Papers ask us to increase production. The distortion is true of glasshouse products, hops and wine, where proposals have been brought forward that are quite inappropriate to our situation. It is even true of a Commision draft regulation about potatoes, which would overturn a marketing arrangement which has worked pretty successfully in Britain. That is a draft proposal about which the Commission consulted absolutely no one, certainly not our own Ministry of Agriculture or, as far as we know, any of the farmers' organisations. It is intolerable for the Commission to dream up such proposals out of the blue, when we then recognise that our own Ministers are unable to defend us against them in the Council of Ministers, as has been amply demonstrated over the question of skimmed milk.
Mrs. Dunwoody: I hesitate to interrupt my hon. Friend. He is putting his case so succinctly. However, there is a move inside the Commission to do away with the whole marketing board structure, and this would not only materially damage our situation in regard to hops, potatoes and the Milk Marketing Boards but would cause great trials and travails to the industry and the housewife.
Mr. Gould: I am happy to agree with my hon. Friend on that point.
I wish to make the comment on the White Paper that it does not help to be mealy-mouthed about these issues. I very much regret that paragraph 29 of the White Paper, dealing with the skimmed milk fiasco—which was unanimously condemned by the House and disowned by the Minister because of the compulsory nature of the scheme—mentions the release of intervention stocks and the disposing of the stocks we now have. There is no indication in the White Paper that there is anything unacceptable or intolerable about that proposal. Therefore, it does not help us to debate these issues in that sort of manner. These considerations lead to a distortion of our whole trading pattern and of our trade balance with the Community.
In addition to the substantially increased amounts we must now pay for more expensive food, we run a much swollen deficit in manufactured goods amounting to a figure of nearly £1,000

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million. That is a major component of the overall deficit with Community countries of £2,386 million last year. What has happened is that, instead of following the natural pattern of buying our food and raw materials from the cheapest producers abroad, who in turn provide us with preferential markets for our manufactured goods, we are now having to pay substantially more for food which is more expensive than we need to buy from precisely the same people who are outselling us in manufactured goods.
Mr. Douglas Hurd: Since the hon. Gentleman is referring nostalgically to the natural pattern of buying, may I say that that pattern involves farm incomes in this country sustained by taxpayers' subsidies? If we return to that system, has he made any calculation of the addition to our borrowing requirement, under which we are already labouring with such difficulty?
Mr. Gould: The hon. Gentleman does not make a point of substance, because both the system of intervention and that of deficiency payments cost a great deal of money. The only point that is of significance as between the two systems is that one pushes up consumer prices and produces surpluses that are unsaleable whereas the other keeps prices down.
I return to the subject of the trade deficit. It does not require a skilled economist to say that a deficit of that size, particularly in manufactured goods, is of major significance, not only for our balance of payments but also for jobs, investment and the £ sterling.
Considerations of time prevent me from going further into those issues, and I pause only to speculate about what might have happened, given the dire warnings that we were given in the referendum about the consequences to this country if we withdrew, if we had withdrawn from the Community and had then found that the pound had dropped from $2.32 to $1.80, with unemployment being increased by 30 per cent. and investment continuing to lag.
I wish to mention one further point which should be taken into account when drawing up the balance sheet. This matter is not easily quantifiable in economic terms but is of great impor-
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tance. We were at one time assured that we would gain by a pooling of our sovereignty and we were told that our fundamental interests could always be protected by veto. In the sphere of international negotiations, we have already seen that, in reality, experience is different.
We know that in regard to North Sea oil we had to struggle hard for a few minutes in which to represent our opinion at the International Energy Conference. In regard to the common fisheries policy, we have handed over to the Community the ability and the right to decide these matters for us. My right hon. Friend the Minister must appreciate that the more firmly he insists on obtaining something as a result of the common fisheries policy to which we are not legally entitled, the more he will guarantee that we will have to pay a high price indeed for that concession.
These problems do not occur only in terms of international negotiation. We also know that there are difficulties on the subject of textiles. How many people recognise that the ability of the British Government to take anti-dumping measures will pass from us in July of next year? Under the Treaty of Accession we have ceded to the Community our right to take action. In terms of domestic legislation, from turkeys to transport we have given away the power to decide what is best for the people of this country. The most striking recent example was the skimmed milk situation. The House condemned it and the Minister disclaimed responsibility for it, but it remains law.
In case I am accused of drawing up this balance sheet on grounds of narrow nationalism and of concentrating on the undoubted damage which membership has meant for us, let me also say that the six-month period covered by the White Paper has been a bad period for the Community. The growing divergence of the economies of member States has burst asunder the currency snake and brought to a dead stop any prospect of economic and monetary union. The Tindemans solution for this problem—the two-speed Community—is perhaps the most unsatisfactory of a whole range of unsatisfactory compromises and destroys the only benefit ever promised to us by pro-Marketeers.

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That benefit was thought to be a magical and mysterious process by which we would be dragged along on the coat tails of the more prosperous members. I never understood the argument that it would be possible for different Community members to proceed at different speeds and still arrive at the same place at the same time. Apart from economic difficulties and the problems of economic and monetary union, the Community as a whole has experienced substantial recession and a high level of unemployment. It has been notably unsuccessful in dealing with those problems. The common agricultural policy contains many lunacies which have become increasingly apparent even to one of its prime advocates, Commissioner Lardinois, who is to resign from the struggle of grappling with the inconsistencies of the policy.
Furthermore, the Community has failed to co-ordinate its policies—foreign policy, aid and notably any common approach to UNCTAD. There must have been many raised eyebrows at the recent statement by President Giscard d'Estaing to the effect that the French must have an army at least as powerful and numerous as that of the Germans. That is hardly the sort of comment one would expect from a leading partner in a body that is supposed to outlaw national rivalries.
The reaction to these difficulties has been two-fold, at least on the part of those committed to the idea of further European integration. On the one hand they have set about harmonising everything in sight, giving the illusion that something is happening and that matters are progressing, even if only about the contents of mayonnaise.
The second reaction has been an attempt to conceal the widening cracks imposed on the whole shaky foundation by imposing a tottering superstructure of federal institutions. I was delighted to hear the Minister agree that the Commission's document on European union is a blueprint for European union the day after tomorrow, a blueprint which has not even been contemplated, let alone endorsed, by the British people. The danger is that the British Government may react to these proposals and concessions with passivity and reluctance but
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nevertheless will find themselves feet-dragging and being edged along the path towards a destination which they will not or cannot perceive.
I confess that I regard direct elections as a step along that path, but I do not intend to develop that point. I share the Minister's view that the House should have the opportunity to debate that matter before a binding commitment is entered into. I believe that it is important that the Government should take the opportunity that now presents itself and should recognise that in European affairs we now stand at the crossroads.
There are two models of Europe to which we can work. On the one hand is the Europe of the federalists; perhaps I ought to say, the Europe of the unionists. That is the Europe which my right hon. Friend himself has said flies in the face of reality and all recent experience. It is a political dream which is simply doomed to failure. It proposes the prospect of a massive, centralised, autocratic, political, military and economic block, a sort of European super-State motivated by a form of super-nationalism. It is a prospect which I and many of my hon. Friends instinctively dislike.
The other model is that of a confederal Europe in which mature and friendly nation States recognise their community of interest and agree wherever it is sensible to do so—where decisions are made at intergovernmental level in the Council of Ministers, where views are notified and national interests are, in the last resort, protected by the veto, where democracy, which is so sadly lacking, must be introduced by virtue of the control which national Parliaments exercise over Ministers in Brussels. That is why it is important not to give up the battle, which we have hardly begun, to develop our own rules and institutions to make Ministers accountable to this House for what they do in Brussels. It is something to which the Government ought to pay a great deal more attention.
It is that second model of Europe which provides the Government with a great opportunity. The Government can come forward with a positive, clear, constructive alternative to the wilder fantasies of the Eurofanatics and say "We shall work towards the greatest possible

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degree of co-operation in areas like foreign policy, aid, defence policy and all the great economic problems, including unemployment and the disparity in our balance of payments." All this could be done by using the EEC as the foundation but not limited to the Common Market and—looking forward to the day perhaps when the Common Market itself will expand—to include other countries in Western Europe and our friends abroad.
It is significant that the recent arrangement made by the Chancellor of the Exchequer was not based on the special relationship or membership of the Common Market. It would have been possible, no doubt, quite apart from the question of whether we were members. I believe we must work for the extension of the Community. We must welcome the Greek application and look forward to the day when the Spaniards, the Portuguese and the Turks will also wish to join.
There is a test to be applied to those who used to resist the charge that the Common Market was a rich man's club. Let them now prove it. For those who claim that membership of the Common Market was an exercise in internationalism, let them now prove it. Those of us who are not happy with the Common Market want to see the widest possible membership and the widest possible opportunity of free trade. We must work to remove these obstacles to profitable and useful co-operation such as the irrational, wasteful and expensive CAP. We must try not only to reform it but to get rid of it. I recognise the political problems, but that must be our objective.
We must also avoid any woolly-minded tendency to be misguidedly Communantaire when our national interests dictate a different course. No other member of the Community makes that mistake. We should do much more to help the process of European co-operation if we followed a policy of enlightened self-interest—a phrase of which I believe my right hon. Friend the Chancellor is particularly fond and has used to good effect recently.
In other words, I believe that the Government should be working for those things which are sensible, practical and acceptable within the Common Market and a wider European context. We hear less these days of the argument advanced
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10 or so years ago that by virtue of joining the Community we should somehow or other be able to give leadership to Europe. The fact that we hear less of it is perhaps a further reflection of the lack of national self-confidence which in my view led us to confirm our membership last year. Although we hear that argument no more, I believe that we have an opportunity to take a lead in Europe in the sense that we could point the Common Market and Europe in a more sensible and pragmatic direction. That is the particular contribution that we could make.
I believe that if the Government followed that course they would have very wide support not only from those who have always favoured Community membership but also from those who, recognising our membership, nevertheless feel that there is a possibility for European affairs to develop in a way which would suit our own interests. I hope that the fact that my right hon. Friend and the Government have indicated acceptance of the amendment on the Order Paper will represent an important first step in that direction.
6.5 p.m.
Sir Derek Walker-Smith: The hon. Member for Southampton, Test (Mr. Gould) is in the unusual and agreeable position for a Back Bench Member of this House of having his propositions accepted even before he has made them. I congratulate him on that, and I would also congratulate him on the vigour, fluency and attractive way in which he put his arguments forward. He covered, as he was clearly entitled to do as the mover of this important amendment, a considerable area of ground and in particular three matters—the New Zealand matter, the institutional matters and finally, the Greek position.
I do not intend to follow him at all on the first of those points. I shall be making observations on the second, but, before I do so, I would just say parenthetically, in a sentence, a word in regard to the Greek application.
Of course I sympathise with this application and I hope to see the Community expanded in due course with nations like Greece which seek to join, but I wish to emphasise and reinforce what was said so eloquently by my hon. Friend the Member for Saffron Walden

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(Sir P. Kirk), that this application, at this time, has to be assessed in the full context of the implications of the position of Turkey in general and the position in regard to Cyprus in particular. I have an interest in and affection for that island—that lovely land for which nature has done so much and events have served so ill. I hope that in the not too distant future we shall have an opportunity for a more concentrated discussion on those particular aspects of the matter and, therefore, I say no more of it at present.
I wish to address my observations, in particular, to Section XII of the White Paper which forms the main subject of this debate and in which the institutional aspects are dealt with. That section starts, and rightly so, with a reference to the Tindemans report.
The terms of reference he was given are quoted in his report. It says:
"At the Conference of Heads of State and Heads of Government of the European Communities, which was held in Paris on 10/11 December, 1974, you"—
he is addressing his ministerial colleagues—
"asked me to define what was meant by the term European Union'."
That much used and much abused term means different things to different people. Of course, all sensible people want European union in a general sense. They want the maximum co-operation, the maximum common purpose and common action, not only in the economic and social matters covered by the Treaty, but in matters of defence and external relations. Unfortunately, the question is beclouded and bedevilled by the use of capital letters, by bandying about the term European Union with a capital "U" and by the encouragement which that gives to what I think were called dewy-eyed politicians or centralising politicians—not so many in this country but fairly numerous in other countries of the Community—to advocate and expect the early attainment of a tightly centralised institutional structure.
I am against that sort of structure. I am against the concept of a centralised European super-State. I doubt whether the peoples of Western Europe favour such a concept, at any rate at present, and I am reasonably sure that the British people do not.
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Of course I am aware that federalism does not necessarily connote a tightly centralised super-State, that the term "federalism" has different connotations, or may have, according to whether one lives in a federal State like Germany, where it has implications for the preservation of the rights of the Lander against the central State, or whether one lives in a non-federal unitary national State like Britain.
In proclaiming his personal preference for federalism Mr. Tindemans may have some less absolute concept in mind, but in Britain, "federation" or "a federal State" has been adopted as a convenient shorthand for a centralised form of government to cover all the activities in the countries of the Community.
As such, the British people reject that concept. When I say that, I am, of course, speaking of the present, and of the predictable future. I do not profess to read the future 50 years ahead, when I shall not be in a position either to have to eat my words or alternatively to have the melancholy satisfaction of saying "I told you so." For the present, rebus sic stantibus, as the lawyers say, this is not the path for the British people. Ours is the pragmatic path which was sketched by Robert Schumann, one of the founding fathers of the Community—the step-by-step approach. That is a very sensible approach. For myself, in the words of the hymnographer,
"I do not ask to see
The distant scene;
One step enough for me."
That does not mean that we should not seek to extend co-operation, common policies and concerted action among the Nine. Of course we should, and we should seek to devise mechanisms to do so, particularly in defence and external relations, having regard to the insistent and insidious growth of Soviet imperialism and to the need to capture the hearts and minds of the Third World. That last aspect, relations with the Third World, has its economic aspect also, making it a fitting subject for the EEC because, as we know on the highest authority,
"Where your treasure is, there will your heart be also."
The evolution of the Community, the strengthening of its base, and the

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invigoration of its activity must proceed by way of consent and respect for the Treaties. I say this because it is only by the Treaties that Britain is bound and it is only to accession on the basis of the Treaties that Parliament has given its consent. Expansion or reconstruction of the institutions of the Community requires amendment under Article 236 of the Treaty, which, in turn, requires ratification by the constitutional procedures of the member States, and that, in the United Kingdom, in fact if not in form, under the Ponsonby rules, requires the consent of Parliament.
Indeed, this allocation of responsibility recognised by the Commission is seen in a recent European parliamentary answer on 19th February:
"The Commission would point out however that it is competent to pronounce on possible infringements of the fundamental rights set out in the Convention only in connection with the application of Community law. Where national law is involved, the question of infringement depends entirely on the rules regulating the Convention's applicability, and national guarantees of legal protection, in the member State concerned."
We have, then, two spheres—a sphere of national responsibility and a sphere of Community responsibility—and two Parliaments, a national Parliament and a European Parliament. The two are neither contradictory nor competitive. They are, or should be, complementary. It is necessary that each works efficiently and harmoniously with the other to ensure that all executive action which is taken is brought under maximum parliamentary scrutiny and safeguards, as becomes our democratic processes.
These, then, are the lines on which I think we must seek to evolve and advance—recognition of common purpose and common interest, respect for the Treaties which give effect to them, and for the rights of the national Parliaments as directly representing the general will of the countries comprising the Community.
There are two dangers in particular which threaten the Community. They arise, as it were, at opposite ends of the spectrum and constitute the Scylla and Charybdis through which the Community and the component States must seek to steer their craft.
The first of these dangers is the habit of proclaiming vague and generalised aspirations couched in high-sounding
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language and asking that they be treated as serious and precise proclamations of policy. These are mainly the proclamations of the so-called "summits"—a word which does not appeal to me because it seems to be lacking in constitutional significance.
Mr. Geoffrey Rippon Mr. Geoffrey Rippon (Hexham)indicated assent.
Sir D. Walker-Smith: I am glad to see that my right hon. and learned Friend nods assent to that proposition.
The vague references to European union, and in particular the ill-fated call for economic and monetary union by a fixed date, are the sorts of things I have in mind. Every target proclaimed and missed is a setback for more practical and pedestrian progress. It is significant, and perhaps no accident, that none of the Heads of Government who participated in the 1972 summit and who helped to formulate these general propositions is a Head of Government today.
The second danger is the danger of excessive particularism, of undue interference in and regulation of the lives of the citizens. Mr. Tindemans said in his report:
"No one wants to see a technocratic Europe."
That is surely correct and, I think, would carry general assent.
Article 100 of the Treaty gives a power to approximate laws, the power to effect harmonisation for harmonisation's sake, as it is called. But, of course, it is not necessary to harmonise all laws coming within the permitted powers of Article 100. Indeed, it is necessary not to. I have preached the doctrine of no harmonisation for harmonisation's sake ever since our entry into the Community in January 1973, and I am glad to say that the point is now clearly registered with the Commission, at any rate in principle. We hope to see further progress in this regard.
We have, then, to try to steer the Community on the right course between the Scylla of cloudy generalisation and the Charybdis of excessive harmonisation and regulation. In that, I believe that parliamentarians sitting here and in Strasbourg have a clear duty and a continuing opportunity. These, then, are the general lines on which I believe it

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would be wise for the Community as a whole and Britain as a member to seek to advance.
Time forbids reference to any other aspects save only one, if I may deal with it very shortly. Paragraph 86 of the White Paper refers to the protection of fundamental rights. I believe this to be of great importance both in the Community context and in our national context here in Britain. The Legal Affairs Committee of the European Parliament is engaged at the moment in an active consideration of this question of fundamental rights both in the context of the voluminous report which the Commission has produced on the subject and in its general context.
Whether the Community is yet in a position to embark upon the formulation of a written code of rights for the protection of the individual citizen covering all those socio-economic matters that are not covered by the European Convention of Human Rights, I am not certain; but I am certain that we must not lose sight of that possibility as a target and as a contribution which can be made to the well-being of the individual citizen. Meanwhile, we may have to rely on the development of case law in the European Court of Justice rather as our own law has evolved as judge-made in the United Kingdom. The protection of the rights of the citizens is a sine qua non of a free and democratic society, and I hope that we shall make speedy and significant progress both in this country and in the Community, and that our endeavours in each will help the other.
6.22 p.m.
Mr. Michael Stewart: I do not think that it can be disputed that the six months to which this document refers have been a dull six months for the Community. "Disappointment" may be too strong a word, but certainly when one looks at what happened at the end of that period—the very depressing Summit meeting in April—one is obliged to conclude that this has been one of the Community's dull periods. But it is all the more significant that, as one looks through the document, one finds that throughout that time, even during one of the duller periods of the Community,
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the process of making trade agreements all over the world has continued with the State trading countries, with Canada and with Mediterranean countries and that with trade agreements has gone also the political influence of the Community.
I do not think that it can be disputed that the existence of the Community and the desire of both Spain and Portugal to enter it have given it a power or a leverage to move those countries in the direction of the restoration of democracy. The Community, in other words, has been showing itself to be what many of us believed it would be—a magnet attracting attention throughout the world. To many of us, apart from political reasons, this was one of the considerations that we had in mind when asserting that it was right for this country to join the Community.
If we had stayed out, the Community would not have ceased to exist. Activities of the kind described in this White Paper would have gone on and Britain would have been excluded from all their results. Increasingly, as time went on, we should have become an afterthought in the eyes of the great countries of the world and of the Community of Europe itself.
I listened with great interest to the speech of my hon. Friend the Member for Southampton, Test (Mr. Gould). I am sorry that it is not possible for him to be with us at the moment. But I was glad that he spoke in terms of the kind of Europe that he wanted to see and how that could be built through the Community and other countries. The important factor to realise is that any realistic vision that anyone may have for the future of Europe has to be seen in the Community framework. The point that I was making earlier that the Community is a magnet affecting virtually all the countries in the world and that a Britain excluded from it would be a Britain without influence means that we have all to accept now that any idea that the Community itself will cease to exist or that it is sensible to think of taking Britain out of it must be regarded, to coin a phrase, as a dead duck. Whatever may have been our views in the past, we have to look forward to the development of the Community with Britain in it. It is to that that we must now direct our attention.

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Let me give another example which illustrates what I mean. In paragraph 76 of the White Paper, there is a reference to the energy policy of the Community:
"The Commission responded with outlined proposals including, inter alia, a Community system for a minimum import price for oil."
That is a matter of great interest to Britain. But we need not imagine that, if we were outside the Community, the Community would not have an energy policy. It certainly would, but it would not be so interested in a minimum import price for oil as a Community with us in it would be. This would happen all along the line. Therefore, I repeat and emphasise that it is no longer realistic to attempt to fight the battle of the referendum over and over again; Britain's membership of the Community has now to be accepted as a fact.
Mr. John Lee: Is not my right hon. Friend allowing his enthusiasm to run away with him? If he looks at the history of almost every federation to have been formed since the Second World War—the West Indies, Rhodesia and the South Arabian Federation, for example—he will find that, whether good or bad in their intentions, they have all broken up.
Mr. Stewart: That is an extraordinary argument. We are not restricted, in our judgments about future political institutions, to federations formed after the war, I remind my hon. Friend that 200 years ago there was a federation formed which is celebrating its 200th anniversary. The Swiss federation also goes back some considerable time. What is more, I have never believed in the attempt to argue by analogy from history as though history was a person and remembered what it had done last time and decided to do it again. We have to judge what may happen in Europe on the basis of the present European facts—quite apart from the fact that the EEC is not a federation. I do not know whether it will ever become one, but that is not what we are discussing at present.
In what must be admitted to have been a depressing six months, there are one or two matters on which we may be able to go forward. I mention here the question of direct elections and, in a few moments, I shall develop why I
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think direct elections to a real European Parliament will be important.
But one matter that would cheer up Europe would be if Ministers could at last solve the not absolutely Herculean problem of the numbers and allocation of seats. That is all that there is to it; we need not bother about setting unrealistic target dates. The plain fact is that, if we want direct elections in the spring or early summer of 1978, Ministers have to reach a decision about the number and allocation of seats fairly quickly. It is to he hoped that they will do that in July. If they do not, it will not be possible to reach the target of 1978, though I accept that that would not matter all that much. If it means waiting another year to get full-hearted agreement, it does not matter. But Ministers should not behave as though there is all the time in the world to spare and go on postponing the decision from one conference to the next.
My right hon. Friend the Minister of State knows that, some time ago, I put forward a proposal whereby we could have direct elections to the European Parliament in this country without any alteration of the treaties. I did not press that idea because I felt that, now that we were in reach of real direct elections, there was no point in pressing it further. If Ministers go on from one conference to the next unable to agree on real direct elections there may be a case for looking at my plan again. The present arrangement of people like myself, trying to fulfil a dual mandate, cannot be expected to go on indefinitely. The situation is not satisfactory either for hon. Members or for the proper working of the European Parliament.
I have a special interest in paragraph 84 entitled "Uniform Passport and Passport Union". I shall concentrate on the mild objective of uniform passports, which means that all citizens of countries in the Community have for their passport a document shsowing clearly which Government have issued it. It would also be designed to clearly show that the issuing State is a member of the Community, so that any official on frontiers all over the world will know that he is dealing with a Community citizen. That is a mild task. We have to agree on the size of the document and on the design on the front. The paper says that the

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introduction of uniform passports will depend on the conclusion of the review of nationality. I wonder why. That review might determine who will be entitled to a passport but the uniform passport involves only a decision about the type of document that it should be. That decision could be made in a couple of week's time. The design of the document does not require a decision from the review of nationality. I hope that Ministers will get on with that matter because if they cannot do that they cannot get on with anything.
Mr. Jay: I hope not.
Mr. Stewart: I might have expected that kind of remark from my right hon. Friend the Member for Battersea, North (Mr. Jay).
Those of us who believed and still believe in British membership of the Community are not obliged to argue that everything in the Community is perfect, any more than those who believe in the integrity of the United Kingdom are obliged to argue that everything in the United Kingdom is perfect. My right hon. Friend the Member for Battersea, North will go on hoping not, but the tide of events will diverge from his thinking in the future as much as it has in the past.
Hon. Members who disagree with British membership of the Community often point out to the rest of us how things have not gone as well as were predicted and how some of us were overoptimistic.
Mr. Noble: He can say that again.
Mr. Stewart: They can sober themselves with the thought that their thinking has been rejected by the people of the country. I find it interesting to note that the people who wanted us out were those who wanted a referendum. We had that referendum and we know the result.
Mr. Prescott: In the referendum the people were asked to judge on an extremely complex matter. They had to make a decision between two parties—one optimistically in favour of our membership and the other pessimistically against it. The people made a judgment in favour of the case made by those who
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were more optimistic and we are entitled to argue that they made a mistake.
Mr. Stewart: The people made a judgment on the two cases presented by the two parties, and they made their judgment emphatically. It makes no sense for anyone to try to reverse that judgment. We must consider the kind of future that we want for Europe.
I now turn to the Tindemans Report. I look forward to the time when the nations of the Community can enjoy monetary union. The plaguing of trade between them by varying currencies is a misfortune but much must happen before we achieve monetary union. It is an admirable goal, but there is no need to put unrealistic dates to it. In order to get there it is necessary to have a more effective and generous use of regional policy by the Community.
That brings me to the other social, and in some cases political, functions that the Community should be serving. One of the weaknesses of the Tindemans Report is that there is much in it about institutions but it is not emphatic on what the machinery will turn out, or what it is for. One should add to Tindemans a more imaginative concept of the social objectives of the Community. We need effective control over institutions, such as multi-national companies and the pushing ahead of Community-wide regulations on health and safety at work, the protection of migrant workers and—to go with monetary union—the preservation of a high level of employment. Those are reasonable objectives. They should be of particular interest to my hon. Friends because sooner or later we shall have direct elections that will be fought on party lines.
If, therefore, we in our party, whatever our previous disagreements about the Community, have any regard for the standing of our party, we should want to see it working with its sister parties in Western Europe. We shall need to work out with them a common attitude on the social and economic future of the Community. That is an imaginative and valuable task to which we should be addressing ourselves. That future now matters, and the arguments about whether Britain should be in or out of the Community can be relegated to the shelves and the history books, where they properly belong.
6.39 p.m.
Mr. Ian Grist: The debate is an odd one. As my hon. Friend the Member for Saffron Walden (Sir P. Kirk) said, we are attempting to cover an extraordinarily wide field. I am glad to see that the hon. Member for Southampton, Test (Mr. Gould) is back in the Chamber, because he made a good speech and covered a wide range. His strictures on the EEC would have been more convincing, however, if he had shown an awareness that we were going to remain in the EEC, which is based on the Treaty of Rome, and not some kind of quasi-EFTA.
I wish to talk about the application by Greece for membership of the Community. Hon. Members will know that that began in 1962 when Greece made an association agreement with the then Community and there was an understanding that Greece would eventually achieve full membership. That was frozen during the dictatorship of the colonels and became unfrozen with their overthrow and the advent of Mr. Karamanlis. The result of the association has been that one-third of Greece's exports and half her imports are already with the rest of the Community. Therefore, there is already a powerful trading arrangement between them.
Last year there was the application for full membership. In January this year the Commission produced an opinion on membership. In February the Council of Ministers, I think rashly and for Greece's internal political reasons, seemed to overthrow that opinion and go for rather rapid discussions.
There appear to be two main arguments in favour of Greece's membership. The first is that we wish to encourage the establishment of democracy in Greece and stabilise it, and it is thought that her membership of the Community will serve to cement the new democratic regime. That is arguable, but I do not think it is provable. We may yet see in older members of the EEC that that is not necessarily so.
There is also the argument that in order to survive the Community must grow, that somehow the two go together: that it is like a yeast that starts dying if it stops growing. I believe that to be dangerous rubbish.
814
We have already heard several times that in the past six months the EEC has been at something of a standstill and that they have been a disappointing six months. So they have been, but they have in any case been a very difficult six months internationally. It should not be held at the head of the EEC that it has failed. In fact, there has been quite a lot of movement forward, steadily and gradually. It is only foolish people who oversell the EEC and believe that miracles will happen in the short term.
If there has been difficulty, surely it has been contributed to by the indigestibility of this country in the institutions of the EEC. If growth is to be the criterion of whether the EEC is a living institution, why not have Turkey and Portugal as well, and why not renegotiate with Norway? Why not have Spain if it produces a democratic regime? People have mentioned the possibility of having Israel as a member. It meets the Ministers' insistence that all members should be democracies, and it is certainly Western in nearly all its outlooks.
As each new member joins the EEC, however, the Community's institutions come under increasing strain, because it is not just a free trade area. If we are to admit Greece, with its proud language, is Greek to be one of the languages of the Community? If not, why not? How many more interpreters shall we need, how many more documents and how many more seats in the European Parliament?
I represent a Welsh constituency. There is the argument about the size of the European Parliament to accommodate enough representatives from Scotland and Wales. If we continue to demand the maximum numbers in the Parliament so that Wales and Scotland have their representation, what size will it be by the time we have admitted all the other countries? The matter has not been properly thought out.
But is Greek entry altogether wise in Greece's own interests? The economy of Greece is still structurally very badly out of accord with that of the rest of the Community. Income per head is still under half the average of the rest of the Community. Greece has 35·7 per cent.

815
of her total working population still engaged in agriculture, an enormous percentage, quite out of accord even with the more agricultural members of the present Community. If she entered the EEC, there would be a major claim on the Regional and Social Funds, at the expense of this country as a recipient and putting an intolerable strain on the patience of the West Germans, who are beginning to be just a little fed up with beggar countries such as us.
Mr. Lee: Is not the hon. Gentleman perhaps subconsciously reinforcing one of the criticisms that many of us have made of the EEC, that it is a rich man's club? Greece is a poor nation knocking at the door. Is that right?
Mr. Grist: Not at all. The very size of the trade between Greece and the Community indicates that a strong Community can do better trading with Greece and aiding Greece as an associate outside full membership than inside, where she will be subject to all the rigours and disciplines of full membership, until her economy more nearly equates to that of the rest of the Community.
That was the opinion of the Commission in January, when it said at paragraph 11 of its report:
"Although in 1975 the work of agricultural harmonisation has been taken up again, the fact is that Greece's position is still far from being that of a near Member State. Complex political and social considerations will mean that integration of Greek agriculture with that of the Community, whether within the framework of Association or of membership, will take time: and the faster the process, the greater the cost. … Greece is currently to a great extent free to conduct its trade policy towards third countries. Even with regard to trade with Member States, special mechanisms could be allowed if grave difficulties were to arise.
"In the case of full membership, however, the same degree of flexibility could not be allowed without disrupting the common market. Everything possible should of course be done to avoid such a risk, especially in view of the likelihood of further applications for membership from countries in a similar economic position to that of Greece, for whom the arrangements concluded within the framework of Greek accession would create a precedent."
In its conclusion to this section it said:
"The Community's experience has already shown the need for a transitional period of some years even for countries with a highly developed industrial base and an agricultural
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structure comparable to the other Member States. In the case of Greece, where structural changes of a considerable magnitude are needed, it would seem desirable to envisage a period of time before the obligations of membership, even subject to transitional arrangements, are undertaken."
That seems to me to be an extremely wise conclusion, reached on the basis of just how strong Greece is industrially and agriculturally.
The Council of Ministers would have done well to treat that opinion with a little more respect. It seems to have panicked slightly under the pressure of Mr. Karamanlis and his fellow Greek politicians, who suggested that the Commission was spitting in the face of Greek aspirations. I do not believe that it was. I believe that the opinion was in the best interests of the Greek people.
Mr. Christopher Price: Does the hon. Gentleman think that we in this country are the best people to read economic lessons to other countries? Is not the nub of his argument that we, having squeezed into the club ourselves, wish to blackball anybody else who applies?
Mr. Grist: Not at all. The hon. Gentleman missed my earlier point about what happens if the club goes on and on getting bigger. We should have been a founder member. We were blackballed because we were a little slow in our original thinking on Europe, but we are a heart member of the Community. I am sure most hon. Members will agree that Europe without Britain but with Greece would not be the same as Europe without Greece but with Britain. There is no doubt that we are a heart member of the EEC. We have to be at the core of any European unity. Of that there can be no doubt whatever.
We ought to consider also the effect on the EEC's dealings with the countries of the Maghreb and the Eastern Mediterranean if Greece were to become a member—the trading agreements relating to the agricultural products of Greece and the Maghreb.
Finally, we ought to look at the effect on relations with Turkey. I thought that the Minister was extraordinarily optimistic in thinking that if Greece were to become a full member of the EEC—I wonder whether the negotiations would last for three. four or five years—somehow or other historical hatreds would die out

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along that border and in Cyprus itself. I cannot believe that that would be so. I should have thought the hostilities there were comparable to those in Northern Ireland. Anyone who thinks that that sort of historical hostility dies in less than two or three generations is a great optimist.
If we were to have Greece within the EEC, we would be buying ourselves a very real bundle of trouble. Of course, Mr. Karamanlis has said that he would not oppose Turkey's application for membership. But there is the question of what we mean by a democracy? Even within the EEC, could we be assured that those two countries, just because they were members, would cease to wrangle and be hostile? I believe that it could tear apart the fabric of the EEC itself.
We should be extremely careful—much more careful than Ministers have so far shown themselves to be—before accepting this particular application for membership. It would provide considerable difficulties in its own right. It would impose a great strain on the EEC's institutions. It would damage the development of the EEC, especially in foreign affairs, where, after all, the Minister has already told us that we should seek to speak with a single voice. I cannot conceive of that continuing to happen.
It would set a highly troublesome precedent for the application of other countries. It could lead to a form of gigantism and to internal wrangling which in my opinion could lead to the ultimate collapse of the Community—and that collapse would itself lead to the most fearful political consequences.
6.53 p.m.
Mrs. Gwyneth Dunwoody: I should like to take up some of the points of the hon. Member for Cardiff, North (Mr. Grist) on the problem of Greek accession, but before doing so I want to deal with some of the problems as I see them in the Common Market today.
I say to my right hon. Friend the Member for Fulham (Mr. Stewart) that many of those who were not in favour of entry into the Common Market nevertheless feel that we have a very real rôle to play at the present time, not only in the European Parliament but also in this House of Commons, in submitting to very close scrutiny the directives, the decisions and
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the moves taken by the Common Market institutions. I hope that my right hon. Friend will accept that this does not arise from a simple desire to wreck or to destroy an existing institution.
It arises out of a very simple fear, that if we create an enormous power bloc, and that power bloc arrogates to itself the powers normally vested in democratic institutions—without developing a means of at least reporting back to the people of the Nine countries the decisions being taken and the reasons behind them—we create the very opposite of a democratic and efficient State. We do not in this way create a federation, but something close to an international bureaucracy. That would be a most dangerous thing for us to do at this stage of world politics.
I find the past six months that we are discussing rather frightening because of the way matters have developed. The Common Market seems to me to have lost any sense of where it actually wants to go. We have this afternoon been discussing very briefly some of the major policies and the way in which the finance of the Nine is divided between those policies. I should like to address myself to some of the difficulties that I think arise, not only in terms of internal policy but also in regard to particular political questions, such as the accession of the other Mediterranean States and the Maghreb countries.
First I turn my attention to the agricultural policy of the Common Market. There is a great deal of discussion on the need to reform the CAP. We look at the amount of money being spent and are frequently told by our partners that Britain constantly benefits from the monetary compensation amounts. We are told that we are now, three-quarters of the way through the accession period, still benefiting from the fact that other people are actually subsidising some of our food. I do not believe that it is wholly true. My hon. Friend the Member for Southampton, Test (Mr. Gould) dealt with many aspects of that policy this afternoon.
There is no doubt in my mind that, unless the basic dichotomy of the CAP is dealt with, and quite rightly, we do not need to worry whether Britain stays in the Common Market, because I do not

819
believe there will be a Common Market in existence in 10 years' time.
My reasons are very simple. The CAP developed over a period of time when it suited the agriculture of the existing member States. After 16 years since its inception there is still a large majority of small farming units. They are utterly dependent on 10 or fewer cows and on the production of milk and milk products, for their basic income.
The CAP in that time has done very little in real terms to change that structure. When the hon. Member for Saffron Walden (Sir P. Kirk), who speaks for the Opposition, talks about the need for structural change, I agree with him absolutely, but perhaps he will try to convince the Commissioners who have to apply these policies, and the Agriculture Ministers who sit in the Council, that it is really not good enough to say that the EAGGF has within it some means of assisting structural change, when at the same time the bulk of the moneys of the CAP are still being paid to the farming community to enable it to maintain its traditional methods of production. This is really what is happening.
It does not matter whether it is milk, butter or beef, the traditional patterns of agriculture inside the Common Market, because of the intervention system and the attempt to get common product prices, are continually creating unwanted surpluses. The surpluses then become a political embarrassment to the Commission. The Commission then comes forward—almost invariably at the last moment before the price review—with a number of ad hoc measures meant to deal with the surpluses in such a way that each individual Council member can return to his own State and defend the deal he has made in Brussels.
The result can be seen not only in the total fiasco of the skimmed milk powder but of the sort of decision, debated in the House this week, on the problem of creating two different levels for wheat prices and being able to distinguish which wheat is which only by creating a test which, everyone accepts, is not workable, has not been accepted by the member States, and cannot really be defended. It is an open invitation to fraud.
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Some of my hon. Friends are keen on telling us that the Europe of tomorrow must be built immediately, but it is that sort of inconsistency and nonsense that will tear apart the fabric of the Common Market, not the carrying of a common passport and not a common decision on continental time. The major decisions of policy important for everyone day after day are concerned with food and unemployment. There is no realistic political target for changing either the financing of the Common Market or the way in which it reaches political decisions.
I sometimes despair. Some of my European colleagues are almost federalists. They say that, when there are direct elections, the European Parliament will be able to reach conclusions the present Parliament is unable to reach. Yet we are given no evidence for believing that. They do not tell us which powers are to be arrogated from this House to the European Parliament. After the direct elections will the European Parliament have fiscal powers? Will it be able to pass new laws? If it is to be an effective body after direct elections it must have other powers. I should strongly resent the stealing from this House of more basic powers. The only safeguard for the British people lies within the House of Commons, as it has done for many hundreds of years.
If there is to be structural reform it must be in the areas on which the Common Market spends most of its money. I have already quoted the draft European budget for 1977 which shows conclusively that agriculture is at the head of the list. Very little attempt has been made inside the EAGGF to change the existing structure of the industry.
We find on examining the Tindemans Report that Leo Tindemans has endeavoured to be pragmatic and to produce a document that will meet with the approval of all the member States. Yet he has nevertheless committed himself to certain decisions which should be fully debated in the House before they are agreed by anyone, let alone by the Council of Ministers. For instance, he says of a common foreign policy:
"The co-ordination of policies, which is important during a transitional period, must therefore gradually make way for common policies, which means that our States must be able to draw up a common policy and act together".

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He goes on to say that the Council will have
"the obligation to reach a common decision."
When he talks of a new economic world order he says that decisions must be taken
"to strengthen the instrument of our common action by gradually transferring to the Community a substantial part of national appropriations intended for development co-operation (major development projects, food aid. financial aid), and in co-ordinating the remainder of our activities in this field".
He goes on to talk of a common nuclear policy, a subject that has never been debated. He says that we should create a nuclear regulatory commission exerting control over the siting, construction and operation of power stations. When he speaks of the institutions of the Common Market, he says that recourse to majority voting in the Council should become the normal practice.
Mr. Tindemans is saying that we should move much more actively towards a federal State. [HON. MEMBERS: "Hear, hear."] If that is the view of some of my hon. Friends they should spell out the full implications to the people of this country. They carefully omitted to do so.
Mr. Roderick MacFarquhar: I did.
Mrs. Dunwoody: I do not believe that there was ever any attempt to explain that what the federalists envisaged was the creation of a European State with fiscal and legislative powers, control being taken away from the elected Parliament of this country.
Mr. MacFarquhar: My right hon. Friend the Minister of State will back me up when I say that, whatever other hon. Members said in the referendum campaign, I maintained throughout that that was my view of the future Europe, and I spelt out the implications for my voters.
Mrs. Dunwoody: My hon. Friend did it so silently that we did not hear it.
Mr. MacFarquhar: My hon. Friend should have come to Belper.
Mrs. Dunwoody: My hon. Friend may hold that view but it is not one that I hold. The Common Market is undergoing such stresses and strains that
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we need to be clear in our minds whether we are prepared to go along with that view.
The hon. Member for Cardiff, North had considerable doubts about the accession of Greece to the Common Market. Were I a pro-Marketeer, which I am not, I, too, would have considerable worries—[Interruption.] My hon. Friend the Member for Lewisham, West (Mr. Price) displays the lack of appreciation of democratic institutions which is common among those of his ilk. He believes that those who sit in the European Parliament should be wholly committed to an idea which is very limited in its application. The full implications of the accession of Greece have not been spelt out. The initial decision to allow Greece to apply for membership was taken with astonishing ease. I am worried that that decision was taken on the assumption that the period of negotiation will be so long that there will be time for the Greek economy and political institutions to change fundamentally.
In its "Opinion on Greek application for membership" the Commission has this to say of agriculture:
"While the area under cultivation in a Community enlarged to include Greece will increase by close to 10 per cent. and the farming population by a little over 12 per cent., the number of farm units will increase by 19 per cent. The output per person engaged in agriculture in Greece is about 40 per cent. only of the Community average. Agriculture contributes 16 per cent. to the gross domestic product at market prices in Greece, and employs 36 per cent. of the population."
Greece will be faced with considerable difficulties during the transitional period. The strains and stresses on the average Greek will be so great that they could contribute to the destruction of Greece's exceedingly shaky democracy. I should like to have some reassurance that Common Market Ministers have considered the trauma to which the Greek economy will be subjected in the transitional period.
Mr. Sydney Bidwell: I asked my right hon. Friend the Minister of State a Question on this matter some time ago. I have received no reply. One problem which does not seem to have been taken into account is the question of migrant labour from Greece, or even from Turkey.
Mrs. Dunwoody: I think my hon. Friend must accept that there will be these inconsistencies, because the Greeks will be able to work wherever they wish in the Community. There is no conceivable way to stop them, nor should we seek to stop them if they were full members.
The difficulties which will arise in the transitional period will be very great. If this is so for the Greeks, it is even more so for Spain. I do not believe that there is yet any real evidence that the Spanish authorities have taken on board the fact that a democracy is not a place in which people can be imprisoned for following normal trade union practice, or incarcerated for objecting to the political system in their own country.
I believe, unlike some of my hon. Friends, that as we are in the Common Market we must seek to alleviate the difficulties which arise for this country in membership. I believe that our entry into the EEC was wrong, and I would have liked the people to have come to a different decision, but what I am most worried about now is the total lack of long-term planning and the fact that lip service is paid to the need for a change in policy but is not backed up by the decision-making process.
The dangers for Britain are very considerable indeed, but the dangers for a democratic Europe from this rickety, ramshackle and singularly inappropriate organisation which we call the EEC are far greater, and are growing greater every day.
7.11 p.m.
Mr. John Davies: In listening to the speeches throughout this debate as I have done, my view about the White Paper would approximate more closely to what has been said by the right hon. Member for Fulham (Mr. Stewart) than to the lugubrious Jeremiah speech to which we were treated by the hon. Member for Southampton, Test (Mr. Gould) or the somewhat complacent view given by the Minister of State at the outset.
We can only recognise that the achievements of the Community in the six-month period described do not give great satisfaction and cause us real concern. I think that this debate will serve as a means of expressing our views as to how
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satisfied we are or are not with what has been done in the past and the way we see the future developing.
I think that the Community needs to change its sense of direction in many ways. It seems to me as I look back and as I am drawn more than most into the specific detail of Community activity; that this activity arises too largely as a result of the chance evolution of projects. Things simply happen—they emerge at the appropriate moment, then they are fielded for the Community to deal with. I do not think that is the right way to go on. When one looks at the diverse propositions which pass one's horizon, it seems to me that there is no serious pattern of any major kind. This is very worrying, and it is represented today in the White Paper before us.
I cannot subscribe to the thought that being a life-long believer in future development of a much more integrated pattern on this Continent should debar me from objecting to or criticising matters in the EEC which I feel have not been dealt with properly. I believe that a framework of strategy for the Community should be concentrated upon in the same terms as you, Mr. Speaker, would concentrate upon a request for Standing Order No. 9 debate. You would have to decide whether the matters raised had been shown to be specific, important and urgent.
That should also apply to EEC matters. There should be a real realisation that these things should rivet the attention of the Community and condition its development. It is essential that the Community should devise a framework of action for assessing these things and deciding whether they are things which no individual member State alone could achieve. In these circumstances, the Community itself would be the essential vehicle to bring about changes which could not by any other means be embraced. That would be a more valid move, and a way of devising its strategy which I would welcome.
That would include such things as institutional change, although I do not believe that institutional change in itself is any more desirable than harmonisation for harmonisation's sake. It must lead to a purposeful objective. This would be embraced by the criteria I have mentioned—whether the matter is of an

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urgent, important and specific character, coupled with whether it is something that the Community would have the sole capability of dealing with.
The real underlying requirement here is that the organisations of the Community should work far more in concert to devise the framework with which I am concerned. The hon. Member for Southampton, Test mentioned an external event which came across our horizon yesterday in the Scrutiny Committee when we heard evidence from the Minister of Agriculture. This was concerned with devising a new market organisation for potatoes in the Community. There was no consultation with the Government Department in this country, and as far as the Minister knew there had been no consultation with any organisations in this country which have a real interest in the matter. We are incapable of saying whether such consultation took place in every available department or organisation in other member countries. This highlights my anxiety.
It is essential to try to bring about a realisation that the important thing in Community terms is that there should be a degree of understanding of the relevant problems from a technical standpoint by those who evolve them and those who have the political task of ensuring that they are acceptable to their own people and that the people will abide by them. That is an essential part of the organisational structure of the EEC, and I doubt very much whether it is working this way at the moment.
We have had in the Scrutiny Committee innumerable cases before us where the consultation activity in the Community was very suspect, to say the least. This issue is very worrying when one is concerned with getting a proper framework and strategy for the future.
Mr. Frank Hooley: Would not the right hon. Member agree that this is a basic disease which has infected the whole Commission? It is justifying its existence all along the line by meddling in every direction. This makes no sense at all.
Mr. Davies: It is very dangerous to generalise too greatly. I would rather concentrate on the experience we have had with inadequate consultations which
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result in patently incompetent proposals. To say that this is true across the whole range of the Commission's activities is erroneous. But the cases I have instanced demonstrate the lack of purposeful structure to achieve things which the Community alone can achieve.
I shall not talk any further about such matters as direct elections or the relationship with Greece, important as they are. I tend to agree with the comments made by one or two hon. Members that the Commission's views were too abruptly swept aside by the Council of Ministers; but that can happen.
It is vital that the Community should address itself in the most profound manner—I recall that the former Prime Minister, the right hon. Member for Huyton (Sir H. Wilson), was strongly of this opinion some time ago—to the extremely difficult problem of the future access to world-wide raw materials resources for a Community which disposes of none, or very few, of its own.
It is essential that this matter should be regarded as of fundamental importance to the development of the Community. It has an important correlation, too, in the relationships of the Community with the rest of the trading world, particularly the developing world. Therefore, it is an area which no individual nation State can itself deal with adequately and where a central unitary organisation is needed to overcome the problems, not least in relation to energy and in many other materials essential to our welfare and the maintenance of our industrial competence, and ensure that they are adequately catered for in the future.
Here is a specific, important and urgent area where action needs to be taken but where it cannot be taken by individual countries. It must be a joint operation. I therefore believe very strongly that it should be regarded as a primary task of the Community.
I turn to industrial policy. More and more we are confronted inside this House and outside by the fact that we have industries throughout the Community which are in serious danger of complete extinction. The shipbuilding industry and even the steel industry are at very serious risk of going under. There are many others. There has been reference

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to the fishing industry. These are industries in which individual action by individual countries will not preserve the earning and employment capacity of these industries. Here some common action is possible. There should be a definite intention of the Community to deal with these issues. This, therefore, is an area of precise and specific importance which can be dealt with by the Community.
Mr. Marten: I take the point my right hon. Friend is making. He mentioned shipbuilding. Surely that is a world-wide problem. Would it not be better to deal with that problem through something like OECD? There is shipbuilding capacity all over the world which must be reduced.
Mr. Davies: That is true, but there are rival problems which exist in the trading relationships covering such matters. There are countries trading with the Community which have serious shipbuilding problems. I think of Spain, for example. I have had something more than an entirely happy exposure at times to the problems of this industry and I therefore feel about it deeply. Europe must try to concert a common understanding of what this industry with its great growth potential needs and how to procure it in the face of the most ruthless and absolute competition of a totally non-respecting kind from the extremities of the world.
The problem must be dealt with by organisations like the Community and not by an organisation, however intellectually competent, like OECD with its incapacity ultimately to administer any kind of sanction. That again is an area of quite fundamental importance to the Community about which the Community should be concerned.
In trade I am concerned very much with the continuous development of relationships between European States and the developing world. A lot has been done. Europe has shown the ability to concede through generalised preference arrangements and the Lomée Convention the most imaginative proposals. Much more has yet to be done, however. There is the whole problem of the stabilisation of export receipts in developing countries. That is still a fundamentally difficult task. We have not reached the end of the road yet.
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I refer particularly to the matter of sugar. There is a recent agreement, which, because it seems to be so unpopular to all the parties involved in it, must be just about right. There is not the slightest question about the potential threat to our industrial and trading position of the enormous industrial power of Japan, which I do not believe subscribes to conventional world-wide trading norms. It is impossible to imagine that individual countries can cope with the immense power involved in that area.
I look at the internal markets of the Community and I am sure that, although there are still curious distortions of competition, there is not a great unease about competition within the Community itself. I do not believe that is an area where immense effort needs to be exerted in order to procure some kind of sanity which does not already exist. I think, however, that more needs to be done on cartels and monopolies. Again, that is an area where a major Community activity must be performed which should have the general agreement of the member States. I believe that that also goes for the multinational problem. I am not one of those who subscribes to the generally emotive reaction to the multinationals. My perception in the developing countries has been that the one thing that is more welcome than the arrival of a member State is the arrival of a multinational.
I come now to the difficulty of economic policy. Here I echo comments which have been made earlier, but I take the matter from a slightly different angle. The various facilities of the Community, through the CAP, the Regional and Social Funds, and the funding operations of the European Investment Bank and Euratom could all be directed to the single purpose of improving the structure of the Community. There should be a master plan, but there is not. These various elements of Community activity operate independently of one another and in total ignorance from time to time of what is going on alongside them. This can happen in a single area. For instance, in atomic power, borrowing and lending undertaken by one of the Community institutions was totally unknown to institutions responsible for another part of that subject. That is the wrong approach

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to the problem. There must be a proper correlation of such matters.
Therefore, in improving the economic structure of the Community the nine member States, with the Commission and the other institutions, must outline an objective and say how it is to be attained long before instruments of a more or less imprecise fashion and incomprehensible nature are implemented.
On monetary policy, I can only say that I am sure it is true that the chances of improving monetary relationships are still very distant from us. They are equally distant from us in the world outside. We all realise that the existing state of monetary policy world-wide is in the most deplorable condition and can give rise to the kind of external explosion that occurred recently with sterling. But the Community must clearly be prepared to seize opportunities, because that is what is required, and one of the opportunities which it has seized is acting as a banker on borrowing and lending. The Irish and Italian Republics have been the subject of substantial effort.
There has been reference to agriculture. I do not subscribe to all the extreme critcism of the CAP. I think it has a very sensible purpose to perform and I support it strongly. Of course, it is beset with dilemmas. With the member States the Commission certainly has a problem to try to eliminate some of the extraordinary and ridiculous elements which so befoul the performance of the policy itself.
I do not disagree with the hon. Member for Crewe (Mrs. Dunwoody) regarding the over-contribution of funds to intervention and the under-contribution to structure. There is a purpose to be achieved, but it needs to be achieved not by the totally unaligned and independent activity and thinking of the Commission but by discussion with member States.
I believe that there is a vast area of work to be tackled and that the approach to it has not been as it should be. Evidence is to be found in the White Paper that the Community can contribute immensely to our welfare as a country and as a continent, but unless it changes its method of approach to the evolution of policies it will continue to arrive at what
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is at best a disappointing White Paper and six-month review.
7.31 p.m.
Mr. Roderick MacFarquhar: I hope that the right hon. Member for Knutsford (Mr. Davies) will forgive me if in this wide-ranging debate I do not take up all his points, many of which I agree with entirely. My objective is to try to discuss briefly one problem—namely, Greek entry—and to relate it to the political development of the EEC.
I am in favour of the fullest possible unity within Europe on the basis of democratic institutions. I hope that Spain, Portugal, and perhaps one day Czechoslovakia, Poland and others, will want to join and will be able to join the European Economic Community, or whatever it may be at that stage.
I agree with my right hon. Friend the Minister of State that, bearing in mind the great contribution it has made over the centuries to the development of democratic ideas, Greece has a special call upon our consideration when it applies for membership of the Community. I realise that it ill-behoves a member of a late-entry country to seem to cast doubts on the forthcoming membership of an even later-entry country, but perhaps I might be forgiven on that score as I have supported British entry into the Community for far longer than the years we have been a member.
I have no objetion to the entry of Greece into the Community on the ground of cost. I am sure that my hon. Friend the Member for Southampton, Test (Mr. Gould) is wrong in his allegations that those of us on this side who cast some doubts upon the immediate need for Greek entry are attempting to preserve a rich man's club. As my right hon. Friend the Minister of State said, the arguments for Greek entry are not really economic. I am prepared to pay the economic cost. I believe that the arguments are political. It is on that level that I wish to discuss the problem of Greek entry.
It seems that there is a fundamental illogicality in suggesting that an organisation that is primarily a group of nine independent nations united for certain economic purposes, as my right hon. Friend was at pains to emphasise, would be able to act as a bulwark for the

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internal political institutions of a tenth member. We know that in the spirit of good community relations the German Government have on occasions provided financial backup to the Italian Government, and even to the British Government, but what is any Community Government, or all Community Governments acting in concert, going to do if the Greek colonels, captains, generals or whoever manage to carry out another coup? I am not suggesting that another coup is likely, and I am sure that all hon. Members devoutly hope that such a thing will never take place, but I make the point that while an economic community can take economic rescue actions to support one of its members, it is not fitted to take political rescue actions.
I ask hon. Members to consider what steps they think any other member of the EEC could have taken in 1958 or 1968 if political developments in France had gone in a direction other than that in which they did go. Nor are the dangers of Greek entry purely internal political ones within Greece. When the Greeks put forward their application a Greek official spokesman was quoted in The Economist as saying:
"Turkey would think twice before attacking a member of the EEC."
If Turkey does think that way, it might be because it considers that it would be putting a definite black mark on its own proposed entry. There are no other reasons for the Greeks being confident that membership of the EEC will protect them militarily against the Turks.
Does any hon. Member think that if there were to be an outbreak of hostilities between Greece and Turkey the EEC, as the EEC, would be able to do anything about it? If there were hostilities and Turkey were to get the upper hand and Greece were to lie helpless in the face of a Turkish invasion—we must all hope and pray that such developments will not take place, but we must consider possibilities—I think everyone would agree that it would be a tremendous blow to the solidarity of the Community.
Some argue that if the Turks were also to come into the EEC there would be no problem. That is an argument that does not have much force. Both countries were members of NATO, but
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that did not prevent the recent crisis arising. I believe that Turkish entry poses more serious problems to the EEC and perhaps may not take place even in the distant future.
I regard the EEC as a model for similar moves towards regional unity in other parts of the world, and it is to be hoped that in the long run some beneficial results will stem for world unity, but the Community will not be able to provide such a model if its eyes are bigger than its stomach and it attempts to go beyond the word "Europe", a title that firmly and succinctly reflects the common cultural heritage which provides the basis for the gradual growth and expansion of the EEC. That is a common heritage which is not shared by Turkey. If it is felt that Greek entry obliges us later to admit Turkey, I regard that as a further argument against Greek entry at this stage.
I regret that my hon. Friend the Under-Secretary of State is not on the Front Bench as I wish to take this opportunity of congratulating him on what I think will be his first appearance at the Dispatch Box in a debate. I hope that he will say whether the Government believe that Greek entry places any moral obligation—not a contractual one—upon the other EEC countries to admit Turkey at a later date.
How should we face the problem of Greek entry? As the motives for accepting it and for Greece wanting to come in seem to be primarily political, the problem can be considered only in political terms. The first requirement is time. There must be time for the wounds that Greek democracy has suffered in recent years to heal so that we can be reasonably confident that Greece can solve its own political internal problems.
Secondly, I believe that the Turko-Greek problem should be solved so that the EEC is not likely to be faced in future with a situation in which it will inevitably have to sit back and watch helplessly while one of its members becomes sucked into mortal conflict.
Thirdly, I believe that Greek democracy can be supported by politicians in the EEC if and when they are able to work as European politicians in an elected European Parliament, strengthening European institutions both at the

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European level and the national level by their joint endeavours.
Mr. Christopher Price: Does my hon. Friend realise that, by laying down the condition that there must be a solution to the differences between Turkey and Greece before Greece is allowed entry, he is giving Turkey, in the negotiations between that country and Greece, it already having overwhelming and masive military superiority and other superiorities, such power that he is almost ensuring there will never in those circumstances be a signed solution to such differences as Cyprus and those that exist between the two countries?
Mr. MacFarquhar: My hon. Friend has made a valid point. I suggest that the Turks have certain interests in Europe. If the Turks have interests in Europe—interests on which other people in the Community may have different views from the ones that I have expressed—they will not want to try to blackball Greece by the various methods mentioned, but will be more anxious to obtain a solution to the problem.
I should like to end by urging my right hon. and hon. Friends who have responsibility for these matters to help in every possible way, to use their best endeavours to press on with the programme for direct elections by the spring or early summer of 1978. The Minister of State emphasised the pragmatic progress that we have achieved and the pragmatic way in which we may hope to make further progress.
My right hon. Friend did not say very much in the five matters that he listed about direct elections. I accept, and I am sure that all those whom my right hon. Friend might regard as dewy-eyed accept, the need to work on sensible programmes in a constructive way, but my right hon. Friend and other Ministers with responsibility must accept and, I hope, to some extent share the belief that over and above these concrete steps we all hope that he and others will be able to take there must be the goal of a growing European unity. A directly elected European Parliament will be a milestone on the route towards that unity. Not to achieve it by the date that has long been announced and worked for will be not just a passing setback, as my right hon. Friend seemed to suggest, but a major
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defeat. It will give encouragement to those who, even today, have not accepted the result of the referendum and the reality of British membership, to try, yet again, to get Britain to withdraw from the Community.
7.42 p.m.
Mr. Roger Moate: The hon. Member for Belper (Mr. MacFarquhar) referred to two subjects to which I wish to turn later. At this stage I merely say that I disagree with him on both counts. I found it hard to understand—he was not very convincing—his proclaimed belief in a wider Europe and his reasons for not admitting Greece to membership of the European Community. I shall return to those matters later.
I should like to begin by adding to the complaints that have been made about the nature of the debate. I mention this matter now not to repeat the points that have been made, but to urge that at a future date it should never be argued that any of these 22 documents could be regarded as having been properly discussed in a debate of this nature. Many hon. Members have referred to the Greek application. It could be argued that that subject has been fairly widely considered, but when we recognise that many of these 22 documents have not been mentioned—I make no complaint; it would not be possible to refer to all of them—to suggest that the House has taken note of any of them would be wrong.
The debate covers documents dealing with the bread-making quality of wheat, European union, the Greek application, New Zealand butter, and so on. We have such a vast variety of documents that I am surprised that the Leader of the House should have thought it possible to put them all together in a one-day debate. I call this a dustbin day. The right hon Gentleman has put in as many things as he conveniently could. It may be that many of these documents will be consigned to the dustbin of history and that that is the appropriate place for them.
I welcome the Government's acceptance of the amendment moved so eloquently by the hon. Member for Southampton, Test (Mr. Gould).
I also welcome the speech made by the Minister of State. I hope that it will not

835
embarrass him if I say that I agreed with almost everything that he said. If he feels that he must rewrite his speech, I can understand that; but it was a sensible and pragmatic speech.
I welcome what the right hon. Gentleman said about the Government being prepared to reject the Commission's opinion on European union. I was hopefully awaiting a similar statement by my hon. Friend the Member for Saffron Walden (Sir P. Kirk) on behalf of the Conservative Party, but that was not forthcoming. That, too, is a point to which I should like to revert later.
The Minister said that a belief in a pragmatic, practical and prosaic approach was entirely acceptable. The only trouble with a pragmatist is that, welcome though that approach is to these matters, one is not sure what he will be saying tomorrow. The right hon. Gentleman is one of those whom we used to regard as dewy-eyed idealogues. Therefore, we are suspicious that tomorrow or the day after he may be back with that same class of people.
The Minister said that we wanted a clear and precise indication of where we are going. He gave a clear rejection of federalism on behalf of the Labour Government. I think that is right. We need a clear indication of where we are going and where we are not going. One of our national problems is that we have had so much woolly talk about the future of this country in Europe that there is now no sense of national destiny. The whole situation is so blurred that it is necessary, particularly now with our national fortunes in such a state, that a clear idea be given by the Government of what they see as being our national destiny. I ask this even more from the next Government—namely, my right hon. and hon. Friends on these Benches. We have not yet had from the Government a clear and precise indication of where we are going. When our national fortunes are so low—we all understand that we can only revive our national fortunes by a restoration of national self-confidence—it is vital to give a clear indication of what our future is likely to be.
Some hon. Members passionately believe that our future lies in a federal Europe. I understand their arguments, but I disagree with them. I admire those
836
who are frank enough to admit it clearly, and many have done so over a long time.
I admire the frankness and consistency of my hon. Friend the Member for Saffron Walden, who is a self-confessed federalist. I am sorry that he is not present to hear these remarks. But I question that he is speaking for the Conservative Party as the official spokesman on this matter. Is he saying that the Conservative Party holds a federalist position? It clearly does not. There must come a time when, frankly and clearly, we say what we see as our national destiny. We cannot speak with so many confusing voices. My hon. Friend is welcome to his personal view. However, there comes a time when personal views must be put aside and we must speak for the party.
I hope that my hon. Friend the Member for Mid-Oxon (Mr. Hurd), when winding up for the Opposition, will make it clear that we support the amendment that the Government have accepted. That amendment lays stress on the importance of adhering to the pledges made to New Zealand and the rejection of the Commission's opinion on European union. There is no point in going over this matter in detail as the amendment has been accepted.
However, I should like to point out why the Commission's opinion is felt to be so alien to the beliefs of the people of this country. For example, on page 17 it states:
"The ultimate objective should be for monetary resources to be an exclusive field of competence of the Union".
Nothing could be clearer than that. If there is total and exclusive monetary control over the affairs of all the members of the union, it will, in effect, be either a federal or a unitary State.
The document says earlier, on page 14:
"The Union should therefore continue to aim for the main Community objective: economic and monetary union. This entails giving it competence, powers, and means of action in five main fields: monetary policy; budgetary expenditure; budgetary revenue; improving economic structures so as to help reduce imbalances; social affairs."
I do not think that economic and monetary union has been spelled out in quite that form to the House. We are told that that is already a commitment into which we have entered.

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Clearly this document is one which would lead us to an integrated European federal State—call it what one will—and it is right that this should be rejected by the House. I hope that my hon. Friend the Member for Mid-Oxon will make it clear that he and the Conservative Party, too, reject the rather woolly federalist ideas that have so often caused us confusion and sometimes quite unnecessary ill feeling and uncertainty in the whole debate on the European argument.
I turn next to the question of direct elections. This was also touched on by the hon. Member for Belper. If we are being pragmatic, practical and prosaic I cannot believe that in practical terms the abandonment of direct elections would make one scrap of difference to the fortunes of Europe or of the United Kingdom. No one has really suggested how we shall be any better off through having a directly elected European Assembly.
We are told quite precisely by the Government spokesman that the powers of a directly elected European Parliament would be precisely the same as those of the present Assembly. That is the statement. On the other hand, we have heard many statements by the protagonists of direct elections to the effect that following upon direct elections there would be a fairly rapid accretion of legislative power to such a directly elected Assembly. That must be the objective. The hon. Member for Belper nods, but it is not helpful for him to admit that, because we know that he wants that. I wish him well, and wish him ministerial office in the short period left to the present Government. However, it is the Minister on the Front Bench I want to hear admitting that consequent upon a directly elected Assembly would be the passing of legislative power to such a body.
The Tindemans Report makes it quite clear. I am not sure whether the Government are rejecting that report at the same time as they are rejecting the Community Opinion. The Tindemans Report says:
"A consequence of the Parliament's new authority will be an increase in its powers, which will take place gradually in the course of the progressive development of the European Union, notably through a growing exercise of the legislative function".
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How is it to gain that legislative function, which so many supporters of direct elections regard as inevitable? It can come only through amendments to the Treaty of Rome—which are not so difficult to obtain; there have already been at least two, although they are not fully ratified yet—which will involve further supra-national powers. However, if we are saying that we do not wish to proceed to greater supra-nationalism and that we do not want federation, why are we proceeding to direct elections, unless it is to give more supra-national power?
We could happily do without a directly elected Assembly in the context of the Community as it is today and in the context of its operating within the present Treaty of Rome. It is only if one goes further than that into the supranational federalist field that there is a case, and a strong case, for a directly elected Assembly. I can well understand that for the passionate pro-Marketeers it represents a virility symbol designed to compensate for the self-evident impotence of the Community in its relevance to the major problems facing Britain and Europe today.
However, there will be further opportunities to discuss direct elections. It is my hope that we shall never see the advent of such direct elections. It should not be taken for granted that the British Parliament will pass the necessary legislation to allow them to proceed.
This is a wide ranging debate covering a number of points. There are two others that I wish to discuss. The first concerns Greece. It is absolutely consistent for those of us who opposed membership of the Common Market to believe quite sincerely that a wider Europe would be beneficial to the whole of Europe. It would not be damaging to Europe. However, the concept of a wider Europe is much more in the interests of Britain. It saddens me that hon. Members have been speaking so strongly against the admission of Greece. Obviously one does not rush into allowing all and sundry to join. These matters must be considered carefully. I thought, however, that the Commission's response to the Greek application was mean-minded, un-European and rather curmudgeonly. Some of the arguments that have been put forward today are very

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odd, coming from a country such as ours with its economic problems, a country which has been securing great benefits, apparently, from regional funds, and so on and now turning round and saying "We are in, but we shall not allow anyone else in".
I was pleased that the Council of Ministers took a very positive step and said that it would commence negotiations for Greek entry as soon as possible. What worries me is the Commission, because while the Council of Ministers is saying positively "We want the Greeks in", the power of the Commission to drag its feet on this matter is very considerable. I suspect that it is within the power of the Commission to ensure that these negotiations drag on over a very long period.
One should look at the document to realise why the Commission is likely to have that attitude. I should like to quote one or two remarks from the consultative document on the Commission's opinion on the Greek application. This will make my point. It says,
"The Community is preparing to take some important new steps on the road towards European Union comprising a whole range of political (e.g. direct elections to the European Parliament) and economic (e.g. Economic and Monetary Union) questions."
Again, it assumes that we are already going to take that step. I do not think that it is a view that we all share. It continues:
"On some of these matters, decisions of principle have already been taken. This ongoing integration process must not be delayed by further enlargement."
That is the crux of it. The Commission does not want to let any new members in because that might slow down the process of integration and the creation of a more tightly-knit European Community. I suspect that if that is what it believes, there will be endless foot-dragging in these negotiations and that it will be very hard to ensure that Greece becomes a member in due course.
Mr. MachFarquhar:As the hon. Gentleman has mentioned my contribution, may I ask him whether he accepts that he has not answered the points I made, which were political points? He has attempted to suggest that the arguments against Greek entry are economic. I said that
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this is not so—certainly not with me—and that I would be prepared to pay the cost of Greek entry. There is no problem there. However, the hon. Gentleman has to answer the political problem.
Mr. Moate: The hon. Gentleman is right in respect of his own arguments, but others were saying—my hon. Friend the Member for Cardiff, North (Mr. Grist) was one—that the rest of the Community was rather tired of beggars and that it saw us in that light, and that there would be less money in the kitty for us if Greece were to join. I cannot think of a less attractive argument than that, but it was so proposed.
The arguments about poverty and about agricultural standards in Greece are not very convincing. If the Community is arguing that it needs only rich members and cannot help the poorer parts of Europe, I should have thought that, too, unconvincing, and totally out of line with the type of arguments advanced by passionate marketeers for rectifying regional imbalances. Therefore, I do not think that the economic arguments stand up.
The hon. Member for Belper argued that this would, perhaps, be importing political dynamite into the Community. I believe that the Cyprus factor is important. I suspect that many hon. Members who have argued on this point have done so only because they have a particular partiality to the Turkish or Greek case on Cyprus. I hope that what is a transient dispute will not be allowed to stand much longer in the way of the creation of a wider Europe. That wider Europe should ultimately contain Spain, Portugal and Greece.
One wonders about Turkey, because in my mind it has never been "Europe". However, I believe the wider the better, and the more the European Community will conform to the type of Europe most suitable to this country.
I should like to comment on New Zealand because it is dealt with in the amendment, which has been accepted. One needs to say little at this stage because we know that new proposals have been made. We have the Government assurance that they will fight and fight again to honour the pledge given to New Zealand in the Dublin Agreement. It is alarming that, even at this

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stage, with a fairly tightly drawn agreement, already the Community is expressing doubts about the position of New Zealand. Already we have the French Minister saying that he is fed up with non-EEC members making their case in this way.
What will happen in 1980? We are arguing now about the ability of the British people to buy some of the best and cheapest butter in the world for the next two or three years. I can understand the Community's point of view, that, if one is truly a full member of the Community one should accept the principle of Community preference. Following that argument we should buy French and Danish butter instead of New Zealand butter. But what are the chances of securing the position of New Zealand after 1980? The answer is pretty bleak.
I find that a depressing situation. The British people were told that membership of the Community would not involve breaking these vital links with the English-speaking world. We are now seeing the truth. Of course it involves severing those links, and the giving of preference to the Community over traditional suppliers. Although there may be interim arrangements to satisfy us for two or three more years, at the end of that period there is little prospect, if the Community survives in its present form, of maintaining those links which are of such importance to the British people.
It has been said in this debate that the last six months have been dull, depressing and disappointing for the Community. Certainly for Britain they have been a very bad period. Economically, we have been through a tremendous crisis, sterling has fallen at an unprecedented rate, and we are facing an enormous balance of payments deficit as well as mounting unemployment. Against this picture we have only to think back to the argument used in the referendum when we were told that we could not afford to pull out because there would be catastrophic consequences. I am not arguing now about membership of the Community. That is something to be left to the course of history. But I believe the British people feel that if membership of the Common Market has any signifinance, it has possibly damaged our position and, indeed, made our position
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worse. At the very least, it has been a monumental irrelevance to Great Britain at this time of great economic difficulty.
That is the way it is, and the way, I suspect, it always will be. We have to recognise that if our future is in Europe, it is part of a Europe of nation States. Our national fortunes will depend on national efforts. Success can only be achieved if we stress that our future lies in a Europe des patries and not a federal Europe. Once and for all we must rid our political system of the notion of federalism.
8.5 p.m.
Mr. Neville Sandelson: I hope that the hon. Member for Faversham (Mr. Moate) to whose views we all listen with respect in a debate on Europe, will forgive me if I do not take up his arguments. I could be tempted to speak on some of the wider issues and problems that face Europe. We have heard about some of the anxieties felt by pro-Europeans and those who have not been in favour in the past of this country going into Europe. We had a memorable contribution by the right hon. Member for Knutsford (Mr. Davies) who articulated some of the anxieties which many of us pro-Europeans on this side of the House feel. It would be wrong for any hon. Member to assume the worst about us on these matters. It must not be assumed that we are totally blind to the other side of the case and that we are incapable of understanding the problems as they present themselves to this country.
However, although I am tempted to join in the debate on those questions, I shall, nevertheless, confine myself this evening to making a few comments about the Greek application for membership. Because I warmly welcome that application, I appreciate the way in which my right hon. Friend the Minister of State expressed the Government's wholehearted and unreserved support for Greek accession to the EEC. We all realise that the application presents difficulties for the Community. Indeed, every new application and every new accession to the Community presents new and special difficulties, as did our own accession. Certainly there will be special problems to be resolved economically and politically.

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However, in my view too much weight is given in these matters to economic considerations. Assuming that there is no fundamental bar to membership, those considerations should not be allowed to play too great a part in determining the outcome of applications from nations which have a good deal to offer in other ways and which have a need to be sustained for the benefit and well-being of Western Europe as a whole. For the purpose of this debate I have only Greece in mind in that context, although consideration may have to be given to other applicants in due course. Those applications will have to be examined on their own merits and according to well-established criteria.
I do not share the views expressed by my hon. Friend the Member for Belper (Mr. MacFarquhar), who seemed to exclude completely the possibility of Turkey coming into the European fold. I take a contrary view. I hope that in due course Turkey will apply to join the Community. One of the greatest achievements in the Community has been to reconcile ancient enmities. We have seen this happening closer to our shores with the bringing of once warring nations into peaceful and fruitful compact. Is it inconceivable that Greece and Turkey, too, will possibly before long, as members of the Community, resolve their traditional differences by looking outward within the wider European context and will escape the narrow confines of their local animosities? That, after all, is a major purpose of the Community and one very good reason for enlarging its boundaries.
I do not accept that the accession of Greece, with its special problems in the field of external relationships, will have a weakening effect on the political cohesion of the Community. On the contrary, it could be said that the present EEC, within the existing geography of the Community, is playing too narrow a rôle and failing to serve the fundamental purpose of creating political unity in Europe as well as promoting the economic strength of all its members. Surely the creation of political unity on the wider plane can be achieved only by extending the Community's frontiers to embrace nations such as Greece which qualify for membership.
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Something has been said about Cyprus and the special difficulties that might be posed for the Community in the event of Greece becoming a full member. That cannot be an accurate approach to the question of membership because it would seem to have only one consequence, and that is to exclude Greece permanently from membership of the Community however proper the conditions might be for her joining. That may indeed place too much strength in the hands of one antagonist in the dispute as against the other.
I would put the argument on a somewhat different plane—that the world abounds in political disputes. Nearly all the member nations of the EEC have their external political problems, and it is surely fallacious to suppose that all those existing problems present any special difficulties for the Community. I do not think that Cyprus, and its present unwanted political problem, is something which the EEC will necessarily have to take on board when Greek accession to the Community comes about.
Mr. MacFarquhar: Does my hon. Friend have an optimistic view that the Cyprus problem will be solved and that, therefore, we do not need to worry about it, or does he believe that, if the Cyprus question rears its head again and there is the possibility of Greek-Turkish hostility, the EEC will simply be able to ignore it even if Greece were a member of the Community?
Mr. Sandelson: I take the view that it is, unfortunately, an ongoing problem. It would be highly optimistic to suppose that it is capable of an immediate political solution. I have already indicated that membership of the EEC on the part of Greece, and even on the part of both the antagonists in the Cyprus affair, might ease the path towards a peaceful solution in Cyprus. I do not believe in the likelihood of an outbreak of further military hostilities between those two countries. I think that Greek membership of the Community would in itself be a deterrent to an outbreak of a military character.
Some people would argue that the relative economic weakness of Greece must act as a detriment and a disadvantage to other beneficiaries within the Community, approaching this as if it were a dilution of the Community funds. I was glad to

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hear what the hon. Member for Faversham said about that a few moments ago. I was also glad, in that context, to hear the Minister stress the distributive factor from the richer to the less well-off members of the Community. Increased economic benefits all round is what is needed. Of course, it has been said ad nauseam in debates over the years—this was mentioned by some of those most hostile to Britain's entry into the Community—that we were joining a rich man's club. We do not hear so much about that these days, certainly not since the referendum and the decision taken by the overwhelming majority of the nation a year or so ago. It is not a rich man's club. It would fail in its purpose if it sought that kind of exclusivity. If that had been so, Britain herself would not have qualified for membership.
Greece's application should be viewed in a similar light. It is true that Greece needs the economic promotion that membership brings. It would be the height of selfishness and international folly for beneficiaries like Britain to deny the same opportunities and benefits to others because of their relative weakness.
The Commission's report makes it abundantly plain that, while much will have to be done in terms of economic restructuring in Greece before the obligations of full membership can be undertaken, nevertheless there are no insuperable problems or impediments. I listened with some surprise to hon. Members who seemed to give the impression that in respect of Greek accession the opinion of the Commission should convey a contrary view. The impression that it conveyed to me was that the opinion of the Commission, on both political and economic grounds, was favourable to Greek accession to the Community while being sensitive to the very obvious and real problems that the application poses.
In any event, the Commission's report clearly took into account the enormous economic progress in Greece since 1962 and the association agreement. A cursory study alone of the statistics governing the relevant economic factors in the country shows tremendous change in that period, bearing in mind the limitations of population, the relative weakness, which we all appreciate, of the industrial base in Greece, and the dependence on earnings which have been badly hit by external
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factors familiar to all of us over the last two or three years and which have affected all of us equally.
There are already the conditions for considerably increased growth and for economic balance which would be greatly accelerated by the outside investment reasonably to be expected from full Greek membership of the Community. Therefore, while it is true that Greek membership, which in the fullest sense cannot be brought to fruition without an intensive preliminary programme to bring its structure into line with the Community as required by the agreement of association, may have a temporary diffusive effect and may lead to some political uncertainty arising out of Greece's own external relationships, in my view there is no reason to fear adverse long-term consequences in either the economic or political fields.
I was glad to hear the Minister express a similar view on behalf of the Government. In my view the political considerations in this instance greatly outweigh any economic doubts in regard to Greek accession. The primary consideration—indeed, the sine qua non—of Greek membership must be the extent and quality of democratic parliamentary government in that country.
I am merely one of a number of hon. Members who actively and continuously expressed political protest at the tyranny of the former régime in Greece. The overthrow of that evil régime and the restoration of democracy over the last two years are events of great significance for Western Europe. The Greek achievement in so short a time has been momentous and dynamic. It has had our wholehearted support during this brief period—or such support as, at a distance, we have been able to give—and it now deserves all our support in this concrete long-term form.
Some of us have friends in Greece who fought courageously against the dictatorship and suffered for it. One remembers the importance which they attached during those grim times to the prospect of ultimate membership of the Community as an encouragement to the fight for the renewal of democracy in their country. That has been achieved, and Greek democracy now needs all the support and encouragement that other Western democracies can give

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it. It is in Britain's own interests, from every point of view, that Greece should gain economic strength and political stability. That will be brought about only by bringing Greece into close union with the Community.
Less than three weeks ago a group of hon. Members, including myself, from both sides of the House visited the British war cemetery on Crete. It was a moving occasion and, not least, a vivid reminder of the part played by Greece in the war against Fascism in Europe. It spoke eloquently of her democratic past as well as of her democratic renaissance and of the historic friendship between our two countries.
There is no less a need today to bind together all democratic European nations in a mutual defensive bond, and Greece has a vital contribution to make in that direction too. It is for all those reasons that we should welcome the widening of the Community.
Mr. Tindemans says in his report, somewhat depressingly:
"Europe today is part of the general run of things. It seems to have lost its air of adventure."
There are possibly many reasons for that, and I do not accept the pessimism generated by many whose hostility to the Community is well known. We see them, of course, on both sides of the House. In any event, I believe that, in its own small way, Greece will reactivate our own European impulses and add a new impetus to the Community adventure.
8.23 p.m.
Mr. George Reid: I hope that the hon. Member for Hayes and Harlington (Mr. Sandelson) will forgive me if I do not take up his points. As a member of the SNP, I want to confine my remarks to my own country and to the possibility of independent Scottish membership of the Community.
It is a little curious that the House should give consideration to European union when the whole future of the British Union is itself in considerable doubt. If our present unitary state is about to be unscrambled, as I hope and believe it is, that inevitably has considerable repercussions for the future of the Communities. Put simply, there will
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no longer be a Community of nine because one of the component parts, the United Kingdom, will have ceased to exist as a political entity.
Even if, by the early 1980s, Scotland has progressed no further than a devolved Assembly, that too will bring about new relationships with the Community, in terms of which Ministers—whether Assembly Ministers or London Ministers—go to Brussels, in terms of dual and distinctive legal systems within one country and in terms of contacts between Brussels and Edinburgh.
Mr. Ortoli, in his report of July 1975 to the Taoiseach, Liam Cosgrave, the President of the European Council, dealt in detail with what he called "basic democratic rights". Mr. Tindemans in his report emphasises what he calls the "fundamental human freedoms". It is a basic democratic right that if the Scottish people choose independence they should have it. It is a fundamental human freedom that if Scotland wishes to exercise the same responsibilities and privileges as other nations through a Parliament entrusted with the sovereign rights of the Scottish people, she cannot be denied that freedom within the European Communities.
The aim of my part is perfectly plain. It is self-government for the Scottish people and the restoration of Scottish sovereignty by the establishment of a sovereign Scottish Parliament, within the Commonwealth, whose authority will be limited only by such agreements as may be freely entered into by it with other nation States and international organisations for the purpose of furthering international co-operation and peace.
It therefore follows, in our view, that the ultimate relationship between the European Communities and an independent Scotland can be determined by the Scottish people only in the circumstances obtaining at the time of independence. We are, of course, a member of the EEC at the present time, and I believe that our links with Europe can be significantly strengthened.
When the Patijn Report advances the suggestion of 17 Members of the European Parliament for Denmark, it is politically unacceptable that Scotland, with the same population and GNP, should have only seven. My party takes the view

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that Scotland's history as one of the oldest nations in Europe, her distinct legal and administrative identity, her location at the northernmost periphery of the European Communities, the economic importance attached by the EEC to marine and energy resources, her regional diversity and the scattered distribution of her population entitle Scotland to parity of representation within the Communities with Denmark.
It is totally unacceptable that Luxembourg, with half the population of Scotland's capital city of Edinburgh, should have six Members, a Commissioner and veto powers and that Ireland, a country substantially smaller than Scotland, should have representation across the board when Scotland does not.
Mr. Dalyell: The hon. Member should remember—I say this not in an unfriendly fashion—the evidence that Mr. Patijn gave to the Select Committee in answer to questions last week, when he talked of having a bargain. If one of the existing States breaks up like this, we should be faced not with a Europe of 10 but with a Europe of 26, including Alsace-Lorraine, Schleswig-Holstein and Brittany. The main European countries will not agree to that.
Mr. Reid: Comparing Scotland with Schleswig-Holstein and Alsace-Lorraine shows a poor sense of history and political realities. Mr. Patijn probably regrets his remark about 26 or 27 Members which he made when he was last in Edinburgh.
There are differences in the degree of commitment to the European Communities within my party as there are in the Labour and Conservative Parties. I see the referendum as the great constitutional divide in Britain—for the English, the formal and final abdication of imperial pretensions; for the Scots, a simultaneous reawakening of our rôle as a small North European nation. I am not talking about nineteenth-centry nation-State sovereignty because no one, with the possible exception of the Soviet Union and the, United States, and possibly China, is sovereign these days. I am talking about the qualified independence which is possible to any small country in the Communities.
In that respect, I note with approval the remark by Mr. Tindemans on page 10 of his report:
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"A return to selfish national attitudes, to national barriers and to the antagonisms which they frequently engender would be seen as a historic defeat—the collapse of the efforts of a whole generation of Europeans."
I accept that. I have absolutely no sympathy for the old racist nationalism which smeared the face of Europe in the 1920s, 1930s and 1940s. I am seeking the interdependence which is achievable these days among small nations. It is only by being outward-looking and by getting rid of the parochialism which has dominated so much of Scots society that we can begin to participate in solving the real problems of Europe—the inequalities in the distribution of wealth, the exhaustion of resources and the consequences which that has for all industrial societies, and the recognition that internationalism of economic life makes a system of production ever more dependent. All these can only be faced in the Communities as a whole. To put it bluntly, no one can go it alone.
But even if some of my colleagues are largely committed to Scotland's future development along the lines of Norway, with associate status, we all agree on one matter. Exactly as my party comes at present to a Parliament which we hope to leave at speed, so we are represented in the EEC and will strive to make the existing institutions work. But we all view with concern certain developments in the Communities. We would oppose any development towards a Euro-State, with power drifting from member States to an embryo government based on the Commission and the Assembly. We agree about the need for a confederal Europe—a partnership of self-governing nations in no way subordinate to one another. The SNP believes that democratic control is best encouraged on a decentralist basis.
I have some friendly advice for our friends in Europe. In the last year, my colleagues and I at Westminster have had the pleasure and privilege of talking to representatives from most of the other member States in the European Community at both diplomatic and political level. They, too, have their minorities. The French have their Bretons, their Alsatians and their Corsicans. The Italians have their South Tyroleans and their Sardinians. There are the Basque and the question of what happens to

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Catalonia if Spain ultimately gains membership of the Community.
I give the hon. Member for West Lothian (Mr. Dalyell) two answers to his question. First, there is a difference of degree in that no one else in Europe at present among the minorities has the degree of distinctive administrative and legal identity which Scotland has. If these small peoples within Europe want institutional change, it is up to them to effect that change through the ballot box, as the people of Scotland have done. The SNP has no part in the so-called Bureau of Unrepresented Nations in Brussels.
I want to give this message to the representatives of other member States in the Community—it is the same message as that which the SNP has put to the two majority parties in this House: in the same way that talk of devolution to the English regions should not be allowed to hold up the transfer of government to Scotland, so a preoccupation in the member States with their own minorities must not stop the adhesion of Scotland to the Communities if she so wishes.
Lastly, I deal with the intermediate phrase—the Assembly phase. The Commission has said that it hopes significant steps will be taken towards union by the early 1980s. Within that period there will be equally significant constitutional changes in the British Isles. They are already happening, and I wonder whether they are understood by some people in Europe.
I note, for example, that Mr. Tindemans refers in his report to his meetings with the Scottish Labour Party. Such an animal did not exist at the time. He saw the British Labour Party north of the border. Giving evidence on behalf of the British Labour Party north of the border was a certain Alec Neil, who is now General Secretary of the Scottish Labour Party. He and the hon. Member for South Ayrshire (Mr. Sillars) came out of the British Labour Party because they recognised that one of the great determinants of Home Rule in Scotland is the adhesion to the European Communities. They recognise the need to establish a new link between Edinburgh and Brussels—a fact admitted by Lord Kilbrandon, who, when asked what constitutional model he saw for the future of
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his country, described a new link being established between Edinburgh and Brussels with the Westminster link fading away.
So I deal with the intermediate period of an Assembly. I suggest, first, that it is well nigh inconceivable that any Assembly can lack powers in health, agriculture, transport, education, social policy and so on. That implies that the Scots Assembly from the very start will have substantial dealings with the EEC, from which flows a growing stream of regulations pertaining to those very areas of government. From the start, the EEC dimension in Edinburgh will be an integral and inescapable part of the work of all Assembly committees, and it should be recognised as such.
In the long term, the evolution of the Assembly towards full independence will resuscitate the whole question of Scotland's relationship with the European Communities. But in the short run, in the Assembly phase, it makes sense to attempt Scottish representation in the EEC on a basis equal to that of the other member nations.
For the benefit of the hon. Member for West Lothian, let me explain what I mean. The most important step is to obtain Scottish representation, where possible, on the Council of Ministers, which is the key decision-making body in the Communities. Scotland cannot be a full member until she is a fully sovereign State.
But there is scope for upgrading Scotland's present rôle in the United Kingdom delegation. Scottish Ministers have been to the Council of Ministers on five or six occasions. I hope that it will be an immediate Assembly objective to ensure that Scotland is represented at all meetings of the Council of Ministers as part of the United Kingdom delegation. I hope that the Ministers representing Scotland will be Assembly Ministers, because that will facilitate the involvement of the Assembly in European affairs. The Assembly should have a Minister of European Community Affairs who can attend all Council of Ministers' meetings. The Assembly should also have the power to appoint an official who would be attached to the United Kingdom permanent representatives' department and who should have ambassadorial rank. The hon.

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Member for Crewe (Mrs. Dunwoody) may smile, but I wonder whether she is aware of the political realities in Scotland at present and how close the rôles of our two parties are to being reversed.
Mrs. Dunwoody: Having listened with respect to the hon. Member for Clackmannan and East Stirlingshire (Mr. Reid), I am astonished that he should be so totally unaware of the political realities of Europe. If he was not so unaware, he would not favour the House with such rubbish.
Mr. Reid: I am all too aware of the political realities of Europe and that Scotland will not get a fair deal in Europe until it is an independent nation.
A perceptive article appeared in today's Scottish Daily Express by its political editor, who is just back from Brussels. Talking of devolution, he said that he found
"that Europeans know and understand a great deal more about Scotland's quest for devolution than a bunch of ignorant and hostile English Labour and Tory MPs I met last month.
Frenchmen, Germans and Italians know all about the Government's proposals for a Scottish Assembly as well as about the SNP and the astonishing thing for me is that none of them is worried.
"Separatism" is a purely English, unionist word. It is a concept that worries Europe not one whit. …
Their very sensible view is that Scotland is so closely linked to Europe economically and culturally that the precise form of government we have is a pretty academic point. Any kind of Scotland would still be an intrinsic part of Europe, obliged to trade and co-operate with her neighbours."
The article goes on to explain how the writer was told:
"Sorry, the top table is for nation states only. And remarkably often this was followed by the matter-of-fact question: 'Why don't you become a nation state? We would be happy to have you.'".
Scotland should be in Europe on the same basis as the Danes. Nothing less will do.
8.38 p.m.
Mr. Max Madden: We have been told that this is a Common Market dustbin day because we are discussing a mountain of paper proposals. That is true, but it is also uniquely refreshing that we have been given the opportunity in daylight to discuss Common Market
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matters that affect the United Kingdom. That is a by-product of the unusual combination of Sir John Foster and the all-out war being waged against the Government by the official Opposition. It has allowed the business to be transacted at a reasonable hour and at reasonable length. For that we must be grateful.
We must also be grateful for some of the excellent contributions to the debate, which, for a change, may appear in the national newspapers, to be seen and read by the public whom we seek to represent.
I hope that the newspapers will report at length the excellent speech by my hon. Friend the Member for Southampton, Test (Mr. Gould) who traced the harmful developments of the Common Market as they have affected the United Kingdom since we became a full member. In his critical analysis he showed the damaging effects which membership is having on the British people.
My hon. Friend also mentioned, as did my right hon. Friend the Minister, the effect of our business today on the British textile industry. My hon. Friend warned the industry and those of us who represent textile constituencies of the dangerous effect the Common Market will have on our industry because we shall relinquish opportunities to reform our dumping legislation. That is just one matter of importance to the industry which flows from our membership of the Common Market.
Today we are considering five lengthy documents from Brussels concerning the textile industry. Their effect is to give a green light to more cheap textile goods from Macao, Singapore, Malasia, Korea and even Japan. It will be another blow to British textile and clothing manufacturers and the workers in those industries, whose grave problems have been echoed in this Chamber over the past two years by hon. Members on both sides of the House.
Stripping away all the verbiage on which the Common Market and its bureaucrats flourish, we see that these documents reveal that, despite all the enormous difficulties the British industry faces, still more imports into the United Kingdom have been authorised under these Common Market agreements, which contain page after page of increased quotas for suits, trousers, shirts and all the rest.

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So far a I can see there is not one reduction in any quota affecting the United Kingdom. Some of the increases are substantial.
All this has been agreed—or, I would suspect, plotted—under the so-called burden sharing agreement within the Common Market. Many of us have suspected that under this agreement Britain is shouldering most of the burdens and missing out on most of the sharing. That has been so all along, and this series of agreements is no exception.
It is no good Ministers saying, as they probably will again tonight, that other Common Market countries are shouldering a fair proportion of imports from low-cost countries. The base year figures for the Multi-Fibre Arrangement are taken from a time when the United Kingdom was importing an exceptionally large quantity of textiles from lost-cost countries. This has meant that the United Kingdom has faced, and still faces, a much bigger problem than other Common Market countries as a result of imports from low-cost countries. These agreements do not help that situation. Indeed, by removing certain restrictions they could result in the position deteriorating still further. I challenge my right hon. Friend, who referred to the beneficial effects of the agreements on the textile industry, to wait and see. I do not believe that their effect will be beneficial for the British industry.
I draw attention to statements made by leading members of the textile industry only yesterday, when Mr. Bill Barnes, Chairman of the British Man-Made Fibres Federation, said that unless radical changes were made to the MFA the complete disappearance of the industry, sector by sector, was assured. If that is not significant enough for the Minister and the Government I also draw their attention to the remarks of Mr. Edmund Gartside, President of the British Textile Employers' Association, reported in The Guardian and The Times yesterday. He warned that there was an urgent need for radical changes to the MFA to protect Britain, and, says The Guardian, drew attention to the fact that:
"The import proportion in the UK was higher to start with and with the same growth rate as that of the US the consequences for Britain were startlingly more destructive'.
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Since the mid-1960s business had dropped in the UK by 40 per cent. compared with 10 per cent. in the US. If a growth rate of 6 per cent. was allowed to continue the figure for UK penetration by imports from outside Western Europe in this sector by 1984 would be 71 per cent—compared with a US figure of 17 per cent."
We know also from replies I have received this week from Ministers in the Department of Trade that, between 1st January and 11th June, 83,000 import licences for textile commodities have been issued. For some strange reason the Department processes them on an American-made computer. It is not surprising that there are some hold-ups in the processing of those figures, but the trend is there.
I am astonished that the Government, despite the onslaught they have faced from hon. Members representing textile constituencies, still steadfastly stick to the same story that the measures they are taking are helping the industry. I agree that there has been some help, but it has been extremely limited, and we are looking for radical reform and protection of the British industry if it is to be saved. That is not an exaggeration. Mr. Barnes was again drawing attention yesterday to the extent to which certain countries are dominant in the flow of cheap textile imports into the United Kingdom. Between 1970 and 1974 Hong Kong, South Korea and Taiwan were responsible for $4,000 million worth of textile exports to this country. That is 60 per cent. of all the textile exports from developing countries. Clearly, under the Multi-Fibre Arrangement, not enough protection is going to the really less developed countries, as opposed to these more developed countries.
It is to the British textile industry that the Government must talk tomorrow and the day after tomorrow, for that industry, all of us who represent it, and its workers, are bitterly resentful at the foot-dragging that has taken place over the introduction of measures to help the industry overcome the threat of unfair competition which it faces.
In view of the deep problems of British industry, it is only fair and proper to ask why these problems have not been recognised in the agreements we are discussing tonight. Why is there not one category where the quota for the United Kingdom has not been reduced, and

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reduced substantially? It is significant to note that negotiators for other countries have been successful, but not the United Kingdom, where the textile industry is suffering from the biggest recession.
In view of the importance of the textile industry in Britain, in terms of the economy and employment, its regional significance, and the enormous social problems which flow from the decline of the industry which has already taken place, why were British negotiators prepared to put their names to this agreement? What consultation took place on these agreements with British textile employers and trade union representatives, and with Members of Parliament, before these agreements were reached? What were the views of the respective parties in those consultations if, in fact, consultations took place?
I conclude by asking what hopes there are of an early review of these agreements and of reducing the quotas to a level which reflects more accurately the problems which confront the British industry. That industry is perplexed, angry and bewildered at the situation it faces.
Many of us do not expect very much from the Common Market or from Brussels. We expect much more, however, from a Labour Government, whatever the difficulties they face in Brussels. Very clear proposals have been made by Mr. Gartside and others, and the Government are being asked to consider them. They are very specific and very urgent. We are asking for reforms of the Multi-Fibre Agreement to protect the British textile industry and the workers in that industry. They have faced an enormous recession, short-time working and redundancy. I ask the Government tonight to recognise those problems and to tackle them before it is too late for all of us.
8.49 p.m.
Mr. Nicholas Winterton: I am delighted to follow the remarks made by the hon. Member for Sowerby (Mr. Madden). I fully endorse the pressure that he and his colleagues on the Government side are putting upon the Government to recognise the unique situation facing the British textile industry.
I also join my right hon. and learned Friend the Member for Hertfordshire,
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East (Sir D. Walker-Smith) in the tribute he paid to the hon. Member for Southampton, Test (Mr. Gould) for the very fluent and interesting speech he made towards the beginning of this important debate. I believe that he did a service to the House and to a much wider audience. I look forward with great interest reading his speech in Hansard tomorrow, to remind myself of the way he presented his case. Although I did not agree with it, I think that the case he expounded needs to be put to the House and to the Government.
I quote now from the annual report for 1974 of the British Textile Confederation. The textile industry supported our entry into the EEC. I quote from the president's report of that year:
"British membership of the community has considerable commercial and industrial advantages for the British textile industry. Our industry needs a larger and more dynamic home market to remain viable at anything like its present size. Only membership of the Community can guarantee us such a market. The industry also needs protection from increases in low cost imports, which would be possible outside the Community only if the United Kingdom were exempt from the provisions of the Multi-Fibre Arrangement, which gives developing countries a right to increased access to the markets of the developed countries. Any such exemption would be a severe blow to the expectations of the Third World, and it is by nomeans certain that the British Government would wish to renegotiate the MFA in this way even if it could do so."
The British Textile Confederation is representative of both sides of industry, trade unions and employers.
I preface my remarks about the textile industry and Europe, with a few statistics. The United Kingdom textile and clothing industry employs 870,000 people. This represents 11·5 per cent. of the total employment in manufacturing and 20 per cent. of the female employment. The industry is among the four largest United Kingdom export earners, with sales last year of £1,150 million. The capital intensity of the industry is remarkable. Modern textile processing is highly capital-intensive. New machine installations in the main processing sectors, for example, typically require investment of between £15,000 and £30,000 per employee. Since 1966 the industry has invested more than £1,400 million in fixed assets, 8·5 per cent. of all manufacturing investment in this period. In the

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past three years investment has averaged nearer 10 per cent. of that in manufacturing as a whole and has been roughly 25 per cent. greater than that of the vehicle industry.
I am sorry that there is not a major Government Minister on the Front Bench because the Government do a great deal for the vehicle industry. I hope that they will recognise the importance of the textile industry and act accordingly.
Major disputes in textiles and clothing are rare. The incidence of days lost through strikes in the past decade has been under one-third of the national average.
Here we have a fine industry which makes an excellent contribution to the economy and has a fine industrial relations record, but what is happening? The industry is suffering severely from unfair competition. I am sure that Government supporters who sit with me on the all-party group for the textile industry will admit that the textile industry remains a favourite candidate for emerging countries, despite its capital intensity. The shift of the world's fibre and processing capacity towards the developing nations has gathered momentum during the past few years. The problems of reconciling the demands of developing countries for export growth with the absence of violent disruption in the recipient market has long been recognised throughout the world.
The first world-wide attempt to ensure orderly growth in trade in textiles was the GATT long-term Cotton Agreement in 1962. This culminated in the Multi-Fibre Arrangement introduced on 1st January last year and which will remain in being until the end of 1977. This is all-important in the European context. The MFA products include wool, manmade fibre goods and cotton, whether woven or knitted. Quotas may be imposed only where a real threat of market disruption exists. Most quotas introduced under the MFA carry a minimum growth factor of 6 per cent. a year.
What are the drawbacks for the European and United Kingdom textile industry in this situation? I believe that in normal circumstances the European textile industry could live with a 6 per cent.
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annual growth rate if this were applied comprehensively to all low-cost imports, especially since the largest importers, such as the United Kingdom, can be expected to incur lower rates of growth as a result of the EEC burden-sharing formula.
However, there should be some mechanism for relating the flow of imports to the prevailing market conditions. For this reason the industry has pressed the Government time and time again over this matter, explaining that while import growth is tolerable in times of reasonable trade it may be catastrophic in a recession. Thus we now have a situation where the new quota of Indian cotton goods is equivalent to 140 million square metres a year, similar to the previous quota level. I would remind the Government, however, that this is 30 per cent. higher than average arrivals from India in recent years.
As the hon. Member for Sowerby said, the quotas have been pitched far too high. The quotas of Malaysia and South Korea are, respectively, 77 per cent. and 40 per cent. higher than the 1974 imports, as a result of these countries' efforts to build a substantial performance in the months immediately prior to the negotiations. There is nothing to prevent either the established supplying countries turning to products not covered by the quotas or the emergence of new entrants into the market. This may be splendid for the developing countries, but it makes a total myth of the 6 per cent. growth factor and falls short of providing conditions in which the United Kingdom industry, or the European industry for that matter, can plan and invest with confidence in the years ahead.
The hon. Member for Sowerby mentioned the President of the British Textile Employers' Association, Mr. Gartside. I am pleased he did, because Mr. Gartside has made many forthright, positive and correct statements in recent days. He said that the present MFA arrangements had been effective for Japan and the United States—I hope that the Minister will take this message on board—largely because of the vigour with which those countries had implemented the particular proposals. However, our own Government's attitude towards imports from the developing countries tends to be excessively liberal.

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Mr. Gartside also said that the United States had a particular advantage in starting from a low base of less than 10 per cent. import penetration compared with a United Kingdom figure of over 50 per cent. The United Kingdom industry's severe disadvantage was startlingly illustrated by a prediction that with present growth rates the United Kingdom's import ratio to final consumption would rise by 1984 to 73 per cent. import penetration as against the United States figure of only 17 per cent. This is a very serious situation.
It is worth mentioning that a Cometextil Report showed that the increase in exports of textiles by developing countries between 1970 and 1974 totalled some $4,000 million. Of this total, three countries—Hong Kong, Korea and Taiwan—were responsible for 60 per cent. of the increase. How right Mr. Gartside was to emphasise that in the renegotiation of the MFA attention should be paid to this imbalance to ensure that genuinely less-developed countries were able to benefit.
Unfortunately, the shortcoming of the international arrangements for controlling low-cost imports have been compounded—and here I think I have the support of Labour Members—by the lack of a decisive and consistent industrial policy in the United Kingdom towards textiles. The attitude of successive United Kingdom Governments towards the textile industry appears to have been determined much more by short-sighted political policy than by serious economic considerations and a real understanding of the industry.
For 20 years, a large sector of our manufacturing industry has been sacrificed to duty-free entry. I remain to be convinced that official thinking has changed very much, in spite of the occasional movement by the present Government. It is surely time that our Government and administrators woke up. The United Kingdom can no longer afford this kind of unrestricted liberality. It can no longer afford the luxury of cheap imports when they have to be paid for increasingly by a further erosion of our already dwindling industrial assets and employment.
I come from a textile area and I know what the problem means to the people in my constituency. Yet, too often the Department of Trade seems concerned to assist the importer who is generally
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responsible for little fixed investment or employment than to promote the interests of an important home-based industry. The Departments' recent letter seeking to fill the yarn quota for Turkey is a case in point. Generosity and fair play are admirable if we are winning or if everyone abides by the rules. But we are not winning and not everyone abides by the rules.
The November issue of Textile Asia reports that goods are now being shipped through the Philippines and Indonesia, whose textile exports are still not subject to quotas within the EEC. I shall be pressing the case very hard with the Govment during the next few months. I believe that global quotas should be introduced for textile and clothing imports to prevent a further erosion of the United Kingdom market by the arrival on the scene of new producers not covered by existing bilateral agreements. In this I refer in particular to Portugal and the EEC associate States.
Second, believe that a flexibility clause or regulator should be introduced to provide for a downward revision of growth rate in a time of grave and severe recession. Third, I believe that a fall-back clause should be provided or that there should be some means of allowing countries like the United Kingdom which have a high import penetration level to adopt special measures to protect their own production capacity for sound strategic and economic reasons.
Fourth, I think it is important that an extension of the base period for determining quota size should be increased to two years to prevent a build-up of trade by exporting countries as a negotiating device. Lastly, I believe that there should be an extension of the period of the Multi-Fibre Arrangement and that it should be at least five years to allow for better forward planning by the industry.
I shall be pressing these points upon the Government over the coming months. I realise that ultimate acceptance or rejection depends upon the EEC as well as the signatories of GATT. In the first instance, however, my task and that of Labour Members is to convince the Government in this country. There are faint glimmerings that they might be a little receptive. But the action they have taken so far has not been the action required

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by an industry that makes a growing and important contribution to our economy.
9.5 p.m.
Mr. Mike Noble: Tonight, as on other occasions when we have debated textiles—I was glad to see that at 8.35 p.m. we managed to get round to the textile industry—we have heard a united voice from both sides of the Chamber speaking on behalf of the textile industry. I shall take up some of the points made by the hon. Member for Macclesfield (Mr. Winterton), and my hon. Friend the Member for Sowerby (Mr. Madden).
I must begin by expressing my amazement at the comments of my right hon. Friend the Minister of State, when he announced, almost with triumph, the arrangements that have been made with the under-developed countries through the MFA. I can only say that he must have watched carefully the England performances against Scotland and Brazil recently when England were beaten 2–1 and 1–0 respectively, when Mr. Don Revie said that he thought they were promising performances. I hope that those performances are not examples of the way in which the Government will move in future.
Mr. Hattersley: England won 4–1 after that.
Mr. Noble: Actually, we did not win 4–1 in the next match because we were still in the United States, but that is by the way.
We must judge the Government's performance on results. If they can express such confidence, can we look forward to their returning with the goods when they negotiate on the textile market?
We are talking not only about the British textile industry but textiles internationally. It is about the largest industry in the world. It is estimated that it employs about 100 million people. As we all know, it attracts in the underdeveloped countries the first form of industrial development. It is against that background that the hon. Member for Macclesfield mentioned the developments that have taken place in the past in an attempt to control textile imports.
I gave the MFA a cautious welcome when it was first introduced, but the
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advantages of the scope which it covers, the range of products which it covers within textiles, and the fact that there is international agreement and not unilateral imposition are largely lost because of the failure of the Government to negotiate realistic quota levels.
In the circumstances faced by the British industry it is ridiculous that any growth of imports should be considered. Import penetration is now above 60 per cent. The general levels are too high. It is burden sharing in terms of sharing for the future but sharing none of the burdens of the past. As the hon. Member for Macclesfield said, there is an absence of any regulator.
The agreement we are discussing tonight has demonstrated the weaknesses all too well. If we take the examples of Macao, Malaysia and Singapore, three of the five countries involved, we find that the agreement states that restrictions on cotton yarn and other cotton textiles are to be phased out as there is no evidence that they are causing or threatening market disruption. I should like my right hon. and hon. Friends to go to my constituency, or any area in the North-West, and make that statement. The fact is that any cotton yarn or cotton textiles imported into this country threaten disruption in circumstances where we have such a high amount of short-time working and unemployment. The Government must come to terms with that fact.
On 7th May I received a letter from my right hon. Friend the Prime Minister, and in it he said, when talking about the MFA and negotiations for the next round, that
"We can expect some very hard bargaining".
I am delighted to hear that, as we have seen no such bargaining from this country hitherto. The agreements, when we talk about the dustbin of the Common Market, are the rubbish in the dustbin.
When we talk about Malaysia—the agreement says that there is no need for the restrictions on cotton yarns or cotton textiles to continue—what do we find? Malaysia attracts investors by offering tax-free holidays, tariff protection and low wages. We must take a new look at the under-developed low-cost countries.

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I have a copy of a report of a seminar held in Djakarta of the International Textile Garment and Leather Workers' Federation. Some of our trade unions are members of the federation. In page 92, in dealing with Malaysia, it states
"Textile and clothing industrialists joined other industrial groups to participate in these profit-making projects with the first giant companies in Malayan Weaving Mills Limited and Textile Corporation of Malaya in Johore, followed by Tiaping Textiles Berhad and Kamunting Textiles Limited in Perak."
Incidentally, this is an industry in which we are told there is no threat. That has happened over two years. The report continues:
"In Selangor, spinning mills were set up by Kima Textiles Berhad and Sharikat Fu Yuen Berhad. Over the years many textiles and spinning mills were opened and knitting and garments companies soon joined in the race to exploit to the fullest the generous tax incentives and cheap labour. By September 1974, Malaysia had more than 120,000 spindles whereas nearly 3.500 weaving looms and about 1,200 knitting machines are used in the textile industry, not including another 30,000 spindles in the new companies just opened in the Free Trade Zones in Butterworth and Bayan Lepas in the Province of Penang. All in all, about 25,000 people are engaged in 35 companies operating in Peninsular Malaysia producing textiles and other related products like cloth, furnishings, stockings and ready-made garments. All these companies including the multinational corporations bring in foreign experts who are seconded here on a contract basis and are paid high salaries. … Young school-leavers and migrant workers between 16 to 25 years are the raw recruits who also become easy victims of exploitation as trade union consciousness and workers' education is relatively unheard of, particulary by workers who come from rural backgrounds with simple ways of life."
Taking the 100 largest institutions or organisations in the world in budget terms, 50 are multinational corporations—a large number of which are Japanese—and they have moved textiles into South-East Asia and, indeed, Indonesia, as was indicated by the hon. Member for Macclesfield. That is because those areas provide cheap labour and a means of sending their textiles into Western Europe, particularly this country.
Till we appreciate that the ball game has changed we are helping, not the low-paid, under-privileged and over-exploited workers of the Far East, but the multinationals to recoup from exploited cheap labour profits for return to Japan and other areas. That is the situation with which we have to come to terms.
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These multi-national corporations are unscrupulous in the way that they exploit the movement of capital and take advantage of tax concessions, and so on. Ultimately, together with the workers in the Far East, we shall be the sufferers.
Many of these multinationals are joint ventures, but some have budgets bigger than those of Governments of the countries in which they are situated. Therefore, they are in a position to dominate those Governments and in some circumstances, I should guess, to control to a large extent the negotiations that take place through the MFA.
Most workers in the countries concerned are not union-organised. I believe that through the next round of the MFA we can do ourselves and those countries a good turn by accepting the recommendation of the International Textile, Garment and Leather Workers' Federation for an international labour code to be negotiated and attached to these agreements and to be policed the countries concerned. Only in that way shall we be able to protect and improve the standards of our own workers and the workers in those countries.
My right hon. Friend said that one of the five objectives should be aid to the under-developed world. I am sure that all hon. Members share that objective, but a handout in the form of cash is not the answer. I suggest that a hand out in the form of access to markets alone is not the answer if we take account of the role of the multinationals in those countries, particularly in the textile industry.
What is the answer? It is to work through these agreements and through the international trade union movement to establish in those countries the kind of collective bargaining machinery that we should like to see set up, but which is frequently prevented by law, and a system of social security payments. In that way we can raise the standards of workers and make competition fair. The definition of "competition" in international agreements is such that fair competition is not comparing like with like. We are comparing workers with free collective bargaining in Britain and Europe with workers in the Far East who are little more than highly exploited wage slaves. Till we can come to terms with that situation, they are going to lose, and so are we.

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I hope that my right hon. Friend the Minister of State will have taken note of this point and that when the MFA is renegotiated, in the next round, all the improvements suggested by my hon. Friend the Member for Sowerby and the hon. Member for Macclesfield will be taken into account. I hope that the Government will take into account the need for an international labour code, and do themselves, the countries in the Far East and the international labour movement a service.
9.15 p.m.
Mr. Douglas Hurd: It is probably fair to say that we have had a more enterprising and useful debate than might have been expected from the ragbag of documents that have been thrust at us. It is right that I join with several of my right hon. and hon. Friends in protesting at the form of the debate, which illustrates the difficulty we still face in this House. The fact is that there is now a European Community dimension to almost every sphere of our own policies in Britain. In some spheres it is greater, in some it is less. However, the European dimension to each policy should be discussed alongside that policy and not put together in a ragbag of things lumped together simply because they have a European origin.
There is no clearer proof of that than the last three speeches we have heard on the subject of textiles. It is nonsense that such speeches, particularly the practical and powerful speech of my hon. Friend the Member for Macclesfield (Mr. Winterton), should be delivered to a Front Bench of Ministers who are in no way responsible for these matters. It is the Ministers who are responsible for trade and industry who should listen to such speeches which have the European dimension built into them, and they should reply in the whole context of textile policy, including the European aspect.
Hon. Members have made a powerful case for radical changes in the FMA. My hon. Friend the Member for Worthing (Mr. Higgins) has often spoken on these matters and on the need to preserve the balance between protecting our own industry and avoiding a spiral downwards into protectionism in a world in which our other industries—and, indeed,
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the textile industry in some of its forms—would be among the first to suffer.
The EEC must strike exactly the same balance as British Governments have had to strike in the past. There is no real difference. As we are constantly reminded from the Government Benches, the EEC has its responsibility towards the Third World and towards the industries of the Community. I do not think that Labour Members who have spoken in this debate have established any case for supposing that the EEC was less successful, with its much greater bargaining power, in striking the right balance between these interests than the British Government would have been by themselves.
However, once again one must return to the practice of lumping these matters together. It is wrong and unhelpful. The Leader of the House shakes his head, wrings his hands and says that it is all very difficult. However, the more one listens to these debates the more one is forced to the sad conclusion that the last institution in Britain that will develop this European dimension successfully is probably the House in which we sit. Unless we spend even more time and ingenuity than we have had under the guidance of my right hon. Friend the Member for Knutsford (Mr. Davies) hitherto, this lack of a proper working European dimension to our days and nights will be our loss and a failure on our part adequately to represent our constituents.
The hon. Member for Southampton, Test (Mr. Gould) has chosen two disparate points to cover in his amendment. The Opposition find no difficulty in accepting the amendment, either as regards New Zealand butter or as regards the Commission's view on the future form of the European Community—to which I shall return shortly.
There is one separate matter which it is right to consider alongside the Tindemans Report and the Government's White Paper. That is the question of Greece and possibly Greek accession. We have had an interesting discussion on that point which has cut across both party lines and the ordinary divisions for and against membership of the Community. I quite see the force of the argument advanced by my hon. Friend the Member for Cardiff, North (Mr. Grist) about the difficulties associated with

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Greek entry, and I appreciate the reasons why he supported the line taken by the Commission on that point.
I regard the arguments the other way as powerful. Given the Community to which we belong, its history, its origins and the inspiration from which it started, it is not possible to say to the Prime Minister of a democratic Greece "Greece is not eligible to join the European Community", particularly when for several years she has been party to an association agreement with the Community which looks directly towards full membership. That is not a possible line to take. My right hon. Friend the Member for Chipping Barnet (Mr. Maudling) has several times in this House reasserted our support for the entry of Greece.
Mr. Budgen: Is my hon. Friend saying that entry into the Community should be based on being a good democratic boy rather than on some form of community of interest?
Mr. Hurd: I suspect that that community of interest lies in being a European State—a State which is not democratic but which excludes itself by that process.
One would have to be totally lacking in a historical sense if one could bring oneself to argue to a democratic Greek Prime Minister that Greece was not eligible. There is one point that follows from that and which has been reflected in the speech of my hon. Friend the Member for Cardiff, North—namely, that in admitting Greece, whenever that is possible, we should take considerable care not to admit the Cyprus question to membership of the EEC as well.
Mr. Dalyell: The hon. Gentleman is seeking to have his cake and eat it.
Mr. Hurd: I hope that the hon. Gentleman will allow me to develop that point. In the time that elapses between now and the entry of Greece, which I support, the EEC has a duty to exert itself more than it has done in the past to try to find a solution to this essentially European problem. It is not enough simply to say that we are in favour of inter-communal talks. Let us seek out an experienced statesman in the Community and say to him "For six months or a year, you will be the Community
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representative on the Cyprus question". Let him go around and talk to the people concerned, as Ambassador Jarring used to do for the United Nations and in so doing made considerable progress by quiet, effective diplomacy. Let us see whether in that way we can reach an agreement. It may not succeed, but it would be better to make an attempt than simply to drift into a situation in which the Cyprus dispute became embedded inside the Community. I put forward that suggestion for serious consideration by the Government.
The Minister of State, in an interesting speech, said that where the Community had spoken with one voice on foreign affairs it had spoken with great effect. I am not sure that that can be sustained by the record. There have been occasions when it has spoken with one voice. For example, it spoke with one voice on the declaration of principles on Angola and again on Rhodesia, but we cannot say that it spoke with great effect on those matters. We are in an intermediate situation. Obviously we are exchanging information effectively on foreign policy. We have got to the stage of occasionally issuing declarations of principle, but we have not developed the back-up to enable those principles to be effective in terms of world diplomacy.
The Community does not have armies and navies but it possesses substantial civilian power. However, it has not yet organised itself to use that civilian power to back up the principles on which it agrees. It is particularly important vis-a-vis the Soviet Union and Eastern Europe. It may be right to suggest the setting up of a political secretariat, as was suggested by my hon. Friend the Member for Cardiff, North. I believe that we need to develop a European foreign policy going beyond a simple exchange of information and declaration of principle but providing a continuous back-up so that points that are agreed are reinforced in our dealings with the outside world.
It follows that Mr. Tindemans is right in saying that in that respect, the Foreign Ministers should accept an obligation to reach a common view. That does not mean removing the veto by some constitutional piece of surgery. It means creating the habit of agreement such as ought to exist, and usually does exist, in the British Cabinet when one goes into the

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room and expects that by lunchtime it will have reached agreement on this or that. The question of vetoes or voting does not usually arise. It is that habit of agreement which, so far, the Community does not entirely have, to put it mildly, and which it needs rather than any constitutional change if it is to make progress in this field. To that extent, I am not sure whether Mr. Tindemans in his report was suggesting an institutional change. I think that what is require dis more a change of mood and habit.
In respect of the Tindemans Report and the view of the Community, I broadly agree with the comments of my right hon. and learned Friend the member for Hertfordshire, East (Sir D. Walker-Smith). Mr. Tindemans has been rather crudely criticised in some quarters in this country as if he had produced a federalist report. Of course he is a federalist, but he is one who in his report deliberately and expressly renounced the federalist approach as the immediate way of discharging the duty which he had been given. He concentrated on making practical suggestions, starting from the present situation rather than trying to present a kind of federalist blueprint.
I do not believe that in my lifetime, perhaps not even in the lifetime of my hon. Friend the Member for Faversham (Mr. Moate), we shall see the nation States of the Community fade away. I do not believe that we shall see national Governments or national Parliaments submerge their identity in a European executive or European Parliament which will take over the competence of national Parliaments. I do not believe that that is a likely development, and I think that this was realised 10 or 15 years ago.
If that is so, it leaves us with the Council of Ministers as the decision-taking organ of the Community. This means bargaining and wheeling and dealing. My hon. Friend the Member for Banbury (Mr. Marten) interjected earlier and used the phrase "wheeling and dealing" as a complaint against the way the Community operates. One cannot have it both ways. If there is a veto, and if every country retains the power to exercise a veto when it thinks its own interests are in danger, one will have wheeling and dealing.
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The question to which the House needs to address itself seriously is whether we are adequately equipped to make the most of our own bargaining position in our own interest and that of Europe. I agree with the hon. Member for Southampton Test—enlightened self-interest. Having listened to his speech, although it was very powerful, I feel that the hon. Member's view of "enlightened" is a great deal darker than mine. A great deal more accent needs to be put on the word "enlightened" before we can get self-interest.
I am worried about the way the Government set about getting the best bargain for this country. Of course they used up a lot of credit in the renegotiations, and we understand that. I do not want to go into that argument again, but there are worrying signs that the Government are still not equipped to get the best bargaining for this country, and for Europe, in the Council of Ministers. A classic example of how not to do it was the present Prime Minister's exercise in applying for a separate seat at the Conference on International Economic Co-operation. It went down well in this House. I remember the cheers he got from below the Gangway—[Interruption.]
Mr. Sandelson: Rubbish.
Mr. Hurd: The hon. Gentleman says, "Rubbish". Maybe he sat ostensibly silent at that point.
Mr. Sandelson: I did not refer to anything at all that the hon. Gentleman said. In fact, I was agreeing with what he was saying.
Mr. Hurd: Was it an internal argument on his own Benches?
What the Prime Minister did was a political success, momentarily, in this House, and such political success comes fairly cheap and easy. But in fact it was damaging for this country. It was a mistaken tactic and it undermined the credit of this country in future dealings with the Community. In retrospect, that is not controvertible.
It is no good shouting at the Community from a distance and expecting it to listen when we are a member. It is the experience of history that, if one wants to win an argument, one must couch it in Community terms and accept

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a Community objective. That is what the French have done consistently. They have, of course, pursued and achieved their national aims, but they have always tried to put them in terms of a Community argument. That is what we must do and what we do not yet do.
The Minister of State was perfectly correct, looking to the future, to identify the common fisheries policy as the next area where there is an important national interest which we need to protect in this way. When the Government set about this major test of bargaining skill, I hope that they will do so not by shouting at the Community from this side of the Channel but by entering into what our partners are trying to do, balancing what we need to achieve in this field against what they want to achieve in other fields. Unless we think ahead that far, we shall simply become involved in a series of shouting matches. Out of that the interests neither of this country nor of Europe will be served.
While I am dealing with bargaining power, I would say that the intervention of the hon. Member for Clackmannan and East Stirlingshire (Mr. Reid), who is no longer present, was amazing. It was a completely unreal analysis of where power lies in the Community and how it is exerted. If anyone wanted to weaken the influence of Scotland and the Scots in the Community, there is no more effective way of setting about it than by working for the disruption of the United Kingdom. The influence of Scots, as anyone who goes to the capitals of Europe can see at a glance, is already very powerful. If they simply became the representatives of a small nation State, their influence would be substantialy reduced.
I have one final comment on the question of bargaining points. I want to be gentle about this because it does not apply to the Minister of State who opened the debate or the Under-Secretary who will reply to it. But it is no good Ministers of the Crown associating themselves with documents of this kind if, in the next breath, or the next week they want to go to Europe to strike a good bargain for this country.
I am thinking here of the Labour Safeguards Committee policy document "Promises and Reality", which was
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launched at a Press conference by the Secretary of State for Energy. He has a right to these opinions and to express them, but if he does so from within the Government neither he nor his colleagues can expect their arguments on behalf of Britain to be taken too seriously. It will always be said on the other side "These arguments from the British Ministers are not real arguments based on their real national needs as a member of the Community; they are simply a reopening of the argument which continues within the British Cabinet."
It would therefore be advisable, before we get into these difficult and dangerous negotiations on matters of vital interest to us, such as the fisheries policy, that this kind of exercise, as affecting and involving members of Her Majesty's Government, should be brought quietly to a conclusion.
There is a general feeling that over the last six months the Community has suffered a disappointing loss of momentum in comparison to its tasks, particularly in the economic sphere which my right hon. Friend the Member for Knutsford described so vividly. What he said about lack of correlation, particularly in the Commission, is a warning which we should all take seriously.
A lot of work has been done particularly in establishing relations with the outside world. This is less understood within the Community than it is outside. It is only when one listens to people concerned with business outside the Community, with New Zealanders or Japanese, that one finds that they have a far greater interest in and respect for the Community as a bargaining power and a pole of attraction than many of our own citizens—a power which does 40 per cent. of world trade and is just beginning to understand how that influence could be used.
The right hon. Member for Fulham (Mr. Stewart) quoted the experience of what is happening in Spain and Portugal. That is a vivid illustration of how the Community is beginning to make a sensible and constructive use of its power. It is a polar attraction, it is a civilian power and, in my view, it is a prime national interest of this country. Looking at it from the point of view of our enlightened self-interest, we in this House

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and in this country should do our utmost to help forward this process and make it succeed.
9.35 p.m.
The Under-Secretary of State for Foreign and Commonwealth Affairs (Mr. John Tomlinson): I begin by picking up two matters raised by the hon. Member for Mid-Oxon (Mr. Hurd). The first concerns the procedural problem to which he referred at the beginning of his remarks and to which a number of other right hon. and hon. Gentlemen referred. There is a great deal of sympathy with the views which have been expressed about it, but this is basically an issue which has to be resolved by the Lord President following representations to him. Obviously, it is not a matter for which the Foreign Office can be answerable in a debate of this kind.
The hon. Member for Mid-Oxon went on to criticise the hon. Member for Clackmannan and East Stirlingshire (Mr. Reid), and I agreed with him very much. I fully endorse his comments about the hon. Gentleman's contribution to the debate. It would be a process of self-delusion if the hon. Member for Clackmannan and East Stirlingshire continued to lead people to believe that a devolved Assembly would be able to have separate representation for Scotland. This monstrous process of self-delusion has to be exposed every time it comes forward, and it has to be accepted for the nonsense that it is.
Mr. Dalyell: Having had to put up with this nonsense weekly, cannot the Foreign Office set out the facts of the case and outline the nonsense which is put forward week after week not only by the SNP but also by the hon. Member for South Ayrshire (Mr. Sillars) and his colleagues these days?
Mr. Tomlinson: If I tried to take that task on board I should be left with no time to do anything else, but certainly I take note of my hon. Friend's comments.
Our debate today has been not only a very wide-ranging one on a diversity of issues, but it has produced a very much better debate than many of us anticipated when we saw the array of different matters which which we had to deal. It
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has been a debate of immense diversity, ranging from the Commission's opinion on the Greek application, to the problems of textile imports, about which we heard from a number of hon. Members. At times, the debate has, perhaps, lacked cohesion, but the opportunity for a wide-ranging discussion of these many important issues is no less valuable for that.
Before I attempt to reply to the many matters raised in the debate perhaps I might say a few words about two documents in respect of which not a great deal has been said. I also want to refer to the arrangements for Community imports of New Zealand butter. I want to comment briefly on the food aid programme in dried skimmed milk. Then I want to discuss briefly the Ministry for Overseas Development report on Food Aid.
In opening the debate my right hon. Friend the Minister of State said that I would be referring in some detail to New Zealand butter. This is a subject in which the House has always taken a keen interest. At the outset I wish to pay tribute to the Scrutiny Committee for considering so quickly the information which my right hon. Friend the Minister of Agriculture put to it only last week about the latest proposals likely to emerge from the Commission. Moreover, I am sure that the House welcomed this early opportunity to examine the questions to which these proposals give rise.
The House will know that the Commission carried out a review in the wake of the agreement in Dublin by the Heads of Government in March last year and that this review was presented to the Council in Document R/2099/75. That document recommended that we should be allowed to import from New Zealand 129,000 tonnes of butter in 1978, 121,000 tonnes in 1979 and 113,000 tonnes in 1980. The House knows that this subject has been discussed in the Council of Ministers in an effort to reach agreement.
There is general recognition in the Council that exports of butter are a matter of crucial importance for New Zealand. However, there is also quite natural concern about the prospects for the Community's producers in a situation where Community production of butter is

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increasing at the same time as the consumption is decreasing. To take account of these considerations the Commission has now proposed that New Zealand should be allowed to export to us 125,000 tonnes for 1978, 120,000 tonnes for 1979 and 115,000 tonnes for 1980.
A certain proportion of those quantities can be sold for uses other than direct consumption; for example, for the manufacture of other foods. The part that would go for manufacture would depend on market developments, but it would be that amount by which our authorisation to import New Zealand butter in any year exceeded 25 per cent. of the total quantity sold for direct consumption in the United Kingdom in the preceding year. Butter diverted in that way for manufacture would have to be sold at a lower price than that for direct consumption because it would be competing with vegetable oils. I know that that is a complex matter and hon. Members will want to study the text in order clearly to assimilate it.
The Commission proposal envisages that the special levies chargeable on New Zealand butter should be varied and differentiated to bring prices down to an appropriate level. However, the intention is that the cif price for the whole quantity of butter would be negotiated periodically as originally envisaged, and that it would apply on average to the entire quota each year.
Arrangements for the maintenance of imports of butter after 1980 are to be made in the light of a report by the Commission before the end of 1978. We recognise the importance that New Zealand attaches to the commitment which would give her the continued assurance of being able to find an outlet for butter exports.
Mr. Jay: My hon. Friend will remember that the Government's White Paper on the renegotiation stated:
"In March 1975, the Heads of Government, meeting in Dublin, issued a Declaration of Principle which provides for the annual imports of butter for the next 3-year period 1978/1980 to remain close to deliveries in 1974 and 1975."
Can he assure us, as I understand that he can, that the arrangement that he is now describing honours that wording?
Mr. Tomlinson: Yes. I believe it does honour those words.
Mr. John Davies: Will the Minister say what the New Zealand reaction is? If we felt that New Zealand was happy about the proposals it would be of considerable help to the House.
Mr. Tomlinson: As my right hon. Friend said when he opened the debate we have not had an opportunity of discussing the latest document with the New Zealand Government.
These are clearly complex proposals which the House will want to consider carefully, but they might provide an agreement with our partners in the Community, which respects their interests whilst honouring the commitment in Protocol 18. That is the confirmation for which my right hon. Friend is waiting.
I now turn to the speech made by my hon. Friend the Member for Southampton, Test (Mr. Gould) which was contentious but interesting. He has apologised for not being able to be here in the Chamber at this time. He raised the question of the principle of digressivity as applied to New Zealand butter. We have already secured a considerable improvement in the latest Commission proposal and digressivity has been considerably reduced. On the post-1980 arrangements we will continue to press for New Zealand's interests. I hope that my assurances will satisfy both my hon. Friend the Member for Southampton, Test and the hon. Member for Faversham (Mr. Moate).
Mr. Nicholas Winterton rose—
Mr. Tomlinson: I am sorry that I cannot give way. I have only 15 minutes, and there is still much to cover.
We are maintaining close contact with New Zealand and we will assure ourselves that the compromise proposals have the support of the New Zealand Government before we consider agreeing to them.
I turn now to the Commission communication outlining the Community's food aid programme in skimmed milk powder for 1976. As a result of a decision by the Council of Agricultural Ministers on 2nd and 3rd April, the programme has been increased from 55,000 tonnes to 200,000, 95,000 of which are to be delivered in 1976 and 50,000 in 1977. A further programme detailing the distribution of the extra 95,000 tonnes

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is under consideration by the Commission and will be made available to the House in due course.
I turn to the report prepared by the Ministry for Overseas Development, which gives detailed returns up to 31st December 1975 of food aid shipments to countries in need under the Community food aid programmes, for 1975 in the case of dairy products and for 1974–75 for cereals. The report does not include shipments made in 1975 under earlier programmes. In giving priority to the poorest and neediest countries, the Community food aid programme is consistent with the objectives set out in the aid White Paper "More Help for the Poorest" and in line with the resolutions adopted by the World Food Conference in 1974, which we supported.
The hon. Member for Saffron Walden (Sir P. Kirk) raised a number of questions which need to be answered. I in no way agree with the hon. Gentleman that the most disappointing area in the development of the Community over the past six months has been political co-operation. The hon. Gentleman cited Angola. I agree that it was unfortunate that the Nine were not able to agree on recognising Angola at the same time, but that is a single episode that caught the headlines. When the hon. Gentleman says, basing himself on that one case, that we had disappointments in the area of political co-operation, he ignores the fact that since then the Nine have agreed a major statement on policy towards Southern Africa. That statement of 23rd February was laid before the House. Similarly, the Nine have given their support to British policy on Rhodesia. The statement of the Heads of Government on Rhodesia was similarly laid before the House.
The two statements on Rhodesia and Southern Africa are only a beginning. They constitute the broad framework of policy which demonstrates that the Nine are already making efforts to develop further. The issues involved are not trivial. I hope that a common position on this and other areas of important policy will develop.
Political co-operation has been functioning well in other areas, too. The General Commission of the Euro-Arab
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dialogue, to which the hon. Gentleman referred, met recently in Luxembourg, I believe with a satisfactory outcome.
The Nine continue to consult one another on matters such as the CSCE. I believe that this co-operation will be of developing importance as we progress towards the Belgrade review conference next year.
Political co-operation is, therefore, very much alive and well. The lack of headline-catching activity in this area does not mean that nothing is happening.
The hon. Gentleman made an issue of the question of a political secretariat, to which his hon. Friend the Member for Mid-Oxon also referred. The House is well aware that this proposal caused the greatest difficulty in the past, and there is no substantial evidence that the positions taken up among the Nine have changed significantly. I see no reason for adding gratuitously to the catalogue of current problems within the Community, which is what we should be doing if we resurrected the question of a political secretariat now.
Perhaps the hon. Gentleman is suggesting that a political secretariat is necessary in order to galvanise political cooperation. I do not believe that to be the case. I believe that the secretarial facilities provided and the work done by the Luxembourg presidency have been exemplary. I take this opportunity of conveying Her Majesty's Government's congratulations to Luxembourg on what has been achieved during the past six months.
We should at the same time acknowledge that, if Luxembourg can shoulder the burden, there is no reason why it should be intolerable for any other nation holding the presidency. Indeed, it is something this Government looks forward to being able to take on for the six months beginning 1st January 1977.
I should like briefly to refer to the common transport policy. This is another item to which the hon. Gentleman referred. He did not indicate what sort of developments he would like to see in a common transport policy, but much of our concern has in fact been with pre-accession agreements on such matters as tachographs and drivers' hours which were accepted under the Treaty of Accession. We want to sort these out before we go any further. We are, of course,

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resisting the understanding reached among the Six on lorry weights; no new agreement is yet in sight.
I have already mentioned the specific question of my hon. Friend the Member for Southampton, Test in relation to New Zealand butter. Whereas we could go a long way in agreeing with many of his views on other subjects—for example on the headlong rush towards federalism, and harmonisation for its own sake—there is a serious divergence between us when we look at his views on trade.
To try to attribute to our membership of the Community the trade imbalance which at present exists is as monstrous a distortion of the facts as that to which I was referring earlier from the hon. Member for Clackmannan and East Stirlingshire. The deficit with the Community is much larger than we would wish, but it has to be clearly established in the debate that the figures for 1976 show a very strong improvement and that our exports to the Community during the present period—are expanding very strongly indeed. I hope that Members of the House, whatever view they take on the EEC, will welcome this as being necessary for the economic salvation of this country.
I now refer briefly to the points raised by my hon. Friend the Member for Crewe (Mrs. Dunwoody). During her interesting speech she asked about the reports of a Commission proposal to abolish marketing boards. I state very clearly that I know of no such proposal and that the Government's objective is to ensure the continuation of the boards, which are important for the orderly marketing of our farm produce. Indeed, I understand that on a recent visit members of a delegation from the European Assembly were very impressed by the operations of the Milk Marketing Board, which they saw.
Mrs. Dunwoody: They were so delighted that on their return they told their colleagues in the EEC that the boards should continue, only to learn that a decision of the European Court made it impossible.
Mr. Tomlinson: That is not the understanding of the Government, but if my hon. Friend cares to write to me about it we shall be happy to look at it.
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I now turn briefly to the speech of my right hon. Friend the Member for Fulham (Mr. Stewart). I should like to take two points from his speech. First, he asked a very blunt and direct question. He asked why Ministers cannot make early progress on direct elections, pointing out that this is not a Herculean problem. I say to my right hon. Friend and to the House that I am reasonably optimistic that the outstanding problems on the numbers and allocation of seats can and will be overcome in the very near future.
I personally have a great deal of sympathy with my right hon. Friend's plea concerning passports. If we spend too much time over the shape, size and colour of a passport, we shall not be able to maintain the necessary progress.
A great many hon. Members spoke about the Greek application for membership of the EEC. I can see no reason why Greece's application should in any way alter the Community's attitude in the Cyprus dispute. We cannot reasonably expect prospective members of the Community to enter the Community free of outside disputes. We were not ourselves in that position. We had disputes, for example, about Icelandic fishing, both before and after entry into the Community, and it would be unreasonable to say that any country which had an external dispute should not be considered.
I thank my hon. Friend the Member for Belper (Mr. MacFarquhar) for his kind personal remarks. In reply to his specific question, Greek membership will not be allowed either by the Commission or by member States to prejudice the Community's relationship with Turkey. The association agreement of the EEC with Turkey and the provision for eventual Turkish membership will stand. Spain, Portugal and Turkey have not applied for membership and may not be in a position to do so for some time. As and when they are in a position to apply, there is no reason why their applications should not be sympathetically received.
The question of textile imports was raised forcefully by my hon. Friends the Members for Sowerby (Mr. Madden) and Rossendale (Mr. Noble) and the hon. Member for Macclesfield (Mr. Winterton). There are signs of a growing recovery of the industry. I accept that the recovery is patchy, but it is most pronounced in

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the spinning and weaving sectors. I note the warnings of hon. Members with constituency interests in the textile industry. I equally note the industry's concern that the improved demand may be met by imports and thus be of no advantage to the home industry.
Under Article 4 of the GATT Multi-Fibre Arrangement, the EEC has negotiated 11 bilateral textile restraint agreements, five of which are relevant to the debate. Four further bilateral agreements are being considered and talks on another two may begin. The EEC is also taking unilateral steps in relation to Taiwan. The Multi-Fibre Arrangement review will take place this summer and the Whitehall preparations for the review have been begun. The GATT Textile Committee, we hope, will be looking at the review proposals by the end of this year.
All the points made in the debate about textiles will be given most careful consideration in the Whitehall preparations that have begun, and there is a prospect of the inclusion of proposals that are accepted in the GATT multi-fibre review taking place this summer.
This wide-ranging debate has been distinguished by a series of well-informed
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speeches. The debate has acknowledged that we are in the Community and that the Community has sought to deal with the problems of our membership. To the residual minority of hon. Members who still insist on fighting the battle that was so comprehensively lost in the referendum they demanded a year ago, let me say that we are in the Community, we are part of it and it is part of us.
Let those who still have doubts and reservations accept the challenge of using their energies towards the attainment of the objectives listed by my right hon. Friend the Minister of State at the conclusion of his opening remarks, so that together we can go forward in developing Britain's membership of the European Economic Community.
Amendment agreed to.
Main Question, as amended, agreed to.
Resolved,
That this House takes note of the Report on Developments in the European Communities, November 1975—April 1976 (Command Paper No. 6497), calls on the Government to ensure that the EEC fully honours the Dublin Agreement of March 1975 on imports of New Zealand butter into the United Kingdom, and disagrees with the Commission Report on "European Union" (R/1815/75).

EMPLOYEES' RIGHTS AND COMPANY LAW
10.1 p.m.
The Under-Secretary of State for Trade (Mr. Clinton Davis): I beg to move,
That this House takes note of Commission Documents Nos. R/2155/75, R/2863/75, R/2381/72, R/131/73, R/69/76, R/569/74, R/2128/72, R/2053/72, R/3128/75, R/1279/75, and R/160/76 relating to Employees' Rights and Company Law.
I should like to begin by paying tribute to the Select Committee on European Secondary Legislation for its Eighth Report, which is before the House to assist us today. The Committee has considered a whole series of draft instruments concerning company law, and in analysing these complex and technical documents it has been assisted by a tremendous amount of work done in another place. It has presented the issues to us in a clear and intelligible form. There is considerable value in the expertise with which the reports have been presented in the field of negotiation which remains to be undertaken.
It would be convenient to the House if I were to introduce the documents fairly briefly and then respond at the end of the debate to specific points which may be raised. Work on all the documents before us, with the exception of the Commission's Green Paper and draft directive on the admission of securities to listing, was begun a considerable time before our accession to the Community. Consequently, they were prepared along lines which reflect the continental or Roman law concepts rather than the different principles which underlie the company law of the United Kingdom and Ireland.
Our negotiators in Brussels were at a considerable disadvantage in seeking to integrate into the philosophy the traditional principles of our own law, and inevitably the process of negotiation has been slow and difficult. I acknowledge the patience with which our point of view has been listened to and the readiness to recognise our case and make accommodations.
In negotiations on company law directives, we have been following four general precepts. The first is not to accept changes which would be detri-
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mental to our own companies and which would seriously undermine our own legislation. The second is to press for equivalence rather than uniformity in this process and to avoid becoming submerged in too much detail and entering into specific rules. The third is to preserve as much of the flexibility of our own system as we can. The fourth, and most important, is to arrive at a conclusion whereby the minimum requirements only are imposed so that we remain free to impose additional requirements in United Kingdom company law as may be found necessary.
Changes in our domestic company law are long overdue. These changes need to be fundamental. There has to be a radical change of emphasis. The traditional methods of reforming company law, such as those embodied in the 1973 Bill, are no longer adequate. For these reasons the Government have undertaken a wide-ranging review of company law, have set up the Bullock Committee on industrial democracy in the private sector and have engaged in a review of arrangements for supervision of the securities market. All these developments, coupled with the changes presaged by the documents we are now considering, make is abundantly clear that the next few years will provide us with the greatest period of radical reform of company law in the history of this country.
I now turn to the documents and will explain briefly the stage which they have reached. I shall say something about the main recommendation of the Select Committee's report. I begin with the draft second directive which deals with the co-ordination of safeguards in respect of the formation of public limited liability companies and the maintenance and alteration of their capital.
The Select Committee's report was necessarily based on a text which was considerably out of date. A considerable number of amendments have been made in the course of the three readings of the document in the Council's working group, and substantial progress has been made in the last two or three months during which time our negotiators in Brussels have had the benefit of the Select Committee's report. Notably, it has now been accepted by the Commission and the other members of the Com-

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munity that the directive should apply in the United Kingdom only to public companies. That was a matter that was causing a great deal of concern. Public companies have been selected because they are most closely analogous to companies in the other member States to which the directive will apply.
It will, however, be necessary to introduce legislation which will require all companies to make it clear in their titles whether they are public or private companies, and this will probably be done by some alteration to the titles of public companies. It is planned to bring a draft of this directive before the Committee of Permanent Representatives in Brussels in the very near future. Although final agreement has not been reached on some of the other points to which the Select Committee has drawn attention, I believe that there is good reason to say that our views on most of them will be recognised before the directive is finally adopted. This will require amendment of our company law to bring it into operation not less than two years after its adoption.
I turn to the draft third directive on company law concerning agreed mergers between public companies, and in conjunction with that I shall take the draft directive on the safeguarding of employees' rights in the mergers, takeovers and amalgamations, which is more commonly known as the "acquired rights" directive. Although it has been found convenient to deal with this matter in conjunction with the company law directives—in another place this was dealt with in the Twentieth Report of the Select Committee there—nevertheless this is not a company law directive and ordinarily it would fall to be dealt with by the Department of Employment. My hon. Friend the Under-Secretary of State for Employment is here to rescue me if it should be necessary.
No work has been done on the third company law directive since the first reading of the draft was completed in November 1973. It appears likely, however, that consideration of the text will be resumed in the near future, though I expect that some considerable time will elapse before the directive is ready for adoption. During the ensuing
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negotiations we shall, of course, pay careful attention to the points which have been singled out in the Select Committee's report.
The acquired rights directive is much further advanced and is expected to be adopted by the Council of Ministers later this month. A revised explanatory memorandum is before the House which states that amendments have now been made which deal with the two matters to which the Committee drew attention. Those are, first, that it is now agreed that the provision in Article 6 prohibiting dismissals on the occasion of a transfer except for "pressing business reasons" should be amended by deleting that phrase. It is likely that the directive will not necessitate any significant changes in current legislation affecting dismissals.
The second point on which the Select Committee commented was that the consultation provisions of Article 9 were not to apply to mergers covered by the third company law directive, which also contains provisions on consultation, but it has now been agreed by member States that the consultation required in the directive will apply to third directive mergers.
The fourth directive deals with the content of company accounts and the form in which they should be presented. I readily acknowledge the assistance which our negotiators have received from the accountancy profession, which has been most valuable. Progress on the directive has been reasonably good during the past 12 months. It is possible that it could be ready for adoption by the middle of 1977.
The Select Committee has drawn attention to four matters of importance concerning this document, and I shall refer to them in turn. First, the text has now been revised in a manner which, in our opinion, makes it clear that the principle that the accounts shall give a true and fair view of a company's affairs should be recognised as overriding other considerations. The concept of the true and fair view is essentially one which was born and practised in this country, and is unfamiliar on the Continent. I am sure that hon. Members who belong to the accountancy profession will recognise how important this change has been.

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Secondly, the Committee refers to the need to draw a distinction between private and public companies, and we shall be pursuing this on the lines already agreed for the second directive. We shall seek to clarify the position of acceptance houses. The third point concerns the period for the writing off of goodwill. This is a difficult problem which requires considerable further study.
Finally, the Committee recommends that the accounts of groups of companies should be presented in consolidated form. This is desirable, and the Commission has recently published a draft directive on group accounts. However, difficult problems are presented, especially as regards the definition of groups of companies which should be required to present consolidated accounts. It follows, therefore, that it may be some considerable time before the directive is ready for adoption. In the meantime, and while the work continues, I think it may not be desirable to delay the fourth directive.
Another important issue concerning the fourth directive is the provision that is to be made for inflation accounting following the Sandilands Report. Agreement has been reached in Brussels that the directive must accommodate inflation accounting, and the precise way in which that should be treated in the directive is currently under discussion. I say in parenthesis that I was intrigued to read in page 5 of the Fourth Report from another place the interesting and unimpeachable assertion made in the evidence given by the Accepting Houses Committee that conservatism is not identical to prudence. It is true that that observation was made in an accounting context, but I sense that it has somewhat wider implications.
Although the directives that I have mentioned so far have been concerned primarily with technical matters, the fifth directive on the structure of companies deals with subjects of major industrial and political importance. The right hon. and learned Member for Hertfordshire, East (Sir D. Walker-Smith) is especially interested in the fifth directive and is playing a leading part in Europe in the move towards its final form. The directive contains provisions for the introduction of two-tier boards, providing for
890
supervisory and management boards in companies with more than 500 employees, and the proposal that supervisory boards should include one-third of members appointed or approved by the workers or their representatives. It deals with the powers, duties and liabilities of persons appointed to the supervisory and managerial boards, the rights of shareholders' general meetings, the approval of accounts and the appointment and responsibilities of auditors.
The Commission recognises the fundamental importance of these issues, particularly in connection with industrial democracy. In order to encourage public debate on these important issues, it has published a Green Paper on employee participation and company structure. That document is before the House, and I shall refer to it more specifically later.
In the meantime, the draft fifth directive can be regarded as being in abeyance. No discussions are taking place on it at present. The Commission intends to revise it after the end of this year in the light of consultations which take place throughout the member countries on the Green Paper.
The Green Paper contains an extensive survey of the problems of company structure, the responsibilities of boards of directors and the question of two-tier boards and employee participation. We welcome that approach to this important subject. We particularly welcome the evidence of understanding of the need for flexibility in Community legislation in this area.
As the House knows, the Government have appointed a committee of inquiry, headed by Lord Bullock, to examine and advise upon these issues. It would be inappropriate for me to enter upon any discussion of the detailed proposals until the report of the Bullock Committee is before us. Suffice it to say that we regard the underlying philosophy of these concepts as fundamental to the creation of a new spirit in industry—a movement of ideas throughout the Community which, in my view and that of the Government, is irresistible.
Mr. Tim Renton: Does the hon. Gentleman anticipate that when the fifth directive is reconsidered the Commission will accept that its provisions should apply to public com-

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panies in this country rather than to all limited liability companies? Will the Commission accept the same kind of amendment as the hon. Gentleman has advised us has been accepted in relation to the second directive?
Mr. Davis: I cannot answer that question, because it will obviously be the subject of considerable debate. It will depend on the reflections of the member countries on the Green Paper. The hon. Gentleman is asking me to prophesy something which I do not think anybody is capable of prophesying at this time. I am sorry that I cannot be more helpful in answering that question.
The sixth directive aims to co-ordinate the information to be provided to the public in prospectuses issued by companies seeking Stock Exchange listing of their shares. The Stock Exchange has been assisting in the preparation of the draft. It is expected that consideration of the text in the Council of Ministers working group will begin later this year. In general, we are broadly satisfied with the progress that is being made, although the amount of detail asked for is still somewhat excessive having regard to the standards already set by the Stock exchange for listed companies in this country.
I should now like to refer briefly to the draft instrument, examination of which is not yet complete, which complements the sixth directive. Whereas the latter is concerned with information to be supplied to the investing public, this draft provides for minimum standards which securities must attain before being admitted to final Stock Exchange listing. It is seen only as a first stage in a wider harmonisation process. The Stock Exchange has been actively concerned in the preparation of the draft, and it is anticipated that consideration of the text in the Council of Ministers working group will begin in 1977.
The House will recall that the Sixth directive was debated in another place on 8th April. The debate demonstrated that there appeared to be no major difference between any of the parties in that House or, indeed, about the Government's approach to the negotiations that are being pursued.
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I turn next to the European companies statute, which is a draft regulation. Unlike the directives that I have discussed so far, it would, if adopted, take direct effect as law in the United Kingdom. There would be no necessity for amendment of any United Kingdom legislation. It would simply take effect as the law of this country.
The proposed statute would make available a new legal form of a company—the European company—incorporated under Community law. Its use would be optional. That is to say, it would apply only to companies that decided that they wished to form a European company, either by a merger with a company in another member State or by combining with a company in another member State to create a joint holding or a subsidiary company.
Despite its optional status, the Government consider that this proposed statute represents a range of important issues and problems, which are set out in the explanatory memorandum. The Committee of Permanent Representatives in Brussels is now considering a number of political problems which will arise from the statute, not least its far too rigid—in my judgment—provisions for industrial democracy, which are about equivalent to the German system as it was, and it is considering what machinery should be set up to process the document. The Commission has urged the Council to adopt the statute by the end of this year, but in the view of the Government we need a very careful and prolonged examination of this draft statute before a decision can be taken by the Council of Ministers concerning its adoption.
I am somewhat sceptical about it and about its value. We are not convinced of the need for the creation of the European company at present. We have the strongest reserve about the "European company" which would operate in the United Kingdom and yet not be subject to United Kingdom company law, and we take the view that European Community company law should follow and build upon the directives rather than precede them.
Necessarily, I have had to paraphrase comments about the directives and about the other issues on which I have spoken, because it is difficult to foresee what will

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be the issues raised by hon. Members in so wide-ranging a debate on such technical and complex issues as these. However, in conclusion, I want to say that I shall do my best to respond to any specific points that are made by hon. Members.
We very much welcome the opportunity for debating these matters. I think that it is the first time we have been able to have a comprehensive debate. Notwithstanding the lateness of the hour, I think that it will have value. It will, of course, have value to those who are negotiating on behalf of Britain to secure the best deal that we can and the best form of European company law. It follows also from this that the House will recognise that the report of the Select Committee has been considered by the Government with great care and will also be of continuing value to us in the discussions that will necessarily take place over a very long period.
Mr. Deputy Speaker (Sir Myer Galpern): The Question is as printed on the Order Paper—notwithstanding the lateness of the hour.
10.25 p.m.
Mr. Esmond Bulmer: The Government have invited us to take note of eight Community documents which cover a great deal of ground. I propose to deal with the employment aspects of the Green Paper and my hon. Friend the Member for Mid-Sussex (Mr. Renton) hopes to have the opportunity to deal with company law.
The importance of the Green Paper, both of itself and in the context of the Bullock Committee, cannot be overstated. We welcome the constructive contribution made to the debate by the Green Paper issued by the Commission, and we join with the Government in welcoming its emphasis on flexibility and concerning the need for time to allow member States with different backgrounds in industrial relations to come closer together.
The Commission in its document spells out the case for harmonisation, the need for common standards as a prerequisite for progress towards a genuine Community, the economic benefits that flow from the removal of national barriers to the development of trade and the merg-
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ing of companies, the social advantages that stem from greater mobility of labour and equivalent safeguards and responsibilities for those at work, and the reduction of imbalance between regions.
We would not dissent from any of those matters nor from the Commission's judgment that the Community's foundation must be completed, otherwise it may well collapse. Commissioner Gundelach, in a recent speech, drew attention to the relative decline of Western Europe in relation to some other countries following the dramatic increase in the price of oil and the effect on national resources on which prosperity depends. The Commissioner said that if we are to prosper we must invent, manufacture and trade more effectively than our competitors. To do this we must harness the full creative abilities of our citizens. We all agree that we have a long way to go to achieve this.
As a first step, the Green Paper rightly draws attention to the democratic imperative—the need to recognise that those who will be substantially affected by decisions made by political and social institutions must be involved in the making of those decisions. If we are not to be progressively discomfited by the speed of change and by its sometimes unforeseen nature, and if we are to carry through the fundamental reorganisation that is necessary in much of our industrial life, we can do this only with the active support and understanding of those affected.
We have a great deal to change. The approach of scientific management which sought to take all decision-making out of the job is now clearly counterproductive. As Len Neal put it, "We have run out of morons". Indeed, our school leavers are better informed than ever before. How many jobs insult the intelligence? How many jobs are dead end? We have to meet the higher aspirations of those at work, and we have a task no less formidable than to reestablish the emotional security of work forfeited during the Industrial Revolution.
We must do all we can to encourage management by consent. "Theirs not to reason why" was an attitude as disastrous to Lord Cardigan and the Light Brigade in the past as it would certainly

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be to any management in the future. It is foolish to think that way. The willingness to trust is an essential prerequisite to success. This, more than any formal structure, will build confidence and reduce confrontation.
We have to bring about a substantial shift in employment from activities which consume wealth to those which create it. We have to streamline those industries which clearly are overmanned and we must reduce unemployment. We cannot hope to do this without the help and understanding of the trade union movement. Whether this can best be enlisted by the development of collective bargaining or by presence at the board table has yet to be worked out.
The Green Paper, while acknowledging the role of collective bargaining and the need to extend it across national frontiers, comes down firmly on the side of board-level representation and the fostering of understanding through co-operation rather than conflict.
The trade union movement is divided over employee directors. To some extent, perhaps, that division reflects the difference in attitude between union leaders whose members work in the areas of the economy which are successful and those who, if they were to accept the responsibility, would have all the difficult decisions to take.
Overmanning is a problem in many industries—steel, printing, railways and the motor industry. It is not reasonable to expect trade unions to co-operate and even to shoulder a major responsibility in the streamlining of these industries without a major contribution from the Government to retraining and the development of social plans which remove hardship and foster hope. Nevertheless, at the macro-economic level of the TUC it is obviously in the interests of all our labour force that it should be deployed to produce the maximum wealth. A recent survey of those working in the nationalised industries showed that 57 per cent. thought that they could do more work without too much effort. This was twice the figure for small business and was some indication of the contribution that might be unleashed if motivation could be improved.
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The Green Paper rightly points out that company law must reflect the real world. The Under-Secretary of State has said that British company law is outdated and derives from the nineteenth century and that the board of directors is charged with the management of the company in the interest of the shareholders. Our Bill to reform company law which was lost as a result of the February 1974 General Election made it clear that we thought the time had come to formalise the obligation of directors to take into account the interests of the employees, although that is indeed taken into account by the vast majority of boards.
Mr. Clinton Davis: Is it not the fact that no mandatory requirement was set out in the 1973 Bill to that effect?
Mr. Bulmer: The word was "entitled".
I think we might now wish to go further. In fact, I believe that we need to go further and perhaps require the chairman of an organisation to show how the employee's interest is taken into account, and to provide for companies with over 2,000 employees to enter into participation agreements as outlined by the CBI and for codes of practice, relevant to the great diversity of British industry, both public and private, to be established by a body on the lines of the Advisory, Conciliation and Arbitration Service in order to point the way.
The Green Paper rightly stresses the need for time to effect changes that are agreed to be desirable. All the companies which have been most successful in developing participation up to board level, such as the Bristol Channel Ship-repairers, understand clearly that this is a long process even in small companies. To move from little or no participation to the standards of the best that are set today can take up to 10 years.
The Commission is unrepentant in its claims for the supervisory board. The arguments which it puts forward are powerful: that long-term policy can more easily be put before consideration of the short term, that decision-making and decision-taking are less likely to be confused, and that management is more effectively supervised. The CBI has set out well the contrary arguments. I noticed, however, that Unilever, in its submission to the Bullock Committee

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and from long experience of supervisory boards, gives them a substantial measure of support.
Unilever and other major companies are at one, however, in supporting the Commission concerning board representation on the basis of two-thirds shareholders and one-third employees. Unilever, in its rejection of the TUC's submission for parity, said:
"We totally reject this proposal which would mean that the United Kingdom, from a base generally less developed than any of the Continental countries discussed, would in one jump reach a state which none of those countries has deemed necessary even after long experience. Employee relations is not a field for taking leaps in the dark. Furthermore, Supervisory Boards with 50 per cent. representation would create the risk that shareholders, through their representatives, would no longer be able to exercise the ultimate control which should derive from their ownership of the Company. It is still a fundamental characteristic of a free society that property rights should be respected and protected."
Every British company would, I believe, echo those sentiments. If the Government were to seek to legislate on the basis of the TUC's proposals, this would attract a reaction from management and shareholders that would mirror the hostility of unions to the Industrial Relations Act. The effect on the pound and on investment would be disastrous.
A more general and gradual approach is what we would all welcome. The Biedenkopf Commission found that the more effective was the participation on the supervisory board, the more smoothly the workers' council functioned. Commissioner Gundelach has rightly emphasised the need for supporting structure, and in the present evolution of British industrial relations, it might well be more sensible to legislate for employee councils rather than board representation. It is from membership of such councils that employee directors will most naturally evolve.
There are a number of points in the Green Paper which we would specifically wish to recommend to the Bullock Committee and in which we hope that the Government will join us—for example, that worker directors should be employees of the company, that board level representation can function most efficiently on the stem of proven structure, that employee directors should be truly
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representative of employees and that all employees should be involved in their election, and that employee directors should be responsible to the enterprise as a whole.
I believe with Commissioner Gundelach that no union can claim that the existence of formal democratic guarantees is harmful to it. Further, it is no service to the trade union movement to seek to deprive employees who are not members of trade unions of fundamental rights. There are millions of them. The Green Paper makes it clear that there can be no question of enforcing participation on those who do not wish it but that those who do wish for it must be provided with a proper back-up and secretarial facilities and time to study relevant documents.
The Commission also makes two further points which I think are important—the need to ensure that minority views can be represented, and the contribution which financial participation can make both to motivation and, I would add, to the independence of the enterprise.
I believe that it would be immensely helpful in this country if companies which have outgrown the impetus of the original founding families were able to involve employees in the ownership of the enterprise. There are, of course, the familiar risks which attach to the arguments concerning "all the eggs in one basket", but if companies are to thrive and to remain independent it is in the nature of a mixed economy that some risks should be taken. Too many companies which might have made a valuable contribution in their own right have been sold to larger enterprises when the synergy was high and the price attractive, with disastrous consequences both for employees and for the locality in which they work.
The Bullock Committee has been handicapped from the start by its terms of reference. I hope that it will study the Green Paper for the valuable points that it makes and the pointer that it provides to the way in which participation will be developed within the Community. There is a great need for a non-partisan approach and for a recognition by all concerned that development should be by consent and that there is no middle road between a market

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economy and a bureaucratic, centralised State. For those who wish to preserve a market economy and freedom of choice, a growing measure of participation by employees is an important key.
We very much recommend to the House many of the points in the Green Paper.
10.38 p.m.
Mr. Ivor Clemitson: It is a pleasure to follow the hon. Member for Kidderminster (Mr. Bulmer) and to see him, with his considerable knowledge and experience of industry and industrial relations, speaking from the Dispatch Box.
I wish to follow the hon. Member in considering the document "Employee Participation and Company Structures in the European Communities". I found it something of a curate's egg. There is much in it with which I can agree. It talks, for example, about the need to come to terms with
"the increasing recognition being given to the democratic imperative that those who will be substantially affected by decisions made by social and political institutions must be involved in the making of those decisions."
It has taken us a long time to realise that the democratic principle cannot stop short at the narrowest of political limits. Now, unfortunately, it is in danger of becoming a cliche. Nevertheless, we should welcome the fact that the penny is at last beginning to drop.
I cannot dissent from the proposition in the document's conclusion that no attempt should be made to impose a rigid framework for industrial democracy in the EEC. The conclusion states:
"The main task is to construct a framework which provides for the objectives to be reached in a way which leaves discretion to member States as to the precise models which they may adopt."
That is correct. There must be flexibility not only between member States but in any legislation passed in this country which should be enabling legislation.
So far, so good. We recognise the democratic imperative and that it would be wrong to impose a rigid strait-jacket. When, however, one begins to dig beneath the surface of the document and to disentangle some of the basic attitudes and philosophies on which it is based,
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some nagging doubts arise. For example, the document gets off on the wrong foot by its sympathy for the poor companies which it describes as being imprisoned within their national system. Tears do not immediately spring to my eyes, because when I survey my own constituency, for example, I see that there are a number of "prisoners" which have successfully escaped. A major company in my constituency is owned and controlled by a foreign-based multinational company. The picture of an imprisoned company needing release is wide of the mark in that case.
I should have been happier had the document posed the question of how the great centres of power, the suprenational companies, can be made accountable and democratized—to use modern jargon—instead of dealing with participation in terms of the poor imprisoned company. The supranational companies present a most difficult problem and are a grave challenge to industrial democracy. I do not wish to develop that argument at length, but I am increasingly convinced that the problems cannot be solved in the context of individual nation States and that countervailing power—to use a Galbraithian phrase—must be built up across frontiers by different States and trade unions coming together.
The key passage of underlying philosophy is that on page 51 which says:
In so far as economic and social policies come to regard the company as an enterprise in which labour and capital combine in their own and society's interests, then the laws relating to companies will sooner or later have to reflect this change of underlying philosophy".
The picture there is one of two groups of people coming together, one of which supplies the labour and the other of which supplies the capital. If that is true, there can be no argument against a fifty-fifty representation on boards. If the two sides are equally important, they must be equally represented.
The document says earlier, in referring to the experience of systems with minority employee representation on the boards:
"There is no fundamental shift in the ultimate balance of power as regards decision making".
We must be fair and recognise that to talk of capital and labour as having

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equal rights is an enormous step forward. It is patently nonsensical that the control of companies, certainly in terms of the law, should still be entirely in the hands of the suppliers of capital only. I am talking about the legal, technical position, not of what may be the position in practice. I find it impossible to see how that legal position can be defended in the twentieth century.
The view that there are these two distinct groups, the suppliers of labour and the suppliers of capital, who come together is a very simplistic view of the nature particularly of capital in modern society. Clearly a large proportion of capital in a large modern enterprise is that which is produced by the people who work within the company and is reinvested in the company. Much of the capital from outside the company comes from such things as insurance funds and pension funds, which are contributed by millions of people, most of them working people who generally have no say in the running of those funds and how the money is invested.
A much more radical analysis than the one contained in the document is needed. This kind of capital and ownership cannot be adequately dealt with by share participation schemes. The document deals very briefly with this aspect, saying:
"with a very few exceptions, none of the existing systems in practice give employees any real influence over the decision making of the enterprises in which they work".
However, I am not arguing that until we get the ownership question right we should have nothing to do with industrial democracy. That would be a very negative approach. I argue, on the contrary, that the more we move towards industrial democracy, the more will the whole question of the patterns of ownership be raised and the more we shall develop new patterns. I believe that the questions will inevitably flow from the development of forms of industrial democracy.
The same kind of rather superficial thinking comes up again when the question of supervisory boards is considered. It is true that the document asks for a clear distinction between what it calls
"the function of management on the one hand, and the supervision or control of management on the other",
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but the real nature of the difference between the two functions is missed in the document. The real distinction is between the making of policy and its execution. I know that in practice it is not easy to distinguish between the two, but I believe that in a conceptual sense we must distinguish between them. What we have in much of industry is an almost total blurring of those two functions. That has not been for the health of industry.
The task of the board—or the supervisory board if we are to use this dualist jargon—should be to make policy. The function of management is basically to carry out the policy as determined. The document talks of supervisory management. Very well, that is fair enough. But supervisory management is essentially a subsidiary function. It is a follow-on function from the making of policy. We must get this distinction clear in our minds.
I must confess that at one time I was sceptical of the idea of workers in the board room, but I have now come round to the idea—provided, of course, that it is on a fifty-fifty basis—because democracy clearly must imply participation in the making of policy at the highest level. I believe increasingly that we cannot achieve that by any other means. The document is basically right on this. One hears the argument that, if one develops and expands collective bargaining that way, one can influence policy and so on at the highest level but in practice collective bargaining has been around for a long time and we are still waiting for the really significant influences on policy at the highest level to come about.
I have become convinced that the sort of proposals put forward by the TUC would bring about that influence over policy-making at the highest level and would, as the document rightly says, provide a fillip to industrial democracy at all levels. Clearly we are talking about the development of industrial democracy not only at the top but at every level in the organisation.
The document shies away rather from the idea of imposing a works council structure except in the case of the Euro-companies, which I do not wish to talk about. It is right not to attempt to

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impose such a policy. My own observations lead me to the conclusion that such bodies are either talking-shops about trivialities or become challenges to the official trade union organisation, which does nobody any good. At the best, that sort of organisation is a useful stage in the development of industrial democracy or good industrial relations. I do not believe it can bear the weight that some people wish to put upon it.
If we are talking about industrial democracy in the real sense, we are talking not merely about consulting people, however seriously the management may take consultation. We are talking about influencing, determining and changing policy—that is a different order of things altogether—whether it is achieved by representation at board-room level, by collective bargaining or whatever else it might be.
I may have appeared to be unduly critical of the document, but it is important that we should attempt to look at its underlying philosophies on which the proposals are made. In this respect I found the document somewhat lacking in depth. However, I welcome the general commitment to advance in industrial democracy and what I take to be the general approach of not imposing blueprints and of allowing the maximum flexibility.
10.54 p.m.
Sir Derek Walker-Smith: Like the hon. Member for Luton, East (Mr. Clemitson), to whose very interesting speech I have listened with close attention, I shall confine my observations almost entirely to the fifth directive. That is not because the other directives referred to and the ancillary documents are not of considerable interest and importance—of course they are. Some of them are of considerable technical complexity as well. But there is no doubt, and this is common ground, that the fifth directive has a far greater content of general political and sociological significance than any of the others. Therefore, it is perhaps right in what is inevitably a relatively short debate, and having regard to the diversity of subject matter, that we concentrate on that subject.
By way of preface, I thank the Under-Secretary for his very kind reference to
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my own interest and participation in the formulation of this important directive. The fifth directive, with which we are here concerned, was formulated as long ago as September 1972—that is to say, before the entrance of the United Kingdom into the Community.
That explains—if I may say so by way of parenthesis—why my hon. Friend the Member for Mid-Sussex (Mr. Renton) does not find a clear answer to his question as to which British companies are covered. If he looks at the original text of the directive, he will find in Article 1 thereof that the companies to which the directive applies are listed seriatim under the countries—in France, la société anonyme; in Italy, la società per azioni; in the Netherlands, de naamloze vennootschap, and so on. There is not, however, any reference to the limited liability company in this country, because the United Kingdom was not being catered for in the directive.
As "public company" is not a term of art in British company law, certain complications will arise, and to these I drew attention in the early days, three years ago. So far, however, that particular matter has not come to be decided.
In its original form—and as it originally came before the Legal Affairs Committee of the European Parliament, in the early days of my membership of that Committee—the fifth directive was peremptory. Under Article 2, the two-tier board system, as we call it, was mandatory—that is to say, there has to be a management board and a supervisory board. Under Article 3 of that directive, the supervisory board was responsible for the appointment of the management board. Article 4 of the directive specified the composition and appointment of the supervisory board. In effect, two alternative methods were specified, which for convenience I shall call the German and the Dutch methods. The German method involves the appointment of two-thirds of the supervisory board by the shareholders and one-third by the workers or their representatives. The Dutch method involves membership of the supervisory board by co-option, with a right of objection on the part of the workers.
Article 12 of the original fifth directive specified the spheres in which the supervisory board would have the power

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not only of consultation, to which the hon. Gentleman has just referred, but of co-decision—that is to say, it specified the matters in which the decision of the management board would depend upon authorisation by the supervisory board.
Under Article 64 of the directive, member States would be obliged within 18 months of the promulgation of the directive to amend their company law to bring it into line with the directive and to institute a two-tier system with appropriate employee participation. Such a requirement might have been reasonable in countries already operating a two-tier system and familiar with the concept, but it was hardly realistic in respect of a new member State such as the United Kingdom which had joined after the formulation of the directive and was inexperienced in the two-tier system.
Matters did not proceed very fast, partly because, at the same time, the European company statute was under consideration and the Commission was anxious—and the European Parliament acquiesced—that priority should be given to the evolution of the European company statute. That statute was debated in the European Parliament in plenary session, after lengthy discussion in the Legal Affairs Committee, in July 1974. Many amendments were made, most of which were adopted by the Commission, which recently referred it back to the Parliament. Now it is recommended by the Commission to the Council with those amendments incorporated.
In spite of that impeccable background, I must echo the doubts and scepticism of the Under-Secretary of State as to the extent to which the European company statute will come into operation. As will be recalled by my hon. Friend the Member for Saffron Walden (Sir P. Kirk) and my hon. Friend the Member for Kensington (Sir B. Rhys Williams)—who have made such a distinguished contribution to these matters both in the House and in the European Parliament—I found it necessary in the course of our proceedings both in the Legal Affairs Committee and in the plenary session of Parliament to issue a warning that, although a great deal of labour had gone to the evolution of the European company statute, it might not be taken up
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to the extent that its originators would wish because its final form was not wholly practicable.
I do not want to make more than a passing reference to the European company statute because we are primarily dealing with the fifth directive, to which the Legal Affairs Committee returned after the passage of the European company statute. We returned to it against the background of knowledge of the difficulties that would face certain member States in adopting that directive as it stood, and we resumed our consideration with the keenest perception of the issues involved, as many of them were common to the European company and had been exhaustively debated in that context in the committee and Parliament.
There is this important difference between the two. The European company is voluntary. No one need form a company unless he wants to. But the fifth directive when it comes into operation will be part of the compulsory processes of harmonisation—or approximation, as it is technically called—of law. It will be compulsory on its adoption in its final form, whatever that might be, for the member States. Therefore, it is a matter of vital importance to the business and industry of this country and the large section of our population engaged in business and industry.
When we resumed our consideration of this matter, we were fortunate in having a Commissioner dealing with these matters, also from a new member State, a man of great wisdom, practical judgment and receptivity of mind, Mr. Gundelach. After his dialogue with us in the Legal Affairs Committee, he informed us that he was withdrawing or deferring his directive and proposing to issue a Green Paper—using that phrase in the English tongue. That is the genesis of the Green Paper which we are discussing today, and which is also currently under discussion in the Legal Affairs Committee of the European Parliament. That means that the final form of the Commission's fifth directive as it will go forward for consideration by the Council of Ministers will be settled only in the light of thorough and detailed consultation with the European Parliament and the Legal Affairs Committee. This is a pre-legislative function

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of the greatest practical value. It involves the association of Parliament in the vital formative stages of law-making. It is a procedure we have not succeeded in incorporating into our parliamentary process in Britain, in spite of generations of parliamentary experience. I referred to this in my speech in the procedure debate on 2nd February this year, and if any hon. Member is an unsatiable glutton for punishment he can refer to it at column 1087 of the Official Report of that day.
We have already had some parliamentary discussions of the Green Paper in the Legal Affairs Committee with Commissioner Gundelach, and we are about to resume them. Indeed, I was in conversation with Commissioner Gundelach on this subject yesterday in Strasbourg. I left that city before six o'clock this morning in order to take part in today's debates on Community matters, so that if my clarity of exposition leaves anything to be desired I hope I shall be forgiven. That very friendly and constructive conversation with Commissioner Gundelach took place within moments of the vote of censure by our group on the Commission of which he is a distinguished member. It is not only in this Parliament that we observe the traditions of personal friendship in spite of occasional political differences.
Next week, all being well—and who can tell these days in these matters?—we in the Legal Affairs Committee will have our first detailed discussions on the Green Paper with, and in the presence of, Commissioner Gundelach and his officials. We shall seek to answer a series of questions which he is addressing to us. These questions include such matters as the prescription of a transitional period, for which no provision was made in the original directive, and the question of alternative structures which will be permitted during that period.
Four such alternatives are set out at page 74 of the Green Paper. First, there is the two-tier system with employee representation on the supervisory board. Second, there is the two-tier system with a transitional arrangement for employee participation. Third, there is the one-tier system with employee representation on that single board. Fourth, there is the one board system with a
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transitional arrangement for employee participation—that is to say, not actually on the board.
There are the four methods set out. We shall consider them and, very important, we shall consider the position at the end of the transitional period and what the directive is to prescribe for them. That includes the basic question whether the directive should make the two-tier system with employee participation compulsory at the end of the transitional period or whether, even at the end of the transitional period, the option should be given in the light of the experience of that period to adopt the alternative method of introducing some appropriate form of employee participation short of a full two-tier system with the supervisory board.
The other sort of questions that we shall be discussing with Commissioner Gundelach will include the method of the allocation of the workers' representatives that can be prescribed in such a directive—how far they should be local, to what extent they should be the organised representatives of the trade unions, and the like. Also, I should think that the Commissioner would wish to consult us in regard to the relationship of employee participation to the important question of collective bargaining. All these things go to the heart of the matter. It means, therefore, that the Commission will formulate its substantive directive in replacement of the original 1972 directive only after full consultation with the Parliament and its Legal Affairs Committee, at the same time en rapport with individual Ministers in the various member States. The Ministers in the member States will also have the benefit of the views of their own national Parliaments.
When the time arrives for the Council of Ministers to take its decision, there will be for its help and guidance a whole confluence of parliamentary opinion flowing in from various sources by divers channels and fertilising and enriching the whole democratic process. What will be the outcome? Equally important, what should it be? I shall not suggest answers to the various questions to which I have been referring and on which discussion will begin in the Legal Affairs Committee on Tuesday. It would perhaps be

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inappropriate for me to do so as it is my duty as the chairman of that committee to preside over the discussions, although, on the continental model. I am a participating chairman and, therefore, I am not shut out from expressing my views in the matter.
I can restate my general views and approach on these questions. In principle, as I have said before in this House and elsewhere, I believe in the two-tier board system and employee participation. I have held this view for several years and would hold it irrespective of the Community implications. I should take the same view if there were not a fifth directive and the harmonisation of company law. I should hold it on its intrinsic merits. I believe in the two-tier method of achieving two desirable and perhaps essential objectives, of the first of which we have properly heard much this evening—namely, employee participation. Curiously enough, we have not heard much about the second set of objectives—namely, a proper place, a proper role and proper protection of the shareholders of the company.
Shareholders play only a mute and inglorious role in twentieth-century capitalism. Although nominally elected by the shareholders, directors in many companies are thought by some to be something in the nature of a self-perpetuating oligarchy, and shareholders have little or no actual say. A supervisory board on the German model with watchdogs, perhaps experienced bankers and the like holding the proxies of individual shareholders and breathing down the necks of the management board would be much more powerful protection for shareholders than anything presently existing in this country.
I have held that view for a number of years, and who can say that some episodes in our company history in the past few years have not justified and reinforced it? On the other hand, I believe that a proper degree of employee participation is the natural order of events and the beneficent and probably essential ingredient in a dynamic and successful system. In the long run, I believe that it can best be achieved by suitable participation in the two-tier board system.
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I am also aware of the virtues of collective bargaining and the part it has to play. Indeed. I was brought up hereditarily in an atmosphere of collective bargaining. As a result, I was privileged as a young Member of this House to enjoy the friendship of such great trade union figures of the past as Ernest Bevin and George Hicks. I need no instruction on the merits, qualities and contribution of collective bargaining. However, I think we must recognise that collective bargaining of itself is not enough. There is always the danger that the concept of the two sides of industry, a phrase that find unattractive, is becoming negative. We must get away from the idea of polarisation that is implicit in that phrase. We must get away from not only the implications of dichotomy implicit in that phrase but possible division and even collision and conflict.
Employee participation would give to workers at once a greater responsibility for the industry in which they work and a greater incentive to achieve success for it. I believe that it is no accident that in Germany, where it is practised, the growth rate is so much higher and the inflation rate so much lower than in this country. We need a new spirit of unity in industry, which can be achieved in that way, so that all will be associated with the success of the industry in which they serve.
In conclusion, I would add this cautionary word. The principle is clear and is easy to state, but its achievement in practice may be difficult.
In particular, I stress two points. First, it is vital to get the right balance between the functions and powers of the management board and the supervisory board. We spent many hours discussing this matter on the European Company Statute. In some matters the supervisory board should have the right to co-decision as given, for example, in Article 12 of the original fifth directive. In effect, that is a right of veto. In other matters, however, it is appropriate that a supervisory board should have only a right of consultation. It is necessary to achieve a meaningful role for employees and shareholders through the supervisory board without prejudicing, and still less frustrating, the efficient executive conduct of industry.

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My second observation is that worker participation must mean what it says. That is not worker control. Employee participation on a two-tier board is not and should not be the introduction of syndicalism by the side door. It is not intended to be that. Employee participation should reflect local democracy and not be a mere extension of the powers of trade union organisation, which are in all conscience, sufficiently powerful at the present time.
Our goal is clear. When we can hope to achieve it in totality is less clear. For that reason we should be prepared to be flexible, practical and long-sighted. In that spirit, I shall hope to continue my discussions with the Commission next week, and that spirit I commend to the House.
11.23 p.m.
Mr. John Lee: The whole House should be grateful to the right hon. and learned Member for Hertfordshire, East (Sir D. Walker-Smith) for giving us a long and detailed account of the negotiations that have been taking place. I think that it was of value to all of us, whatever views we may take on the matter.
It is a pity that, once again, a whole series of quite different matters have been gathered together and bundled into the same debate—matters of a technical character relating to accounts, prospectuses and so on, all of which merit attention but few of which will get the attention they deserve because of the late hour at which we normally conduct these deliberations. If we were to give these matters the attention they merit, they would tend to shut out what the right hon. and learned Gentleman has rightly chosen as the theme which will remain the theme for the rest of the debate.
This debate, to make a slightly controversial comment and perhaps to introduce a somewhat discordant note, is based on the premise of the continuation of the mixed economy. That is a premise that I reject and do not regard as being more than a transitory situation. Nevertheless the fact remains that, whatever the political fortunes of this country, the public company in one form or another—indeed, the private company—will be with us for some time to come.
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Therefore, it is only right to think in terms of company law revision.
My complaint about this matter is that we find ourselves discussing it as a kind of spin-off of European legislation. However, I take the point made by the right hon. and learned Member for Hertfordshire, East that the most painstaking and scrupulously attentive activity is going on in Europe to see that as many people as possible are involved in the discussions and that the atmosphere in which the revision, particularly of the fifth directive, is going on is as democratic as possible. But I do not like the way in which this may tend to pre-empt our own root-and-branch consideration of company law, as I hope it will be.
I hope that the Under-Secretary of State will be able to tell us that, if not in this Session, at least in the coming Session there will be scope for a comprehensive review of company law. I have heard rumours, via the grapevine, that there will be a Companies Bill of a comprehensive kind in the next Session. Bearing in mind that we shall be clearing the decks for action for devolution and that almost everything else of importance will be swept aside, I hope that there will be scope next Session for a review of company law dealing with far wider matters than are under discussion in this debate.
Returning to the theme of employee participation, I echo the remarks of my hon. Friend the Member for Luton, East (Mr. Clemitson). At the end of the day we are considering to what extent we make the government of a company vested in those who work in it to a large extent. I am not casting doubt on the good will of the people concerned, but nevertheless, all the discussion about whether it is to be a one-tier or two-tier board system and about the exact proportion of participation short of 50 per cent, participation represents a kind of fancy franchise or hybrid constitution-making and is done for the purpose of avoiding the reality of control by those who participate.
It reminds me so much of the hybrid constitutions of the emergent colonies, where elaborate franchises are evolved and special measures are introduced into the legislatures to cushion the countries against the effects of democracy. In every case the constitution is swept aside

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and is replaced by full participation by those elected. I know that the analogy must not be pushed too far, but it is the same kind of situation.
The recommendations contained in the document which suggest the replacement of one-third employees and two-thirds shareholders by the one-third, one-third, one-third concept reminds one also of Dick Crossman's crack-brained attempt to revamp the House of Lords. That provided for the balance to be held by some indeterminate grey area held by the kind of people the Leader of the House would call political eunuchs.
At the end of the day the House will have to recognise that, whatever the European Commission may want when it has finished its deliberations and whatever the European Parliament may want, Labour Members will not be content with anything which gives less than a determining influence on the policy of a company by this participation.
The argument goes a little beyond that. I accept that not all criticisms of trade unions are unreasonable and that not all trade unions, any more than anyone else, are always wise in the way they conduct their affairs. If, however, it were to be thought that we were going to use this system in order to side-track, bypass or outsmart the trade union movement, it would do no good. It would cause great resentment and in the end would be counter-productive.
I therefore find it difficult to understand why the hon. Member for Kidderminster (Mr. Bulmer) should make a sour comment and try to draw an analogy with the Industrial Relations Act. One failing of that Act was that it introduced a spurious air of democracy in trying to produce a balance in trade unions. One recalls when the railway unions were forced to hold a ballot under that Act and the Government were confident in the expectation that the vote would go a particular way, to the discomfiture of the trade union leaders. In the end, the opposite happened and it was the Government, not the trade union leaders, who were discomfited.
I hope we shall hear a little more about some other directives. The Minister scarcely referred to the question of the protection of the rights of employees in the matter of transfer. I do not know
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whether I understood my hon. Friend the Under-Secretary correctly, but looking at Commission Document R/2155/75 it seemed to me as though the Government were resiling a little from what seemed to be a useful, if rather minor, improvement that had been suggested. I hope that that is not so. My hon. Friend will have an opportunity to comment on that when he winds up the debate.
Mr. Clinton Davis: I am in a position to respond to the point that my hon. Friend makes, but I should like him, albeit at this late hour, to develop, just briefly, the point from which he says we are resiling.
Mr. Lee: Perhaps I misunderstood my hon. Friend, but I thought that that was so. Perhaps I have misread my own notes on the matter. If he tells me I am wrong about it, I shall accept what he says.
Will my hon. Friend say a little more about the technical question of the writing off of goodwill? He made no definite comment on that point, but I see that there is provision in the document for the recommendation of a five-year period with regard to that. What is the Government's view? My hon. Friend seemed to express no particular view as to whether that was likely to be adopted.
Again, although my hon. Friend appeared to welcome the reference to the group of companies producing consolidated accounts, I am not entirely clear whether the Government think that that is a practical situation. The impression I got from my hon. Friend—I hope that in this instance I have not misunderstood him—was that the Government had doubts about this matter on grounds of practicability. I hope that that is not so, because it would be a useful minor improvement.
Perhaps my hon. Friend will also comment on the proposed changes in company meetings where there would be two-thirds majorities, as has been recommended by some of the drafts, in place of the situations in English company law where a simple majority at present would suffice. I think that all hon. Members would welcome any greater degree of participation and greater safeguard of that kind. There is a reference to mergers

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also. We should be glad to hear from my hon. Friend on those matters.
Finally, I echo the view that the European company seems to be a non-starter. I see no benefits from it. It seems that it is merely a device to remove the control of a number of companies outside the supervision of the Department of Trade. I hope that the Government will discourage this proposal. If I understood my hon. Friend aright on this matter—that this proposal has a direct impact on British law—may we know whether it is to be incorporated in any Statutory Instrument here or is to take the form of any amendment to our domestic law?
I hope that my hon. Friend will refer to the directive on the European company. I hope that it is a non-starter. It is wholly undesirable and only tends to increase the suspicions that many of us have had. One of the many objections to the Common Market that many of us have had is that it tends to make life easier for the multinational conglomerate and the control of such institutions that much more difficult.
11.34 p.m.
Mr. John Davies: I shall be very brief. I am tempted to follow up some of the earlier remarks but I shall not do so.
The assembly of documents with which we are faced presented the Select Committee with something of a dilemma. That dilemma is mirrored in the problem that the House faces.
There is an extraordinary complication of different issues, and it is natural that the fifth directive and the consultative document should monopolise the interest and discussion in this debate—apart from some rather ill-judged remarks by the hon. Member for Birmingham, Hands-worth (Mr. Lee), who obviously has not studied these matters with the care and attention which they merit.
The dilemma with which one is faced is that the system that exists to review Community matters in the House does not lend itself to instruments such as those which are now before the House. They are instruments which respond better to the more normal methods of legislation in this House—particularly examination in Committee involving detailed point-by-point and line-by-line
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examination. One cannot conduct an exercise of that kind on occasions such as this. Therefore, these instruments lack the degree of analysis which they should properly have because they cover a wide variety of matters.
I wish to draw attention to what was said by the Lord President of the Council earlier today about a rethinking of methods of dealing with Community legislation. Certainly we require a different approach to the matters which are before us tonight. It is true that the Select Committee will very much need to review this debate and to consider whether the undertakings given some time ago by the Government in relation to proceedings of this kind are met by the kind of debate we are having tonight.
It may be that the fifth directive and the Green Paper can be said to have been given a certain airing in this debate and can be regarded as having been considered. But it would be ridiculous to imagine that we have taken note of such matters as mergers between public companies, the presentation of accounts and matters of that kind. Surely we must regard those matters as not having been dealt with, and the Select Committee will seek to give whatever help it can to the House in advising it how best to proceed on any other occasion.
Finally, I wish to deplore the somewhat general douche of cold water poured on the European company statute. I think that that statute could serve a useful purpose. It is unlikely simply to be dropped. It does not seem to me that that is likely to happen. It is possible that it will be accompanied by some positive advantage flowing from incorporation under the statute which at the moment is not evident.
Mr. Gundelach, to whom much warm reference has been made, regarded this as being the pace-setter of European company law and a means by which one could project the pace of European company law in a single statement which would serve as an objective for the more complex arrangements which would ensue. I personally hope that the Minister does not regard the European company statute as something to be discarded. No doubt it has difficulties ahead of it, but it would be a pity to regard it as something to be avoided at any price.

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That sums up what I have to say. We shall have to think carefully again about how the House can cope with these problems.
11.38 p.m.
Mr. Peter Viggers: My right hon. Friend the Member for Knutsford (Mr. Davies) referred to the volume of detail involved in these documents. I have checked the situation and find that I have read a depth of 2·6 inches of foolscap paper in relation to this debate —or, to put it in European terms, a depth of paper of 6·6 centimetres.
Company law reform in the United Kingdom tends to go in 20-year cycles. We had the 1929 Companies Act and the 1948 Companies Act, revised by the 1967 Act, and that was intended to be followed by other Acts. The Conservative Bill of 1973 failed to reach the statute book, and I think there is now general agreement that revision of company law is due. When the revision takes place it should be on a basis agreed by all parties since the law of companies is not something which lends itself readily to political tinkering. I suggest that we should all press for a non-controversial modest reforming Bill.
The reforming measures we now need in this country could be classified in two broad groups. There are first, the technical reforms to rectify specific abuses and to eliminate areas in the law which have become obsolete. In this category there ought to be some revision of the laws of disclosure as spelt out in Sections 27 to 33 of the 1967 Companies Act. There should also be some tightening of the law on insider trading. I say that specifically not because I feel that insider trading is a great abuse, but it is an area to which public and Press attention has been drawn, and it is proper that an area which has been the subject of Press criticism should be seen to be rectified.
The second area of necessary reform is more important and reflects a changed attitude to company activity. This was expressed clearly in the White Paper on company law reform published by the last Conservative Government in July 1973. Part of it states:
"The Government are specifically recognising, in the context of company law, the generally accepted fact that ownership involves responsibilities as well as rights. This requires
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company directors on behalf of the shareholders, to discharge their social responsibilities as well as to protect their legitimate interests. The boards of companies and their managements thus have a manifest obligation towards all those with whom they have dealings—and not more than the employees of the company."
We ought to be discussing the responsibility of companies in the broadest sense —their responsibilities to the public, to consumers, to employees and to their pensioners.
In dealing with the Commission document we need to bear one important point in mind. It has been dealt with before, but I am not satisfied with the reference made to it. The Community regards a limited company in the United Kingdom as the institution which it seeks to control by its directives. This includes, in British terms, the listed company, the unlisted company, the public company and the private company. The private company is in many cases a small concern dealing with the family affairs of perhaps a small shopkeeper or a small business man.
In Britain the laws of partnership are so harsh that a partner can be at a considerable disadvantage in that he can find himself responsible to the extent of the whole of his fortune for some mistake or misdeed of one of his partners. Therefore, the small private company is becoming the normal way through which small business is carried on in this country. It is quite inappropriate for small companies to be controlled by Commission directives.
In Britain, most industrial and commercial activity is carried on through companies even down to the very smallest operation. That is not the case of the Continent. In Germany, the normal form of a small company is the Gesellschaft mit beschränkter Haftung—GmbH—and in France it is the société á responsibilité limitée—SARL. This continental conception is a form of business organisation which is a legal person in form and an partnership in essence, so that economically it is a hybrid between a company and a partnership. There is a clear difference between the GmbH and the Aktiengesellschaft—AG—which is the German form of a public company. The Commission documents are based on the concept of the Aktiengesellschaft, and the suggestions made in the Commission

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documents are appropriate for major industrial organisations. They are clearly inappropriate for small private companies. It is of overwhelming importance that small British private companies should be exempted from the rules, controls and structure which are appropriate to larger companies.
It is clearly important for us in this country soon to bring forward a change of our company legislation so that large and medium-sized companies, those which are prepared to accept certain disclosure and other requirements, should be called limited companies and should have the word "limited" as the last word of their title but that the small family business and company should now be given a completely different complexion and name. It might, for instance, be suitable to use the word "private" in the title to distinguish it from the limited company.
Although this has been recognised—the Under—Secretary referred to it time goes by and it does not happen. If we are not careful, the Commission will continue to regard limited companies as those which are to be controlled by directives. We cannot simply sit on this: we must deal with it. We need this legislation soon.
Having made that preliminary point about small companies, the rest of my speech will be about larger companies. I have no strong comments on Document R/2155/75, which deals with employees' rights in the event of a merger, takeover or amalgamation. Certainly the document appears to raise no great difficulties for the United Kingdom, but I agree with the view in the Minister's supplementary explanatory memorandum that this point could be covered in the third directive and does not merit its own paper.
The Green Paper on employee participation and company structure is a fascinating document. It takes the view that the best way of proceeding in this field is with common guidelines—that is, laying down suggested methods of approach without firm rules. This is a reflection of the Commission's decision to proceed gradually towards harmonisation of company laws. This is the flexible and gradual approach which, I understand, is known to those in the European Parliament as the "salami approach", the
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slice-by-slice approach, rather than one traumatic revision of everyone's business law system.
I am not inspired or impressed by the Department's explanatory memorandum dated 5th January 1976, which explains that an independent committee of inquiry was announced in August 1975, that its membership was announced in December and that apparently it will be in a position to make final recommendations within 12 months of December 1975. Time goes on. Does the Under-Secretary feel satisfied that progress is being made and that legislation will be brought forward?
In our approach to employee participation, we must search for methods which will be grasped enthusiastically by all employees. Page 161 of the Commission's Green Paper states:
"Company law in the United Kingdom makes virtually no provision concerning a company's employees."
For too long attitudes on the subject of employee participation have been bitter and inflexible. Those demanding industrial democracy have made demands which are quite unrealistic and unworkable, and as a result employers have tended to take the line of greatest resistance.
When employers read the kind of speech that was made by the hon. Member for Birmingham, Handsworth (Mr. Lee) their reaction is to wonder whether to emigrate or to reach for their cheque books to make another donation to Aims of Industry. The last thing they will do is make a concession to their employees.
For too long the actors in this debate have portrayed each other as stereotypes. One example of the way in which the debate has evolved is the policy suggested by the TUC General Council that companies employing more than 200 employees should have a two-tier structure, with one-half of the members of the supervisory board being appointed through trade union machinery. This is not realistic. It is a formula for deadlock, and the sooner the TUC recognises that the better.
We should try to work not through imposed legal requirements but through a code of practice which companies should be encouraged to adopt. I strongly support the thoughtful and constructive suggestion put forward by my right hon.

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Friend the Member for Lowestoft (Mr. Prior) on Tuesday of last week that there should be minimum legal requirements which would be spelt out and that there should then be a code which would lay down ideas beyond those minimum standards.
For too long the shrill demands of the far Left and the inflexibility of the far Right have masked the fundamental fact which should be in the front of our minds—the overwhelming desire of nearly all decent, hard-working, moderate people for a feeling of belonging, a knowledge that their views are taken into consideration and their interests safeguarded. That is clearly spelt out in the Green Paper in a phrase that rings out. It refers to the increasing recognition of the democratic imperative and says that those who will be substantially affected by decisions made by social and political institutions must be involved in the making of those decisions. The decisions of employers have an effect on the way of life of employees, their work satisfaction, their sense of dignity and their autonomy as human beings.
I hope that we can benefit from discussion in the European arena. After all, the mixed economies of many European countries are controlled by Socialists—and they are none the worse for that because they are forward looking and ongoing. They are not reactionary and negative. We need a new spirit, and those involved in this debate may find that new spirit in Europe.
In the second directive on the formation of companies, private companies must be exempt. The best way to do that would be for the United Kingdom to legislate to distinguish between public and private companies. Subject to that comment, the directive should not cause any difficulty. The third directive on domestic mergers is broadly acceptable for public companies, but it is preposterous that it should apply to private companies.
The fourth directive on company accounting is meaningless in the context of private companies. I am struck by the strength and excellence of the London financial market and the way it operates. Two important points have been neglected in the directive. There should be rules for group consolidation and group structure, which are more import-
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ant in the United Kingdom than in any European country. For any accountancy provisions to lay down rules in the European context without taking into account the importance of the group structure in the United Kingdom makes the rules less meaningful.
Mr. John Davies: When he introduced the debate, the Under-Secretary mentioned that there is now a seventh directive, which is not among the papers we are considering today, dealing with the consolidation of group accounts. To try to discuss many of these matters without regard to that new supplementary directive, which has a bearing on accountancy problems on a group basis, is to deny the purpose of the discussion.
Mr. Viggers: I am grateful to my right hon. Friend the Member for Knutsford, who has a wide knowledge based on much work and his membership of the Scrutiny Committee. I am not aware of the contents of the seventh directive, but the Under-Secretary said that there was a need to take account of it and that it would be included elsewhere. If that is so, it would be unfortunate.
My second point involves the United Kingdom principle that accounts should give a "true and fair view". That principle does not appear in the directive, and its inclusion should be urged. There are two ways of dealing with company accounts.
Mr. Clinton Davis: The hon. Gentleman is speaking to documents which were unamended and were before the Committee of the House which considered them in that form. The position has now been changed, and reflects exactly the point the hon. Gentleman is making.
Mr. Viggers: I am grateful to the Minister. I noticed that some of the papers to which I referred were dated 1973. I was not sure whether they included the latest amendments.
The subjective approach, reflected by the "true and fair view", which throws the onus of responsibility on the auditors, is clearly the better way. The alternative is to take an objective view and lay down standards of everything to be included. This happens in the United States, where a prospectus document is so thick that only a company lawyer can

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understand it. It is bound with red binding and is universally known among company lawyers as a red herring.
The fifth directive is the draft proposal for the rules to be regarded as mandatory for all companies. We read in it about those strange institutions the management organ and the supervisory organ, which, together with the general meeting of shareholders, comprise the three principal management arms. Any view on these proposals must be subjective. No one can say that he knows the answer. One can only form one's own view. Having been chairman of a public company and having attended a large number of general meetings, not to mention board meetings, I have come slowly to the view that the two-tier board structure is good.
The concept of a supervisory board exercising supervisory functions over the management board should work quite well, and it works quite well in the countries in which it is implemented. I particularly like the concept of the supervisory board appointing the directors of the management board, because anyone who has attended a general meeting will know that the shareholders, or the nominees or proxies who are used to appoint the directors, act from a position not of knowledge but of ignorance. Often the shareholders who are voting for directors do not even know who they are voting for or against, unless the chairman of the company has the wit to ask the directors to identify themselves by standing. A supervisory board, which should have the opportunity to know something of the individuals concerned, is a good concept and one worthy of support.
The sixth directive, on prospectuses, again poses no problem in the United Kingdom, whose Stock Exchange is way in advance of any other European institution. I pay tribute to the quotations department of the Stock Exchange, which is responsible for the implementation of its regulations. The staff are a model of constructive efficiency. Their ability to deal with complex situations quickly, as they arise, has helped to maintain London as the leading capital market in Europe.
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The draft regulation for a European company statute takes us outside the known world and introduces the concept of the Societas Europaea. There is a need for such an organisation as companies cannot conveniently operate across national boundaries, and it is eminently sensible and logical that there should be a pattern of European company which is readily understood throughout Europe but which is required to comply with the national laws within which it operates.
I listened with interest to the hon. Member for Luton, East (Mr. Clemitson), who criticised the permission which appeared to be given by the creation of the European company to the spread of multinational companies. I think he felt that no multinational needed help and that such companies were strong enough already, rather like an octopus which can twine itself round anything it finds tasty. Having been on the other side of the fence and acted as company lawyer to a large multinational company, I have found that it is difficult to reconcile the different demands of different countries. I feel that the provisions for union representation which would allow European representation would offset any disadvantages the hon. Gentleman may fear in the creation of European companies. I would therefore modestly support the proposal.
Mr. Clemitson: Am I wrong in thinking that the Commission's proposals are in fact talking in terms of one-third representation on the board? The Green Paper acknowledges that this does not give employee representatives any controlling influence over policy-making or any great influence at all.
Mr. Viggers: The hon. Gentleman and I would not agree on the basis of what we are trying to achieve in terms of representation. I believe that one-third representation on the supervisory board would give employee representatives—and I hope that they are employee representatives rather than trade union representatives—a very important say in the affairs of the company and an ability to bring their views to the interest of management, the cognisance of employees generally and the world outside in an important way. As far as I understand it, the hon. Gentleman will not get the

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strangehold he requires. He will get one-third representation, which is adequate, I think, in present circumstances. That, however, is a philosophical argument which we might continue tomorrow or elsewhere rather than now.
Knowing the ability of the Under-Secretary to charm the birds off the trees, I felt he was hiding the spring of joy in his soul when introducing the debate. He did not pay tribute to the opportunity that this debate and the directives give us to move forward in employee participation. After all, we are all in this together and it does not help to strike an inflexible attitude.
Britain has the strongest trade unions in the world. I wish Len Murray well and a speedy recovery to full health, but I noticed a remarkable remark attributed to him in the Press that in future Ministers would have to recognise that they could not always see the General Secretary of the TUC. Is it not incredible that with such powerful unions we are the laggards in Europe when it comes to employee participation? Is this perhaps because our attitudes have been so inflexible and perhaps that the unions have preferred to follow the path of free collective bargaining without genuinely wishing to involve themselves in company management?
As a business man I criticise this Socialist Government for failing to deal with the genuine needs of employees. At the present rate of progress, it will need a Conservative Government to bring participation to the factory and the shop floor.
12.3 a.m.
Sir Brandon Rhys Williams: The Under-Secretary covered a great deal of ground with his usual capacity in opening the debate and I do not think he could seriously have expected that we would respond in detail to all the points he touched upon, although my hon. Friend also covered a great deal in his speech. But I am sure that in studying this debate the Department will find many useful indications of the trend of thinking among hon. Members concerned about company law reform.
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The motion set down by the Government points particularly to the rights of employees and company law. The fifth directive and the Green Paper are bound to attract the most attention, not only in this House but among the public outside. Before leaving Strasbourg today, I had the responsibility of speaking on behalf of the European Conservative Group on the resolutions proposed by the Economic and Monetary Affairs Committee in preparation for the tripartite conference that takes place next week. I thought it appropriate to draw attention to the need to create a greater sense of unity in industrial enterprise and to prepare public opinion for Government action in the industrial field.
On the Continent they tend to use the phrase "the social partners", when in this country we still use the objectionable phrase "the two sides of industry". This concept of partnership is surely something far more civilised than the idea of class struggle and conflict which is, unfortunately, incorporated in the Marxist approach to the joint stock company of all too many people in this country.
The debate has been fruitful, and reflects the fact that among the students of company law there is a growing consensus in this country about many of the things which have to be done. No doubt the Bullock Report, when we receive it in due course, will reflect opinions drawn from all sides, and will, I hope, be able to make specific recommendations, which will command very wide support.
But the general direction of movement in company law reform must already be obvious to the Government. I have been disappointed by the indications we have seen lately that the Bullock Report was likely to be delayed, that consideration of its findings might not be possible for 12 months, and that a General Election would probably have to come and go before we actually saw any legislation arising from the report.
Mr. Clinton Davis: Was the hon. Gentleman not in the House today to hear the Prime Minister respond to that very suggestion, when he said that legislation would be introduced in the next Session of Parliament?
Sir B. Rhys Williams: I must apologise. As I was endeavouring to

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fulfil the duties in Strasbourg, for which I was nominated by this House, I was not able to hear the Prime Minister. I shall be delighted if what he says proves true.
As to the general direction of movement in company law reform, it is surely important to differentiate between two very clear aspects. One is the question of human relations at the work place. The formulae adopted for consultation and reconciliation in the case of disputes, and all the procedures that go into good human relations in joint stock companies, are very important.
On the Continent, and particularly in Western Germany, they have been brought to a high degree of civilisation. Willy Brandt's 1972 Act—there used to be a copy of it in English in the Library—sets out in very fine detail the way in which human relations disputes are to be tackled. If only a quarter of German companies have been able to follow the directions exactly as set out in the Act, they must have much to teach us.
We need also to consider that other aspect of company law reform which concerns company structure. It is only in quite recent years that the phrase "the two-tier board" has passed into general use in this country, and we are completely unfamiliar with the practice that has evolved in Germany over the past 100 years, of separating the supervisory element in the board from the executive. As this is a new concept, we have allowed ourselves to relate it to what in Germany is a highly topical debate, namely, the extent of worker participation in the supervisory board. But there are other aspects of the supervisory board which are of great interest, in addition to the way in which the workers can make their voices heard there.
I have tried humbly—I hope with a modest degree of success—to draw attention in the House over a period of years to the need to give greater power to the supervisory forces in the joint stock company. The whole question of the management audit, and the way in which the senior executives are to be guided and appointed—and dismissed, for that matter—or, if necessary, corrected when they make mistakes, is receiving study, although it seems to me to be quite outside the scope of the Bullock Report. If
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we learn something from the Bullock Report on that subject it can only be incidental and arising out of the Bullock Committee's study of the way in which employees could take part in the supervisory board. Surely the time has come for us to hear from the Government specifically on the social responsibilities of the company. Again, this goes far beyond the question of employees' rights. And I should like to hear how the Government's thinking is evolving on the rights and future role of shareholders, particularly institutional shareholders, who are in a separate class from private shareholders. The latter are undergoing a slow process of euthanasia and are finding it increasingly difficult to exercise any control over joint stock company management. I should like a constructive debate to be started by the Government on their view of the future role of shareholders in relation to the other stakeholders. I personally would like the word "stakeholders" to be used more freely and defined more clearly. I think that it ought to include the pensioners and the main contractors of the company as well, of course, as the employees.
I recognise that we cannot do everything at once. If it is true that the Government have committed themselves to introduce legislation next year, I suppose that they are adopting the "big bang" theory, that we can do something dramatic in company law reform. I doubt whether we have in this country enough people who sufficiently understand the etiquette of the two-tier board to make them work if they are introduced in too much of a hurry. I join those who express approval of the idea of the two-tier board, and I am sure that it has to come; but we must not do it badly. We must make a start.
Commissioner Gundelach, in his admirable Green Paper, recommends a transitional period. In this transitional period there should be preparatory and permissive legislation. At present we find that, even if they want to, British companies may be prevented by our existing obsolete company law from making experiments which might prove fruitful and which might help to throw light on the way in which company law could evolve in the future.
As an example, I might mention that as long ago as 1969 I drafted a Private

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Member's Bill on the transferability of pension rights, in which I persuaded the sponsor to include the suggestion that representatives of the employees should be included on the board of management of the pension fund. This is one of many ways in which employees could be encouraged to take part in the management of companies without having to have two-tier boards created for them before they can make a beginning.
As another example, Clause 53 in the Conservative Bill of 1973 was a decided step forward. The Under-Secretary of State often draws attention to the fact that it was only permissive, but in 1973 that was probably as far as we were able to go, and it is possibly as far as we are able to go now. Why should we not make a start with that? Why should we not draw attention to the responsibilities of the board for the employees, or at any rate give them the option of putting the employees' interests alongside those of the shareholders?
I hope that in Committee on the Companies (No. 2) Bill we shall have the opportunity of considering the idea of setting up an audit committee as a subcommittee of the board. That practice was introduced 10 years ago in Ontario, and it is now increasingly common pracstice in North America. It is admittedly only a device for making an easier relationship between the board of directors and the auditors, but in effect an audit sub-committee is a nascent supervisory board. If we make a beginning by setting up formal contacts between the board and the auditors—who in British company law are effectively the supervisors appointed by the shareholders over the heads of the directors—and call for reports on the way the company is being managed; and if thereby we make a start on organising the work of the auditors through a sub-committee of the board we shall have started out towards the creation of the two-tier board and we can take our time before making the next move.
The Government could also perform a useful service by making the provision of management accounts a matter of course. In too many companies, even if we had a supervisory board it still would not have the data in front of it on which it could rely to judge the per-
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formance of the management. In all too many companies the preparation of estimates and collation of information is too out of date or amateurish to give a clear view of what goes on. If we had a supervisory board it could not perform a really responsible function. But the Government can make a start in the way I am suggesting, even while they are waiting for the Bullock Report.
Finally, as far as the European company statute is concerned, I do not think many British companies will leap into this new formula, but it may be a way of gaining experience of the German system that would be valuable in our period of transition to a system more akin to that of our continental neighbours. Some continentally-based companies might adopt this formula and put it into practice here. Under the tutelage of people who are familiar with continental practice, alternative methods could grow up in this country through one or two major companies operating the continental system. That would be fruitful, and I cannot see what harm it would do.
The European company statute is only a voluntary system, and even though it may be premature for British companies, I do not see any reason for resisting it. A great deal of work has gone into it, and when resources and people are organised on the continental pattern for the creation of wealth we only have to look at West Germany to see that the results can be extremely fruitful.
12.17 a.m.
Mr. Tim Renton: We may have considered a mixed bag of documents tonight, but we have been fortunate to have speeches from two members of the European Parliament—my right hon. and learned Friend the Member for Hertfordshire, East (Sir D. Walker-Smith), and my hon. Friend the Member for Kensington (Sir B. Rhys Williams), both of whom have spoken from a deep knowledge of the subject. We were also lucky to have a contribution from the Chairman of the Scrutiny Committee on European Secondary Legislation, my right hon. Friend the Member for Knutsford (Mr. Davies). I agree with his comments on the need for time to scrutinise these documents line by line.

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In opening this debate, my hon. Friend the Member for Kidderminster (Mr. Bulmer) said he would confine his remarks to the employee participation side of the documents, and I shall speak to the company law reform documents.
The Under-Secretary showed his beguiling pessimism about the future of company law reform in the years ahead. On 19th May he said:
"For all these reasons I see the next few years as being the greatest period of radical reform in company law in the history of this country."—[Official Report, 19th May 1976;Vol. 911, c. 1639.]
As my hon. Friend the Member for Gosport (Mr. Viggers) pointed out, company law reform tends to be the Cinderella of Government policies. The Government find more popular and more pressing things to do, and Cinderella seems to get to the ball only once every five years.
It would be helpful if the Under-Secretary gave us information about the programme that he envisages for company law reform outside the Bullock recommendations in the next year or two. Does he envisage that when the Bullock Committee reports there will be a White Paper for the House to consider before any legislation is brought forward?
In his opening remarks the Under-Secretary referred to four general precepts on company law reform. I reply by saying that there are five principles that apply in this field. First, company law reform should not add to the administrative burdens on companies, especially the smaller companies. Where possible, we should try to simplify rather than complicate. Second, let us not have change for change's sake, or uniformity for its sake. Where there is need for a common form, let us standardise up to the best available practice.
Third, let company law encourage the maximum disclosure and the maximum passing of information, but only to the extent that this is consistent with the successful growth of the company. Fourth, let us recognise and, where necessary, deal with this by appropriate changes in company law, so that employees, shareholders, customers and creditors all have a common interest in the growth and success of the company. But let us not so burden the company
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with new legislation in favour of one group that the continuing success of the company as a thriving entity is impaired. If that happens, none of the groups affected will benefit and they will all suffer.
Fifth, all company law should actively encourage those companies which provide continuing employment and create wealth for the benefit of the Community. The essence of reform should be to carry forward the brilliant Victorian concept of the limited liability company, so that a new incentive exists for the creation of wealth for the Community's good.
I fail to see how these basic principles are promoted to any great extent by the mammoth documents that we have been examining. There must be evolution and change in company law, as all hon. Members recognise, but to impose standardisation for its own sake in an area that goes to the heart of every limited liability company in the country, excluding Northern Ireland, and where our customs are, as the Under-Secretary said, notably different from those of our Continental neighbours, could have a purely negative effect. It could cause more paper work and administrative change when companies need to be encouraged to get on with their basic business of manufacturing and investing.
Taking an overall view of the documents, it is rather pointless to get at company law reform via these directives. If we have to harmonise, there are many other laws that need to be changed in order to achieve uniformity in the movement and treatment of capital throughout the EEC. But I think that the Commission takes the view that it must harmonise piecemeal and in detail in order to achieve anything, and it is against that background that we have to consider these documents as part of a very detailed move towards the overall objective.
The documents on company law reform will involve mammoth change for companies in this country. My hon. Friend the Member for Gosport pointed out correctly that the fifth directive will affect every limited liability company in the land. The discretion that exists throughout the Continent, by which the Société anonyme, the Aktiengesellschaft, the Gesellschaft mit beschränkter

933
Haftung and the société à responsabilité limitée are exempted, does not exist here. Every company here is basically incorporated in the same form of law. It will be helpful if the Minister amplifies his earlier remarks and tells us whether he sees the exclusion for private limited liability companies that now applies in the second directive being extended to all the other directives we are considering. As my hon. Friend the Member for Gosport said, this is an important matter for private companies in this country.
There is a follow-on from that. We should all like to know whether the exclusion will mean that in due course private limited liability companies in this country will have the same more limited amounts of disclosure required from them as that which is now required by SARL and GmbH in France and West Germany, respectively.
It is natural that our discussion has concentrated on the fifth directive. It is by far and away the most well known of these documents. I believe that it is possible to advance a counter-argument to the point of view that we have heard from both sides of the Chamber in favour of two-tier boards. There are a number of business men in Germany, for example, who would say that two-tier boards are not a bad thing in terms of cosmetics, that one-third employee participation does not impede the growth of a company and that the supervisory board is a useful place in which to place the statesman who has retired from the management board, where his advice and experience can still be available to the company, but they would go on to say that the supervisory board puts a brake on the flexibility and speed of action of the management company. German management is caused great worry when it comes to consider 50 per cent. employee representation. I realise that at that point it is taking up an entrenched view.
Against that background, we must have deep discussion and give consideration to the question whether the two-tier board is the ideal structure for the United Kingdom, totally apart from the employee participation issue to which my hon. Friend the Member for Kidderminster referred.
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We do not have two-tier boards at present, and it would mean something of a board-room and administrative revolution to achieve them here. The pattern of share ownership in this country is very different from and far wider than that in West Germany. It suited the German financial institutions that hold the major part of the equity in industrial companies to have a supervisory board on which they could place their representatives, but I believe it is questionable whether unit trust, investment trust and pension fund shareholders, let alone private shareholders, would take any more active an interest in their investments through a supervisory board than they do through the unitary board, or whether supervisory boards will reflect any better the wishes of a diverse share ownership than does the present unitary system.
Two-tier boards will lead to further administrative apparatus, at a time when we are anxious to cut down expense in that respect. At times it is impractical to think that executive decisions at management board level can be divorced from the long-range debate and planning at supervisory board level. There is a risk that decisions could fall between two stools. I believe that, at most, we can have only a very gradual and voluntary evolution towards a two-tier board system in the United Kingdom.
There are other ways of proceeding, for example, through wider disclosure and, as my hon. Friend the Member for Kensington mentioned, by placing specific responsibilities on non-executive directors. There are other ways of ensuring that the interests of shareholders and employees are not over-dominated by those in management.
As the second directive, Document R/2381/72, is at present drafted, it would prevent an interim dividend without the auditing of accounts up to the point at which the interim dividend is declared. That would be a tiresome procedure. We should, therefore, resist it. It defeats the point that interim dividends are only an instalment towards the total dividend payment of a company. I hope that the Minister will reassure us that that matter will be fought.
On document R/569/74, the fourth directive on the presentation and content

935
of annual accounts and management reports, the question of goodwill being written off over five years comes up. A number of hon. Members have referred to this matter. It seems to me that this reflects a doctrinaire attitude against goodwill. It will particularly affect service companies. Such businesses are bought on a price earnings multiple rather than on an asset basis. For example, in an insurance broking business the intangible assets are the individuals who make the profits. There is no need to write off goodwill as long as those individuals remain in the employment of the company. I hope that that point will be thoroughly debated with the Commission.
Turning to the sixth directive, British law addresses itself to the company at the time that it is proposing to issue shares. It requires information to be made available from the company whenever it issues shares. On the other hand, this directive points itself to the company that is seeking a public quotation, although there may have been non-public trading in that company's shares for a long time previously. I believe that that is the wrong priority.
The sixth directive does not provide for any form of attestation by public accountants at the time that the shares are issued. It is extremely important that attestation by public accountants should be covered. I hope that on both those matters the Under-Secretary will be able to give us some reassurance.
I have listened with interest to the various comments for and against the European statute envisaged in document R/1279/75. That European statute is a potentially important development. Multinational companies could use European companies as vehicles into which they would hive off all their European operations. These would then have a uniform legal base throughout the Community. The hon. Member for Binning-ham, Handsworth (Mr. Lee) saw it as a shelter behind which multinationals could hide. I think that it might turn-into the opposite. It might help the Europeanisation of multinational companies. I ask the Minister to enlarge on that point in reply to the debate.
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Lastly, I believe the most recent document of all—R/160/76—to be fairly inoffensive. It errs only in one respect. The directive requires proof of profitability. If proof of profitability at the time that the prospectus is issued were to stay, British Leyland, for example, when it was reconstructed last year, would not have been able to come back to the market because it could not have shown either past or future proof of profitability. That would have been a great disadvantage to British Leyland at that time. I hope that this point will be taken up very strongly in Brussels.
We should take pride in the fact that, in this whole area of prospectuses and the listing of shares, we have the strongest Stock Exchange in Europe. Together with Ireland, we have 3,500 public quoted companies compared with 2,400 public quoted companies in the whole of the remainder of the EEC. Therefore, I hope that the United Kingdom will take the leading position in the redrafting of document R/160.
In summary, many of the proposals in these documentts seem to be drawn together on a somewhat random basis. They are so theoretical that those involved daily in practical business have not yet given much time to their deep consideration. We should therefore follow the example of the banking directive. The first draft of that was examined by the British Bankers Association. They disliked it, and found so many clauses totally unacceptable that, with other countries, through the Federation Bancaire they persuaded the Commission that the first draft was not "on". A second draft is now available and is being considered.
My right hon. Friend the Member for Knutsford was right when he said that we required a detailed degree of analysis of these documents—an analysis more detailed than we have been able to have in this debate.
That is the line that should be taken. In taking note tonight, we are not approving the documents. We are pleased to have had the opportunity of debate but we believe that more examination is required in due course, and that the House must have more time to debate the documents further.
12.36 a.m.
Mr. Clinton Davis: Necessarily, this debate has been incapable of pursuing a

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coherent theme We could foresee that when this substantial number of directives was presented to the House in this way. The right hon. Member for Knutsford (Mr. John Davies) is right in saying that we must look carefully at how we scrutinise this type of proposal. I do not know that I would wish to add anything to what the right hon. Gentleman said in that respect. I am glad that he will reconsider the position.
I shall try to deal with the observations of hon. Members in the order in which they made their contributions.
The hon. Member for Kidderminster (Mr. Bulmer) spoke of his belief in a form of industrial democracy. It is easy to adumbrate principles about that, but I was not quite sure whether the hon. Member was passionate about the detail that would have to arise in order to implement the principles to which he was adverting. I was very interested to note that he commented on the inadequacy of Section 53 of the 1973 Act, and went much further than did his hon. Friend the Member for Mid-Sussex (Mr. Renton) when we debated these matters on Second Reading of the Companies (No. 2) Bill on 19th May.
The hon. Member went on to discuss a matter that he will recognise, I am sure, I cannot join him in debating. It would be wrong for me in any sense to prejudge the outcome of the Bullock Committee Report. We have made a commitment about the need to introduce legislation here. It was reinforced only this afternoon by the Prime Minister. That is something to which I referred in an intervention in the speech of the hon. Member for Kensington (Sir B. Rhys Williams).
I want to say something about the Bullock Committee in refutation of a point made by the hon. Gentleman. He said that it was handicapped by its terms of reference. I do not accept that. I do not believe that a man of the capacity of Lord Bullock and men of the capacity of those serving on that committee would willingly have served and have accepted appointment if they thought that the terms of reference would cripple the findings ultimately made by them. I have no doubt that their work will make a major contribution to the study of industrial democracy in this country and
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to the legislation that we shall be introducing in the next Session.
Mr. Mike Thomas: I hope that my hon. Friend will forgive me for interrupting him, but at this late hour a number of us have forborne from making speeches. It is not only trade unions and shareholders who have an interest in these matters. One hon. Gentleman opposite mentioned the customer, in passing, and there is a large consumer interest. Will my hon. Friend tell us what part the Department of Prices and Consumer Protection will play in the process, as well as that of his own Department and that of the Department of Employment?
Mr. Davis: My right hon. Friend was very fully consulted about these matters. She will be fully consulted about the legislation as it begins to take shape. It is not without interest that Mr. John Methven, who was the Director General of Fair Trading, is a member of the Bullock Committee, although he is no longer serving the nation in his former capacity.
Mr. Bulmer: Is it the Government's intention to introduce a White Paper following the report of the Bullock Committee, before they legislate?
Mr. Davis: We shall have to discuss that matter when we have the report. We shall have to determine whether to have a White Paper or a Green Paper, or whether to proceed directly to a Bill. These are matters on which the options have to remain open. The hon. Gentleman will recognise that it would be quite foolish for me, certainly without consultation with my right hon. Friend the Secretary of State for Trade, and others, to offer any prognosis about that at this stage. However, we have indicated that we wish to allow the maximum possible consultation on these matters. There must be full discussion because the principles that will be adumbrated in the legislation will be absolutely critical, and critical not only from the point of view of the legislation but in building a new spirit in industry, which is a point that has been made by hon. Members on both sides of the House.
I turn to the interesting comments of my hon. Friend the Member for Luton, East (Mr. Clemitson). He expressed his anxieties about the control that can be

939
exercised against multinational companies, and asked how one makes them accountable. One has to answer that question with two others. Where does power reside? How is it exercised? I do not hide the fact that this will be one of the most difficult questions that we shall have to try to resolve. In a way, however, my hon. Friend put his finger on perhaps a more positive way of approaching this matter, namely, the increasing power of the trade union movement, in an international sense. That, I believe, can be the only salutary and effective sanction against abuse by companies of that character.
On the other hand, it would be quite wrong to brand all multinationals as villains of the piece. That is not so. There have been villainous activities on the part of some—I do not deny that—but we ought to be very careful about generalising in such a situation.
Mr. Clemitson: I was not arguing that multinational companies necessarily acted villainously—to use my hon. Friend's phrase. I was trying to imply that by their nature they are nondemocratic organisations. In this debate, presumably, we are talking about the extension of democracy within industry. The particularly difficult question is how to extend democracy in the context of the supra-national company.
Mr. Davis: Unsatisfactory though I have no doubt my hon. Friend will consider this response, I must say that the multinational company will become increasingly subject to the domestic laws of the countries within which it operates. Therefore, the element of democracy that will be infused into the multinational company must depend upon the legislation that prevails in any given country in which it operates.
However, having said that, there is the caveat that I have already entered—that it depends largely upon where effective power resides. I do not think that I can add anything useful to the points I have already made in response to the interesting comments of my hon. Friend.
The right hon. and learned Member for Hertfordshire, East (Sir D. Walker-Smith) explained why he could not remain in the Chamber to hear the end of
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the debate. I do not blame him in the least for that. He is probably very wise. He reflected very interestingly on the development of the fifth directive, born as it was in pre-accession days. He spoke of the multifarious problems that we shall have to resolve.
Let me summarise my feelings—and, I hope, the Government's feelings—about the fifth directive and industrial democracy generally. Because of the lateness of the hour, I speak only in headline terms. We hope to be able to try to encourage a greater emotional attachment to industry on the part not only of workers but of management. That is the crux of the issue. People are too detached from the industry in which they work at present, and in a sense that point was made by the hon. Member for Kidderminster. I am convinced that we must work out our own design. We cannot simply ape the experience of others in seeking to plant this new seed of industrial democracy here. That is not to say that we should throw aside a study of those experiences, but we have our own traditions in working out things, and I am sure that is right. We should work out our own future opportunities.
Thirdly—and here I accept one of the points made by the hon. Member for Kensington—the mere fact that we have set up a committee to deal with the problem of industrial democracy is no reason to deter existing experiments or, in the interim, to fail to develop new experiments in this area. We have made that plain, and my hon. Friend the Secretary of State for the Environment, in his former office at the Department of Trade, made that clear in announcing the appointment of the Bullock Committee.
I turn to the comments made by my hon. Friend the Member for Birmingham, Handsworth (Mr. Lee), who made a characteristically robust and controversial contribution. He asked about document R/2155/75 and said that the Government were resiling. Then I, as a solicitor, placed in a position in which particulars did not seem to be forthcoming, requested further and better particulars, but my hon. Friend—I am sure uncharacteristically, so far as his normal life at the Bar is concerned—failed to give me any. I am not able to go to a master in chambers, but the fact is that I can see no evidence that we have resiled from

941
anything. Perhaps my hon. Friend was referring to the prohibition of dismissals on occasions of transfer, except for "pressing business reasons." I dealt with that matter in my speech. It was a fairly long speech, and was probably rather boring, and I can understand my hon. Friend's missing that point. But this was a phrase that the Government and the Select Committee found unacceptable. I made that point absolutely clear.
Mr. Lee: I accept that.
Mr. Davis: I am glad about that. My hon. Friend then made a point about writing off goodwill, which was echoed by the hon. Member for Mid-Sussex. We have opposed the writing off of goodwill within five years as being unduly rigid. It should depend on the circumstances of the assets concerned, and we are still negotiating on that point.
My hon. Friend then mentioned consolidated accounts. Our doubt on this score is not about the practicability of the proposals; it is about timing. It will obviously take time to work out the answer. My hon. Friend went on to refer to the question of the majority for the increase in capital. We take the view that control of the company by 50 per cent. of the shareholding should carry with it the ability to increase capital. Therefore, this is a matter in respect of which we shall have to negotiate.
As for the European company, and its effect on the United Kingdom law, no Statutory Instrument would arise here. It is a draft Regulation and, if adopted, it would apply directly. That is what I said at the beginning of the debate.
The hon. Member for Gosport (Mr. Viggers) spoke about certain matters such as insider dealing and disclosure. I do not think that I can usefully add very much more to what I said on 19th May in the discussion on the Companies (No. 2) Bill, when I referred to the Government's proposals for future legislation—a point made by the hon. Gentleman. I am surprised that he made that point because I spoke about the Government's proposals for future legislation on that occasion and it extended over several columns of Hansard starting at 1635 and going on to 1639. The hon. Gentleman was there, and he should have read it. Perhaps he misheard me.
Mr. Tim Renton: I was indeed there. What I want to know is whether, in view of the obviously increasing legislative burden in the next Session, the Minister still believes that the Government, in addition to a Bill implementing the Bullock Report proposals, will bring forward a Bill dealing with the statutory disclosure provisions and the whole range of securities provisions which he touched on on 19th May.
Mr. Davis: No. I do not think that we can commit ourselves to legislation dealing with securities. I did not give that impression at all during the debate on the Companies (No. 2) Bill. What I was saying—and I have said it tonight—is that our immediate requirement will be for a Bill dealing with industrial democracy. That will be next Session. That is our undertaking.
At the moment we are engaged in discussions with professional and other organisations on securities that will cover insider dealing, warehousing, and matters of that kind. We are also dealing with the securities market, and we have sent out a consultative document. We are considering replies to that. We do not believe that we shall be able to legislate on this matter next Session. The programme after that must encompass picking up other matters of the more traditional aspects of company law that, inevitably we shall have to deal with.
We have set up the Bullock Committee to look into a situation that will necessarily involve huge changes in the whole concept and direction taken by companies. That must be our first priority.
The hon. Member for Gosport went on to speak about public and private companies. I thought I had made the situation clear as far as the directive was concerned. They are not included in it. But whether they are to be included in others must depend on the nature of the directive. The fourth directive must apply to private companies, as well as public companies, because there are some very large private companies. Each directive will therefore have to be negotiated on its merits.
As part of our wider reform of company law, we are considering the possibility of a new form of incorporation for the smallest companies, but there are

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a number of problems to in that regard.
Mr. Viggers: Does the Minister accept that it is urgent to have a separate form for small private companies? Unless something is brought forward they will be swept under the general definition of limited companies that the directives of the Commission now incorporate. It is urgent that something should be done.
Mr. Davis: I do not accept the consequence recited by the hon. Member. It will be a matter, to a great extent, of negotiation. We are fully aware of the position. As I have said, one has to negotiate on each directive on its merits. I do not believe that this terrible fate lies before all private companies.
The hon. Member commented on the desirability of the true and fair view of accounts. I have dealt with that. I think that in my intervention I corrected the impression that the hon. Member had formed—I do not blame him for it; it is very difficult with all this documentation—from reading the out-dated documents which do not deal with the position.
I have nothing to add to my original comments about the concept of the European company. I have the most serious reservations about it. I think that it is too rigid, that on the industrial democracy aspect it imitates the German system without regard to traditional developments elsewhere.
Incidentally, I do not believe that we are the laggards in Europe in this respect. There are other countries that have not formulated proposals for industrial democracy. Some of the experiments that we have carried out in this country are unique in their own way and have made a major contribution. The hon. Member is altogether too pessimistic.
I have to be a little controversial, even at this late hour, but only for a moment. The hon. Member said that we need a Conservative Government to infuse a new spirit into industrial relations. Foolishness of that kind at 1 o'clock in the morning is understandable, but unfortunately it goes on after that hour. It is an incredible claim. The Conservatives are the architects of the Industrial Relations Act and the three-day working week—a situation in which a country
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Came to a dead stop in January and February 1974.
In contrast, we repealed that Act. We have introduced the Employment Protection Act and the Health and Safety at Work Etc. Act. We have a social contract and for the first time a 17:1 endorsement of our incomes policy by the TUC. Under this Government the number of days lost through strikes has been the lowest since 1968. We have set up a committee to study industrial democracy. Yet the Conservatives say that they have the answers to these problems. That is a lot of rubbish. They printed more money than anyone else ever did, and they did a great deal to ruin the economy.
Now I come finally, and briefly—my right hon. Friend the Patronage Secretary has made his presence felt—to the speech of the hon. Member for Mid-Sussex. He skated over all the directives, and I do not know that I can usefully deal with the points he made. I believe that I have covered many of them already.
One of the four principles that I stressed at the beginning of the debate was the need to avoid too much detail and too many specific Regulations. That is the Government's ambition, among others, in dealing with negotiations in this area.
If I have not dealt with all the points that the hon. Member made, I believe that any further attempt to do so would only upset my hon. Friends. They are absolutely with me on that.
This has been an interesting debate. I am not satisfied that the way in which we deal with these matters is right, and I hope that the House will have another look at the procedure involved.
Question put and agreed to.
Resolved,
That this House takes note of Commission Documents Nos. R/2155/75, R/2863/75, R/2381/72, R/131/73, R/69/76, R/569/74, R/2128/72, R/2053/72, R/3128/75, R/1279/75, and R/160/76 relating to Employee's Rights and Company Law.

STATUTORY INSTRUMENT
Motion made, and Question put forthwith pursuant to Standing Order No. 73A (Standing Committee on Statutory Instruments, &c.)

CUSTOMS AND EXCISE
That the Anti-Dumping Duty Order 1976 (S.I., 1976, No. 736), a copy of which was laid before this House on 20th May, be approved.—[Mr. Frank R. White.]
Question agreed to.

NEWCASTLE UPON TYNE
Motion made, and Question proposed,
That this House do now adjourn.—[Mr. Frank R. White.]
12.59 a.m.
Mr Mike Thomas: I apologise to the Minister for keeping him at this hour and also because, given a choice on this topic between the Department of the Environment and the Department of Industry, I chose his Department. The issues that I shall raise also involve the Civil Service and the Department of Energy. I apologise to the Minister for the breadth of responsibility which I am imposing on him.
On 19th January this year the Newcastle City Council produced a document entitled "Jobs and Houses in Newcastle". I shall refer to that and speak of the problems of economic development of our great and historic city and the problems of the three major employers in my constituency.
I begin with Swan Hunter, two of whose shipyards are in Newcastle upon Tyne, East. About 4,000 people and their families are dependent on the prosperity of those yards. We are grateful for the Government's support through grants and financial help to the yards and through orders for that company, the most recent being the Type 42 guided-missile destroyers and the through-deck cruiser, which will bring work to the Swan Hunter group. My purpose is to place on record my support and that of the trade unions within the Swan Hunter group for the Government's Aircraft and Shipbuilding Industries Bill and to say again that every one of the thousands of men and women in Newcastle who depend on shipbuilding for their livelihood will remember that the Opposition have placed their jobs and hope for the future in jeopardy by their behaviour in the last three weeks. My hon. Friend
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should tell his colleagues that Newcastle wants the Bill, needs the Bill and can afford no further delay in its progress. As the premier shipbuilding area in the country we shall find it hard to accept, when the Bill is passed if any arrangements are made for the headquarters of British Shipbuilders to be centred anywhere but in Newcastle.
I now turn to the firm C. A. Parsons, one of Britain's two turbo-generators manufacturers, with over 6,000 workers in my constituency. Again the picture is one of uncertainty of those workers and their families. About 2,000 workers face loss of jobs within the next two or three years if the energy order book does not pick up, The Government have direct responsibility. They authorise the CEGB's ordering programme and could do four things to help my constituents to see their future more clearly. They could get on with the steam-generating heavy water reactor project and at least ensure that there is no further slippage in the timetable.
The Government could get on with considering the extension of the Drax B coal-fired power station. They could ensure that CEGB treats suppliers fairly over repairs and spare parts. They could consider whether the stockpiling of generating sets, along the lines of the present machine-tool programme, might not be started in present circumstances.
I welcome the CPRS's inquiry into the problems of electric plant suppliers and the decision of the Government to have discussions for planning agreements with the industry. But I should make one matter clear to my hon. Friend. Unless the Government make their intentions clear by placing orders, their first venture into planning agreements will be to ask my constituents to agree to massive planned redundancies. That would not be the way to start the planning agreement process for which we hold out so much hope. The third major employer in my constituency is the Government, in the form of the Department of Health and Social Security. My hon. Friend will know the auxieties of the workers at the Longbenton offices of the Department over the public expenditure White Paper. I hope that the Government will maintain employment at Longbenton, for to create jobs in places such as Sunderland and Washington New Town while losing

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them in Newcastle would make nonsense of their dispersal programme for Civil Service jobs.
These specific anxieties must be seen against the general background of the decline of the whole economic base of Newcastle in the past 20 years. I have referred to Swan Hunter. Employment in shipbuilding in Newcastle has declined by over 40 per cent. since 1964. At Parsons there have been substantial reductions in the work force—a thousand or more in the past two or three years, and more before that. Overall, between 1961 and 1971 Newcastle lost well over 10 per cent. of its jobs—22,000 in total.
Unemployment has been consistently high, despite the fact that over the same period 28,000 people moved out of the city. In Walker, the heart of my constituency, male unemployment when it was last calculated for that area in 1971, exceeded 13 per cent. It is almost certainly considerably higher now.
Even the dispersal of Civil Service jobs has had only a small effect. Existing and planned dispersal to Newcastle since 1963 amounts in total, including jobs yet to come, to only about 1,300 jobs. Down the road, Washington New Town is already attracting manufacturing industry successfully. It will get 3,000 or more jobs—about six times the proposed dispersals to Newcastle.
The burden of my argument is that the Department of Industry and the Department of the Environment have placed far too much emphasis on development of new industrial areas in the past and far too little on sustaining our existing communities. Between 1961 and 1974 the English Industrial Estates Corporation, for example, produced 12,354 jobs in the Tyne and Wear metropolitan area, yet only 941 were in Newcastle and even they were on the outskirts. In the five districts of Tyne and Wear there are 30 advance factories and there are 49 factory units at Washington New Town. Gateshead has seven advance factories, North Tyneside five, South Tyneside five, Sunderland district 13. Newcastle City has none.
I should like to take this opportunity to raise with my hon. Friend the fact that one advance factory was approved for Newcastle in January 1973, but there
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is still no site settled for it because the Department is unwilling to pay the higher costs of a city location compared with a peripheral location. This problem is caused mainly because of the policy of building on only a quarter of the site to allow for expansion. That is a rational policy only where land is cheap. On expensive land, expansion space should be in the form of buildings, not land, and expansions should be accommodated by moving industrial tenants to larger buildings as they grow. Just across the river from my constituency, in the Team Valley, that is precisely the policy that is followed successfully.
The Government will not even let local authorities make up for these deficiencies. I should like my hon. Friend to tell us why the Government appear to take exception to the powers that the Tyne and Wear metropolitan authority, the Tyne and Wear County Council, is seeking in its local Bill, which is now coming before Parliament.
I am deeply concerned, as are many thoughtful people in the city of Newcastle—and this applies to many other old industrial centres, particularly in the North of England—that if the erosion of the employment base of the city continues at the rate we have experienced over the past 10 to 15 years the whole community will be in danger, because the migration out of the cities is selective. It is the younger, fitter and the better-paid who leave the cities. This unbalances the community, and unemployment among those who remain tends to rise. The need for community support services tends to increase while the ability to provide them, the economic base from which they can be paid for, tends to diminish. This should not be allowed to happen.
I conclude by making one or two suggestions to my hon. Friend of measures that might be taken to prevent this happening. The survival and regeneration of Newcastle as a community would be important at any time but it is particularly important in a period of low growth. The community and fabric of Newcastle have a store of social and economic capital which has been accumulated over generations, and it is an asset of enormous value not just to those who live in the city but everyone in the region outside.

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In addition, the new towns policy was pursued because it was felt that city centres were overcrowded with people who needed to get out and industry needed to get out to the green-field sites. That was fine in the past, but now in its way that policy is starting to unbalance the whole community in many just our industrial cities. Newcastle is just one example of that.
We cannot go on approving all sorts of investments in new towns when in so doing we are allowing the capital already invested in existing cities to be run down and used to less advantage than it might otherwise he. For this reason an economic strategy for regions and particular towns and cities must have some feeling, relevance and sincere appreciation of the importance of the existing communities as well as the new.
I hope my hon. Friends from other towns and cities in the North-East will forgive me if I speak with special pride of the importance of the community in Newcastle. It is declining at a rate which is starting to worry us all, and at a rate which could see us in a position where the city will effectively die as a balanced community. One part of that will be the responsibility of other elsewhere, the Department of the Environment and so on, but another part of it is firmly in the lap of my hon. Friend and his colleagues, because if the economic base of the city cannot be sustained, if jobs cannot be found, in the end the city will die in the way many American cities have started to die.
I do not want to see that happen to the city I represent. I am sure my hon. Friend would not want to see it happen to Swansea, which he represents. I hope he can give some assurance that the Government appreciate the problem and are starting to take some steps to deal with it.
1.14 a.m.
The Minister of State, Department of Industry (Mr. Alan Williams): I thank my hon. Friend for giving me this opportunity so early in the day to deal with the problems of his area. I share his concern at the effect which the filibustering activities of the Opposition will have on the shipbuilding industry. I fully take his point about jobs in his area being placed in jeopardy. It is tragic
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that the Opposition are playing political games when such important stakes are involved, stakes of extreme importance to the individuals working in these industries.
My right hon. Friend will note the point that my hon. Friend made about the headquarters of British Shipbuilders. It is a point of view which has been intimated as of some concern to people within his region. I can understand why, because of the region's involvement with the industry, and I will ensure that his remarks are drawn to the attention of the Secretary of State.
Regarding my hon Friend's comments about the boilermaking and electricity generating industries, I fully understand his concern over the SGHWR project and Drax B. I think that my hon. Friend equally well appreciates that we have seen the most drastic fall-back in the demand for electricity as a consequence of the change in fuel prices over the last couple of years. This has led to a situation where surplus capacity rather than demands for capacity tend to be the order of the day.
I know that my hon. Friend is aware, from his comments to me in conversation and from his comments in the Press and in broadcasting, of the review being carried out into the problems of the turbogenerator and boilermaking industries. He will be fully aware that we expect a report in the autumn. This hardly represents a major delay, as we are now well into June. It will give us an opportunity to assess the situation in a proper perspective.
Mr. Mike Thomas: My hon. Friend will appreciate that it is orders that we are after and not talks and reports.
Mr. Williams: My hon. Friend will equally appreciate that he wants the right orders, and so do we. Creating orders purely for the sake of it would not necessarily be the most sensible way in which to conduct our business, and I am sure it is not the way the industry would want us to do it. Therefore, it is imperative that we make the right decision when the orders are placed. The objective of the review is to make sure that the correct decision is taken, and, as I have indicated, we shall have the report of the review before very long.
I fully appreciate my hon. Friend's point about the advance factory. He will

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himself be aware that originally it had been hoped to obtain land at Kenton Bank Foot in North-West Newcastle. This was privately-owned land but, as my hon. Friend will, I am sure be conscious, the negotiations were not successful, and we therefore had to look for alternative sites.
The site we considered was in conjunction with the local authority, but it has not been possible to agree suitable terms. My hon. Friend will know that the Department of the Environment, to which he may care to direct some of his comments, has to inform the local authority that it should not sell below the district valuer's estimate of the correct price for the land.
Certainly I will take note of my hon. Friend's point about the area of land required. I am not fully familiar with all the possibilities he has intimated. I will look into it but I do not want to build up too many hopes. He has suggested that it might be possible to meet the requirements on a smaller part of the land than that currently envisaged. I will discuss it with my officials, but again I ask him not to take this as a commitment.
Mr. Mike Thomas: The problem is that if there is an insistence, as the Department and the English Industrial Estates Corporation appear to be insisting at the moment, that three-quarters of the land must remain unused for expansion, it makes the purchase of a site of which only a quarter is to be used extremely expensive.
Another problem is that the statutory undertakers are reluctant to release quite large amounts of land available in the city.
Mr. Williams: I fully noted my hon. Friend's point about the amount of land being kept for expansion, and will discuss it with my officials. I would not want to raise false hopes at this stage that this will automatically provide a solution, but I assure him that his recommendation will be looked at. I fully realise his concern about the problems of the Newcastle area. As he rightly said, it is a problem affecting many inner urban areas. It is for that reason that the Department of the Environment and the
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Home Office have set up a series of studies on the problems of these areas. I assure my hon. Friend that if, in the light of those studies, changes in policy appear to be necessary, the Government will have to consider such changes. We want to get the results of the studies. If I remember aright, two are being conducted by the Home Office and one by the Department of the Environment.
Mr. Mike Thomas: Why is the Minister's Department not playing a more active part? In Scotland, where the Department of Environment and the Department of Industry are much more closely related, there is a more satisfactory approach to development in old communities as apposed to new towns.
Mr. Williams: If my hon. Friend has in mind Glasgow, where a substantial sum is being spent on urban renewal, that expenditure comes out of the total sum already made available to Scotland and is part of the budget provision.
There is the difficulty of deciding how many objectives we can pursue in a global policy. We have substantially modified over the years the approach to regional economic planning. I recollect, when I first came to the House, speaking from the position from which my hon. Friend is speaking and urging that we should break away from the unitary development area and go for multi-tier areas, so that we could distinguish between relative needs within development areas. It was my good fortune, in going to the Department of Economic Affairs, to play a part in bringing forward policies to set up the special development areas and subsequently, as part of regional planning, the intermediate areas. We have developed a gradation of policies to meet a gradation of needs.
When the needs are as great as they are at present, there are limits to the number of objectives we can pursue. With unemployment as high as it is in the Northern area, it is important to get as much industry as we can into the North. We can hardly overcrowd some areas with job opportunities while other areas are left in need. Our priority at this stage must be to make it easy for the business man to choose the site he wants in the region. I recognise that that is not the degree of fine tuning for which

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my hon. Friend asks and that in the light of the studies to which I have referred we may have to modify the policy but for the time being, with structural unemployment at a high level on which has been superimposed recessional unemployment, it is imperative to do all we can to provide job opportunities in the region.
I recognise the conflicting requirements of individual localities, but there is a travel-to-work area which is substantially greater than the area covered by the individual authority. We are, therefore, justified in looking to job provision in the travel-to-work area rather than in individual localities.
Mr. Mike Thomas: The implication of that is that if we are not careful we shall get an imbalance. What has been a thriving industrially-based city will become a dormitory town which everyone leaves to go to work. That is the reverse of what is understood in the metropolitan South-East by a travel-to-work area.
Mr. Williams: I fully understand my hon. Friend's concern. In America the centres of many cities are being regenerated. In my previous Department—with which my hon. Friend is very familiar and on which he is knowledgeable—I was frequently warned of the danger that hypermarkets would denude the city centres, on the American pattern. I am fully conscious of that difficulty, but I ask my hon. Friend to bear in mind that Newcastle has many natural advantages. It is a historical centre for the region. It has an administrative and commercial centre, with the advantages and disadvantages that arise from that. The disadvantages are that there are complex inner urban problems. These problems arise elsewhere, but they do not arise substantially as a result of the original policies. They are more characteristic of the pattern of development taking place in cities throughout the country.
The concentration of housing development in peripheral areas because land is available means that there is a tendency for industry to follow to the green-field sites, if possible. It does this because these sites are cheaper, and there is more opportunity to expand and have a more
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efficient layout. This is not the case with inner city sites. One understands why the industrialist chooses to go outside the main cities rather than stay within them. He is attracted by the ease of access to the national road networks, and often tries to get as near the motorway links as he can.
These problems which draw industries to the edges of cities are often superimposed on the decline of traditional industry. This has happened in Newcastle. But Newcastle is an administrative centre of considerable standing, and, although my hon. Friend was not exactly glowing in his comments about the administrative jobs which have been created, the fact is that the city now has the major Department of Health and Social Security complex with 12,500 jobs. Also, we shall add substantially to the number of Civil Service posts in the Northern Region as a result of dispersal. There will be over 3,500 jobs added in the region. Other jobs will be created—not by dispersal—by the siting of the Capital Tax Office at Stockton, and the Development Land Tax Office and Land Registries will also add to the work force. In fact, a total of 7,500 jobs will go to the Northern Region.
Mr. Mike Thomas: The Minister makes my point precisely. Almost none of those jobs will go to Newcastle, and the DHSS central office has been at Newcastle since time immemorial. There is no point in talking about jobs in Stockton, Sunderland, and Washington New Town when the number of jobs for Newcastle will be very small indeed.
Mr. Williams: My hon. Friend should bear in mind what is available privately as well as from national sources within the Newcastle area. Within the Newcastle district there is 32,000 square feet of factory space actually available, with another 99,000 square feet under construction, or to be developed. Private development which is taking place within the city will add a valuable 250,000 square feet of office accommodation, with another 115,000 square feet planned.
While I fully understand the sincerity of my hon. Friend's advocacy of the needs of his area, he must not over-estimate, the extent to which the pattern he

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has described has developed. There is considerable promise still for the area and in the upturn taking place—
The Question having been proposed after Ten o'clock on Thursday evening,
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and the debate having continued for half an hour, Mr. DEPUTY SPEAKER adjourned the House without Question put, pursant to the Standing Order.
Adjourned at twenty-nine minutes past One o'clock.