Commons Sitting of 4 April 1977

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
NEW WRIT
For Grimsby, in the room of the right hon. Charles Anthony Raven Crosland, deceased—[Mr. Michael Cocks.]
ORAL ANSWERS TO QUESTIONS
  WALES

    Ceredigion
    Mr. Geraint Howellsasked the Secretary of State for Wales if he has any plans to visit Ceredigion during the next month.
    The Secretary of State for Wales (Mr. John Morris): Not in my official capacity.
    Mr. Howells: Is the Secretary of State aware that many people in Ceredigion and other parts of Wales are wondering what has happened to the Scotland and Wales Bill? Is he able to comment on that today?
    Mr. Morris: I am sure the hon. Gentleman is aware that discussions with other parties and with my hon. Friends are taking place with the object of establishing whether a broad measure of agreement can be reached. The Government remain fully committed to devolution in Scotland and Wales.
    Mr. Nicholas Edwards: Will the right hon. and learned Gentleman make a joint visit to Ceredigion with his new Liberal partner so that together they can explain why, on top of all the existing burdens of unemployment, the abolition of regional employment premium and increased social security tax, the Government are now imposing a vicious petrol tax?
    Mr. Morris: I noticed the other day that the hon. Gentleman paid a visit to, of all places, Hereford to warn the populace there of the dangers of the Liberal agreement. All I can say to the hon. Gentleman is that I feel he may be afraid of losing his seat in the next General Election.

    Derelict Land Clearance
    Sir A. Meyerasked the Secretary of State for Wales what representations he has received from local authorities in North Wales regarding the latest allocation of funds for derelict land clearance.
    Mr. John Morris: None, Sir.
    Sir A. Meyer: Is the right hon. and learned Gentleman aware that there is at least one protest on his Department's decision, according to the Flintshire Leader, which records the hon. Member for Flint, East (Mr. Jones) as having protested against this decision on the part of the Welsh Office? Is the Secretary of State further aware that his allocation of funds is widely regarded in North Wales as being greatly discriminatory against the interests of North Wales? Is he not aware that if the unwanted, directly-elected Assembly which he and his frightened Liberal mercenaries are proposing to impose upon the protesting people of Wales comes into being, this kind of thing will get worse?
    Mr. Morris: The hon. Gentleman is completely mistaken in his utterances. My hon. Friend constantly makes representations to me on behalf of Clwyd on a whole range of issues, and, if I may say so, with a broad measure of success.
    I am aware that there has been concern in a certain part of Clwyd in respect of some schemes which so far have not found favour. But I have told the Welsh Development Agency that I agree to the overwhelming bulk of the proposals—a little under 90 per cent. Because the other proposals had a lower priority and were substantially environmental, they had to be looked at again together with any other schemes which might have a higher priority. I am sure that the hon. Gentleman, who is so concerned about limiting public expenditure, would wish to ensure that public money is spent on proposals with the highest priority. I assure him that there is no bias against any part of Wales.
    Mr. Ioan Evans: Would my right hon. and learned Friend agree that the greatest amount of derelict land is in the mining valleys of South Wales and that the Mid-Glamorgan county area has a larger proportion of derelict land than any other county in Wales? As well as ensuring that the momentum is maintained in clearing the dereliction, will my right hon. and learned Friend ensure that he will take measures to attract industry into the cleared derelict areas instead of placing it on agricultural land?
    Mr. Morris: I am sure that my hon. Friend is broadly right in that there are large areas in need of assistance to wipe out the ravages of the past, for which this generation has to pay the price. A large proportion of such land is in South Wales, but some can be found in North Wales. I assure the House that there is not a regional or geographical bias in the determination of this matter, either by the Agency or by myself. What we seek to do is to ensure that the money goes to the areas with the highest priority, and that priority still is for industry and for housing. I am sure that my hon. Friend would agree with me on that score.
    Mr. Cledwyn Hughes: Is my right hon. and learned Friend aware that people in Wales as a whole, from North and South, appreciate the remarkable work carried out by the Derelict Land Unit over the past 10 years? The people of North Wales do not believe that there is any discrimination in favour of one region against another. Will my right hon. and learned Friend be good enough, however, to look in particular at certain areas in Gwynedd—Clwyd has already been mentioned—which are affected by state waste and, for example, Paris Mountain in Anglesey, which is still in a state of serious dereliction as a result of the old copper workings?
    Mr. Morris: It was, of course, my right hon. Friend who started all of this. He has created an enormous appetite in Wales. I do not complain. I boast about his achievements. The result has been £45 million worth of bids for the next programme in Wales. The resources which we could allocate were of the order of £15 million, the totality of which I have agreed, although there has been a discrepancy—10 per cent. or there-
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    abouts—as regards some of the schemes. I will look at any area to ensure that we make the fastest possible progress in removing dereliction throughout Wales.
    Sir A. Meyer: On a point of order, Mr. Speaker. In view of the unsatisfactory nature of that reply, I beg to give notice that I shall seek to raise the matter on the Adjournment.

    Education
    Mr. Wyn Robertsasked the Secretary of State for Wales what steps he has taken to encourage public debate on that sector of education in Wales within his sphere of responsibility.
    The Under-Secretary of State for Wales (Mr. Barry Jones): I recently chaired a conference in Cardiff attended by about 200 people from all parts of Wales and representing many educational interests, as well as both sides of industry, parents and pupils.
    Mr. Roberts: Is the Minister completely satisfied that he is getting a full expression of parental views on all the educational issues involved in Wales? Secondly, will he urge his right hon. and learned Friend to take the utmost care before agreeing to the Welsh Joint Education Committee's recommendation that Wales should have a single examination system for 16-year-olds instead of the CSE and GCE O-level? Will he bear in mind that the Department of Education and Science has not accepted a similar recommendation for England, and that if Wales goes it alone on this it seems that we shall have no means of comparing standards of educational achievement in Wales with those of the rest of the United Kingdom?
    Mr. Jones: To take the latter point first, I am aware of the Welsh Joint Education Committee's views about examinations. I must, however, give them careful consideration and come to no hasty decisions. The decisions must be arrived at between Ministers. As to the hon. Gentleman's first point, there were 70 organisations represented at our conference. Of the 52 people who spoke from the floor, many were teachers and representatives of parents in Wales.
    Mr. D. E. Thomas: Will the Under-Secretary accept that the great debate on education initiated by the Government is

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    basically a "con" trick in that this great debate is taking place at a time of serious reduction in the allocation of resources to education generally and when we have a high percentage of unemployed young teachers in Wales?
    Mr. Jones: It is not a confidence trick. It is a success as a conference. Two hundred people from all over Wales met to debate an important issue—the future of our children in Wales. The hon. Gentleman should remember that without any doubt many improvements can be made, even during a shortage of resources.
    Mr. Michael Roberts: Will the Minister consider organising the showing of the film recently made by the BBC about a comprehensive school in Acton so that Welsh parents and governors of Welsh comprehensive schools may compare our schools with what goes on in the rest of the country?
    Mr. Jones: The hon. Member was a distinguished educationist. I think he is really saying that we are doing quite well in Wales with regard to our schooling. There is no complacency, but there is much to be proud of.
    Mr. Cledwyn Hughes: Is my hon. Friend aware that we in Anglesey would welcome television cameras into all our comprehensive schools so that the country may appreciate how successful the system is?
    Mr. Jones: We would welcome them in Clwyd, too.

    Hospital Services (Cynon Valley)
    Mr. Ioan Evansasked the Secretary of State for Wales what proposals have been submitted to him regarding the future of hospital services in the Cynon Valley and particularly the casualty unit at Aberdare Hospital.
    Mr. Barry Jones: Those contained in the Consultative Paper on the Reorganisation of Hospital Services in the Merthyr and Cynon Valley and Rhymney Valley Health Districts published by Mid Glamorgan Health Authority in 1975. The authority proposed that minor casualty services should continue to be provided at both Aberdare General Hospital and Mountain Ash General Hospital.
    Mr. Evans: I thank my hon. Friend for that reply. The deputation that came to see him expressed anxieties about the future of the hospital services in the Cynon Valley. There is particular concern about the casualty unit, and there are rumours that it will be taken from the area. Can my hon. Friend categorically confirm that the casualty unit is to be kept open?
    Mr. Jones: I recollect the deputation that came to see me and the strong case that it put. I recollect, too, the many representations made to me by my hon. Friend about health services in his valley. The area health authority, in its submission, has not proposed to discontinue the casualty unit. If it did do so, it would first have to go through the normal processes of consultation.

    Rural Wales
    Mr. Nicholas Edwardsasked the Secretary of State for Wales if he is satisfied that the Welsh Development Agency is making adequate arrangements to deal with the economic problems of those parts of rural Wales that fall outside the responsibility of the Development Board for Rural Wales.
    Mr. John Morris: Yes, Sir.
    Mr. Edwards: Is the Secretary of State aware that the highest levels of unemployment in Wales are outside the Mid-Wales area—indeed, are outside the special development areas? I welcome the emphasis placed by the WDA on the importance of small businesses, but does the Secretary of State think it sensible that the new Budget scheme to help small businesses should be confined to the special development areas? Does he not think that we should reconsider the boundaries of all these regional schemes in order to concentrate help where it is most needed? Are not some of the divisions that now exist becoming most unsatisfactory?
    Mr. Morris: It is always difficult to draw a line whatever one does, but the special development areas have had traditionally a high degree of priority, and this is where we shall start with any problem.
    Mr. D. E. Thomas: Has the Secretary of State received the appallingly clichéridden document produced last week by

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    the Welsh Development Agency, which apologises throughout for not being a proper strategic plan for the development of the Welsh economy? Will he now accept that it is time to give orders to the Agency to take its finger out, to stop scratching about on the environmental surface of Wales and to invest in public enterprise development in the empty advance factories from which so many of us suffer?
    Mr. Morris: I do not accept any of that tirade. In the short period of its existence, the Welsh Development Agency has taken on major responsibilities for derelict land and the building of advance factories. It has also played a major part in ensuring the development in Merthyr Tydvil and has started, as the hon. Gentleman may have seen in the Press, on its joint investment programmes. For example, an important firm was announced recently for Newport, and there are others.
    Sir A. Meyer: Is the right hon. and learned Gentleman aware that the Welsh Development Agency is doing exactly what we said it would do, unfortunately, in raising very high expectations and being totally unable to fulfil them, particularly in North-East Wales?
    Mr. Morris: I can assure the hon. Gentleman that the plans so far announced by the Welsh Development Agency in the environmental sector have been largely welcomed. Obviously there have been criticisms about some of the points raised in earlier Questions. Generally, however, the Agency has set out to tackle the task it was supposed to do. It has recruited its staff. It is getting more and more involved in industrial development, and we are already beginning to see the fruits of the seeds.

    Transport Fuel Costs
    Mr. Gristasked the Secretary of State for Wales what examination the Welsh Office has made of the impact of transport fuel costs on the economy of Wales.
    Mr. John Morris: The impact on the economy of transport expenditure as a whole forms part of the background to the Government's review of transport policy.
    Mr. Grist: Does not the Secretary of State recognise that, particularly coming on top of the abrupt withdrawal of REP, the proposed increase in fuel costs will have a devastating effect on many firms and will contribute to increased unemployment?
    Mr. Morris: I do not accept that. The Budget will have a minimal effect on Welsh industry, and a rough calculation has been made of about 0·056 per cent. of industrial turnover.
    Sir Raymond Gower: Is the Minister aware that it is difficult to imagine a tax more damaging to the rural areas of the Principality? Will he take account of the fact that in large parts of Wales people are peculiarly dependent on private transport? Whatever he may say, this will run counter to the Government's policy of making Wales a development area and, indeed, of setting up the Welsh Development Agency. Is not this an idiotic tax in the context of the problems of Wales?
    Mr. Morris: Coming as I do from rural Wales, I am fully aware of the problems of living there. But I am sure that some of these points will be fully adumbrated in today's debate.
    Mr. Anderson: Would not my right hon. and learned Friend agree that one lesson to be learned from the outcry over the recent relatively modest increase in petrol prices is that there is now no chance whatsoever of replacing the vehicle excise duty by an increase on petrol and that, therefore, one effect of that will be that employment at the Driver and Vehicle Licensing Centre is secure?
    Mr. Morris: First, may I welcome my hon. Friend back to the House after his recent illness. I am sure that the welcome he has given to this proposal will be widely echoed in his area, which is an important source of employment for the Swansea Valley. I take great pride in having been one of those who sited the centre there.
    Mr. Wigley: If the Secretary of State is aware of the effect that this increase will have on rural areas, will he press the Chancellor very hard indeed, if the measure passes tonight, between now and the Finance Bill debates to ensure that an amendment comes forward to reduce

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    the catastrophic effect that this increase in the price of petrol will have in rural areas, not only on personal transport costs, when people perhaps have to travel 40 miles each way to work, but also on the prospect of bringing new factories to areas such as the Caernarvon area, where transport costs are a disproportionate part of the total revenue?
    Mr. Morris: I am sure that the hon. Gentleman will be putting such viewpoints forcibly if he catches your eye, Mr. Speaker, either today or in the course of the debates on the Finance Bill.
    Mr. Nicholas Edwards: We are always interested in the right hon. and learned Gentleman's views. How does he justify the doubling of the petrol tax since 1974 in view of its effect on the economy of rural Wales?
    Mr. Morris: I am sure that the hon. Gentleman or some of his hon. Friends on the Opposition Front Bench will want to put those points in the course of the debate this afternoon. But what is important is that we are doing, and have done, much more for Mid-Wales and for rural Wales than the Tory Government ever did. How will the hon. Gentleman explain after being a member of a party that killed off the proposals of my right hon. Friend the Member for Anglesey (Mr. Hughes) for Mid-Wales and did nothing at all in the four wasted years afterwards?

    Glan Taf School
    Mr. Michael Robertsasked the Secretary of State for Wales what representations he has received about the proposed closure of Glan Taf school.
    Mr. Barry Jones: My right hon. and learned Friend has received 47 letters and a petition signed by 3,100 persons objecting to the South Glamorgan Authority's proposals to cease to maintain the Glan Taf High School and to establish a bilingual school in the premises.
    Mr. Roberts: Does the Under-Secretary agree that closing a community comprehensive school without a public meeting is an act of folly on the part of the local authority? Would he agree also that, the local authority having refused the request for a public meeting, the least he can now do is to have a public inquiry
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    as part of the great debate, because the parents will not be satisfied with anything less?
    Mr. Jones: Individual parents met the local authority. We shall be giving very careful consideration to the case, and every expression of view will be taken into account. With regard to the hon. Gentleman's last point, the normal practice is to consider a Section 13 proposal on the basis of written submissions.

    Health and Personal Social Services
    Mr. D. E. Thomasasked the Secretary of State for Wales how many projects have been started during the 1976–77 financial year which have been jointly financed by area health authorities and local authority personal social services departments; and how much he plans to make available for joint financing in 1977–78.
    Mr. Barry Jones: Area health authorities and local authorities have already on occasion shared the funding of services on the borderline of their respective statutory responsibilities. I have no central record of these cases. During 1976 I discussed with local authority associations and area health authorities possible arrangements to enable NHS resources to be used to help in financing developments primarily the responsibility of local authorities. My right hon. and learned Friend will soon be consulting on his final proposals.
    Mr. Thomas: Does the Under-Secretary accept that that answer is totally unsatisfactory in view of the fact that his right hon. Friend the Secretary of State for Social Services made available in the last financial year £6 million for joint funding in England and that £21 million is to be made available in the current financial year? Will he accept that it is time he insisted that local authorities and social services departments in Wales took note of circulars that have been produced by his Department and that the forthcoming circular on joint funding should be a joint responsibility of his Department and the Department of Health and Social Security?
    Mr. Jones: I must reject the inference at the beginning of the hon. Member's supplementary question. He has not told

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    us that the £8 million and the £21 million totals were to come from area health authority budgets in England. Is he really saying that we should do the same in Wales when already area health authority budgets are under great stress?

  INDUSTRY

    CBI
    Mr. Rookerasked the Secretary of State for Industry when he next expects to meet the CBI.
    The Under-Secretary of State for Industry (Mr. Les Huckfield): My right hon. Friend expects to meet CBI representatives at the NEDC meeting this week.
    Mr. Rooker: Will my hon. Friend ask the Secretary of State, before he meets the CBI, to read the new book about the CBI which was published two weeks ago and ask the CBI whether it can explain the apparent contradiction between its total opposition to public expenditure and the disclosure in that book that it uses for its own membership campaigns the fact that it can fiddle company structures so as to screw more grants out of the Government for individual companies?
    Mr. Huckfield: Not only have I read something about that book, but I have read my hon. Friend's review of it in Tribune and I recognise that he has very strong opinions about the subject. I will bear in mind the rough tenor of what he has said, but I am sure he will agree that it is in the interests of both Her Majesty's Government and the CBI to see more investment in this country for everybody.
    Mr. Peter Walker: When the Secretary of State meets the CBI, should he not discuss with it objectively a problem of industries in our public sector which has arisen in South Africa? For instance, Alfred Herbert—whose improved results I welcome—has been urging its South African associates to persuade the South African Government to put on a tariff against the import of British machine tools because of Alfred Herbert's great interest in its South African associates. Would not the hon. Gentleman agree that such a policy of urging the use of tariffs
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    against other machine tool manufacturers could cause unnecessary hostility to an industry in the publicly-owned sector?
    Mr. Huckfield: That is a specialised matter which does not arise from the Question on the Order Paper. However, if the right hon. Gentleman writes to me and gives me more information I shall have the matter looked into.
    Mr. Budgen: Does not the Minister agree that the logic in the question asked by the hon. Member for Birmingham, Perry Barr (Mr. Rooker) should lead him to the proposition that neither the TUC nor the CBI should have any sort of privileged position?
    Mr. Huckfield: That is an interesting observation but I do not think that that is what my hon. Friend meant.

    Leisure, Brewing and Manufacturing
    Sir John Hallasked the Secretary of State for Industry what was the return. before tax, on capital employed in the leisure industry, in the brewing industry and in the manufacturing industries as a whole in each of the years from 1973 to the last year for which figures are available.
    The Under-Secretary of State for Industry (Mr. Bob Cryer): For large listed companies operating mainly in the United Kingdom in manufacturing industries, the rate of return on net trading assets, measured at replacement costs, was 7 per cent. in 1973, 3½ per cent. in 1974 and—provisionally—3 per cent. in 1975. Corresponding figures are not available for companies in the leisure and brewing industries.
    Sir J. Hall: Does not the Minister agree that it is rather curious that no figures are available for the brewing industry? If they were available—I declare an interest here—they would show that over recent years the brewing industry has been earning less as a return on capital than the cost of new money. Does not that factor make it rather odd that it should be the one industry singled out for examination by the Price Commission?
    Mr. Cryer: The singling out of the brewing industry is a matter for my right hon. Friend the Secretary of State for

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    Prices and Consumer Protection, but I am sure that his decision to have that industry examined carefully was widely welcomed by many people who have a direct interest in the drinking of beer. We shall have to wait to see what the investigation finds.
    Mr. Adley: Is the Minister aware that the latest pronouncement on the brewing industry by the Secretary of State for Prices and Consumer Protection will, it is estimated by the brewing industry, delay £250 million of new investment, with all that that means for jobs? Will the Minister have a word with his right hon. Friend so that in future, before he makes these grandiose announcements on prices, he takes jobs into account as well?
    Mr. Cryer: I understand that in this not-so-crowded hour the hon. Member is seeking to raise all sorts of issues. However, if he wants to tackle the Secretary of State for Prices and Consumer Protection he should have the decency and courtesy to put down a Question to him.
    Mr. Hooley: Does my hon. Friend agree that, in view of the social and revenue implications of the brewing industry, there might be a case for requiring it to hive off brewing interests from the other interests into which it is spreading with a view to securing special taxation arrangements?
    Mr. Cryer: The problem of investment in the brewing industry is specifically under examination. The Government are giving every inducement to encourage investment across the whole of industry, and we expect an increase in the level of investment this year of between 10 and 15 per cent., which will contribute towards the economic recovery now on the horizon under the present Government.

  TRADE

    Polish Footwear
    Mr. Fryasked the Secretary of State for Trade when he expects to be in a position to make a statement on the investigation started on 8th April 1976 into allegations of the dumping of men's footwear by Poland.
    The Under-Secretary of State for Trade (Mr. Michael Meacher): I announced on 3rd March that we had obtained a satisfactory undertaking on the future price levels of men's leather sandals from Poland. No other formal investigations into Polish footwear are in progress. The application in connection with men's pigskin suede shoes is still under consideration.
    Mr. Fry: Is the Minister aware—if he is not, he should be—that there are still considerable problems facing the British footwear industry, which will regard the further delay into the investigation, which is still going on, with some concern? Is he also aware that there is a shortage of orders in the home industry? When will he do more to encourage home production to keep jobs in this country rather than Eastern Europe?
    Mr. Meacher: I am well aware of the concern that has been expressed by the footwear industry, especially on imports. That is why we have taken extensive action to cut back imports from Poland, Romania and Czechoslovakia. We are also, for the third year running, holding down the level of imports of men's, women's and children's leather shoes from those three countries to between 5 and 10 per cent. below the 1974 level.
    With regard to the continued investigation into imported pigskin suede shoes, a few days ago the EEC negotiated a voluntary restraint level on all leather footwear imported into the United Kingdom from Poland. For that reason I do not think that we could initiate a full antidumping investigation in respect of one part of the overall range. However, we will be having informal discussions with the Poles in the next few days on that issue.
    Mr. Powell: Do the Government contemplate with satisfaction the prospect that in three months' time all these difficult and tedious matters will be dealt with by the bureaucracy of the EEC and not by Her Majesty's Government?
    Mr. Meacher: It is the fact that on 1st July anti-dumping powers pass to Brussels. We are, as I have said on a number of occasions, retaining an antidumping unit in order to assist British industry with anti-dumping applications. A member of our Anti-Dumping Unit has

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    recently been taken on by the Commission, in order to ensure that the vigour we show will be taken on by that body.

  ENERGY

    Joint European Torus Project
    Mr. Tom Kingasked the Secretary of State for Energy if he will make a statement about the Council of Ministers' meeting, in view of the consequences of the failure to agree a site for the JET project.
    The Under-Secretary of State for Energy (Mr. Alex Eadie): JET was discussed by the Research Council on 29th March. I regret that the Council was again unable to agree on a site. It was agreed that the choice now lay between Culham and Garching, but the view was held that the choice of site could not be made until the basis of the organisational structure had been decided. The organisational proposals put forward by the Commission and Council Secretariat, which we supported, proved to be unacceptable to some member States.
    The Council agreed that this matter would have to be further prepared by officials and that the Council should then meet again as soon as possible to try to reach agreement on both site and organisation. In order to give time for this, the Commission will extend the contracts of the JET design team at Culham, which would otherwise expire on 30th June.
    Mr. King: Will the Minister explain why the Government were not prepared to make a statement on a research project which is crucially important to the whole of Europe and why it needed a Question to be tabled to receive an answer at all from the Government? Does he understand that the Opposition are concerned about the failure to reach agreement and the bitterness that arose out of the chairmanship of the meeting by the hon. Member for Manchester, Ardwick (Mr. Kaufman)? Will he say what reassurance has been given to the members of the research team at Culham, as there is evidence that it is breaking up? Will he also say whether a date has been agreed for the next meeting, as it is vital that the matter should be resolved at the earliest possible date?
    Mr. Eadie: The hon. Gentleman asked why the Government did not make a statement. One of the reasons is that we do not take the cynical view shown by the implication of the hon. Gentleman's supplementary question. As I said in answer to the hon. Gentleman's Question, the Government regard the question of fusion as an issue that Europe will require to decide.
    I want to refute the hon. Gentleman's allegation about the chairmanship of my hon. Friend the Minister of State, Department of Industry. The Government cannot accept responsibility for reports that appeared in the Press. The hon. Gentleman may take some comfort from the fact that at that meeting members of the Council complimented my hon. Friend on the manner and the method with which he chaired the meeting, which they admitted was a very difficult one. It is from the Council that the compliments come. The Government cannot accept any responsibility for the Press.
    The research work at Culham is complementary to the JET programme and is not dependent on JET being sited there. Culham's work would continue with some modifications even if JET were abandoned.
    Mr. William Hamilton: Is it not regrettable that the decision which was about to be taken to site the JET project at Culham was nullified because of the pique of some of the smaller members of the Community because the British Government refused to accept the agricultural price review proposals? Does not my hon. Friend think that it is highly regrettable that that kind of situation should occur?
    Mr. Eadie: I agree with my hon. Friend. It is regrettable that no decision was taken. As I said in answer to the original Question, an issue that everyone thought had been decided was the question of the structure. On the second issue, the Government were assured that the agricultural policy had no bearing on the difficulty arising in reaching a decision.
    Mr. Forman: Notwithstanding the last part of the hon. Gentleman's answer, is this not a lamentable example once again of the Government's failure to be positive in their European policy? No

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    doubt this link exists between the agricultural meeting and the energy meeting. Will the Minister confirm that when he next goes back to Brussels on this matter he will try to secure a positive outcome before it is too late?
    Mr. Eadie: I am surprised at the way the hon. Gentleman has posed his question—talking about a lamentable failure by the Government. It was a surprise to everyone that the question of the structure and the organisation should be mentioned. One member State, much to the surprise of everybody, said "We have to get this organisation and structure correct. If we do not, the question of legality will be involved and the whole of the JET fusion programme will be in danger." The hon. Gentleman may reflect that we have had a number of debates in the House, and the Government have given a very firm commitment to fusion. If the position went awry on 29th March, of course the Council would require to meet again and come to some decision on it.
    Mr. Jay: Is this another example of the EEC speaking with one voice?
    Mr. Eadie: We did not manage to speak with one voice at the meeting, although I think that there was a general appreciation at the meeting that the EEC has to deal with the question of fusion and has to have a fusion technology.
    Mr. Rost: As the dispute has been dragging on for around two years, will the Minister answer the important question put by my hon. Friend the Member for Bridgwater (Mr. King) as to whether a date has now been fixed for the next meeting and whether the dispute is likely to be settled at that meeting? Will he further comment on the Press report that one reason why the talks broke down was that the chair was taken by the Minister of State, Department of Industry, the hon. Member for Manchester, Ardwick (Mr. Kaufman), so that the Secretary of State for Energy could present his case?
    Mr. Eadie: I thought that I had answered the last question first, and I believed that the hon. Gentleman would accept what I said—that members of the Council complimented my hon. Friend the Minister of State, Department of Industry on the way in which he chaired the meeting, with the usual expertise that
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    one would associate with him. [Interruption.] It is on the record that the members of the Council complimented my hon. Friend. I am concerned about the manner in which this information is being received. I am giving the House facts about what other member States did and said.
    The beginning of May was a suggested date. As for the dispute going on for two years, the hon. Gentleman should check back. A dispute like this has not gone on for two years. The question of where the site should be had been an issue, but I think that most member States thought that the question of organisation and structure had already been decided.

  CIVIL SERVICE

    Dispersal
    Mr. Tim Rentonasked the Minister for the Civil Service how many representations he has received to date opposing the dispersal of the Civil Service; and what is the estimated up-to-date cost of this dispersal.
    The Minister of State, Civil Service Department (Mr. Charles R. Morris): Since the Government's announcement of the dispersal programme on 30th July 1974, I have received a total of 51 representations opposing the programme. These have come mainly from Members representing constituencies in or near London. By contrast, dispersal is keenly welcomed in the receiving areas. The costs are being reassessed in the light of the current review of the dispersal timetable.
    Mr. Renton: Does the right hand of this ambidextrous Government know what the left hand is doing? In the light of changing economic circumstances, does it make any sense to shuffle 15,000 people and 30,000 jobs out of London when the Department of the Environment is trying to get offices and factories to reopen in London? Is it not likely that the Civil Service Department will spend £300 million on this dispersal of the Civil Service, which the Department of the Environment will then re-spend on getting people and jobs back here again?
    Mr. Morris: There is no contradiction in the Government's policies in this regard. The London situation ought to

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    be kept in perspective. London still has a much greater share of office employment than any other part of the country. The Government's dispersal policy is designed to help ease the structural unemployment which exists in the Scottish, Welsh and English regions.
    Mr. Arthur Bottomley: Is not dispersal of civil servants from London long overdue? It was first suggested by a Conservative Government, and this Government have carried out the policy. Does not my hon. Friend realise that, unless there is dispersal of civil servants, those in other parts of the country who want promotion within the Civil Service will always have to uproot their homes and come to London? That is wrong.
    Mr. Morris: I accept my right hon. Friend's point about the career development prospects for civil servants in the regions.
    Mr. Anthony Grant: Does the Minister realise that his words do not match his deeds? Does he recall that in a recent parliamentary answer to a Question of mine he revealed that the total number of civil servants moved to the assisted areas in the last year was 0·02 per cent. of the total? If he really believes that the dispersal of civil servants has a contribution to make to regional policy, why does he not get on with it? If he does not believe it, why does he not scrap the whole thing?
    Mr. Morris: There is no contradiction in the answer I gave to the Question tabled by the hon. Gentleman on a previous occasion. The Government's dispersal programme is phased over a period of 10 years. The programme is to disperse 31,000 Civil Service posts from London and the South-East during the period 1974 to 1984. The timing is under reconsideration, but the Government remain firmly committed to that programme.
    Mr. Buchan: Does my hon. Friend accept that as long as he adheres to the policy of Civil Service dispersal he will have overwhelming support from this side of the House? Will he consider, in relation to the projects for the Glasgow area, not necessarily waiting for the full buildings to be constructed but starting on the movement now, particularly of
    860
    civil servants in the Ministry of Overseas Development?
    Mr. Morris: I assure my hon. Friend that the Government remain firmly committed. However, as he will appreciate, and as has generally been acknowledged, the Government have imposed a moratorium on capital building during the next 12 months. This might conceivably affect the time phasing of the dispersal programme.
    Mr. Teddy Taylor: Do the Govern-men really mean business? When will the Minister give us a new date for starting work on the building of the Ministry of Defence in Glasgow and of the Directorate of Overseas Surveys office in East Kilbride? Is he aware that he told us at the end of last year that the programme had been delayed and that he hoped to announce new dates very soon? In fact, no new dates have since been given. Is he aware that people in Glasgow are becoming increasingly worried about the strength of the Government's commitment?
    Mr. Morris: I can understand the interest which all Scottish Members have shown in the dispersal of Ministry of Defence and Ministry of Overseas Development jobs to Glasgow. I assure the hon. Gentleman that I shall announce the new timetable as soon as is practicable and possible.

    Pensions
    Mr. Adleyasked the Minister for the Civil Service by what percentage the pensions of civil servants whose pensions are index-linked have risen since March 1974.
    Mr. Charles R. Morris: Since March 1974 three annual increases, payable from 1st December each year, have been awarded to public service pensioners under the provisions of the Pensions (Increase) Act 1971. These give a cumulative increase of 67·2 per cent.
    Mr. Adley: If, as is rumoured, the scheme is amended or scrapped, will not the sufferers be carrying the can for the social contract, which has been responsible for unemployment and inflation? Does not the Minister agree that the main task is somehow further to increase incentives for skilled workpeople and

    861
    entrepreneurs, without whom the country will not recover its prosperity and recover from three disastrous years of Socialism, to which has now been added the Liberal seal of good housekeeping?
    Mr. Morris: The indexing of Civil Service pensions arises from the Pensions (Increase) Act 1971, which was placed on the statute book by the Conservative Party, to which the hon. Gentleman belongs.
    Mr. Wrigglesworth: Will my hon. Friend refute the suggestion in today's Daily Telegraph that the scheme is to be scrapped? Will he also remind the House that if any action were to be taken to amend the scheme legislation would be necessary, since public service pensioners have a statutory right to their pensions? Is he aware that many of us on the Labour side of the House would be vociferously opposed to any such move? Will he also remind the House that policemen, teachers, firemen and other public servants—as well as civil servants—are affected by the legislation?
    Mr. Morris: I can assure my hon. Friend that he is absolutely right in his interpretation of the provisions of the 1971 Act. Civil servants have a statutory right to the indexing of their pensions. I accept that there has been appreciable public expenditure involved in the indexing of pensions for civil servants and public servants generally. As regards civil servants, during the three increases referred in the answer, in 1976 the increase amounted to £31 million, in 1975 to £41 million and in December 1974 to £21 million.
    Sir John Hall: Does the Minister agree that when the scheme was introduced no one contemplated the present high rate of inflation? The nation as a whole has to bear the cost of index-linked pensions. Would it not think it much fairer if the pensions were linked to the rise in average earnings or the cost of living, whichever was lower?
    Mr. Morris: Let me reiterate the point made earlier in an intervention with regard to a review of Civil Service pensions. The review of Civil Service pensions increases is under constant scrutiny by the Government. We invariably announce the outcome of that review each July. The hon. Gentleman is, however,
    862
    absolutely right when he refers to the alternatives facing the Government by way of the retail price index or earnings. He might be interested to know that, as far as earnings are concerned, the figure I have given represents the rise in the cost of living from June 1973 to 1976. Over the same period the earnings index rose by 70·2 per cent. and the wages index by 86·4 per cent.

  SCOTLAND AND WALES BILL
  Mr. Canavanasked the Lord President of the Council whether he has yet completed his talks with Opposition parties about the future of the Scotland and Wales Bill; and if he will make a statement.
  Mr. Tim Rentonasked the Lord President of the Council what progress he is making in his discussions about the Scotland and Wales Bill.
  Mr. Gowasked the Lord President of the Council whether, in view of the talks currently being held, he will make a statement about the progress of the Scotland and Wales Bill.
  The Lord President of the Council and Leader of the House of Commons (Mr. Michael Foot): The discussions are still in progress. I shall report to the House when the outcome is known.
  Mr. Canavan: In order to recommence progress on implementing the devolution commitment, will my right hon. Friend make an early announcement about the possibility of separate Bills for Scotland and Wales and also about the holding of an early referendum according to the policy of the Scottish Council of the Labour Party, whose view ought to receive more recognition from this Government than any Opposition party?
  Mr. Foot: I fully accept what my hon. Friend says about the necessity for an early statement, and we shall do our best to make one. We are, of course, having consultations with other parties, as we said, but we are also having close consultation with members of the Labour Party and the Parliamentary Labour Party, and, indeed, with others who wish to make representations. On the two points mentioned by my hon. Friend,

  863
  representations have been made about proposals for two Bills rather than one. As he will recall, that was debated in the House, but we will consider representations on that subject. On the second matter, a pre-Bill referendum was recommended by the Scottish Conference of the Labour Party, as my hon. Friend rightly recalls. None the less, we still think that there are very considerable objections to such a proposal.
  Mr. Renton: Does the Lord President recall that in last Wednesday's debate he said that he still expected to get a satisfactory Bill on devolution on the statute book within this Parliament? Will he define what he meant by those words? Does he mean in this Session? If so, does he mean by October or so? If that is the case, is he not running very short of time?
  Mr. Foot: It is undoubtedly the case that the failure to secure a majority for a timetable motion has caused some delay in progress. That is well understood by all observant Members of this House and possibly by others outside, but it does not alter the fact that we are determined to carry through a measure of this great constitutional character within the period of this Parliament. As it becomes more and more apparent that only a Labour Government would carry through such a measure, that is one reason among many why this Parliament should go its full time.
  Mr. Gow: Since the Lord President will have noticed the predictable absence of representatives of the Liberal Party, does he not think that there is a strong caes for strengthening membership of the joint consultative committee by adding the hon. Member for West Stirlingshire (Mr. Canavan) and possibly the hon. Member for Eastbourne (Mr. Gow) to the Committee?
  Mr. Foot: There is a great distinction between those two propositions. I am always very eager to consult my hon. Friend the Member for West Stirlingshire (Mr. Canavan), but the hon. Member for Eastbourne (Mr. Gow) stands high on the the list of hon. Members of whom I cannot say the same.
  Mr. Heffer: In view of the fact that a number of us argued very strongly during
  864
  the course of the devolution Bill that there should be a pre-Bill referendum, and in view of the fact that the Scottish Council of the Labour Party has now adopted that policy, will my right hon. Friend reconsider the reply that he gave to my hon. Friend and bring it forward as a mater of urgency, because many of us feel that if the people of Scotland or Wales genuinely wanted devolution there could be no more argument against it in this House?
  Mr. Foot: I understand the representations made by my hon. Friend and by those at the Scottish conference. I was present at the conference when the debate on this matter took place. I think that my hon. Friend and others in the House must take into account the extremely powerful arguments against a pre-Bill referendum. It could give rise to considerable confusion. The matters on which such a referendum would take place are nothing like as clear as they would be on a Bill which had actually passed through this House, and I believe that there are serious constitutional objections to such a proposal. However, as I said before, that does not mean that the Government have absolutely excluded the possibility. I have merely said that that is the general approach we have to the matter at the moment.
  Mrs. Bain: Can the Lord President give an indication of when he envisages the first elections to a Scottish Assembly taking place? We take a great interest in this matter. Beyond that, can he give an assurance that the passing of such a Bill will be made an issue of confidence with his own Back Benchers, in view of the failure of 44 Members to support the commitment?
  Mr. Foot: We had always hoped that the first elections to the Scottish and Welsh Assemblies would take place in the spring of 1978. We still believe that that would have been a good date. It is certainly not the fault of the Government that that date is to be delayed, if it has to be delayed. But we certainly look forward to the hon. Lady's support and that of her hon. Friends when we proceed further with the devolution measure. I repeat that only a Labour Government can carry through this great constitutional measure. That is why we

  865
  propose to stay here to carry that measure through, along with many others.
  Mr. Pym: Is the right hon. Gentleman aware that we on these Benches were glad to see that the White Paper published on another series of elections as recently as last Friday acknowledges the undesirability of making major constitutional changes without a wide measure of support? Does he recall that over six weeks ago I put to him a proposition that an all-party convention should be convened precisely so that that wide measure of support could be achieved? The right hon. Gentleman rejected the proposition at first and then had second thoughts about it to some extent. Does he realise that the House of Commons would like to hear at an early date what progress has been made with all the parties and whether he will set up such a convention in order to get the widespread support necessary for a constitutional change of this magnitude?
  Mr. Foot: As I said in my original reply, I shall make a statement as soon as we have had time to see what progress is made in the talks. As I indicated before, I am extremely doubtful whether an all-party convention of the type described by the right hon. Gentleman is the best way to proceed—not through any prejudice against him, but because I believe that it would be likely that such an all-party convention would end in complete deadlock. It may be better for us to have some of these further conversations and then to bring forward further proposals which have a good chance of getting a majority in the House.

  HOUSE OF COMMONS

    Broadcasting
    Mr. Christopher Priceasked the Lord President of the Council when sound broadcasting of the proceedings of the House will commence.
    The Parliamentary Secretary to the Privy Council Office (Mr. William Price): The Joint Committee which has been considering permanent broadcasting of parliamentary proceedings has completed its work and will shortly publish its report. If the Joint Committee's proposals are approved, broadcasting will
    866
    begin as soon as the necessary arrangements can be made.
    Mr. Christopher Price: Is my hon. Friend aware that those boxes over there have been there for months and that many of us who voted against televising the proceedings of this House were equally keen on continuing to broadcast the proceedings as quickly as possible? Has my hon. Friend a date for this beginning yet?
    Mr. William Price: I am conscious of the time that it has taken, but I have to deal with the Services Committee, the Treasury, the Joint Committee, Members of this House and the other place. It has not been easy, but we hope to begin broadcasting by the autumn.
    Mr. Dykes: Does the Minister feel that there is a grave dilemma on the question of financing the arrangement? Does he feel that, as a quid pro quo for getting the facilities here physically, it is the broadcasting authorities which should bear the whole cost?
    Mr. William Price: We have never asked the Press or the broadcasting authorities to pay for their accommodation, heating and lighting, and I see no cause for doing so on this occasion. We are hoping to find an arrangement acceptable to the BBC and IBA, in which we shall provide at least the basic accommodation. The rest will be borne by them, and their annual costs will be much greater than our capital costs on a one-off basis.
    Mr. Ioan Evans: Does my hon. Friend agree that the date for the start of sound broadcasting is being put back again and again? If it is not possible to have a definite arrangement for permanent accommodation, could not some temporary accommodation be given to both the BBC and the IBA, with permanent accommodation added at a later date?
    Mr. English: What about Cromwell Green?
    Mr. William Price: We looked at that and, as I understand it, the Services Committee has said that Cromwell Green is not possible. We have now had to look at a permanent arrangement and we believe that we have found a solution which will be acceptable to the House and to

    867
    the broadcasters. But I give the assurance that no further public expenditure and no arrangements will be authorised until the matter has come back to the House.
    Mr. Tebbit: Did the Minister say that no public expenditure will be authorised until the matter has come back to the House? Surely some expenditure has already been incurred. How much has been incurred, and on what Vote? On which Votes, in future, will other expenditure be carried?
    Mr. William Price: The decision to authorise the boxes was taken in the middle of the night on an occasion when the hon. Gentleman was obviously not able to be present. I said that no further public expenditure would be used on broadcasting as a permanent arrangement. If the hon. Gentleman would care to see me, I will give him chapter and verse about how those boxes were built by this House when he was absent.

MENTMORE TOWERS
Mr. Cormack(by Private Notice) asked the Secretary of State for the Environment whether he will make a statement on the Government's position with regard to the acquisition of Mentmore Towers, as Lord Rosebery's offer of the house and its contents to the nation expires on 5th April.
The Secretary of State for the Environment (Mr. Peter Shore): I have made it clear that the Government are prepared to spend up to £1 million on Mentmore Towers and its collection.
I agreed to consider Lord Rosebery's renewed offer if a contribution towards the cost of acquisition and running costs of at least £2 million were made available from private sources. Considerable interest has been shown, but all the schemes so far proposed would have involved public expenditure in excess of £2 million.
Mr. Cormack: Is the Secretary of State aware that substantial funds have been promised since last week from private sources? Is he also aware that Lord Rosebery is prepared to receive a major part of the sum due to him over a number of years and also that Lord Rosebery's solicitors have just informed me
868
that Lord Rosebery is willing to extend tomorrow's deadline until later this week?
In the light of these facts, will the right hon. Gentleman agree to see Lord Goodman and myself later this afternoon with a view to considering afresh the acquisition for the nation of this outstanding house and its contents?
Mr. Shore: I am aware, as is the hon. Gentleman, who has maintained a strong interest in this matter, that some funds have been tentatively put forward from private sources. I am pleased about that, but there is still a considerable way to go. In view of what the hon. Gentleman has said about the message from Lord Rosebery's solicitors to the effect that Lord Rosebery is prepared to extend the deadline, I am willing to have talks with the hon. Gentleman and with others to see what can be done.
Mr. English: Will my right hon. Friend assure the House that no public money will be spent on this building, as distinct from its contents? Is he aware that it is a nineteenth century copy of the sixteenth century hall which is in the middle of my constituency? Is he also aware that the city of Nottingham, which owns the original building—not the copy—urgently needs some money to spend on that building? If there is any public money to be spent on a building of architectural merit it should be spent on the original and not on the copy.
Mr. Shore: I note what my hon. Friend says. It is true that the building has not met with universal approbation. Nevertheless, it has recently been upgraded to a Grade 1 building and will therefore be subject to the protection that goes with that listing.
Mr. Thorpe: Whilst accepting that Mentmore, as indeed this building in which we meet, is not always regarded as the finest piece of architecture ever produced, none the less it is of historic interest, as are the contents. [Interruption.] Is the right hon. Gentleman aware that the reference to my Tory ancestors who sat in this House is very flattering, and I accept it with thanks to the Tory Party? I thought that they had not forgiven me for deserting their ranks.
Does the right hon. Gentleman agree that we are, in fact, talking about a

869
national collection, and, whatever the Philistines below the Gangway may think, it is worth between £8 million and £9 million? Is there not a real possibility of a £3 million bonus to the nation?
Since the Treasury last turned down the suggestion, a further £1 million has come into the kitty, with the possibility of still further funds, and a longer date for agreement on this matter. The Treasury must be more open-minded and more flexible.
Mr. Shore: I hope that I heard all that the right hon. Gentleman said. I do not entirely accept the arithmetic of the valuations that he has put to me. Nevertheless, I agree that there is here a valuable and, in many ways, a unique collection, and it would be desirable, if we could, to find satisfactory terms on which it could be brought into the public domain.
Mr. St. John-Stevas: May I thank the Secretary of State for the Environment for his encouraging words and ask him to make a determined effort, even at this eleventh hour, to save this historic house? Does he not agree that if the house and its contents are dispersed, not only will these be a grave loss to the national heritage but the Government will be losing the bargain of the century on behalf of the nation?
Mr. Shore: We must be careful about the language we use, because, inevitably, widely varying judgments are always imported into considerations of any collection or building. Of course we are anxious as a country—and on both sides of the House—to protect the national heritage. But the truth is that we have an enormous national heritage to protect, and it is the job of successive Secretaries of State to come to a view of what really are the most important items to preserve. Against a background of severe public expenditure restraint, I believe that we have done the right thing in showing considerable willingness—we are prepared to find £1 million—but private sources must come forward with the additional resources required.
Several Hon. Members Several Hon. Members rose—
Mr. Speaker: I propose to call another two hon. Members from either side.
Mr. Faulds: Is it past the wit of anyone in the Government responsible for these matters to comprehend that the Government are passing up the opportunity of acquiring for the nation's collection and for the benefit of our tourist trade a unique property? [HON. MEMBERS: "A copy."] This is a serious matter if some of the lower ground twits would understand it. The Government are passing up a unique opportunity at a price about one-third of the £9 million that this collection alone, without the house, will get at auction, to the delight of Sothebys, ad a Grade 1 empty building will lie like a white elephant around the Government's neck. Cannot they understand this matter?
Mr. Shore: I acknowledge, and the House will recognise, the great enthusiasm of my hon. Friend for this particular building and its contents. Of course it has a potential in the context of the tourist trade. But I have no reason to change the general evaluation that I have made—that it must be judged against other priorities and other claims within the sphere of the national heritage, and I must look very carefully at any proposals put before me.
Mr. Benyon: Will the Secretary of State accept that it really is all or nothing, because if the house goes the collection must go to auction, and most of it will go abroad? In view of the enormous progress that has been made by my hon. Friend the Member for Staffordshire, South-West (Mr. Cormack) in his negotiations, I hope that the Secretary of State will have another think about this matter before it is too late.
Mr. Shore: As I have already said, thanks to the information that has been imparted in the House, it appears that I shall have an opportunity for a further exchange with those acting on behalf of Lord Rosebery and, of course, I shall look at the matter seriously. I assure the hon. Gentleman that the export of particular works of art of outstanding national importance is an entirely different issue. The ordinary rules would apply to such items in any event.
Mr. Newens: Does my right hon. Friend recognise that the opportunity to take this splendid house and its contents into public ownership will be lost for ever if it is not taken now?

871
Would it not be a great pity if we allowed the present temporary situation—I am as concerned as other hon. Members about public expenditure cuts and so on—to condemn us to losing this national asset permanently?
Mr. English: The original already is in public ownership.
Mr. Shore: I am not sure whether one should view this matter entirely in terms of the present situation. As I said, the wider and more difficult question is to assess the place of Mentmore in the whole context of the enormous and costly national heritage that we have and intend to preserve.
Mr. Rhodes James: Is the Secretary of State aware that the real point of Mentmore lies in the combination of the house and the collection and that to separate the two would be to destroy a unique part of our national heritage? May I assure him that we are grateful to him for his response to us?
Mr. Shore: I thank the hon. Gentleman.

NEW MEMBER
The following Member took and subscribed the Oath:
Andrew James Mackay Esq., for Birmingham, Stechford.

ORDERS OF THE DAY

  WAYS AND MEANS
  Order read for resuming adjourned debate on Question [29th March],
  AMENDMENT OF THE LAW
  That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance; but

  (a) this Resolution does not extend to the making of amendments with respect to the surcharge imposed by the National Insurance Surcharge Act 1976 other than amendments for affording relief to charities; and

  (b) without prejudice to any authorisation by virtue of any Resolution relating to value added tax, this Resolution does not extend to the making of amendments with respect to that tax so as to provide—

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

  (ii) for refunding any amount of tax.

  (iii) for reducing the rate at which tax is for the time being chargeable on any supply or importation otherwise than by reducing that rate in relation to all supplies and importations on which tax is for the time being chargeable at that rate; or

  (iv) for any relief other than relief applicable to goods of whatever description or services of whatever description.—[Mr. Healey.]

  [Relevant Commission Documents: Nos. R/566/77, R/567/77, R/2361/76 and R/2520/76.]
  Question again proposed.

BUDGET RESOLUTIONS AND ECONOMIC SITUATION
3.43 p.m.
The Chancellor of the Duchy of Lancaster (Mr. Harold Lever): The party excitements which we have just witnessed remind me of the time when I left the Treasury after a political discomfiture some eight years ago. I took with me the crystal ball which used to be the most prominent object on my desk and which I kept as a warning about the insecurity of prediction and the inadequacy of the instruments we have with which to make predictions. I also took a very distinct memory of the arguments we had had about the details of Budget management.
I had come to the conclusion—I shall not say that I still adhere to it, because it might be against Government policy:

873
who knows?—that we should be better off if we affirmed once and for all the broad structures of the Budget and then, at every Budget time, by some regulator method, lifted or lowered by a percentage the rate of tax that we wished to apply, having regard to the Budget judgment of that year. We should then have been able to focus the talents of the House upon the great economic problems and strategies upon which we have to decide.
On the other hand, I have to recognise that it is the traditional rêle of the House to argue the relative priorities of the burden of tax on toothbrushes, bird food, and things of that kind. I hope, however, that we shall find an opportunity to focus the talents of erudition, learning, passion for the public weal, and all those other high qualities which, on our own admission, we possess in such abundance more usefully on the greater issues.
I mention this because it is not unknown to hon. Members that tonight we have to deal with the Budget Resolutions, some of which have caused difficulty in all parts of the House. In particular, there is genuine concern in all parts of the House about the impact of the increase in petrol tax. I have the greatest sympathy for people in rural areas who are obliged to travel considerable distances, using a car that they can barely afford, or inadequate public transport. But the problems of transport in general, and those of rural transport in particular, are much larger than the question of the price of petrol and the level of vehicle excise duty that we shall be deciding tonight.
Solutions to these problems are more complicated than anything appropriate to a Budget and a Finance Bill. However, these problems have been very much in the mind of my right hon. Friend the Secretary of State for Transport in preparing his White Paper which is due in about two months' time. My right hon. Friend is fully aware of the widespread and justified sense of grievance about aspects of our transport affairs. The question is how we should deal with those problems.
As I said, I do not think that the Budget Resolutions necessarily give the best opportunity for dealing with these problems, but the House must be the judge
874
of that. The Chancellor's proposals, however, are contained in a resolution which is central to the Budget strategy. That it includes petrol tax and VED increases seems to me justified by the fact that in the case of petrol the increase is no more than is required to maintain, as it were, the real value of the petrol tax, and, in the case of VED, to achieve something less than that.
Although I am troubled, as I am sure many hon. Members are, about the problems that arise from the increases, we should bear in mind that in our energy situation we cannot afford deliberately to make fuel for vehicles cheaper in real terms. In addition, in considering tonight the problems arising from the resolution to which I draw particular attention we must bear in mind what is perhaps a weakness in our system of dealing with these matters. Inevitably the House passes the main Budget Resolutions early on, and the collection of the tax proceeds. I do not want to weary hon. Members, but the House will be aware of the immense administrative difficulties that would follow if, for any reason, the Government failed to carry their Budget Resolution on petrol. It would require the repayment of the duty to everyone who had paid it.
Mr. Nigel Lawson: The right hon. Gentleman mentioned energy-saving. So that the House may make up its mind on the basis of fact, can he tell the House what is the quantum of energy-saving—that is, of fuel saved—expected to occur as a result of the increase in duty in the Budget?
Mr. Lever: Of all people the hon. Member should know that that is not a useful question. I am sure that he does not wish to engage me in the kind of charlatanry in which he himself indulges and predict mathematically the consequences of the imposition of the petrol tax. The hon. Gentleman must know that the imposition of this tax makes it rather dearer than it would otherwise be, and presumably rather less of the fuel will be consumed than would otherwise be the case.
Several Hon. Members Several Hon. Members rose—
Mr. Lever: I have not come to devote the whole of my remarks to the petrol

875
tax. I should press on, but I shall give way once.
Mr. William Clark: The Minister spoke of the administrative difficulty resulting from not passing the resolution on petrol tax. Is it not political arrogance for a Government in a minority position to impose a tax coming into operation at 6 o'clock last Tuesday when it could quite easily have come into operation at 6 o'clock tomorrow evening? We should then not have had all this kerfuffle with the Liberal Party. Does not the right hon. Gentleman agree that the administrative difficulty has been caused by the Chancellor the Exchequer's ineptitude?
Mr. Lever: The hon. Gentleman also realises that the point he raises is a spurious one. He knows that in order for the tax to be collected the assent of the House is required and was given. He knows that one cannot announce increases in duties of this kind in advance. In those circumstances, the point that he seeks to raise is a bad one.
Mr. William Clark Mr. William Clark rose—
Mr. Lever: I will not give away again on this point. No doubt the hon. Gentleman will catch your eye at some point, Mr. Speaker. He will then be able to devote the whole or such part of his speech as he requires to this issue.
Mr. Ian Gow Mr. Ian Gow (Eastbourne) rose—
Mr. Lever: I will not give way on this issue. Energy-saving must occur here, too, to save the energy of Members. I have given way several times. I must make some progress. I want to go on with the real point that I have to make.
In a few weeks' time we shall come to the Committee stage of the Finance Bill. The House will then have ample opportunity to consider the problem of petrol tax in detail.
Mr. Lawson Mr. Lawson rose—
Mr. Lever: It is no good the hon. Gentleman jumping up and down. I have given way to him. He has had the opportunity to express himself. I cannot turn my speech into a dialogue with him on one minor issue.
Mr. Peter Rost Mr. Peter Rost (Derbyshire, South-East) rose—
Mr. Lever: I have warned hon. Members that they are wasting their energy and the time of the House if they keep jumping up on this point, beause they will not be heard. Hon. Members have had ample opportunity to intervene and I have given way amply. I shall not allow a continuous barrage of intervention on this one point, which can be dealt with by Opposition spokesmen at leisure.
Mr. William Clark: On a point of order, Mr. Speaker. I raise this point of order reluctantly, but the right hon. Gentleman has said that the Chancellor cannot give advance notice of an increase in tax. That is surely factually incorrect, because any Chancellor can say that on a certain date a tax will be increased.
Mr. Speaker: If I were to intervene whenever I thought that anything was factually incorrect, I should be a busy man. I say that without any reflection at all on the right hon. Gentleman.
Mr. Lever: It has always been the habit of those with weak cases to raise bogus points of order, without advantage to the proceedings of the House.
In a few weeks' time we shall be able to discuss the petrol tax. We shall be able to discuss it with sharper focus because it will not be linked with other aspects. We shall be able to discuss all the details and to express opinions in our customary way. In the meantime, I must say this: recognising the genuine feeling in the House on this issue—among my own colleagues as well as hon. Members opposite and Liberal Members—my right hon. Friend the Chief Secretary to the Treasury will give his usual careful, benign and courteous reception to all those who wish to discuss the problem with him, as he will be very anxious to hear their views upon it. I have no doubt that my right hon. Friend the Secretary of State for Transport will also be equally obliged for any suggestions. [Interruption.] I gather from the noises from the Benches opposite that the Conservative Party is disquieted that what I have said might not be acceptable to the Liberal Party. Of course, we all know that at present the Conservative Party has an almost unlimited capacity for working itself into a frenzy of indignation over any obstacle that stands between it and the assuagement of the

877
office-hunger which it is clearly now so feverishly projecting. But I do not doubt that Liberal Members will recall that they were not elected to office with the specific passion and purpose of assisting the Conservatives in this way. We were all elected to serve certain purposes and motivations. I am offering all right hon. and hon. Members—including Conservatives who feel sincerely about this question and who are not merely seeking to use it as a means for driving a hole through the Chancellor's Budget—the fullest discussions with my right hon. Friend the Chief Secretary and the Secretary of State for Transport of the troubles and grievances with which we are all closely concerned.
Several Hon. Members Several Hon. Members rose—
Mr. Lever: I am not being discourteous, but if any of those hon. Members to whom I cannot give way on this point would care to wait outside afterwards. I shall be glad to see them.
I now turn to the central purpose and strategy of the Budget.
Mr. Peter Emery Mr. Peter Emery (Honiton) rose—
Mr. Lever: The hon. Gentleman does not seem to think that I am a man of my word. I told the House that I had no intention of giving way on this point. No doubt the hon. Gentleman will regale the House with his wisdom upon it in due time.
Mr. Emery: Will the right hon. Gentleman give way?
Mr. Speaker: Order. It is clear that the Minister does not intend to give way. He has said so to the House and I hope that his position will be respected.
Mr. Emery: The Chancellor of the Duchy is a bully.
Mr. Lever: I am afraid that the hon. Gentleman will not necessarily carry everyone in the House with him by suggesting that any Minister who does not give way to him is a bully. It is conceivable that it would be more courteous if he retained his seat, observed the rules of order, and allowed me to get on with the business with which I have to deal.
Sir Keith Joseph: The right hon. Gentleman is generally extremely courteous to the House and is
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generally the master of his brief. He seems to be refusing to give way not because his speech is being unduly delayed, but because he cannot defend his own proposals. My hon. Friends are surely, therefore, entitled to probe a little further before a Minister is entitled to plead that his speech is being so delayed that he should not be interrupted any more.
Mr. Lever: The right hon. Gentleman is attempting to score unworthy points. I hope that I am never discourteous to the House. I have given way copiously on this point, but it is not the major burden of my speech. The main theme is on the Budget itself and the question of the Budget Resolution will be best dealt with in Committee.
Mr. Emery Mr. Emery rose—
Mr. Lever: I do not hear what the hon. Gentleman is saying.
Mr. John Mendelson: Would my right hon. Friend bear in mind—
Mr. Nicholas Ridley: On a point of order, Mr. Speaker. The Minister said that my hon. Friend the Member for Honiton (Mr. Emery) suggested that he was not a man of his word. The right hon. Gentleman had given his word that he would not give way, yet he has now given way to my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) and to the hon. Member for Penistone (Mr. Mendelson). Is it the fact that he will not give way to Back Bench Opposition Members? Is that what he should have said? He has broken his word if that is not what he meant.
Mr. John Mendelson: Will my right hon. Friend bear in mind that although any Excise duty is a serious matter for all hon. Members, there is much more anxiety and criticism on the part of a number of hon. Members about the lack of growth proposed in the Budget? Will he now get on to the major economic strategy and not allow his time to be wasted on one point only?
Mr. Lever: My hon. Friend has validated my assertion that I would not give way on this issue any further, and I have not and will not—not out of discourtesy to the House, but because there are others

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who wish to speak. I have no time limit and could go on and make the rest of my speech indefinitely. I have made the points I wish to make. If any members of the Conservative Front Bench feel that those points are not cogent and convincing, they may wish to give in more articulate form the advice that they have been giving to the Liberals on how they should or should not behave on this issue, and no doubt they will receive the reception appropriate to their wisdom and impartiality.
I turn to the central policy—
Mr. Emery Mr. Emery rose—
Mr. Lever: The hon. Gentleman can go on bobbing up and down like a jack-in-the-box from now until the rising of the House, but I do not intend to give way.
I wish to turn away from the series of somewhat frivolous interventions—
Sir K. Joseph: They were not frivolous.
Mr. Lever: The right hon. Gentleman says that the interventions were not frivolous. Questions asking me to assess the amount of petrol that will be consumed after the tax compared with what would have been consumed before the tax, I regard as frivolous.
Mr. Gow Mr. Gow rose—
Mr. Lever: It is perfectly plain that hon. Members opposite do not want to hear the rest of my speech. I do not blame them, but I am afraid that they will have to hear it, because I have a duty to make it.
In his Budget the Chancellor's central problem, and one that is afflicting the whole of the world was the problem of inflation and recession, or lack of growth. It is quite plain, though one would not have gathered it from the somewhat sterile and negative criticisms of the Budget that have been made by the Conservative Front Bench, that the problem from which we have been suffering these past three years is a grave one troubling all advanced countries. Not only the Labour Government here, but every Government in every advanced country has had to grapple with problems,
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which they have so far not solved, of world inflation and world recession.
The question is how such a situation arose. Why were we not afflicted with these problems before the war? Those hon. Members who are quite satisfied that the afflictions under which we struggle in this country are uniquely to be attributed to the Labour Government presumably suppose that the problems did not exist under the Conservative Government, or do not exist under any other Government at the same time as we have been grappling with them.
While the world, perhaps prematurely, was congratulating itself on having solved the pre-war problems of lack of demand, it was in fact gestating a new problem—the problem of distributing in an advantageous way the level of demand that it had. In other words, in recent years, broadly reaching a climix in 1973, the world had, as it were, changed its problem from the problem of aggregate demand to the problem of managing the demand that it had in ways that would avoid inflation and permit the onward growth of production.
In this country inflation reached acute proportions and the Government decided that, whatever the difficulties, it had to be dealt with. The important question was what remedies were available. We had all learned that the paper chase for unreal increases in money incomes would not be of advantage to us. However, that was a very generalised recognition. The problem was not to recognise the general aggregate of resources available and the demand that could be allowed to match it; the problem was how to structure that demand so that it would lead not to a paper chase, but to stable or more stable prices and a resumption of the growth of real wealth creation.
Three remedies have been suggested for our problems. The first was monetarism, the second free collective bargaining and the third incomes policy. I shall speak briefly about monetarism. It has its addicts in all parts of the House in some form or another. If it were really true that monetarism could claim the possibility of solving our problems of inflation simply by the proper manipulation of the money supply, or the various monetary aggregates, we could pause to wonder why it was that in not one country has the problem of inflation been

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eliminated by this simple and advantageous method.
Although to me monetarism as a doctrine has not been intellectually convincing, it has had a value in drawing greater attention to monetary aggregates, which in the past have had insufficient attention, especially under the Conservative Government—as the right hon. Member for Leeds, North-East (Sir K. Joseph) has pointed out to his ex-colleagues who occupied the Treasury Bench.
However, as a total solution it represents a retreat into financial statistics which ignores the reality that is behind those statistics. A monetary solution, if attempted with the kind of rigidity that alone could offer us the hope of a cure for inflation by this means, would result in protracted and perhaps indefinite high unemployment. There is no guarantee, even within monetarism's own rather inadequate logic, that a structure of iron monetary restraint, would enable us to protect the weaker members of our society from the stronger. There is no justification for believing that this simple solution would resolve our difficulties in the happy way that its more naïve advocates press upon us.
The package may have alluring flowers on the outside, but I suspect that if we sowed the seeds of monetarism with the ruthlessness to which we are urged, we should get not the flowers of inflationless growth but unemployment and hardship for an indefinite period. Certainly there would be no prospect of growth.
Mr. Gow: The Chancellor of the Duchy has been arguing that if we were to follow an iron monetary policy it would be certain to lead to inflation. Since nobody believes that we have been following anything approaching an iron monetary policy over the past four years and since we have the highest rate of inflation that we have had since the 1930s, does not the right hon. Gentleman think that there is a monetary lesson to be learnt from that?
Mr. Lever: As we have a rate of inflation which is not much more than half that of two years ago, it cannot be said—
Mr. Gow: I meant to say "rate of unemployment".
Mr. Lever: I shall have to re-phrase the question to read "unemployment". Certainly this is a grave and threatening problem. However, the fact that we have not been able yet to achieve its solution does not mean that we must immediately espouse some alternative solution without any conviction as to its consequences. A monetarist is entitled to believe that there would ultimately be less unemployment if we applied—
Sir K. Joseph: The Government are applying monetarism.
Mr. Lever: The right hon. Gentleman says that we are applying monetarism. We are paying attention to monetary aggregates, which is not quite the same thing. If the right hon. Gentleman is satisfied that we are applying monetarism, he should be very happy because he has preached it and its fruits should be rich and rewarding. We are not applying monetarism. We are rightly taking into account monetary aggregates as part of the economic package by which we deal with our problems.
Mr. Nick Budgen: Would not the Chancellor agree that M3 is expanding at about 5 per cent. per annum? Is not that iron control of the money supply?
Mr. Lever: We have a firm control of the money supply. That is different from relying on the money supply to accomplish tasks greater than it is feasible to rely upon it to accomplish.
The former right hon. Member for Wolverhampton, South-West, now the right hon. Member for Down, South (Mr. Powell), is always preaching that once one has the monetary disciplines one does not need to care any more what the trade unions or the working people do in organising wage claims and the like. But it has nothing to do with inflation. It is the total supply of money that has to do with inflation.
There is a distinction between total indifference to the money supply—such as the Tories normally display when in office and total adherence to monetarism which relies upon monetarism, and monetarism alone, to cure inflation. I dismiss the notion that monetarism is itself a complete solution.

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I turn to the alternative suggestion, that we should go back to free collective bargaining. The trouble with free collective bargaining is that if, in the present context, we were to resume, without change, the system known as free collective bargaining we would undoubtedly produce a situation in which the stronger groups in our society would be able to achieve considerable benefits in relation to the weaker groups. But they would have two major disappointments. First, the gains that they made would be less than they thought they had made because of the twist to price inflation which was taking place. Secondly, the inflationary situation which would be resumed would bring about the dangers of slump and unemployment.
In all, even the stronger groups exercising their powers, without reference to the aggregate achievement of our society at the present time, would produce a situation in which their gains were temporary and soon would be non-existent. Even they would be worse off than if we could all find the means of co-ordinating our achievements so as to allow greater accretion to our wealth creation than is possible in the inflationary situation which would follow the reversion to what is called free collective bargaining.
The third choice is incomes policy, which is the policy the Government have been pursuing and intend to pursue. This is a policy of free collective bargaining co-ordinated so that each group takes into account, to its own advantage in the long run, the consequences in aggregate of the decisions they are making. I think this is a reasonable interpretation of the voluntary policies that we have been pursuing.
The alternatives to that policy are clear. Without further success in the Government's policy of incomes co-ordination we shall return to the positively horrific level of inflation of two years ago, which will be followed in turn by the prospect of slump, devaluation and deficit.
As a matter of fact, the policy so far, contrary to the pessimistic predictions of Conservative Members, of seeking the co-ordinated efforts of our working people in an incomes policy has had great success in removing at least partially the terrifying dangers that were arising two
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or three years ago. In fact, were it not for the fact that after the successful achievements of phases 1 and 2 a devaluation had occurred which became itself one of the great engines of inflation the Government would have made even greater progress in the success of these policies.
The devaluation which occurred was to some extent at any rate, quite inevitable in the light of the inflationary free-for-all consequences of the previous period. What is worse, it was aggravated by the imperfect state of our international financial mechanisms at that time.
Fortunately, the Government have been able to strengthen our international position—I refer now to the safety not and to the general strengthening of our international financial defences—which enables the Chancellor to offer the House a period of confidence in which we can look forward to the blessings of a stable currency and seek to organise our affairs within that stable currency so that we may become steadily more competitive.
Let me say a word about the parity question in relation to incomes policy and in relation to competitiveness. I often hear the seductive expression "the blessings of an undervalued currency", and we are often told by those who orate most freely about the German achievement in the export markets that it was the blessings of an undervalued currency which made possible that achievement.
I am afraid that that is a shallow view. The truth of the matter is that any economy which is gaining productivity against its rivals in world trade gradually acquires an undervalued currency and that the more it gains in productivity the more undervalued its currency becomes. So if I were to overstate the matter and turn it the other way round, I would say that Germany's currency became undervalued because Germany grew in its productivity in competition with its rivals.
That view is corroborated by simply looking at one or two other experiences. Nobody can deny that, whatever the blessings of an undervalued currency, we got them after the Stafford Cripps devaluation when, in the face of a fairly marginal current account deficit, we devalued by 40 per cent.
We devalued against the deutschemark and against the dollar, which was not devalued. One would have expected

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that with the blessing of this devalued currency, if it is a blessing, we would have leaped ahead and resolved all our problems. I do not need to dwell upon the number of times we have conferred the blessings of an undervalued currency upon ourselves or had it conferred upon us by agitated markets.
The truth is that an undervalued currency is a prize to be won, not a blessing which we are free to confer upon ourselves by parity manipulation. An undervalued currency is the prize which is won by a competitive country gaining in productivity on its trading rivals. That again is shown in the case of Germany by the fact that, although its currency has steadily appreciated in recent years, as its productivity improvements have matched that appreciation the German currency remains undervalued compared with those of its rivals. It will remain undervalued as long as productivity is maintained in this way.
The remedy for the evils of inflation is not to be sought in parity manupulation; nor are prizes of competitiveness. The prizes of competitiveness are to be sought in self-discipline and the organisation of a policy in which, instead of pursuing paper gains which cannot become real because the resources are not there, we seek to achieve in an orderly fashion the possibility of resuming the real economic gains which success in the battle against inflation will bring within our reach.
I read the speech of the hon. Member for Cornwall, North (Mr. Pardoe) with great interest. He made many good points, but I thought there was one weakness in his speech, on the question of inflation.
Mr. William Clark: A split already.
Mr. Lever: The hon. Gentleman seemed to ignore the fact that inflation is not a static condition in our society, but a dynamic process. When he advocated that ideally we should have zero growth, he ignored the fact that at any given time there is a huge weight of inflation already in the pipeline. The effect of a zero growth in wages would be not merely that one would ask for an immediate and probably intolerable sacrifice in real living standards by our working people, but that if one won that, they would not only accept an injury to their living standards but would injure
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the demand upon which their employment depends. And this at a time when nobody could say that our society was suffering from a plethora of demand.
For that reason there has to be some means of bridging the period in which the inflationary price rises in the pipeline are worked out. That is why the Chancellor's strategy is absolutely right in seeking to make the tax reductions march side by side with the self-disciplines which reduce the paper claims which work people make at any given time. This will enable them to bridge a good deal of the gap caused by the inflation already in the pipeline.
Mr. David Price: Would the right hon. Gentleman bear in mind that what he is arguing now does not tie up with what the Chancellor said in his statement or in the Red Book? In both those statements we were promised an increase of 1½ per cent. in economic growth for 1977 and that, if we were lucky, inflation would be down to 13 per cent. by the last quarter of 1977. However one plays with those figures, they can only mean reduction in living standards for the average Briton. There is no other way in which those figures can be interpreted. So is what the right hon. Gentleman is talking about going to happen?
Mr. Lever: I see no contradiction in my right hon. Friend's figures. My right hon. Friend says that we are coming to the end of the period of reduction in real living standards. He says that we shall have an increasing growth. Although I am liable to be irreverently critical of Treasury forecasts, I think that this forecast will, on balance, prove to be pessimistic rather than to overstate the prospects.
It is very difficult to predict these things with detailed confidence. I see nothing incompatible with the Chancellor's proposals and predictions in what I have said. The Chancellor is struggling to create the conditions for sustainable growth. The first condition is the control of inflation. That control is feasible only if we win the support of our working people for an incomes policy which will bring that about.
I am sorry that, owing to frequent interruptions, I have gone on for rather longer than I wished. One or two points, however, still remain. I have read the

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speech of the right hon. Member for Leeds, North-East. As so often, he makes good points that are true only in part.
He has a point when he says that it is not easy for private enterprise, if it faces a barrage of criticism of its efforts of its motivations, always to deliver its most exciting and satisfying work. The right hon. Gentleman is certainly in respectable company in pointing out that confidence in the system by which the country operates is a crucial factor in its success.
Like so many of his good points, however, that leads to no useful conclusion. What does the right hon. Gentleman wish to happen? Does he want, for example, members of the Tribune Group, persuaded by the force of his argument, to affiliate forthwith to Aims of Industry, and from then on to give unqualified paeans of praise to the private enterprise system? Surely that is not a very practicable proposal.
The right hon. Gentleman should bear in mind that it is about 130 years since the Communist manifesto was published, and since then private enterprise has changed dramatically. One of the most dramatic aspects of its change has been in its productivity. The achievements of private enterprise are greater under a barrage of criticism than they ever were when its tenets were regarded with almost religious fervour.
I think that the right hon. Gentleman—as, for that matter, is the Conservative Party—is giving his attention a wrong focus. I am a great believer in the political and economic advantages of, and necessity for, private enterprise. I see it, as well as the public sector, playing a successful part in the years ahead. I should rather see the danger to its survival, value and sucess in terms of its failure to tackle the defects in the system of which my hon. Friends on the Left wing in politics are the most vociferous and perisistent critics.
The danger to the private enterprise system does not lie in the fervent declarations of my hon. Friends the Members for Penistone (Mr. Mendelson), and Liverpool, Walton (Mr. Heffer), but in its own failure to remedy the horrific world level of unemployment and inflation from which we are suffering. It is the failure of
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private enterprise adequately to use the resources at the disposal of mankind for the creation of wealth and for the ordering of its affairs that endangers it. Nothing that is done by my right hon. or hon. Friends represents a danger a fraction as grave as that which threatens from the world evils of inflation and slump with which we are now beset.
That is the reason why I find no difficulty in endorsing the strategy of my right hon. Friend. The fact that there is a world problem within which our own problems must be faced does not by any means permit us to ignore our responsibility to grapple with the still frightening level of inflation.
The Chancellor's strategy is one for grappling with that inflation, not because of some theological objection to it, but because inflation is the biggest single obstacle to full employment. That obstacle must be removed, and because the Chancellor's is the only strategy that has been offered to the House and to the country in support of a policy of growth and full employment, I heartily endorse it.
The Chancellor and the Prime Minister have already shown in their activities in the world that they recognise that whatever is done here can succeed only as a part of a wider world success. We have made and will continue to make our contribution as good citizens of the world. The Budget, however, is a central contribution to the strategy of ending inflation at home and opening the path to sustainable growth and fuller employment policies.
4.31 p.m.
Mr. David Howell: Usually the Chancellor of the Duchy of Lancaster is second to none in his capacity to reassure us that things are growing a little lovelier each day and that the economy is coming up nicely. I hope he will not mind my saying that he appeared today to have filled up with a low-grade fuel with a heavy lead content. We note his reassurances but we do not believe them. I shall explain why later, but first I should like to look back on the debate on the 1977 Budget, of which this is the third day.
For me the high spot of the debate was when the hon. Member for Cornwall, North (Mr. Pardoe) rose, heavy with the terrible burden of his new rôle bearing

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down on his shoulders, and told a hushed House:
"In the present state of the economy hope is about the only commodity for which we can hope."—[Official Report, 30th March 1977; Vol. 929, c. 458.]
I appreciate the burden upon the hon. Member, but there is another commodity—if that is the right word—for which we, certainly all of us on this side of the House, and perhaps the whole House, are entitled to hope. That is a little more candour and less cant in Liberal Party pronouncements. Anybody who was not born yesterday can understand the Liberal situation and see the dfficulties. Liberal Members must support the Government to survive, and I do not hold that against them. That is the political reality and the way in which the system works. But we are entitled to ask to be spared all the high-minded lectures about the new alignment and about giving the country a new era of stability.
Where on earth is that stability? In the 12 days since the Lib-Lab pact there has been almost continuous instability and uncertainty. Over the weekend the Government were supposedly teetering on the edge of extinction while the Liberal Party danced a flamenco around the petrol tax issue, threatening archly to withhold favours from the Government but obviously determined to surrender in the end. The Chancellor had to rush on to the "Jimmy Young Show" to threaten the ultimate deterrent—3p on a pint of beer. That would, of course, have smashed the social contract and brought down the twin pillars of the Government's strategy.
So everything is in doubt, and we need no lectures on the need for stability. Of course, the Liberals must cling to life—and to their shadow portfolios—even more so as their support in the country grows more shadowy still. To call that "stability" insults the intelligence of the electorate. The country can reasonably ask to be excused these "Perils of Pauline" episodes as the Liberal Party rediscovers each weekend that it would rather be red than dead.
I turn to the more serious issues and I follow the Chancellor of the Duchy of Lancaster in looking at the contents of the Budget. I agree with him and the Chancellor of the Exchequer that this is not a political Budget. It may be paying
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the way for a political Budget, but it is not one itself. Indeed, one feature of the Stechford by-election—I shall try not to mention too often that painful episode for the Government—is that by Thursday nobody could remember much about what had happened in Tuesday's Budget, except the price of three, four, and five-star petrol. People saw that it was going up in price. We shall oppose the relevant resolutions tonight because we believe that it would be better for VAT to be consolidated at 10 per cent. instead. That is also what the Liberals believed last Wednesday and Thursday, although today they believe differently.
We should not be surprised that nobody could remember much about the details of the Budget. After all, why should people remember them? If one considers the matter from their point of view, prices are still rising impossibly fast and food and household goods are becoming incredibly expensive. The poor at work will be poorer in the coming year and the poverty gap will grow wider. Everybody will be worse off in the year ahead. Tax will go on rising, despite the temporary hiccough, and everyone will be paying more tax next year than this. As the Chancellor knows, jobs will be scarcer and life will become tougher—for example, the disabled who rely on motor transport will be in great difficulties. The queues at hon. Members' surgeries will be longer with the sad people who cannot make ends meet, such as the heads of one-parent families. Every rate, gas, food and garage bill will go up. This is certainly not a Budget for a family with children or those at the bottom of the heap. If anyone present doubts my word, he should go to Hansard and read the devastating speech of the right hon. Lady the Member for Blackburn (Mrs. Castle), who made that point. This is not a Budget for the weakest, whatever the propaganda may say.
Was this, then, a Budget for industry, the entrepreneurs and investment? We have welcomed the slight check in the deteriorating position of management that is implied in the tax concessions. It is slight, however, because by the time one has added the extra tax on company cars this year, extra petrol costs, and increased rates, the net effect will probably be nil. One should, however, be grateful even for small hiccoughs, and these we welcome.

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What about a major tax boost for business and major incentives for the renewal of enterprise that we must have in this country? What did the Budget do about that? What help was there in the Budget for partnerships and the self-employed? What about easing the rules on the 714 certificate issue—in which the Financial Secretary has played such a distinguished part—that will, in practice, bring total chaos to the construction industry? What about the job-destroying capital transfer tax? There has been no change there. What about the VAT reforms, for which many of my hon. Friends have been pressing? Again there have been no changes. What about savings? They were hardly mentioned by the Chancellor. What about personal capital building or profit-sharing, on which the Liberals are so keen? They were not mentioned.
There is one industrial statesman who, I am told, is happy with the Budget. My right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) reminded us on Wednesday that Lord Ryder will receive a fat increase in his take-home pay out of the arrangements—and good luck to him. He has authorised the National Expenditure Board, so my hon. Friend the Member for Rushcliffe (Mr. Clarke) tells me, to buy an ailing clock company to mark the occasion. I am told that it was a desperate bid to buy time.
The British National Oil Corporation should also be cheerful. The petrol duty increase, if passed, will give BNOC money to spend on its capital programme for drilling this year in the North Sea—a matter that private enterprise could have handled just as well. It might be useful for motorists to know that their money is going into nationalisation programmes.
Mr. Lever: Is the hon. Gentleman really trying to prove to a serious audience that money is being collected in petrol tax because we could not otherwise provide the finance required for work in the North Sea?
Mr. Howell: I am not saying that. I was simply pointing out the squandering of money through the BNOC, whose functions in regulations and safeguarding the national interest could be done in much better ways at much less cost.
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There is nothing in the Budget for the rest of industry. Although the Chancellor refrained from talking about miracles, the real miracle in this country is that the business community survives despite the unremitting hostility of the Labour Party towards it.
Is the Budget designed to please trade unionists? There has been no great clamour of enthusiasm from that quarter. As far as the conditional cuts are concerned, most of my hon. Friends would agree, for once, with Mr. Hugh Scanlon, who said that it is the Government's responsibility to govern and who implied, as we do, that it is not the Government's responsibility to send out little conditional promises and enter into negotiations of that sort with one exclusive body. If we are asked what we would do, our reply is that we would seek an open understanding and not a hole-in-the-corner deal.
Whichever party is in power during the coming wage explosion, the situation will be fiendishly difficult in the face of the consequences of that explosion and the resulting threat to employment. That is the disastrous legacy of two years of the social contract. I am referring not just to the flattening of differentials which is causing such great difficulties and immense tensions. The workpeople were asked to "give a year for Britain" in three successive years. Did they get less unemployment in any of those years? No. It is higher now and as high as it has ever been. Did they get lower inflation? The Chancellor of the Exchequer assured workers that low pay agreements would bring down prices, but have we got lower inflation? No. Inflation is at 16 per cent. and is doing fearful damage to every household budget. Far from being near the level of our competitors, we are running at four times the level of inflation in West Germany.
Surely these figures ought to tell the Chancellor of the Exchequer and his hon. Friends something about the social contract, the third part of which he is trying to set up. They certainly tell the workpeople something. They tell them that while pay restraint may be vital to the holding of jobs—this is more widely appreciated—it is all in vain unless the Government go all out to cut

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public expenditure, taxation and bureaucracy and to lower interest rates and so restore business confidence.
That is the understanding that will really help the workpeople and the trade unions. The Chancellor of the Exchequer may have got a pay agreement last year, but the workers were betrayed not by their failure to deliver pay restraint—they delivered, even though wage drift pushed the level well past the original 4–5 per cent.—but by the Government's obsession with policies, ironically often in the name of the social contract, which froze incentives, destroyed profits and undermined foreign confidence through risks with the public sector borrowing requirement that should never have been taken. That made workers' restraint pointless and wasted and produced the appalling bitterness with which any Government will now have to deal.
If we are asked what would the Tories do, we say that our rôle is not to deliver a sawdust package of Socialist promises in exchange for a scrap of paper that will probably be invalidated by events but to stick to the policies that will bring workers what they want in terms of jobs and living standards. That may need spelling out more clearly and openly, and the monetary limitations under which we have to operate should be set out more clearly. All politicians should be thinking of ways of doing that.
I was interested in the views of the Director-General of NEDC on the links between the NEDO and Parliament. It may be that in NEDC we could create a forum in which these things could be thrashed out. Perhaps the monetary authority should also be given a more prominent rôle in this forum, as has often been done in other countries, as well as other interest groups.
That should be the aim of a constructive pay policy—to bring home more effectively what many responsible trade unionists know already, namely, that there is a monetary total for the year which cannot be exceeded, that public expenditure must be held within cash limits underpinned by the political will to hold it and that within such a policy excess for some means less for others or fewer jobs for all or more pressure on the sick, the weak, the old and the dependent.
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That is the concerted way forward, rather than through job-destroying price freezes or a hole-in-the-corner social contract in which everything does indeed contract.
Mr. Ian Wrigglesworth: The hon. Gentleman talks about giving more independence to the monetary authority. Can he give us any more specific details?
Mr. Howell: I was making the point that in many countries, and maybe in ours, there is a case for the monetary authority, as distinct from the Government of the day, putting forward in its own terms limitations which must be held to and the total resources available for increases in pay and salaries, together with the consequences in terms of unemployment and difficulties for workpeople if those limits are exceeded. That is the concerted way forward, and the work-people are beginning to realise it even if the Government do not. So let us have no more of the chorus of "What would you do?" That question is being overtaken by events. If we are serious people on both sides of the House, we should be putting our minds to the approach that I have described.
Let us, please, also have no more people saying that all is well and that we need not worry because the Budget marks the end of Socialism. That appears to be the Liberal view, and I heard the Leader of the Liberal Party say last week that we would get no more Socialism. I have news for him. Socialist measures and policies of the past have a habit of living on. Nationalisation, the war on the self-employed, the insatiable partiality for State employment and the obsession with price and profit restraint cannot be switched off like a bad television film or a party political broadcast. That is not the way these things work. There will be no end of Socialism until there is an end of this Socialist Government.
Mr. John Pardoe: The hon. Gentleman is right to say that Socialism tends to live on in its effects of increased bureaucracy, wasteful expenditure and lack of public participation. However, the most Socialist acts of the last 20 years have been the Industry Act 1972 and the reorganisation of local

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government and the National Health Service. These have all created far more Socialism than has any nationalisation, and they were carried out by the hon. Gentleman's party.
Mr. Howell: The hon. Member may comfort himself with any arguments he likes, but we recognise the realities. He is supplying the oxygen to the Government. As politicians we understand his position, but he should not try to cover it with ambiguous persiflage and arguments about the high-minded principles of the Liberal Party.
We are reaching the end of a chapter in our country's affairs. It is recognised outside as having been a disastrous chapter even if Labour Members do not recognise it as such. The Conservative Party and the work people of Britain have a massive job to undertake. We tell this Labour Administration to face realities, even if the Liberals will not, that they are done for. We tell them to stand aside with what grace they can summon and we tell them to make way for a new Government who will bring stability to our uncertain nation in the storms through which we still have to pass.
Mr. Deputy Speaker (Mr. Oscar Murton): Mr. Speaker desires me to make the following statement to the House. Six Privy Councillors and many hon. Members who have sat patiently through the previous three days of debate on the Budget have communicated to Mr. Speaker that they are anxious to catch his eye during today's debate. Although it is clear that some hon. Members are bound to be disappointed by failing to be called, it will enable the Chair to call more hon. Members if those who are fortunate enough to catch the eye of the occupant of the Chair will try to exercise self-discipline in the length of time they take.
4.51 p.m.
Mr. Douglas Jay: The hon. Member for Guildford (Mr. Howell) has told us, if I understand him aright, that the Conservative Party is in favour of some sort of pay policy. It is interesting to know that, and I hope that that statement goes for his hon. Friends.
He also appeared to tell us that it is Conservative policy to take monetary
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policy to some extent out of the control of Government and Parliament. That is even more interesting, and we shall await further elaboration of his views from his hon. Friends.
Like my right hon. Friend the Chancellor of the Duchy of Lancaster, I am anxious to examine the real underlying problems facing the country rather than to spend time on the price of petrol or the vacillations of the Liberal Party. I only wish in passing to congratulate the Liberal Party on having discovered that even a little power implies a little responsibility. Perhaps the Liberals will go on to learn that it is wiser to make up their minds first and to talk afterwards, in politics as in many other fields.
I believe that the Chancellor of the Exchequer was perfectly justified in selecting oil and petrol, amongst other taxes, for some of the rises in revenue required to give the income tax reliefs in his Budget. It is not necessary to have worked in the Treasury to discover that the nature and object of taxation is not to please, but to displease as little as possible.
I agree with my right hon. Friend the Chancellor of the Duchy of Lancaster that the real question facing the House and the country, and it goes very much deeper, is how we can get an effective enough voluntary incomes policy to make full employment and growth again possible in this country. My first priority in all this is full employment, which means, of course, full production and higher living standards. I believe that that is perfectly possible.
It is only unrestrained collective bargaining in recent years and the resulting pay explosion of 1974–75 that have made full employment temporarily impracticable. This is true, as my right hon. Friend says, not only in this country but in the main industrial Western countries to a greater or lesser degree in the 1970s. That is why I believe that in the United Kingdom a new incomes policy is even more important than Budget policy and monetary policy.
Indeed, one cannot have a Budget policy at all unless one has an incomes policy. At the moment I understand—my right hon. Friend will correct me if I am wrong—that £25 billion of Government expenditure is made up of payments of wages and salaries by the

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Government. To those who think that one can have a Budget policy without an incomes policy—and until today we thought that was the attitude of the Opposition Benches—I shall put this question: what do we do if there is a 20 per cent. increase in a few months in all wages and salaries, which would increase by 20 per cent. the £25 billion being paid out in Government expenditure? What becomes of Budget policy then?
I apologise for baldly stating one or two blunt economic facts that seem to me to lie at the heart of our problems and the problems of some other countries and that some people are wishfully ignoring. The first is that if pay rates in money terms rise faster on average than the supply of goods and services available overall, prices must rise. That is an arithmetical truism that price control cannot alter, because the value of all goods and services sold must be equal to the total value of money spent on them. What price control can do usefully is to make the prices of some goods lower at the cost of making other prices higher, and there are times when that may be well worth doing.
Secondly, if after prices have been forced up by a pay explosion the Government simply increase the quantity of money sufficiently to employ everyone at the higher rate of pay, prices must increase still further. That was beginning to happen in this country in 1975.
From those two arithmetical truths it follows that a sharp practical dilemma is bound to confront any Government of any party in those circumstances. After a pay explosion and the resulting price explosion the Government can only do one of two things. They can expand the quantity of money in which case prices rise faster and we move towards the South American solution. This is perfectly possible, and it means that prices and incomes rise by a greater percentage year after year. Or, and this is the only alternative, having got into this situation, the Government can halt monetary expansion, and then for a time unemployment must rise.
The other arithmetical truth, which I beg the House to grasp, is that, given a stable quantity of money, a rise in pay rates must mean a rise in unemployment. That is a point that people who are
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demanding rises in pay rates have not grasped. The practical implication is that in these circumstances only by pay restraint of some kind can we get the full employment that we all want. That is where we have got to in 1977.
The level of unemployment in this country in the next few months is thus dependent almost entitrely on the rise in pay rates that occurs. The steeper the rise in pay rates, the higher will be unemployment. This emphatically does not mean that Keynes was all wrong in believing that there was a time when one could maintain full employment by managing demand. This is what extreme monetarists ignore.
One can achieve full employment by managing demand on two conditions. The first condition is that pay rates do not rise faster than the supply of goods and services available. The second condition is that surplus capacity exists. In those two circumstances the Keynesian argument is valid. Far from Keynes having ignored this, he actually predicted the present dilemma in a particularly farsighted section of the employment policy White Paper of 1944, which he inspired and of which I shall quote just one sentence. It says:
"Action taken by the Government to maintain expenditure will be fruitless unless wages and prices are kept reasonably stable."
That is the point we have reached after 33 years, and our present situation endorses rather than contradicts what Lord Keynes then said. This means not that demand management has failed, but that demand management is impossible without cost management. That is not particularly surprising, because the level of employment, after all, depends on the ratio of demand to costs.
If we prevent money demand falling too low—as in the 1930s and at other times—or prevent money costs rising too high—as in 1974–75—we can, given time, achieve any level of employment we wish. The idea now becoming fashionable, that for some mystical historical reason full employment is impossible, is sheer nonsense. We heard all that in the mid-1930s. What rubbish it looked 10 years later!
Again, I agree with my right hon. Friend the Chancellor of the Duchy of Lancaster. In practice three courses of action are open to a modern Government

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who are faced with the pressure of collective bargaining. First, they can restrict money supply and balance the Budget, and have no incomes policy. Until today I thought that that was the policy of the Conservatives. The result of such an approach in the United Kingdom today would be seven or 10 years not merely of high unemployment, but of stagnating production and lower investment. That must mean the decline of this country into a third-rate Power—which is the fact that the pure monetarists do not adequately or honestly face.
Secondly, the Government could gaily reflate without any incomes policy. That is all too easy for a Government if they wish to do so, and that is what some of my hon. Friends, understandably but, I think, unwisely, recommend at present. I beg those who recommend that course of action to realise that in present conditions that would mean prices rising rapidly and accelerating towards the South American spiral, and we all know how that has often ended.
Unless one is prepared seriously and candidly to accept that spiral as the normal state of the economy here, with perhaps a 30 or 40 per cent. rise in prices every year, one cannot honestly advocate unrestrained reflation and no pay policy. I believe that in that way would lie catastrophe for this country and suicide for any political party that led the country into it.
The only practical way is the third way, which is to reflate gradually, with a firm control of the money supply and the Budget, in step with a long-term, flexible incomes policy, which must cover dividends and prices as well as wages and salaries. I believe, indeed, that it is just because stage 2 has been reasonably successful that unemployment is now falling.
At the request of Mr. Speaker we have to keep our contributions brief, and therefore I cannot go into the details and intricacies of incomes policy. However, it should not have needed the British Leyland toolmakers to demonstrate what has always been the central long-term difficulty of an incomes policy.
Mr. John Mendelson: I greatly regret that my right hon. Friend is under such pressure of time, because he is coming to the point of predicting that unemployment
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will fall, and no doubt he wants to say that it will fall without providing any evidence of why that will happen.
Mr. Jay: It is a statistical fact that over the past three months, seasonally adjusted, unemployment has been falling. I could be wrong, but I believe that it has fallen because stage 2 has held, and, given that degree of restraint, I believe that unemployment will continue to fall.
The fundamental and serious difficulty of an incomes policy is to combine the essential movement of relativities inside the pay structure with the restraint of the average increase. That is the essential problem before the country. I do not see myself how it can be solved in the long run without some sort of independent referee authority which would give final rulings on pay claims. If that could be organised, and if it were successful, we should be on the way to solving the really basic problem. Only practical experiment could show whether it would be successful. It is emphatically not a matter of theory. So I say for heaven's sake let us try it.
But what an ironic tragedy it is that in this crisis in our national fortunes we have loaded upon ourselves the extraordinary handicap of the common agricultural policy. Just when we are forced to invite the public to exercise sever pay restraint, the Government are compelled by the 1972 Treaty of Accession gratuitously to raise the price of food, in some instances by as much as 50 or 100 per cent.
It is interesting that no one in this debate has mentioned the EEC and the "great home market" that was to solve all our problems. In our last EEC debate on 16th March I estimated the cost of the CAP to our balance of payments at £500 million net for 1976. A few days after that, Mr. Wynne Godley and his fellow Cambridge statisticians provided a much more expert estimate of £650 million for 1977. Once more, therefore, I must apologise to the House for having under-estimated the damage which the Common Market would do to this country.
Mr. Wynne Godley added that if the EEC Commission's present proposals were accepted, the burden on the United Kingdom balance of payments would rise to £900 million a year or more. To that

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we must add the £1,200 million increase in our trade deficit in manufacturing goods which we have incurred with this "great home market" since we joined.
The stark truth is that the total balance of payments burden resulting from membership is therefore now approaching £2,000 million a year. That was one major cause for the fall in the pound last autumn, a factor which then caused food prices to rise still further. This gratuitous burden has been loaded upon us at a time when price and pay restraint are so crucial. This is the responsibility of all those who voted for the European Communities Act, and this is the burden which must be removed if our national fortunes are to be fully restored.
5.8 p.m.
Mr. David Steel: My hon. Friend the Member for Cornwall, North (Mr. Pardoe) and my right hon. Friend the Member for Orkney and Shetland (Mr. Grimond) have already outlined my party's general view of the Budget strategy. I do not, therefore, wish to trespass on the time of the House for too long. That general strategy is, however, one which we support. We think that it is necessary that the Government should be given the breathing time that is required to secure a sensible pay agreement and further control over the rise in prices in the coming few weeks. That is the stability to which I have constantly referred in previous speeches and which the hon. Member for Guildford (Mr. Howell) was so ready to deride.
I believe that it is right to make a start on shifting the burden of taxation from direct to indirect taxes. The Chancellor said that this is not the year to make a major shift of this nature, but nevertheless he has shifted the burden of income taxes from 51½ per cent. of the whole tax revenue to 48 per cent., and we regard this as a move in the right direction. Obviously, it does not go far enough. We want much more to be done, but this is a significant turning point.
I think that it is unfortunate that the Chancellor did not take the opportunity to raise some of the revenue from indirect taxes by going for a single rate of VAT at 10 per cent. That would have brought in more than the vehicle excise duty
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and the petrol duties combined. It would have also given him an opportunity to raise the VAT threshold from the present £5,000 level. That level should be raised soon, as it has never been changed in the light of inflation. Raising the threshold of VAT and having a single rate would make that tax simpler to administer.
I admit that a 10 per cent. rate would raise the retail price index, but I have never believed that one can disguise the real effect of inflation by tinkering with mechanisms of this kind. That is not a sufficiently weighty reason for rejecting our course of action. This is an issue that we shall raise again with the Chancellor.
Mr. Wrigglesworth: Is the right hon. Member aware that many of us have sympathy with the view that he has outlined? However, with phase 3 negotiations about to start this is the worst possible time to put such an imposition on prices across the board. Although I sympathise with his plan, I think that this is the least appropriate time to make such an introduction.
Mr. Steel: If the hon. Member asks around among trade union leaders he will find that they have sympathy with this point of view as well. While we all regard any increase in prices as undesirable, VAT would spread that increase across the community as a whole. Some of the proposals in the Budget mean that the effects have been particularly severe on certain individuals in our society.
The hon. Member for Guildford in his best Cambridge Union—or was it Oxford?—form this afternoon referred to the Liberal Party. I make no complaints about that. If the Liberal Party adds a little to the joy of politics, there is no harm done, and we shall not take his sallies too seriously. I shall take him up on three points. He said that the business community was very worried about the Budget. That may apply to the Tory moguls whom the hon. Member wines and dines. They may well be unhappy. But in reality the stock market rallied after the Lib-Lab agreement and it steadied even further after the Budget. So there is no factual evidence to support the hon. Member's remarks.
Mr. David Howell Mr. David Howell rose—
Mr. Steel: I shall give way to the hon. Member in a minute. His second point was that we should stop asking "What would you do?" That was a very moving plea, and I shall not ask him what he would do. As he said, this needs more discussion.
Thirdly, he accused my party of supplying oxygen for the present Government. What is the difference between the present Government's position and his party's position in March 1974? The only difference I can see is that we should have been supplying the Conservative Party with not only oxygen but splints and blood tranfusions. It had no parliamentary majority for what it sought, so it must not be too jealous of this agreement.
Mr. David Howell: I did not say that the business community objected to the Budget. I said that it was a miracle that the business community continued to be active despite the unremitting hostility of the Labour Government. Also, there is something a bit pathetic about senior Socialists taking cover behind the gyrations of the stock market as a fig leaf excuse for clinging to office.
Mr. Steel: I did not mean to give the hon. Member another chance to make a second speech. The facts speak for themselves—there is not deep unhappiness. But one of the legitimate complaints that he made when he was at the Treasury was that there was not enough industrial investment. That is still the problem, irrespective of the party in office.
I want to register the Liberal Party's strong opposition to the increase in petrol and vehicle excise duties. That should come as no surprise to the Chancellor. We have taken this view in debates in 1974 and 1975, when we spelt out our position very clearly. On 30th April 1974, when VAT was introduced on petrol, I drew attention to a speech made by the then Prime Minister the right hon. Member for Huyton (Sir H. Wilson) when he was Leader of the Opposition. He made a speech on 20th October 1973 that was widely reported in the Sunday Press and in fact was the front page lead in the Sunday Mirror under the banner headline "Cut petrol taxes". The political editor of the Sunday Mirror wrote:
"Harold Wilson pulled out of the bag yesterday a plan to save Britain's motorists
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from predicted petrol price rises of up to 5p a gallon.
He said, 'Petrol and some oil products are heavily taxed. The Government should do all in its power to stabilise oil prices by corresponding reductions in taxation.'
But Mr. Wilson's plan would also take in the cost of running a private car, an important item in millions of British budgets."
Since then there have been several increases in taxation on petrol. In response to representations from my hon. Friend the Member for Cornwall, North in last year's Finance Bill debates, the Financial Secretary wrote on 10th March and said:
"We are urgently exploring a number of ways in which help might be given and I hope these investigations will result in specific proposals to meet the very real difficulties."
He was replying to the point that we have made constantly about the effect of these increases on particular communities. The fact is that we have had no such measures. The proposed petrol and derv imposition in the Budget comes on top of a £10 increase in the Excise duty on the private car.
We maintain that this is a discriminatory tax because it discriminates against those for whom the private car is unfortunately a necessity of life and not a luxury. This is the burden of our argument. The Government say that the increase is a conservation measure because it is essential to keep down consumption of fossil fuels. While I am sympathetic to that, I urge the Treasury to look back at what has happened after other price increases.
I have made inquiries from a number of garages and the answers suggest that after other price increases there was only a tiny drop in demand for petrol for a short while and then it went roaring away again. Therefore, there is no argument on conservation grounds. If we want to raise revenue on conservation grounds, we should look at the possibility of re-imposing a higher rate of excise duty on larger engined cars.
I know that the Chancellor looked at this previously and argued that the British motor car industry was not geared to selling sufficient quantities of smaller engined cars and therefore he was worried about foreign imports. But things have changed since then. We have seen the success of the Vauxhall Chevette and the launching of the Ford Fiesta. Also a baby car is being developed by

905
Chrysler, and British Leyland is considering financing a successor to the Mini. These developments should lead the Chancellor to a reconsideration of raising revenue by going back to penalising those—like myself—who insist on running large and thirsty cars.
Mr. Ronald Atkins: Would not the right hon. Member agree that if we are considering conservation we must consider also the mileage done? That is more important than the weight of the car. One car might travel 100,000 miles in a year while another might travel only 5,000 miles. To have the same vehicle duty for both is not only inequitable; it does not favour conservation.
Mr. Steel: I hope that the hon. Gentleman will forgive me if I do not go into detail. I am sympathetic to the general argument that taxation should take account of the needs of conservation, but I was saying that what the Chancellor proposes does not do that and that we think that there are other ways of doing it. Beyond that, we should not go into detail now.
What is proposed is a big addition to the basic cost of travel to work in certain areas. When coming to that part of his speech which dealt with income tax reductions the Chancellor of the Exchequer talked about the effect of lowering the income tax threshold, which had risen through inflation. He said:
"The effect has been to weaken the incentive to work throughout the economy."—[Official Report, 29th March 1977; Vol. 929, c. 279.]
I must remind him that there are areas, which very often happen, incidentally, to be where average wages are lower, where one must take into account not just the wage level against the level of social security benefit for which a person might qualify but wages less the cost of travel to work as against the advantage of staying at home. The disincentive is very real in those parts of the country.
Moreover—and I do not think that this is fully appreciated—we are talking about parts of the country where petrol prices are, on average, much higher than in the urban areas. Already it is quite common for people to pay as much as 10p a gallon more in some of the areas about which we are talking than in the big cities with their cut-price wars. So it is not a question of saying that there should
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be favourable treatment for parts of the country where the cost of petrol is a major problem. We are simply saying that already there is a very high cost about which the Government have done nothing.
I suggest that the Secretary of State for Industry and the Secretary of State for Prices and Consumer Protection should have discussions with the oil companies about the price mechanisms for petrol in Britain. I could take the Chancellor to a small community in my constituency where the petrol station has closed because the oil company that supplied it refused to deliver the small quantities that the tanks can hold unless a heavy surcharge was paid. The result was that that uneconomic station closed and the people of the community now have a round trip of nearly 40 miles to fill up their tanks. That is the sort of problem we face in parts of Britain where the extra 5½p tax is the last straw.
I say to the Chancellor with all humility that there may not be many bits of experience that the Liberal Party can give the Government, but we ask the Chancellor of the Duchy of Lancaster, the Chancellor of the Exchequer and the Prime Minister to look at the matter from the point of view of their constituencies in Manchester, Leeds and Cardiff. They do not have the same sort of problem in their constituency surgeries as we do, representing the areas that we know. We have experience of all these problems which we believe the Government have ignored for a long time.
We have already talked about rural transport. I brought forward a Ten-Minute Bill on the licensing of minibuses about two years ago. Governments generally—not only the present Government but the previous Government—have moved very slowly on this matter. A Bill has gone through the House of Lords, and is about to come here, dealing with experiments in collective travel to work in rural areas, with people sharing the cost of private motoring. We are beyond the stage of experiment. There is a major cost-of-living crisis in many parts of the country which has so far been ignored.
Therefore, we oppose the 5½p increase. The only question we must face is that of the best method of opposing it. Of

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course, the Conservative Party will argue that the right way is to vote against it tonight. [HON. MEMBERS: "Hear, hear."] They must note that the Leader of the Opposition referred on Thursday to the administrative and constitutional difficulties that would be caused. Moreover, when we voted in 1974 in a period of minority Government—the February to October period—against the VAT increase on petrol, 43 Conservative Members were conveniently absent, only 17 of them paired, when we could have defeated the Government. They no doubt rightly took the view that the administrative consequences of such retroactive action would be very difficult.
Mr. Norman Tebbit: Set us a good example tonight.
Mr. Steel: One must be fairly determined but also responsible, and we do not want to create administrative chaos in the attempt to pay back the revenue collected since Budget Day.
The second point is that the Budget Resolution covers more than the £300 million revenue involved in the petrol and derv increases. The Chancellor of the Exchequer dealt with these matters in two separate parts of his speech. In Hansard there is a separate heading: "Heavy Oils Duty". The Chancellor gave the different amounts that would be collected for petrol and derv, on the one hand, and heavy duty oils on the other, but unhappily they are together in one resolution tonight and there is no way in which it would be possible to vote against one without voting against the other, causing a total loss to the revenue of £450 million.
We must take into account that if the Government have made their Budget judgment correctly, the Chancellor of the Exchequer would have to find alternative ways of raising the same revenue if the House were to decide that the 5½p increase should go ahead. In a sane world the right hon. Gentleman should be given a chance to consult not only the Liberal Party but his own Back Benchers and the Opposition. Why should he not consult widely on the most acceptable method of raising the alternative revenue?
Mr. William Clark Mr. William Clark rose—
Mr. Steel: For those reasons, I recommend to my right hon. and hon. Friends that we should abstain tonight and later move an amendment to the Finance Bill which will kill the increase. That is what we intend to do.
I ask the Charncellor of the Exchequer to give us assurances on three points in his winding-up speech if we follow that course. First, it is important that the matter be dealt within that part of the Finance Bill taken on the Floor of the House and not sent upstairs to Committee. That is the normal practice with these duties, but we should like confirmation that that will happen.
Secondly, because of the intricacy of the heavy duty oils being linked in the resolution, will the right hon. Gentleman give us an assurance that the Bill will be drafted in a form in which it is possible to distinguish between them and petrol, and that the House will be set free to amend it?
Thirdly, will the Chancellor of the Exchequer give an undertaking that if the House as a whole decides in Committee that the 5½p increase should not go ahead, he will accept that verdict, which will mean the loss of a considerable sum? The Chancellor would then have to find the revenue in different ways.
I believe that the Chancellor of the Duchy of Lancaster could have been a little more forthcoming when he talked about the rather unsatisfactory way in which we deal with these matters. As far as I know, this is the only country where the Budget is treated with Trappist-like secrecy in advance of the Chancellor's statement. The decisions themselves must remain secret, but the options should be open, and the wide range of choices that the Chancellor might make should be a matter for much greater public debate and parliamentary consideration before the Budget is presented. If we learn one thing from this Budget, I hope that it is that this should happen in future.
5.27 p.m.
Mr. Giles Radice: I shall not take up what the right hon. Member for Roxburgh, Selkirk and Peebles (Mr. Steel) has said, except to say that I am sure that he is very wise not to be voting against us tonight.

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The Budget of my right hon. Friend the Chancellor has been described as cautious. Given the constraints that he faced, I am sure that he had no alternative. Even so, I think that he will have given enough away in tax allowances and tax cuts to have given some relief where the pressure points are most severe.
As a northern MP, I also congratulate him on the extension of the temporary employment subsidy and on the introduction of new employment schemes, particularly the one for small firms in special development areas. I hope that he will decide to continue it beyond the six months' experimental period. However, bringing unemployment down will, in the end, depend on expanding the economy.
On present policies, the forecast is that there will be a growth in gross domestic product over the next 12 months of only 1½ per cent., although, if we have a better trade performance, that will rise to 2½ per cent. Given our balance of payments deficit and the level of debt owed by this country it is hardly surprising that my right hon. Friend has decided in favour of caution.
We should not forget that, by the middle of this year, it is quite possible that the Budget judgment will need to be reassessed. By then, our balance of payments should be in surplus, having received the benefit of North Sea oil—so much so that even the Treasury admits that we are likely to be in balance. Be that as it may, it is certainly highly likely that in 1978 and 1979, because of the favourable impact of North Sea oil, we should be able to run our economy at a much higher level of demand.
It would be wrong for us to go for an unsustainable level of growth. That would lead to bottlenecks and thus pull in imports instead of creating jobs. It would also have a bad effect on the rate of inflation. It would be equally foolish if we decided to limit demand and to pile up balance of payments surpluses. Although we would then be able to pay off our debts very quickly, investment would inevitably be discouraged and unemployment would rise further. In addition, sterling would probably appreciate, which in its turn would make our goods less competitive, thus further weakening our economy.
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As the OECD report and my right hon. Friend the Member for Battersea, North (Mr. Jay) suggest, we need to follow a middle course between the two extremes, a course that will both enable our economy to grow and allow us to pay our debts. Even if we accept the OECD report figures, we should be able to grow at 4 per cent. per annum between 1977 and 1982, while running balance of payments surpluses large enough to pay off our debts.
Given North Sea oil, we shall be able to expand our economy without resorting to the sort of import controls for which the Cambridge school argues. The only scenario in which import controls would be justified would be if world trade did not expand in the way that is at present forecast.
However, with the help of North Sea oil we should be able to grow at a considerably faster rate than in the past. A growth rate of 4 per cent. over a number of years would transform the economy and go a long way, if properly managed, to lay the foundations and create the basis for a more open and dynamic community.
If we are to achieve the breakthrough to a period of growth of that nature we need a third round of pay restraint, a third pay deal. When living standards are falling in real terms it is a natural reaction for trade unionists to say that they wish to return to free collective bargaining. That is natural, but it would be disastrous for the majority of trade unionists as well as for the country as a whole. If we have another wages explosion of the sort that we had in 1974–75 we can say goodbye to single figure inflation in this decade. Equally bad, we would almost certainly abort any economic recovery. We must have another round. It will have to be more flexible than the last. Bargainers will have to have some room to deal with the anomalies that have arisen.
Mr. J. Enoch Powell: How much?
Mr. Radice: We shall have to deal with the problem of differentials and the difficulty of wage structures.
Mr. Powell: How much?
Mr. Radice: We shall also have to deal with productivity agreements.
Mr. Powell: How much?
Mr. Radice: In this situation it will be best if the policy—I come to the right hon. Gentleman's point—is expressed in percentage terms and related not to individuals but bargaining units. The recent PEP pamphlet on the next stage of the incomes policy has suggested that the increases should be directly connected to establishments. I see the attractiveness of that idea, but it will be far more practicable if it is linked to bargaining units. A percentage increase such as I have described would give negotiators some freedom to reach agreement on the matters that they believe to be most important and the policy would at least have some chance of sticking.
A policy of the sort that I have described throws up the difficulty of monitoring. If we have a flat-rate policy, it is relatively easy to monitor. The TUC has been highly successful in monitoring the past two stages. However, during the second stage there has been some leakage. The evidence shows that much of it has taken place in unorganised plants. If that is so, it seems that there is a strong case for having some tripartite body, perhaps on the ACAS model, to help monitor the policy. Although I understand the feelings of trade unions about such bodies, I think that the logic of the situation points irresistibly in that direction.
Whatever else may be said about my right hon. Friend's Budget it is certainly not an election Budget. It is clear that with the help of the Liberals the Government intend to continue governing. They intend to continue in office. The Government are absolutely right to take that view.
I accept that the Government have made some mistakes; but if there is one event above all others that would undermine our present prospects for recovery and the enjoyment of a period of unrivalled economic growth—unrivalled, at least, in the past 25 years—that would be a Conservative Government. The hon. Member for Cornwall, North (Mr. Pardoe) coined a phrase when he suggested that a Government led by the right hon. Member for Finchley (Mrs. Thatcher) is one of the few terrible things in this world. I suggest that a Government
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under the right hon. Lady, advised by the right hon. Member for Leeds, North-East (Sir K. Joseph), would be even more terrible.
It is true, as we have heard in the debate, that Conservative policies are remarkably obscure. However, where they are known, they are extremely alarming. The Opposition are unthinking monetarists. They do not believe that we have cut public expenditure enough. They do not believe in an incomes policy. They do not believe in price control. They are against aids for industry. It is by no means certain that they are in favour of a mixed economy. By attitude and by temperament they are singularly ill-equipped to manage a modern economy, let alone one that is going through a severe crisis.
When I look at the alternative I am strengthened in my firm conviction that the Labour Government are the only Administration capable of carrying us through to a long period of growth and economic prosperity.
5.38 p.m.
Mr. Reginald Maudling: I am grateful for the opportunity of taking part in the debate. I think I am right in saying that, apart from the Prime Minister, I am the only other ex-Chancellor remaining in the House. Where have all the flowers gone? Fortunately, most have gone to another place. There are now only two ex-Chancellors in this place, but if the hon. Member for Tottenham (Mr. Atkinson) has his way, we may be joined by a third ex-Chancellor in a fairly short time.
It is interesting to strike a comparison between the Budgets of 1963 and 1977. In 1963 the then Chancellor said:
"I have decided to concentrate this further relief in the field of direct taxation, as this is the method best calculated both to stimulate the economy and to encourage individual effort. At the same time, in view of the importance of incomes policy to our plans for expansion without inflation, I have framed the reductions in such a way as to spread the benefits as evenly as possible over the full range of incomes."—[Official Report, 3rd April 1963; Vol. 675, c. 490.]
When we examine the figures involved in the years 1963 and 1977 we see there provided the most graphic example that I have ever seen of the state to which our economy has been brought and the

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state of our finances under the present Administration. This year the Chancellor needs a reduction in direct taxation of over £2 billion to exempt 850,000 taxpayers from taxation. In 1963 a net reduction of £269 million exempted 3¾million taxpayers from taxation.
Let us take the figures of the economic prospects for the next 12 months and compare them with the 12 months after the 1963 Budget. The Chancellor expects prices to show a 13 per cent. rate of increase at the end of the year, falling to single figures by the second quarter of 1978. Between 1963 and 1964 prices rose by 1½ per cent.
No prediction is now given in respect of unemployment, but in that period unemployment fell by 28 per cent. The Chancellor has predicted an increase in output of 1½ per cent. Between 1963 and 1964 output in terms of GDP rose by 9·3 per cent. As for balance of payments problems, although we had them in 1964, they were small indeed compared with the balance of payments problems faced by the present Government, apart from the factor of North Sea oil. If we had had North Sea oil in 1964, I am convinced that the Tory Government would have lasted ever since.
I turn to the Chancellor's Budget proposals. I see no objection to raising the proportion of total revenue coming from indirect taxes, but why has he concentrated so much on oil? There are surely better alternatives, for example, VAT. What about alcohol as an alternative area of action? After all, VAT would be more widely spread, less felt in individual areas, and would have less impact in terms of further inflation.
Many people hold the view that alcohol is less essential than is petrol. Why did the Chancellor concentrate on petrol and oil? The reason he gave related mainly to energy and transport policies. These increases, plus the increase in gas prices, reflect the Government's policy on transport and on energy. To make it more expensive to heat one's home and to make it more difficult to drive one's car seems a strange form of policy. Neither commodity in present days could be regarded as luxuries. I am delighted that the Conservative Opposition intend to vote against those proposals this evening.
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Where do the Liberals stand following the speech of the right hon. Member for Roxburgh, Selkirk and Peebles (Mr. Steel)? They appear to be standing on their collective heads. However, perhaps that would be a degree of collective decision that is unusual in the Liberal Party. As for the Liberals' main argument advanced by their Leader in the censure debate, that they intended to team up with the Government because of the need for stability, that looks even more bogus than it looked at the time. The idea appeared to be that such stability would be adequate if it lasted a few months until the end of the Session. Now they have not even achieved stability for a few days.
The taxes on oil and petrol and the proposals on vehicle duty are a central part of the Chancellor's financial strategy and of the Government's transport and energy policy, yet they are at risk—though apparently not at risk tonight, because the risk is to be deferred to a period during the Finance Bill proceedings. What price stability then? Do the Liberals think that stability deferred makes the heart grow fonder?
It would be churlish to reject the main thrust of the Budget involving the reductions in income tax and the insistence on the importance of incomes policy. The simple fact is that when a party is in office—and sometimes when it is in opposition—it always recognises the need for an incomes policy, since the days 20 years ago when Lord Thorneycroft introduced the Council on Productivity, Prices and Incomes. Common sense shows that if there is a wage explosion later this year, there will be, as night follows day, an explosion of costs and prices as well. Some people try to deny this. There are the monetarists on one side and Mr. Jack Jones on the other.
Let us take first the monetarist argument. There is the extreme academic view that is reflected in correspondence in The Times today, which appears to show that the course of inflation this year is determined by what happened to money supply two years ago. I find that hard to believe—and, if it were true, what are we arguing about anyway?
Secondly, the less academic monetarists argue the quantity theory of money, suggesting that if the total money supply

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is held, prices as a whole will not rise. But they can and do rise. Spending power may be held steady, but if unemployment rises, production falls and the same amount of money will be available to be spent on fewer goods.
Apart from the consequences in terms of stagnation, unemployment and less investment, I find the argument about monetary control—which is the credit squeeze in different words—totally unacceptable in modern circumstances.
On the other hand, the argument of Mr. Jack Jones seems to be equally unacceptable—namely, that one can counteract increases in wage costs by stiffer price controls. Apart from the disastrous effect of such controls on business and investment prospects, the simple fact is that one cannot consume more than one produces, particularly when one comes to the end of one's credit, as has happened under the present Government.
The trouble is that the present incomes policy has been too inflexible—indeed, it is bursting at the seams because of inadequate flexibility. It has not recognised the overwhelming need for higher productivity, which, in turn, means rewarding that increased productivity. I am convinced that our problem is not one of over-spending, but of under-producing. I have said this on other occasions, and I do not apologise for repeating it now.
We are grossly under-producing not only in respect of new investment but in terms of any international comparison involving existing capacity. Demand undoubtedly is inadequate. When there are so many idle resources and idle people, clearly demand is inadequate. If one expands demand rapidly, one has balance of payments problems and a new demand factor involving the prices equation.
The right way to deal with the situation is not to continue restraint, but to work towards increased output and productivity. We hear so little said about this factor in discussions about economic policy in the House and outside. I do not believe that our public services are excessive. In some ways, they are pitifully inadequate in quantity and quality. What is more important in life than
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education and health? They are essential services for a Government to provide.
The problem is that we have neglected the fact—and this applies to the Labour Government in particular—that those services have to be funded out of the expanding efficiency of manufacturing industry, which is basically privately-owned. The Chancellor appears gradually to be recognising this fact by the cuts in some forms of public expenditure, by his tax reductions, and by his more friendly words in respect of higher profit levels and higher investment in manufacturing industry. But this is only a small move on the long road that we have to travel.
The basic reason for our inadequate industrial performance lies in the lack of industrial morale. The causes have developed over many years, but they are linked with a general decline in British morale and in our loss of empire, and the change from a vast imperial power to a relatively small island.
There are other factors which we must seek to identify. I wish first to refer to the high level of direct taxation. It cannot be a matter of coincidence that we have the most progressive system of direct taxation in the Western industrial world and the worst industrial performance. Secondly, we have had to face the teachings of Socialism about profits and relations between labour and capital over many years. They have eroded much of our industrial morale. This policy was reflected in recent years by the Government's lamentable policies involving the nationalised industries. That history shows how wrong those teachings were.
Furthermore, there has been a limitation in the attitude of many trade union leaders which has not encouraged productivity. There has been little discussion about that side of the picture. We have heard too little about what can be the benefits and fruits of increased productivity.
So much could be done in this country if only we could raise the level of production from the same machinery and equipment in manufacturing industry to the level achieved by some Western competitors. That would transform our entire industrial economic and social picture. A transformation of that kind, coupled with the benefits of North Sea

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oil, could release the energies of our people and lead to the improvement of our living standards—an improvement such as we have not seen since the days when Lord Butler was Chancellor. That is a real possibility.
The Government in their broad approach to income tax reductions are beginning to recognise some of these truths, but they are recognising them belatedly. If we are to have rational, sensible measures—if, indeed, we are to have Tory measures—we need a Tory Government to carry them out.
5.50 p.m.
Mr. Kenneth Lomas: I am pleased to have the opportunity of following the right hon. Member for Chipping Barnet (Mr. Maudling), a former Chancellor of the Exchequer. I only wish that he had made that kind of speech when he was Chancellor. He is right to say that we are suffering from under-production. Equally, however, we are suffering even more from under-investment. That is what the country must face. I would like to take up many more of the points the right hon. Gentleman made, but I promised to restrict my remarks as much as possible.
Now we have heard where the Liberal Party stands tonight, tomorrow night, next Tuesday, and so on. What happens on future occasions is anybody's guess. No one knows. We need not be too worried. All that has emerged is that the man of steel has become a man of straw. There they sit, Tweedledum and Tweedledee, in the persons of the right hon. Member for Roxburgh, Selkirk and Peebles (Mr. Steel) and the hon. Member for Cornwall, North (Mr. Pardoe), listening to what has had to be said. Now they think that they have a chance of entering into some kind of agreement with the Labour Party.
For a long time—and let the Conservatives bear the responsibility for this—between 1950 and 1964, the Liberal Party had a pact with the Tories. Lord Wade, for whom I have great respect, and whom I beat in 1964 in Huddersfield, West, and Mr. Arthur Holt, who used to sit for Bolton, West, were not opposed by the Conservatives for years because of the pact between the two parties.
Now the Liberals suddenly decide that they will have an agreement with us. The
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Liberals know that in many constituencies their candidates are returned by Tory votes. Colne Valley is the classic example of the fact. It will go Labour again next time, because the Tories there will not again vote Liberal in order to keep Labour out.
All parties in this House know that the name of the game is "survival", and that if a vote against the Government will bring the Government down they will shrink from the brink when the occasion arises. The Liberals are paper tigers. They have nothing in their think tank. They will only vote against us when they can see that, despite their vote, the Government will survive. That is where they have some kind of rapport with certain of my hon. Friends, who do exactly the same kind of thing. The Liberals, of all parties, do not want a General Election now. When they poll fewer votes than the National Front they really are in trouble.
Nor is there any joy for the Tories to be told by their leader that she is over the moon. It is not for me to remind hon. Members of the kind of animal which jumped over the moon. It is up to them to draw their own conclusions, but I remind the Conservatives that the same Terry Davis who fought such a magnificent battle for Labour at Birmingham, Stechford, and lost is the same Terry Davis who, in 1971, at Bromsgrove turned a Tory majority of 10,874 into a Labour majority of 1,868. So the Conservatives should not count their chickens before they are hatched. Of course Bromsgrove went Tory again in 1974, and Stechford will come back to the Labour Party at the next election. It may be that an election will take place in October. If I were a betting man I would say that it would be 13th or 20th October, or that we may survive till the second or third Thursday in March.
I broadly agree with the financial and economic strategy of the Government. I am convinced that only a Labour Government will be able to get some semblance of an incomes policy the third time round. If will be very difficult, very tough and very hard. I think that it will be a question of people on this side of the House being able to speak to the trade union leaders and getting some kind of agreement. The Conservatives could never get an agreement, because we know

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what their policies are. They will not spell them out in detail because they are too frightened to do so, but, broadly speaking, their policy is to cut and cut and cut again.
Mr. Patrick Jenkin: Has the hon. Gentleman heard one speech that I have made over the last 15 months, since I became the Conservative spokesman on the social services, in which I have advocated cutting the social services?
Mr. Lomas: I have a great affection for the right hon. Gentleman. He is a very honest man. He may not have spelled out where the cuts would take place, but we know where the increases would take place—on defence, for example. The Conservatives wish to be friends to all men. They say that they believe in devolution, then vote against it; they say that they believe in the Trade Union and Labour Relations Act, and then vote against it; they voted against what is now the Industry Act, the repeal of the Housing Finance Act, and the rest. What will they repeal if ever they get back into office? The Opposition oppose the Budget, and it is traditional for them to do so, but there is great doubt about what they would do, given the present situation.
It is true that 845,000 people will be taken out of the tax bracket by the Budget, but, by the end of the year, with wage increases already in the pipeline, or which will be negotiated, those people will be back once again in the tax bracket, and the Treasury should take that fact on board. Is there no way in which my right hon. Friend could raise the tax band for the lower paid workers? It is something that he must try to do. I say to him, as a loyal supporter of the Government and as a member of the Labour Party for over 30 years, that there is a growing feeling in the country, including in my constituency, that it is better to be out of work and picking up benefits that to be in employment. There is something wrong when that sort of thing happens, and we have to do something about it.
As a Member sponsored by the National Union of Public Employees, I say that this situation applies to many of the ancillary workers in the National Health Service, to workers in local government
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and, certainly in my constituency, to textile workers. I hope that my right hon. Friend will try to find a way out.
It is true that what matters to the average worker is not his gross pay but his take-home pay, and I congratulate my right hon. Friend on doing something about that. It should be recognised that a pay increase from the employer is subject to tax and national insurance contributions, but tax relief means that there is more money in the pay packet at the end of the day. It therefore follows that the proposals put by my right hon. Friend, when fully implemented, will mean that a married man earning £80 a week will get another £2·7 a week. If this were not achieved by raising his allowances, he would need a pay rise approaching £3·50 a week, an increase of 4·4 per cent., in order to obtain the same net gain. So in this respect the Chancellor is right. I think that it is a factor that he has taken on board.
I must join in the criticism by the Liberals and other hon. Members of my right hon. Friend's action in increasing the petrol and other fuel taxes. Such a tax does not hit just the ordinary motorist. Its effect is felt straight across the board in terms of distribution costs and the like, and this inevitably must push up the cost of living. If distribution costs rise, the cost of buying articles will rise.
If the Chancellor of the Exchequer says that it has to be 3p on a pint of beer—and I do not believe it does—then so be it. If it is to be the imposition of a 10 per cent. flat rate VAT I would say "Yes", and many small shopkeepers in my constituency would welcome that. There is something to be said for it. Many people would not like it, but we should look at it. I also hope that the Chancellor would offset that to some extent. With regard to vehicle excise duty, I believe it is totally wrong that the owner of a Rolls-Royce or Mercedes, or of any big powerful car, should pay the same rate of tax as the owner of a Mini or of any of the cheaper kinds of cars produced by Ford, Leyland and other companies. I ask the Chancellor to look at this point again.
In spite of these small points, I support the Budget proposals. I believe that the Budget is recognised as being on the

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correct lines. It is not an election winning Budget, but that was not the intention. We are trying in the national interest to get the country and the economy right. Unlike the Tories, we might just gain some credibility for being honest and truthful by facing the facts of life. We have no desire, unlike the Tories, to buy votes. We only wish to see the electorate take on board the policies that we are pursuing. We shall win the next election because our policies will begin to show that the strategy is right. Exports are increasing, imports are levelling off, and unemployment will continue to fall. The Liberals dare not let us down in this. We need—and they need—to survive for a minimum of six months, and for probably another six months after that, to put things right.
We are truly the party of Government, working not just for political gain but for the benefit of the whole of the nation. We shall survive because the Opposition—or Oppositions—on the other side of the House have not the remotest idea what to do or, indeed, how to do it. The more they try to spell out what they intend to do the less will the people believe them. The electorate will get to know that our policies are right, and will give us the mandate necessary for a strong and stable democratic Socialist Government to carry out the further reforms essential for our country and its people.
I conclude by quoting some remarks made by the General Secretary of the Labour Party when speaking at a Parliamentary Press Gallery lunch in the House of Commons on 15th March last. I apply these words to some of my hon. Friends. The General Secretary said:
"There are too many people who hide behind their alternative strategies and the supposed pristine purity of their socialism to avoid doing the much more necessary task of fighting for and preserving a Labour Government in office."
He went on to say:
"Let me emphasise that objective—'to win and retain power' … I am not interested in the unity of opposition—the unity of impotence. I suspect that there are a number in our party who long for the good old carefree days when politics was merely a matter of Tory bashing with no danger of having to take responsibility or choose priorities."
I hope that some of my hon. Friends will recognise this when it comes to the
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vote. We shall win the next election, and the Chancellor can certainly rely on my vote tonight.
6.5 p.m.
Mr. Peter Brooke: It is a privilege for any hon. Member to rise to address this House, but it is one that a Member feels particularly when he rises to address it for the first time. I am grateful to you, Mr. Deputy Speaker, for calling me, and it is a pleasure to follow the hon. Member for Huddersfield, West (Mr. Lomas).
There is someone else whom I am following today who is not present on this occasion. That is Christopher Tugendhat, who is now a Commissioner of the European Economic Community. During the past month since I was first introduced to this House the great warmth and regard in which Mr. Tugendhat was held on both sides of the Chamber has been made very clear to me. It is therefore an added pleasure to be following so popular and so widely regarded a Member.
That I follow him I owe to the electors of Westminster and the City of London. It is a constituency that embraces not only the majority of the monuments of this city of London, which outsiders think of as London, but also a series of villages and hamlets which join together to make this great city what it is. I am thinking of Pimlico, Covent Garden, Soho, Charing Cross, Knightsbridge, Mayfair, and the City of London itself.
My constituents—I have likewise realised in the course of the past month that at least half the Members of this House are among my constituents—live here in the heart of this capital city because they like it. There can be no more honourable objective for any Member for this constituency than that he should help to make it practicable and possible for them to go on living here and to be helping to create life in the heart of our nation. The very title of the constituency imposes responsibility and privilege on its Member, for Westminster is synonymous with this Palace and with the parliamentary freedoms therein, and the great Abbey across Parliament Square where so much of our history has been consecrated.

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The City of London—the other half of the title of the constituency—stands like a beacon to remind us of certain aspects of our economic affairs where we are still great. Month in and month out, year in and year out, the City makes an unfailing contribution to our current account in invisible earnings that goes a long way to compensate for the deficit that we show on visible trade. It is a shining example of British initiative, energy and success in a world that is somewhat short of such successes. The number of foreign institutions found in this City of London is a demonstration of our having created a market place for the world.
Some of my right hon. and hon. Friends have been disparaging about the industrial strategy. I may join them in the future when this speech is behind me and I can enter areas of controversy. But of one thing I am sure, and that is that if ever that strategy threatened the immense success of our invisible earners or imposed any constraint on their health and growth, I would be a vigorous opponent of that industrial strategy. I understand that one of the principles of that strategy is that winners should be backed, and I hope that the City of London will receive even greater support from the Government than it has heretofore on those grounds. This applies also to the service industries in the other half of my constituency, in Westminster.
I have made my own living as a management consultant in Westminster since 1961, and it is in the context of that experience that I should like to make one brief point this evening. The consulting practice in which I have been engaged has had as its bedrock the recruiting of executives. The point I want to make relates to the movement of executives in and out of the country, for the surest index of the incentive or disincentive effects of a country's tax system is the willingness of citizens to leave the country or to return to it.
The fashionable side of this subject is the brain drain—people moving out. This is a worrying aspect, although it is not my prime concern this evening. The Diamond Commission, in its relevant report, said that the statistics of outward movement did not warrant concern. But in private members of the Diamond Commission
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admitted that the data on which those judgments were based were not as adequate as they might have wished. I hope I am not being controversial if I remark that those statistics and data only go up to the end of 1973 and therefore do not cover the life of the present Government.
My own firm has no involvement in this traffic of executives outward across the Channel or across the Atlantic, but one cannot make a living in this field without being aware of trends within it. There has been a marked rise in the number of executives gratuituously making it clear that if jobs were to open up overseas, they would be interested in taking them. That applies to people who are household names, at least within the corridors of the Department of Industry.
The MSL index published the other day made a similar point in terms of the number of overseas advertisements which are now being carried in this country. I have in my pocket correspondence from the graduating class of the Manchester Business School making it clear that those who graduate this summer would like to take their first job outside this country.
These things are only straws in the wind. We British have the reputation of being insular. In fact, we are among the most maritime and international of all peoples, and always have been. It was so in our past and it is so today. The corridors of international companies are full of our compatriots. One could, I suppose, make a case for the multinational corporations and international organisations being the twentieth century equivalent of Africa and India in the last century as vehicles for the British civilising influence and mission.
At any rate, I believe in a free society and in people not being tied either to their work bench or to their desk. I know that executives who go abroad will be the more valuable when they return as a consequence of that experience.
My concern this evening lies with persuading them eventually to come back, as in the past so many have. My own firm had some success in the 1960s in persuading British executives in the United States to come back to take senior

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jobs here. We are finding it considerably more difficult today. This is always true of high tax countries. For example, it is difficult to persuade the international Swedish executive to return to Sweden.
I have lived abroad, within the last seven or eight years, in both the United States and Benelux. I have a reasonably clear idea of how easy and attractive it is for British executives to live there. It is a sign of the times that the £47,000, tax-free, which my predecessor Mr. Tugendhat is receiving in Brussels is often cited as wealth beyond the dreams of avarice. But in the United States and in Belgium—in the latter case if the man is doing an international job—salaries of that sort after tax are not so extraordinary as they may seem to us.
It is not income which deters people from coming back to this country. There are people who will come back knowing that they will get less income but acknowledging that the quality of life here will make up for that. But the tax burden which they would have to bear does deter them. It is all right for Sweden, perhaps, to be able to get along without the executives who have gone abroad, but in my opinion we shall find it much easier to rebuild this country's fortunes in the last quarter of this century if we can persuade executives to return from across the world.
So something has to change. The Government may say that they have done their best in this Budget. I welcome the changes in direct taxation and the form which they have taken. But the Government are prisoners of their past. Their freedom is limited by the consequences of their own actions. To borrow an analogy from another of my constituency's most successful trades, it is a fundamental tenet of internal decorators that if one paints oneself into a corner, one has only oneself to blame.
The Government have chosen instead, in terms of being blown off course, to blame the exchange rate, almost as if it were an act of God. Hon. and learned Members on both sides of the House will remember the definition in the law dictionaries—that an act of God is an act which no reasonable man would expect God to commit. There is an alternative conspiracy theory about the exchange rate, to the effect that across the world,
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from Abu Dhabi to Zurich, men are lying in wait to bring down sterling and this Government.
I should have thought that there was a third interpretation of the exchange rate, and that is that it is a vivid reflection of the performance of the economy and of the performance of the Government who are handling it. I hope that I am not controversial in setting out that choice. I clearly would be controversial if I indicated which interpretation I myself favour. Since some hon. Members may embarrass me by asking me to make that choice, it is at this moment that I shall sit down.
6.15 p.m.
Mr. Sydney Irving: The hon. Member for the City of London and Westminster, South (Mr. Brooke) is the son of a distinguished father whom many of us remember and whom we respected as a Member of this House. On his own account the hon. Gentleman has made a fluent and most competent speech, although we look forward with some interest to the time when he ceases to be non-controversial, if that was a non-controversial speech.
The hon. Member brings to the House great experience in business and management which I am sure will help us in our deliberations in the years ahead. He rightly spoke with some pride of the constituency that he represents. Some of us will remember two, if not three, of his distinguished predecessors. We remember Sir Harold Webb, who used to come down from the Back Benches and sit on the Treasury Bench, wearing a silk hat, on Budget Day. That figure is no longer there, and in some respects he was a relic of the past. We also remember John Smith and Christopher Tugendhat, who also made distinctive contributions. I am sure that the hon. Gentleman will make his own valuable contribution to our affairs. I congratulate him on a successful maiden speech and look forward to hearing him in future.
I judge the Budget by the extent to which it helps to improve our industrial performance. The need to secure an increase in production, particularly in exports, lies at the heart of practically all our problems. Without the creation of new wealth, none of our aspirations can succeed. In its tax reliefs, the Budget makes a useful contribution to that end.

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However, before I comment on its contents, I should like to make some general remarks.
We are pledged by a number of archaic practices. The first is the convention that the Chancellor sits for weeks, like a broody hen, on his Budget proposals. That inhibits discussion of taxation both in the Cabinet and in Parliament. The Liberal Leader said something of this sort, but I think that he was more concerned with extricating himself from the cul-de-sac into which his weekend pronouncements had led him than with talking seriously about this problem.
It is long past the time that there was a Select Committee on taxation to examine the consequences of different methods of taxation, to look at such subjects as the balance between direct and indirect taxes and the question of drift and distortion, which have been mentioned several times in this debate. It is not surprising that the Chief Secretary had to say several times that few hon. Members seemed to understand the consequences of the difference between a 10 per cent. VAT rate and the car and petrol taxes.
The Chancellor has lost out in some respects here, because he was unable to discuss the basis of his taxation proposals earlier. Nevertheless, he contrived to raise expectations in such a way that the proposals, although very generous, came as an anti-climax. Because he did not get the benefit of secrecy which the system is intended to give, he did not get all the credit for what he has done.
The second archaic practice is the need for a long speech in presenting the Budget. That arises from a state of affairs so different from our own that it makes the practice both tedious and irrelevant. It was not until well into this century that this House started the process of beginning its Session in the autumn. It used to sit until July, sometimes even beyond July as we do, but then it did not resume for the new Session until January. It was clear that, by the time of the Budget, it was appropriate in those circumstances to have a long survey, if the Budget was at all as significant then as it is today.
That practice is now time-wasting and unnecessary. There are those who say
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that it grew up because we had to wait until the Stock Exchange had closed before the Chancellor could announce his proposals. Even now that practice is no longer adhered to and the time of the Stock Exchange closing is ignored in presenting the Budget. I believe that the Chancellor deserves some credit for cutting down the length of the speech to one and half hours. I hope that on the next occasion he will take his courage in both hands and cut out the survey altogether.
In search of industrial recovery, the main and immediate objective is the pay policy. Like my hon. Friend, the Member for Stoke-on-Trent, Central (Mr. Cant) I should have liked to see the Chancellor avoid anything to do with the RPI at this time. All this means is aggravation and greater difficulty in negotiations. It is foolish to deny that there is increasing resentment at price rises which, in many cases, appear to the ordinary person either to be avoidable or a deliberate exploitation of the consumer.
If it was essential to raise the additional revenue, I still believe, despite what the Chief Secretary said, that the arguments in respect of this question of negotiation are in favour of a 10 per cent. rate rather than the petrol and car tax. If he had simplified the rate to one of 10 per cent., he would have had the eternal gratitude of the co-operative movement and the whole of the distributive and service industries. That would have been something on the credit side. He also would have had less difficulty in negotiations.
The co-operative movement, to which I belong and which I represent as a sponsored Member, has been disappointed that none of its representations has been accepted in the Budget. It is disappointed that in a year when the Chancellor is making a number of concessions he has not been able to concede any of the points made by the movement. There is particular disappointment that no capital allowances are proposed for new commercial buildings, as recommended by Sandilands and numerous other reports.
Apart from tax equity with industry, we believe that this relief now would also have been a help in the resuscitation of the building industry. The movement also urged the Chancellor to take general account of the contribution which the distributive and service industries can

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make in solving the unemployment problem if given parity of treatment with industry. There is disappointment that there was no recognition in the Budget of that matter.
The decision to disregard for tax purposes the first £50 of interest in the National Savings Bank and the Trustee Banks as well as increasing the interest rates makes life much more difficult for other small savings institutions such as the I and P societies. We asked for modest concessions and we did not get any recognition at all of this problem. No doubt we shall wish to make further representations very soon.
I am sceptical of the idea of the deferred carrot. I believe that the TUC and most trade union leaders see the need for a third phase of pay policy. They certainly want a transitional phase. It would have been better to have made a reality of the negotiations by indicating that there was £1,000 million available to assist this process and to discuss with them the best use to which the money can be put.
The Tories want a pay policy but they do not want to pay the price. As The Sunday Times said, the people believe that a Labour Government are more likely to succeed in negotiating a third phase of pay policy.
The Opposition display a peculiar and extraordinary ambivalence in their approach to co-operation with the TUC. They want the co-operation of the TUC, and at the same time they question the legitimacy of the right of the TUC even to negotiate, as if it was possible to have some kind of separate representation that could be consulted alongside those organised workers in the TUC. They forget that it is not just the acquiescence of trade union leaders in the policy that we need, but their positive co-operation in selling the policy to their members. Even more importantly, we need them to exert themselves, as they have in the past two years, in some of the difficult situations which arise in defending the pay policy on the ground.
The debate has been characterised by the complete failure of the Opposition to advance any clear strategy or policy to deal with the critical situation which some Opposition Members believed they would have to face on behalf of the
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country in a short space of time. I do not believe that that is responsible opposition or a responsible alternative Government.
There seem to be two groups in the Opposition. There are those who believe that there is an answer if they can agree on it and those who believe that they ought not to put forward an answer but ought to wait until the Labour Government fail and leave them a free run. I do not believe that that will happen. I believe that the Prime Minister and the Government have the determination and the capacity to see us and the country through not only to calmer and more prosperous times but to electoral popularity, which will accompany this success.
The Lib-Lab agreement can make this possible. Let us not forget that the primary purpose of the agreement is to allow us both to survive. What is does beyond this depends on the willingness of each side not to put it under too much strain. If on the Liberal side there is to be an attempt—for personal aggrandisement or for early party advantage—to use it unscrupulously, it will fail and neither of us will survive. Equally, a disposition on the Labour side of the House to hold that it ought to be opposed because it is something more than it purports to be, or what we can do without it, would also put it under strain and produce dangers.
Mr. Neville Sandelson: Would my right hon. Friend not agree that the so-called Lib-Lab pact very much reflects the desire of the majority of the people in this country that the Labour Government should continue to press their policies to a successful conclusion?
Mr. Donald Stewart: What about Stechford?
Mr. Irving: I believe that what my hon. Friend has said is so. But with common sense the agreement can carry us both through to calmer times.
If we have a series of cliff-hangers, such as we have had this last weekend, it will weaken the confidence of the Government in their capacity to negotiate and the confidence of those people who have to negotiate with the Government. Incidentally, it will also bring discredit to those who bring about such a state of affairs.

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I hope that, while supporting the Budget and the agreement, which is a respectable one, the Liberal Party will quickly learn the lesson that it cannot pick and choose but must act in good faith in support of the agreement and not have us in a state of constant anxiety that will damage both parties.
6.28 p.m.
Mr. J. Enoch Powell: To what has already been said by the right hon. Member for Dartford (Mr. Irving) I want to add my own congratulations upon a distinguished maiden speech to my own Member of Parliament—although I did not help him to be elected—the hon. Member for City of London and Westminster, South (Mr. Brooke). I have a special and personal reason why those congratulations are particularly warm. From even before the time, 27 years ago, when I entered this House, I received from the hon. Gentleman's father wise counsel and friendly help and guidance in my earlier years in politics. It is something which I have not forgotten and which I never can forget. It adds to the pleasure, which many feel, that Henry Brooke should have a son to succeed him in this House and to continue, as we are sure he will, the contributions which his father in his time made.
I had assumed, wrongly, that this Budget debate would centre upon what is called the Budget judgment and, in particular, upon the judgment of the Chancellor of the Exchequer as to what should be the size of the public sector borrowing requirement and to what extent, if any, he might absorb some of the expected diminution in that requirement by various forms of tax remission. If so, I would not have taken up the time of the House in order to repeat a point of view already known; for I have in previous debates indicated my own belief and that of my colleagues that the borrowing requirement to which the Chancellor's remissions of tax have again brought the estimate back—a requirement of between £8 billion and £9 billion—imposes an excessive risk of inflationary financing during the coming financial year.
I share with, I think, the right hon. Member for Deptford (Mr. Silkin) his sense of an inconvenience in these debates
932
upon the Budget, in that all of us can complain of a particular form of taxation, a particular taxing decision which the Chancellor has taken, but cannot demonstrate at the same time that we would wish to see any loss in revenue if he were to take our advice on that particular point made good elsewhere. Those of us, therefore, who wish to show our dissatisfaction with the Chancellor's choice of indirect taxation to be increased are not in a position, as many of us would wish to be, to indicate that any remission there ought to be accompanied by corresponding increases in other directions.
However, as it has turned out, the Budget debate has not principally been about the Budget judgment. Unmistakably, the central question in this debate—it has come up every day unsummoned—has been phase 3 of the prices and incomes policy, the question whether, and if so how, it is possible to maintain the limitation upon wage increases for yet another year, but render it—in the now hallowed phrase—"more flexible". I cite, simply as one example of the posing of that question, the right hon. and learned Member for Surrey, East (Sir G. Howe) on the second day of our debate, when he said:
"We have to go through a period of transition to a world which is free from direct Government interference in pay bargaining. That period of transition must be one of greater flexibility to allow room for the compressed spring of pay differentials to uncoil."
I think I am not being unfair when I say that that proposition summarises the aspiration which has been expressed in many speeches from both sides of the Chamber.
The right hon. and learned Member for Surrey, East has said that
"it is important for us to try to hammer out those areas where we agree and disagree."—[Official Report, 30th March 1977; Vol. 929, c. 437–39.]
My contribution to this debate is to say that for my part I believe the whole notion of a transition from a maximum pay limit—a freeze—on the one hand to some flexible system on the other hand, which will allow for differentials to be varied, widened and narrowed, which will allow for the changing supply and demand for labour and for different forms of goods and services to be taken into account, is a sheer chimera. The search

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for it leads into "wandering mazes" where Governments get lost, into
"Seronian bogs, where armies whole have sunk"
and the attempt will recoil with disaster upon the heads of those who make it.
We are long enough in this Chamber to understand where the insolubilities of this course of action lie. It is 15 years now, or a little over, since Chancellor Selwyn Lloyd, having accomplished six or nine months of his 3 per cent. flat-rate pay freeze, produced a White Paper entitled—it was not an original title and has been imitated many times since—"Incomes Policy: The Next Step". That is the perilous next step upon the threshold of which the Government are now poised.
Since 1962 we have learned a good deal about what lies over the threshold. That White Paper set out with immaculate accuracy and in the best Civil Service English all the possible factors which lie behind differentials in wages. It said that those different factors, changing as they did as time went on, ought to be taken into account in the fixing of wages. So, of course, they ought. But what the White Paper did not explain and what no one has yet explained—not even the hon. Member for Chester-le-Street (Mr. Radice) this afternoon—is how the appropriate weight is to be given in each particular case to each of those factors.
Unless one has a machinery whereby the differentials can be correctly assessed, it is futile to talk about a flexible wages control policy, or of a prices and incomes policy which will allow economic change, economic realities and alteration of differentials to be taken into account.
Of course, there is a stage at which—I was waiting for it and sure enough the hon Member for Chester-le-Street stepped in with it—harassed by this question a Government refer the matter to a board. I do not think that we shall have to wait long before once again we get some sort of board for prices and incomes, no doubt under a new title—the possibilities of invention have not yet been exhausted—but with the same motive. The motivation will be "As we cannot answer the question, let us pass it over to someone else and see if he can answer it."
However, the question is inherently unanswerable, because no one can predict
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in advance what ought to be the relativities between one trade, calling or service and another, nor how they are changing; for the only way in which we can judge the change is precisely by that free movement of wages which it is the very purpose of the policy to prevent. So there is an interent impossibility implicit from the outset.
But there is another one, too, which is distinct and cumulative; for the object of phase 3 is to ensure that, whatever variations may be permitted, when wages are all totalled up at the end of the year they will come out at the right percentage increase overall.
Whether the figure chosen for a particular year is to be 4 per cent., 6 per cent. or 8 per cent., a flexible wages policy will have to provide the means of allowing 10 per cent., 15 per cent. or 20 per cent. for one set of people and 6 per cent., 4 per cent., 2 per cent. or—dare I say it—minus 5 per cent. for another set of people, and in such a way that when all the increases are totalled up the required percentage increase overall comes out.
I repeat that there is no transition from a flat-rate policy saying "Nobody can have more than 4 per cent., 5 per cent., or whatever it may be"—that is workable as long as it works, workable as long as the changes in the real world do not set up too intolerable a tension between real supply and demand for labour and the rigidities reinforced by month after month and year after year by a flat-rate system—from that there is no transition, no bridge, no path which leads by pleasant and easy stages to a hitherto wholly undiscovered arrangement for a prices and incomes policy which will maintain an overall ceiling as an average and yet permit considerable variations and differentials within it.
Mr. Jay: I am reluctant to interrupt the right hon. Gentleman's as always powerful argument. The weakness of his present argument is that what he has just proved to be impossible has been done in practice over certain periods. He will find from the record that Aubrey Jones's Prices and Incomes Board operated for a number of years and was operating successfully when it was abolished by the Tory Government in 1971.
Mr. Powell: There is no difficulty in concealing the impossibility of a policy as long as its non-existence is expressed in sufficiently vague terms. I congratulate the Government on professing a prices and incomes policy but having succeeded for nigh on three years in expressing it in terms so general and so vague that they were able to draw a veil over the inconsistencies between what was happening in reality and what the policy professed. Even so, it has worked thus far only because the Government selected as their upper limits the upper limits which the trade union movement was wise enough to know were the maxima likely, in current conditions, to be obtainable and negotiable.
Of course, that does not remove the difficulty of an overall limit nor provide the transition nor the other terminal of the transition; but it explains why the Government, to their credit, have survived with a prices and incomes policy longer, I think, than any of their predecessors.
However, hon. Members on both sides of the House are now saying that this will not do, and that we must move over to phase 3—an expression which must strike terror into, at any rate, Conservative hearts. Phase 3 must be written upon many heartstrings above and particularly below the Gangway on this side of the House. So I ask: having witnessed—demonstrated in practice as well as demonstrable in theory—the impossibility of a system of controlling wages overall while allocating or permitting variable increases for the myriad claimants on the total wage fund, if I may use an antiquated expression, why is it that we are always clamouring to do it again? I believe that the answer has emerged in the course of today's debate.
I was going to ask the permission of the right hon. Member for Chipping Barnet (Mr. Mandling) to say, pace him that we are all monetarists now—not, of course, monetarists in the distorted sense in which the term was used by the Chancellor of the Duchy of Lancaster this afternoon, but monetarists in the sense that the growth of money supply is by all identified as the necessary condition of inflation.
Mr. John Mendelson: Not quite all.
Mr. Powell: Very well, not by all.
Mr. John Mendelson Mr. John Mendelson rose—
Mr. Powell: I gladly except the hon. Member, but I hope that he will assist me because I must be brief. I will give him any indulgence—a plenary indulgence if he wishes—but I should be grateful if he will let me get on.
Mr. John Mendelson Mr. John Mendelson rose—
Mr. Powell: All right, I give way, then.
Mr. John Mendelson: The right hon. Gentleman means the Cabinet and the Tories. He does not mean many sections of the Labour Party and Labour movement which have never accepted the nonsense of the monetarist policy from him or from my right hon. Friend.
Mr. Powell: Very well, I shall be content with the Cabinet for the purposes of my present argument. The Government and many hon. Members opposite have been happy to state as a self-evident verity that the high inflation of 1975 and 1976 was the result of the immense increase in the money supply in the years 1972 to 1974 under the Conservative Government. The Minister of State, Treasury nods assent. The Government cannot do other than assent because this has been the staple of the argument and invective of the Chancellor of the Exchequer in debate after debate.
Moreover, the argumentation from both sides of the House and from many sections of the House—of course, with the exception of the hon. Member for Penistone (Mr. Mendelson)—has been that we must control the public sector borrowing requirement because unless we control its magnitude we are in risk of so financing it that we shall increase the money supply and that in turn will cause inflation. Therefore, there is, if not universal, at any rate widespread agreement on the monetary causation of inflation.
Mr. Lever: The right hon. Gentleman must except me too. He started perfectly correctly by saying that it was widely accepted that a monetary supply defect was a necessary condition of inflation. He has slid into saying that we have accepted it as the cause of inflation. That is quite different.
Mr. Powell: What the right hon. Gentleman has given me is sufficient. Excessive money supply is a necessary

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condition, a sine qua non. Without it there cannot be inflation. That is what the right hon. Gentleman has admitted.
Now, if the Government accept that undue increase in the money supply is a sine qua non of inflation—and they do accept it, whether or not the hon. Member for Penistone accepts it—why are they so anxious to have a policy for controlling wages since clearly, on that hypothesis, the trade unions are powerless, by any action they can take, however unreasonable, to cause inflation? That is the question to which we must address ourselves at the next stage.
An answer to it has been given over and over again, which is part of the conventional wisdom and which it is my purpose to challenge. The conventional answer is that if the money supply is being controlled as it must be controlled, in order to prevent or reduce inflation, the trade unions will obtain for their members increases in wages which are inconsistent with that limitation on the money supply and will thereby cause unemployment. It is to prevent, so the conventional wisdom goes, the trade unions from running their members and workers generally into unemployment while the money supply is being so held as is necessary to control inflation that we must go directly, through an incomes policy, to the trade unions and others and tell them what wages they should have and how their negotiations should turn out.
I deny that that is a rational answer. I believe it to be a theory unsupported by any experience and, indeed, capable of being refuted by any empirical test that can be applied. Our experience is that the trade unions have shown themselves to be extremely skilful and extremely shrewd in judging the limits to which wage increases could be pushed without involving an increase in unemployment for their members. After all, that is what trade union leadership is about—these men are precisely in the business of securing the maximum emoluments for their members without damaging their own positions as trade union leaders. The social contract, as it is called, has stood so far because the TUC and its members—they are very good economists and have good economists behind them, and a great deal of common sense too—
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have recognised that the limits imposed represented in current circumstances approximately the maximum of what was obtainable overall without incurring the risk of pricing the workers out of jobs.
Our experience to date, then, is of a trade union movement which has certainly not shown itself to be out of touch with the current realities or with what was obtainable for its members. But I offer a test—indeed, I ask for a test. I ask for evidence to be produced which will show that there has been more unemployment in those occupations where unions have been specially strong, specially demanding or specially militant, because that ought to be the case if the theory is right. If the conventional wisdom were sound, we should find unemployment in the callings where militant trade unions have extorted what are called excessive wages. Not so. There is no correspondence—no correspondence can be indicated—between the activity of the trade unions and the incidence of unemployment.
Mr. Jay Mr. Jay rose—
Mr. Powell: If the right hon. Member for Battersea, North (Mr. Jay) is about to ask me—[HON. MEMBERS: "How do you know?"]—then I shall let him put his own question afterwards—"Why is it, then, that, in spite of years one and two of the social contract, we have nevertheless had this heavy increase in unemployment over the last two years?", I shall give him the same answer I have given in the House before—and even before the unemployment happened. It is that a fall in the rate of inflation is inevitably accompanied by temporary unemployment. It was perfectly predictable that when the rate of inflation was halved, as it has been over the last 18 months, that would he accompanied by a severe rise in unemployment. Now I shall hear whether that was what the right hon. Member for Battersea, North was going to ask.
Mr. Jay: I was about not to ask a question but to point out that surely the flaw in the right hon. Gentleman's argument is that the money supply was held relatively stable during 1976 and yet there was a large increase in unemployment in that year.
Mr. Powell: In that year there was also a steep fall in the level of inflation.
Mr. John Mendelson: There is never one cause.
Mr. Powell: I do not know that the hon. Member for Penistone is right in saying "never", but I agree that there are usually more causes than one operating. However, the major cause of the rise in unemployment—it was predicted as well as predictable—was the halving of inflation. One cannot halve inflation from 26 per cent. to 13 per cent. without severe dislocation which reflects itself in unemployment. That has always been understood, and those of us who have been concerned to see inflation reduced have always warned that there is a transitional price of unemployment that has to be paid while it is happening.
So I repudiate the notion that the trade unions must be restrained, by an impracticable "flexible" phase 3 of prices and incomes policy, from injuring themselves and their members. On the contrary, trade unionists are probably the people in this country who are most sensitive to the implications of what is happening to the money supply and to demand, and who are most skilful in adapting themselves to it, whatever—for they are politicians too—they may say while doing it.
These subjects are matters of great academic and intellectual interest and amusement. The dissection of the errors and absurdities of prices and incomes policy over the last decade and a half is a fascinating task. But it is not just that. Prices and incomes policy, more than any other single cause, has, over that period, brought Government and Parliament into conflict with the public and the governed. It is true that in the last three years we have been spared the acute forms of that conflict experienced between 1972 and 1974; but, as sure as the sun rises and sets, the attempt to obtain even voluntarily a policy for controlling wages by influencing the movement of individual wages and restoring differentials, will lead—if it is to have any reality—to renewal of that conflict between Government and Parliament on the one hand and the governed and the people on the other.
On whichever side of the House we sit, we surely cannot believe that that is something to be courted or that it is something which this country can afford. Therefore,
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I exhort the Government—whatever smokescreen of words they use to conceal their withdrawal from the impracticable move from phases 1 and 2 to phase 3 of an incomes policy—to eschew a course that will bring them into outright and manifestly insoluble conflict with what millions of workers, trade unionists and others throughout the country know to be the reality which they face in their daily circumstances and work.
The Government have set their hands to the effective lever for doing what must be done—controlling inflation. They have not avoided risks; but they have identified the true lever and set their hands to it. Let them not spoil all by attempting to add an impracticable and damaging wages and prices policy for phase 3.
6.56 p.m.
Mr. Donald Stewart: I start by congratulating the hon. Member for the City of London and Westminster, South (Mr. Brooke) on his maiden speech. We look forward to contributions from his expertise on management. Goodness knows, the Government and the Opposition could do with some of that. The hon. Member made a vigorous and trenchant speech, and if, in accordance with convention, it was non-controversial, there was more than a hint that all his future speeches will not be delivered in that vein. We look forward to his contributions to our debates.
I agree with the point that was made by the right hon. Member for Down, South (Mr. Powell) about phase 3. My party has never supported the alleged social contract, the incomes policy or anything of that kind. Far from believing, as so many people pretend, that the Prime Minister and Cabinet are carrying out the instructions of the Trade Union Congress, my party believes that Mr. Jones and Mr. Scanlon and other such people have sold out the interests of their members to the interests of the Government.
There has been a tendency during the debate on the Budget Resolutions to regard the Budget as innocuous since there has been a standstill on swingeing impositions of tax—except one particular tax, with which I shall deal with in a moment.
The Budget was presented at a time of sharply dropping living standards in

941
the United Kingdom. It appears to be the aim of the Government to push down incomes in real terms. Working people are beginning to suffer a serious erosion in their standard of living. The 15 per cent. increase in incomes between 1975–76 has been wiped out by devaluation of the pound, high inflation and tax increases. According to Government figures, the spending power of the pound dropped by 3p during the last three months of 1976 to the lowest point since early 1974.
The Chancellor of the Duchy of Lancaster and his colleagues agree that the situation is difficult, with regard to unemployment and so on, but they claim that it is due to world conditions. There may be something in that argument. I am not interested in refuting it at the moment, but I am certain that in no sentence in the Labour manifesto was there a qualification that the Government would maintain employment provided that employment kept up in the rest of the world, or that there would be a proper balance of payments provided Germany were not in a worse situation, or anything else of that kind. That is the charge against the Government.
My hon. Friends the Members for Perth and East Perthshire (Mr. Crawford) and Dunbartonshire, East (Mrs. Bain) have already dealt with various aspects of the Budget tfrom the Scottish angle. I intend to concentrate on the disgraceful extra tax on petrol, oil and cars. This increase has created great apprehension and tremendous anger throughout Scotland, particularly in the deprived rural areas.
The policy of the Government and the nationalised industries, such as British Rail and the Scottish Transport Group, seems to be intended to confine the people of the Highlands and Islands to their homes in the same way that Red Indians were confined to reservations and forbidden to leave them. British Airways, which will fly one to Athens for £85, now charges £60 for a flight from Stornoway or Benbecula to Glasgow—a price increase of 32 per cent. in a year.
Now we have 5½p on a gallon of petrol, with no remission for areas such as the Highlands, which are almost totally dependent on cars, and which have the highest unemployment and cost of living
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in the United Kingdom. It is not possible to shop around for cut-price petrol in the Highlands; all the prices are the same and they are the highest in the country. The relative burden is greater on Scotland than on the rest of the United Kingdom. The message has not been lost on the Scottish people that, although Scotland is the only nation with all resources, the British Government's imposition of petrol taxes falls heaviest on the Scots. The Scottish colony has been made to bear the brunt of the present economic difficulties of the country.
What about the compassion of which the Labour Party claims to have a monopoly? At a time when some headway is being made in fighting for better conditions for the disabled, the Budget proposals will be a savage curb on their mobility, and the mobility allowance does not take care of that. Is the Chancelllor of the Exchequer determined to remove their already restricted mobility? For the handicapped and for the ordinary folk at home for whom cars are essential, the SNP will be voting against the resolution on the petrol tax increase.
What do the Liberals intend to do? They are fond of saying "Wait and see". As far as I know, Mr. Asquith used those words only once. The present members of the Liberal Party are prepared to use them a great deal. Their main support comes from rural areas and they were among the first to announce a hard-line position on the extra tax on petrol. However, with the prospect of a Government defeat, the Leader of the Liberal Party has confirmed that they are back pedalling furiously and intend to abstain tonight. His defence, that the heavy oil duty is mixed up with the petrol price increase, and, therefore, causes difficulties, is a lot of nonsense. The Liberals have already betrayed Scotland and Wales on the devolution Bill and now they are betraying the rural areas from which their support comes. Their last shreds of credibility have been blown away. Some years ago Liberal leaders talked about marching their troops towards the sound of gun fire. Now they are becoming an army whose buglers will be required to learn only one call: sound the retreat.
We have announced where we stand, and we shall be there at the vote.
7.4 p.m.
Mr. Bryan Gould: There was a curious omission in the Budget speech. The Chancellor of the Exchequer made no mention of export-led growth. Whatever happened to export-led growth? There was a time a few months ago when no speech or statement by the Chancellor of the Exchequer was complete without the ritual incantation of the words "export-led growth". Last year, the Chancellor did his best to ensure that the competitiveness and profitability of exports of which he was so proud did not eventuate. He spent 1976 spending thousands of millions of pounds trying to prop up the rate of sterling, push up interest rates to 15 per cent. to help the pound, and cut public expenditure as well. Despite this, he maintained that there would be a competitive edge which meant that export-led growth was just around the corner.
We now know that it did not materialise. In fact, it is not even on the agenda, because the Chancellor's Budget speech showed that the Treasury now forecasts a growth in output of tiny proportions. The forecast growth in exports is 5½ per cent. If we take away what we would expect from oil and the growth of invisibles, we are left with a growth in manufactured exports which must be very small indeed and only a tiny proportion of the growth of world trade. The Treasury also expects rising unemployment, falling living standards, and a falling share of world trade in manufactures.
The Treasury figures show that export-led growth is not to be expected, and the Chancellor's speech simply confirmed that fact. The Chancellor must know that the Treasury's own figures on the index of competitiveness of exports and manufactures expressed in dollar terms reveal that throughout the greater part of 1976 our export prices were less competitive than those during the bulk of the preceding three years. According to my calculations, the figure is now the worst since 1972, which was itself a high point in uncompetitiveness. At that time the Bank of England forced up the rate of sterling at the same time as our industrial costs were rising faster than those of anyone else. If my right hon. Friend disputes my calculations I hope that he will produce better figures for the winding-up
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speech. The index of competitiveness is not a wholly reliable indicator of our competitiveness, but it is the best we have, since only that index measures the performance of that part of our manufacturing industry that is involved in exporting.
Even that index, damning though it is, understates our loss of competitiveness in the past five or six years. For example, it takes no account of goods that are no longer exported because they are no longer price competitive, or of the loss of preferences, particularly with the Commonwealth and EFTA following our entry into the EEC. Nor does it take account of the fact that we have had to reduce our tariffs for EEC goods. Admittedly its tariffs against our goods have been reduced, but there is no doubt that ours were much more effective in keeping goods out than were the EEC tariffs. Moreover, the index is based on 1970 figures which related to a situation distorted by a severe credit squeeze then in operation.
There is, therefore, no competitive edge, and no export-led growth to look forward to. The Treasury has forecast import-led stagnation, and that forecast is confirmed by many independent forecasters, including the National Institute and the Economist.
If we look at what is happening in the real world, we see there can be no question but that we have a massive trade deficit, and imports of manufactures are rising three times faster than the export of manufactures. Our export manufactures are rising at half the rate of the growth of world trade. Not surprisingly there is a remorseless and continuing decline in our share of world trade. We have a huge and rising total of unemployment and an industry operating at well below capacity. It staggers me that anyone can argue that export-led growth is just around the corner. Those who argue that the pound should be revalued are indulging in an exercise of self-delusion on a grand scale.
Despite that gloomy picture one can still read articles and leaders in newspapers that say that the competitive edge of British exports means that export-led growth will come. They are deluding themselves, as they have deluded their readers for decades. The problem is that we have no objective measurement in our

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recent history—by which I mean the past century—against which to measure our performance, because every period in that time of decline has been one in which competitiveness has been falling. Therefore, it is quite fruitless to say that we are as competitive as we were in 1973, 1963 or 1953, since in each of those years our industrial decline and falling share of world trade continued.
I believe that the difficulty we face in this country, in facing up to the unpalatable facts, particularly on the exchange rate, rests largely on the fact that we have become accustomed to following a "hooray" policy towards the exchange rate. We regard the pound as a prestige symbol; if we raise the level of the pound, or maintain it, we say we are doing well, quite oblivious of the impact that it may have on the economy and on jobs.
Then there are those who say that perhaps our lack of competitiveness is really the fault of the wicked exporters who recognised the fact that there has been a fall in the value of the pound, and took advantage of this in increased profit margins rather than increased volume. Therefore they say that it is the wicked exporters who are selling the country short. There is absolutely no evidence that the profits of exporting firms have risen very substantially during the past few months or years. If one tried to do a survey of firms that have made their reports in the past six months one would see that there is no difference between firms that export a large proportion of their production and those that do not. The level of profit remains very low in both cases. The only argument on which this claim can be made is that last year export prices rose faster than wholesale prices; but that has been true for many years. It was true in the four years before the 1967 devaluation.
It shows, not that exporting is particularly profitable, but that exporting is becoming increasingly difficult and expensive, since many of the costs have to be incurred abroad, and the cost of credit has risen in recent years. If one doubted that, one could have recourse to the 1967 experience. Exporters took advantage of the devaluation then in terms of volume rather than profit margins. It is hard to imagine that they could do otherwise now, when redundancies are
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biting into the ranks of managers themselves.
Others say that it is inevitable, that our industrial decline cannot be reversed, and that there is nothing we can do about it. They argue that there is some defect of national temperament or character which makes us unsuitable for industrial work, and therefore we can only be dragged along on the coat-tails of other countries, and that, therefore, we cannot adjust our policies to increase our share of world trade. They say that we must wait on other countries to reflate and increase the volume of trade and then, according to the Treasury, if we are lucky we shall pick up half of the rate of the increase in world trade in increased exports.
There are others—and I understand that the National Economic Development Office is to produce a paper to this effect—who say that devaluation or a competitive exchange rate is all very well but that it does not work. The truth is that we have not had an effective devaluation over the past year. The fall in the value of the pound has not done enough to keep up with our loss of competitiveness over that period. If there is one indication of the fact that we have not had an effective devaluation it is surely the fact that we have not had the familiar J-curve result of a devaluation.
Others say that price competitiveness is not a crucial matter and that quality, design and delivery are the real explanation for our difficulties in selling abroad. Of course that is true, but what are we to do about it? Are we to have more ministerial speeches exhorting everyone to work harder and invest more? Are we to pin our hopes on productivity improvements and so on? Will this be the key to our export-led growth? What are we to say to foreign customers in the meantime? Shall we say "we realise that we have acute problems about difficulties with the quality, design and delivery of our products, but we are aware of it and if you leave it to us, in a few more years, after more ministerial speeches and exhortations we shall put things right, but in the meantime will you kindly buy these goods at a price which is higher than last year?" Of course we cannot do that.
We have to take account of price competitiveness. That has served others well.

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The Japanese seem to have done well out of price competitiveness, and the Chancellor of the Exchequer himself thought, not many months ago, at a time when he believed that our exports were price competitive, that that would produce a rapid increase in our volume of exports. This agreement overlooks the fact, that the defects are to be cured only if exporting is made more competitive and more profitable.
We need more investment in new export capacity if we want better quality, design, and delivery dates. These things will cost money. We are suffering from a century-old process of industrial decline, arising from the fact that we have consistently managed our exchange rate in the interests of those who deal in money, rather than in the interests of those who produce and sell things. Until we change that frame of mind—it will be extremely difficult to change the ingrained habit of a century—industry will continue to decline, despite ministerial speeches.
It is sometimes argued that the German experience—my right hon. Friend made this point this afternoon—shows that competitive exchange rates, price competitiveness and so on, are really not essential to export success. The Germans waited until they had a substantial trade surplus, enormous reserves, investment had been made, the factories were there, the skilled work force was there and markets overseas had been developed, and then, when the pressure for revaluation was irresistible, they revalued by the carefully calculated amount which enabled them to make use of those advantages. They were able to reduce the impact of imported inflation. To suggest that we, with our deficit, reserves, and industrial decline, can launch ourselves into that virtuous circle by holding up the rate for the pound, is ludicrous.
Mr. Lever: I never said that the Germans' export success was not related to export price competitiveness. That is not what I said. My hon. Friend has not listened. I said that the German mark became undervalued because of their steadily increased productivity compared with that of their rival nations, and that they continued in that way, and that we had had the opportunity of having an undervalued pound, in spite of the supposed machinations of the City and
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others, but because we were unable to be relatively competitive in productivity, that undervaluation gets lost. In short, the parity does not decide the issue. It is the trend of competitiveness in productivity that decides the issue.
Mr. Gould: My right hon. Friend is quite right in saying that the Germans have maintained their currency at an undervalued level, by improving their competitiveness and productivity, but we can argue about the point at which we can break into this circle. My argument is that for a century we have consistently maintained our currency at such a high level and at such an overvalued level that it has prevented us from producing the sort of investment and productivity to which my right hon. Friend referred.
My right hon. Friend referred to the 1949 devaluation, but, as was pointed out in another part of the Chamber, that was accompanied by a substantial devaluation by other countries at the same time. The devaluation of the pound was to a figure which was really just a cockshy. We had very little idea in the immediate postwar period of what pattern of world trade was to emerge. It was more a question of luck—bad luck as it turned out—that the level ended up at the figure of two dollars 80 cents to the pound.
The final and most difficult argument against following a policy of competitive exchange rates is that in the current situation of pay policy negotiations now underway and with a high inflation rate we cannot afford to let the pound fall further because of the inflationary consequences of such a fall.
That argument overestimates very considerably the inflationary effect of the falling pound. It is clear that the bulk of the inflation that we experienced last year owed nothing to devaluation and a great deal to increased labour costs and changes in the terms of trade. Of course, we could reduce our inflation by pushing up the rate for the pound to $1·90 as some commentators have suggested, but at what price? It is always possible to reduce inflation provided one is prepared to accept another million or so unemployed and a level of economic activity closely resembling paralysis.
Let us look too at the inflationary effects of the present policies and the costs we have incurred in terms of high interest

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rates to protect the pound. Let us look at the costs in inflationary terms that we must pay for allowing labour unit costs to rise because industrial production is stagnant. Let us look at the way in which the burden of inflationary import prices is falling on our import bill. Many people talk as though we are still an economy which imports food and raw materials and exports manufactures. The fact is that nearly 60 per cent. of our import bill is accounted for by imports of manufactures. There is no way in which we can prevent the import of these manufactures from continuing to close British factories and drive British workers out of work without making them less competitive, and that means more expensive. It would be the ultimate foolishness to hold up the exchange rate in the fond belief that we were thereby keeping down our industrial costs, when all we would be doing would be subsidising imports and putting a penalty on exports.
Reports appeared in the Press today and yesterday—and that leads me to suggest that they must have emanated from Government circles—to the effect that the whole policy of competitive exchange rates to which the Chancellor is committed under the terms of the Letter of Intent to the IMF has been abandoned. It is said that this represents a victory for industry over the interests of finance. What gobbledegook! What double thinking and double talk that is! By abandoning any effort to maintain the competitiveness of our exports we are throwing away any chance of growth, of rising employment and of rising living standards.
It pains me to say that this is precisely what is in the Chancellor's programme and in his Budget Speech, and that this is the prospect which faces us. We are once more falling for that wonderful old British failing of simply refusing to face the facts if they are unpalatable. We are also putting yet another turn in the downward spiral which has meant a century's industrial decline for this country.
7.23 p.m.
Mr. Nigel Lawson: The hon. Member for Southampton, Test (Mr. Gould) has just made a very powerful speech about the exchange rate. It reminds me of the arguments that I used to put forward very strongly during the
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1960s, saying that we had an over-valued exchange rate which was at the root of all our problems. I still believe that that was so. Then we were in the era of fixed exchange rates. Now we are in the very different world of floating exchange rates, and the last Conservative Government, to their great credit, took the step of floating the pound.
I say to the hon. Member, therefore, that he really should not worry. If the expected surplus on the balance of payments next year does not seem to come about, the exchange rate will fall of its own accord, and the Chancellor of the Duchy of Lancaster and all his wiles will not be able to prevent it.
Mr. Lever: I did not say that I would want to.
Mr. Lawson: There are two ways of looking at a Budget, and it is difficult to choose which to adopt. First, there are the tax changes comprised within it. Secondly, there is the overall economic strategy, of which the Budget is only one part, and the prospects for the coming year in the light of that strategy. In opening the debate the Chancellor of the Duchy, for whom I have great affection but who, I believe, made a speech tonight that was by no means one of his more successful efforts, seemed to pour scorn on the changes in taxes in the Budget, and he said that we should talk only about strategy. I do not believe that. His view shows how very much removed he is from the thinking of ordinary people, who are deeply concerned at changes in taxation in the Budget, whether in petrol tax, income tax or any other tax.
Of all the 10 Budgets and quasi-Budgets produced by the current Chancellor of the Exchequer, this is by far and away his best. I admit that that may not be saying a great deal, but it should be said. Although far from perfect, this Budget is on balance a good one. It contains, so far as I have been able to discern—we have not yet seen the Finance Bill, of course—not a single fresh instalment of Socialist malice. It is essentially a Tory Budget.
It is a Tory Budget first in that cuts in taxation have been introduced and made possible by cuts in public expenditure. It is a Tory Budget, too, in that the tax cuts have been concentrated on income tax, even at the cost of some

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increase in the taxes on spending. Perhaps most strikingly, it is a Tory Budget in the way in which the income tax cuts have been allocated with a much-needed measure of relief to middle management, and it is worth spelling that out.
Whenever income tax is cut, it is inevitable that those who pay most tax stand to benefit most in absolute terms. The Budget, however, is striking in that it goes much further than that, because the point is true in proportionate terms as well. I refuse to take any notice of the fiction that the 2 per cent. reduction in the basic rate is in any sense conditional, although the relative effects would be very much the same even if one did take notice of it. Taking the income tax reliefs as a whole, the effect on the family man on average earnings of £4,000 a year is a rise in his net family income of 3½ per cent. But for the family man on £15,000, who receives the peak benefit under the Budget, the comparable rise is 8½ per cent. That is a substantial difference.
In one of our debates last week the Financial Secretary pointed out that even so this cut goes only a small part of the way towards undoing the depredations of the dispiriting egalitarianism which has been imposed upon the nation during the preceding three years. Nevertheless, it is a remarkable turnabout. I mention that not merely to commend the Chancellor, at long last, but to express the hope—and I have every hope and confidence—that now that he has blazed the trail we shall no longer hear the tired old Socialist cliches about handouts to the rich when the next Conservative Government take the next steps along this path.
Other steps are obviously needed. It is absurd that the top rate of tax is still as high as 83 per cent. on earned income. That is the highest rate in the civilised world—
Mr. Pardoe: In the uncivilised world, too.
Mr. Lawson: I believe that there are one or two uncivilised countries that have a higher rate than 83 per cent., but certainly there are no civilised ones in that category. That rate comes into effect now at a lower level in real terms than ever before. In the 1970 pounds, which the Treasury is so happy to use in working
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out its forecasts that rates comes into effect at £8,400 a year, and that is ridiculous. Part of the trouble—and I hope that here I carry the hon. Member for Cornwall, North (Mr. Pardoe) with me—is the Government's consistent refusal to index the tax system. I have been pressing for such a system at every possible opportunity since I first entered the House. As such I was appalled to see that the Financial Secretary, speaking in this debate last week, said
"I understand that the main argument for indexation was prompted by the attempt to fix the Government to ensure that taxation was independently based and outside the Government's control."—[Official Report, 30th March, 1977; Vol. 929, c. 536.]
All I can say is that if he understands that, he understands nothing, despite the three years' intensive tuition that I have given him. Every schoolboy knows that nothing can remove the power of Government and Parliament together to determine the level of taxation and make such discretionary changes as are inevitably required from time to time. As the Financial Secretary is obviously unteachable, I direct my remarks to my own Front Bench and implore my right hon. and hon. Friends to pledge themselves to this limited but crucial form of indexation. If they will not do that, it will never be politically possible for them in office to make and maintain—and I stress maintain—the income tax cuts to which we, as a party, are pledged.
What about the rise in expenditure taxes? It is perfectly true that the Chancellor has gone little further than what is needed to make good the loss in real revenue due to inflation. We talk about fiscal drag for income tax—but there is a reverse fiscal drag for the specific duties. [An HON. MEMBER: "Fiscal boost."] I reject the use of the phrase "fiscal boost". If it is analysed, one can see that it is wholly inappropriate and I hope that the Chancellor will realise that the use of it is misguided. My charge against him is not the extent of the rise—he could have gone even further—but the nature of the tax that he has chosen.
We touch here on the Lib-Lab pact, and that is a very delicate subject. I refrain from commenting on the embarrassing negotiations between the high contracting parties to this pact. It is

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clear, however, that both parties are certainly contracting. Another thing is now clear—we have heard from the Leader of the Liberal Party this afternoon that the Liberals will indeed vote against the increase in petrol, diesel and fuel oil duties but, as Napoleon said to Josephine, "not tonight".
The Chancellor's defence for these increases is based on the energy savings argument, but that is so much hot air. When I asked the Chancellor of the Duchy of Lancaster in an intervention how much energy saving there would be, he had not the faintest idea. He said that it was impossible to work out, but the figures in the Budget must relate to some estimation that has been made of energy saving. Judging from the increased yield the Chancellor expects, the assumed reduction in consumption must be negligible.
The real argument against these tax increases, as the Leader of the Liberal Pary has pointed out, is the alarming feature of our present tax system which means that more and more people are better off not working and going on social security than they are by working. Even for those who are slightly better off working the margin is narrowing all the time, as my hon. Friend the Member for Norfolk, North (Mr. Howell) has repeatedly pointed out over the years.
One key element in the equation between working and not working is the cost of travelling ot work, which is not tax deductible. By acting deliberately to increase this cost the Chancellor has done something very dangerous, for many more family men will be better off not working than working as a result of the increased duties, and that is an excelllent reason for voting against this resolution.
Finally, it is worth pointing out that the £1 billion 2 per cent. payroll tax comes into effect only this year, so, despite the Budget, we shall still be a more highly taxed nation in the coming year than we have been in the past year.
What are our overall prospects? Even the Treasury ruefully admits in the Budget Red Book that short-term economic forecasting is something of a mug's game. In the Budget Statement the Chancellor made forecasts for the year ahead which, in a number of important respects, differed wildly from the forecast
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he made for the same period as recently as last December in his package. No doubt as the months go by these forecasts will be falsified in their turn.
Given the miasma of uncertainty in which we all live—and not least the Treasury—a fact which must surely demonstrate the folly of neo-Keynesian fine tuning beyond dispute, my own conclusions necessarily will be in very general terms. First, I believe that to plan to reduce the public sector borrowing requirement from £8·8 billion in 1976–77 to £8·4 billion in 1977–78, bearing in mind the present plan to keep it at £8·6 billion the following year, represents, even allowing for inflation, a too leisurely rate of reduction.
Second, in contradistinction to fiscal policy, I believe that monetary policy has got into an excessively deflationary rut and that this will lead to the current recession being unecessarily prolonged. I am glad that I have the agreement of the Chancellor of the Duchy to that proposition. There is not only that danger but the danger that there will be a panic counter-reaction by the Government in a few months' time. The danger of that is all the greater because of the Government's apparent conviction that the path of virtue is mapped out by the IMF's guidelines, whereas the domestic credit expansion guidelines are laughably lax.
What of the Chancellor's overall strategy? In a somewhat schizoid way the Chancellor has two strategies. There is his monetary strategy, which the Chancellor of the Duchy of Lancaster dislikes so much and which may account for his lack-lustre performance this afternoon. Alongside this, and eclipsing it in rhetoric, there is his incomes policy. In his Budget speech the Chancellor said:
"It is difficult to exaggerate the advantages of a satisfactory pay agreement"—[Official Report, 29th March 1977; Vol. 929, c. 284.]
I have news for the Chancellor: nothing is easier to exaggerate. It is difficult to know what he means by "a satisfactory pay agreement", but the Chancellor had little difficulty in exaggerating to a ludicrous extent the benefits of his proposed income tax cuts in this context. He did this in his Budget speech, his Budget broadcast and in various Press handouts to journalists.
He argued that the tax cuts for the average married man amounted to an

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extra £2 a week in take-home pay, which was as good as a 4½ per cent. gross pay rise. Taking account of the fact that a 4½ per cent. gross pay rise would put up prices by 2½ per cent., however, the Chancellor argued, the poor man would have needed in order to make up for that a 9 per cent. gross pay rise.
Why did the Chancellor stop there with his spurious arithmetic? Why was he so uncharacteristically modest. He could have gone on to say that a 9 per cent. gross pay rise would put up prices by a further 2½ per cent. and in order to make up for that a man would need a gross pay rise not of 9 per cent. but of 13 per cent., and so on ad infinitum. Thus the income tax cuts, on the Chancellor's phoney figuring, are worth any pay rise that one cares to name. If the Chancellor thinks that a single trade unionist believes that, he will believe anything.
Mr. Lever: Spurious.
Mr. Lawson: I do not think that the Chancellor of the Duchy of Lancaster is right. I believe that this spuriousness is not unsymbolic, because it portrays the spuriousness of the whole incomes policy strategy.
The problem is basically that by impressing on the foreign holder of sterling the allegedly vital importance of a satisfactory stage 3 pay deal, whatever that may mean, the Chancellor of the Exchequer has boxed himself into a position where he is forced to conclude something he can portray as being a satisfactory pay agreement, or face a major collapse of overseas confidence such as he experienced six months ago. What then? The satisfactory agreement will, by its very nature, by the nature of things, prove very unsatisfactory to a number of people on whose behalf it has been concluded, causing unnecessary industrial strife and ultimately breaches of the agreement, which will then in turn trigger off just the collapse in overseas confidence that it must be the Chancellor's desire and ambition to avoid.
To what gain is this whole doomed charade undertaken. We must all hope, of course, if we are sensible, to minimise the avoidable level of unemployment. For that reason—and here I part company
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slightly from the right hon. Member for Down, South (Mr. Powell), who has left the Chamber, so I shall not pursue the argument here—there is a danger of people pricing themselves out of jobs.
Therefore, if we wish to minimise avoidable unemployment, we will obviously want some kind of pay restraint. But pay restraint is crucially different from a formal incomes policy. We know that, for example, in the private sector pay restraint is imposed by the nature of the market, of economic conditions, the disciplines and facts of economic life. In the public sector it is the cash limits White Paper that determines pay restraint. The Government brought that White Paper out on Budget day with no fewer than 48 specific blocks of pay in the public sector which are cash-limited. That is the true way in which overall budgetary and monetary control are both translated into and made possible by pay restraint. That is the only form of incomes policy—if one likes the term, and I do not—that is needed.
The idea that if there were to be the abandonment of the formal system of incomes policy which we have now there would suddenly be a pay explosion, just because there was one in 1974, shows a total failure to understand the difference between the economic conditions today and those in 1974. Of course there would be a great explosion for highly skilled men in certain small categories, but overall not at all. There is no evidence—quite to the contrary.
But beyond that—because I go beyond monetarism, the Chancellor of the Duchy of Lancaster will be glad to know—there is needed in our management of the economy a mutual understanding between Government and people and Government and trade union leaders in particular, understanding of what the consequences of particular policies are, and the consequences, too, of bucking them. We have something to learn from the Germans in this context. Their system, the so-called concerted action, is well worth studying by the Government. It is a system of mutual discussion, mutual education, mutual understanding between the Government and the major interest groups in the economy, including the trade unions, explicitly based—this is the basis for the whole understanding—on total non-interference by Government in

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wage bargaining. That is the very cornerstone of the understanding that is reached.
The understanding is also facilitated by a degree of consensus in Germany greater than the consensus at the top that we have in this country. It is a consensus based on success. There is to a certain extent a vicious circle—that if one does not achieve the economic success, it is hard to achieve the consensus, and without the consensus, it is hard to achieve the economic success.
Nevertheless, we have in Britain where it really matters, at the grass roots of industry, a remarkable degree of economic consensus. I think that the divide is much more at the top. That is one reason why I have long favoured some form of genuine industrial democracy. I believe that that is something on which we can build. Certainly, we must try.
We must try to learn to live without incomes policy. Admittedly, we have not learned how to do so yet. But what is absolutely clear—and we have learned this the hard way—is that no free society, no free economy, can live with incomes policy, and the sooner we learn how to live without it, the better.
7.46 p.m.
Mr. Ralph Howell: I should like to thank my hon. Friend the Member for Blaby (Mr. Lawson) for his very kind references to me. I agree with him that the only good thing that can be said about this Budget is that it is devoid of any Socialist malice.
It seems that the Treasury team have made some attempt to move in the right direction, away from direct taxation to indirect taxation, but it is an awful pity that they have chosen to do it by putting the extra tax on petrol, particularly for constituencies such as mine, a rural area where so many people are totally dependent on using their own cars to travel to work because transport facilities are so poor. It would have been much better if the switch had been made with an increase in the standard rate of VAT to 10 per cent. or even more. I beg the Financial Secretary to note the effect that the tax will have on rural areas, because so many people who are spending large sums to travel to work are worse off than if they did not bother to work at all.
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The Budget is extremely disappointing, because we were led to believe that tax thresholds would be raised considerably. The effects of what has been done are minimal. In every category—in every size of family, single people and married couples—people will be taxed at below the social security levels. It is pathetic and nonsensical that we are still taxing those who work so that they are left with less spending power than if they did not bother to work. We should note that the unemployment figures include a considerable number of people who cannot afford to work while the present tax rates and tax system prevail and while the tax thresholds are so low.
I am also disappointed that the Chancellor did not see fit to make all income equally taxable. It is too absurd for words to continue the system whereby benefits are tax-free and wages are always taxable. A man with a wife and two children will still have to earn more than £50 a week to be as well off as if he were on supplementary benefit. How crazy it is that we should continue that situation, despite all the efforts that have been made to draw this absurdity to the attention of the Government.
I mention again the letter that I sent to the Chancellor of the Exchequer from one of my constituents, a widow whose total income is £28 a week, who is currently being taxed at £5 a week, leaving her £23 to maintain her house and meet other commitments. As a result of the Budget she will be roughly 50p better off. If the agreement is reached she will be 60p better off. That 60p is supposed to make allowance for the 16 per cent. price inflation with which she will have to cope.
It is gratifying that there has been fresh thinking among the Cabinet, but the wild men on the Left will not allow this Socialist Government to change from direct to indirect taxation. Socialism depends on high taxation and cannot exist without it. That is a fact of life that we must realise. The only way that the country can free itself of high taxation is to rid itself of the Socialist Government.
Surely the answer to our problems is to create the conditions whereby it is profitable to work, whereby the maximum number of people are working. We need

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a complete reorganisation of our taxation and welfare systems. At present they are totally unco-ordinated, and absurd situations arise where many people are better off not working. There are many others who are only marginally better off by bothering to work.
Surely the Stechford result should have proved to the Government that something is wrong with their voters. They failed to realise that car workers, industrial workers and miners are major taxpayers. Those workers are heartily discouraged by our excessive taxation. After the Budget we are still at the top of the world's income tax league. We are at the top by a quite considerable lead.
I address my remaining remarks to our Front Bench colleagues, to the incoming Conservative Government. It cannot be many months before we shall have to take charge of the nation's affairs. The Conservative Party must take on board that small changes will have no real effect. We have not had a true free enterprise Budget since the war. All the Budgets since then have been Socialist in content. There needs to be a great switch so as to give incentive to our people who work. That is recognised in Stechford. Those remarks might cause amusement to some Labour Members but they are recognised by nearly everyone in the country.
There must a dramatic reduction in income tax rates if we are to be able to compete with our main competitors. They have an average starting rate of income tax of less than 15 per cent. and no more than 55 per cent. as the top rate. If we were to adopt similar rates, we should have to halve the yield that we get from income tax. That is what the next Conservative Government should think of doing. Indeed, they should do so very quickly.
It is no good reducing income tax as gradually as we have done in the past. People are saying "The Conservatives are criticising the Budget, but what would they have done?" We should now tell the country what we would do. We should tell the people that it would be our policy to make a major switch in the direction that I have outlined.
I am not suggesting that we should promise to cut taxation generally. I am
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not in favour of promises that we might not be able to fulfil. However, surely we could promise to switch from direct to indirect taxation. That would leave the wage earner free to do what he wanted with his wages. If he chose to spend lavishly, he would pay a great deal of income tax. If he spent modestly, he would pay little tax. If he spent hardly anything, he would pay virtually no tax. That is the way ahead for our party. It should be popular throughout the country and we should gain the confidence and the co-operation of the great majority of people.
7.56 p.m.
Mr. Ian Wrigglesworth: I do not wish to take up the remarks of the hon. Member for Norfolk, North (Mr. Howell), save to say that if he is worried about the policies of his Front Bench he should read the speech that his right hon. Friend the Leader of the Opposition recently made to the Zurich Economic Society. If he does that, he will find to his great pleasure but to my horror that the economics of Adam Smith and Alfred Marshall, the latter being the doyen of nineteenth century economists, are held high as an example. It was a remarkable speech that led us back over two centuries of economic experience in this country and the Western world to the simplicy of economists of bygone days. I fear to think of the havoc that would be laid upon the economy and British industry if those philosophies were reintroduced by a Conservative Administration.
I begin my remarks by welcoming the general thrust of the Budget. It makes good sense, although when I returned from Stechford on Monday after canvassing to listen to the Budget on Tuesday I was not sure that it made very good political sense. The rub will come in due course. The long-term political analysis is probably right. It is a good thing for the Labour Party and the Government to be pursuing a modest and reasonable policy and not going ahead with too great an expansion, choosing to restrain growth until the economy, along with the economies of the Western world picks up.
I like the way in which my right hon. Friend the Chancellor of the Exchequer has linked his policy with the need to keep down inflation, with the industrial

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strategy and with the need to get a further round of pay policy. There is help in the Budget for small companies in the special development areas. There is extra stock relief for companies for another two years. There is corporation tax relief for small companies. All those matters and a number of other measures tie in with the Government's industrial strategy. Those are all features that are to be welcomed.
Clearly, the main economic indicators are showing the right trends. The public sector borrowing requirement is below the agreed IMF level. Domestic credit expansion is at half the level required by the IMF agreement. The balance of payments trend is going in the right direction. Although it is early, probably, to try to reach firm conclusions, the trend in employment is going in the right direction. The pound is much stronger than we could ever have hoped shortly before Christmas.
The measures of 15th December have had their effect upon the money markets and the City. Interest rates have come down sharply so that borrowing by companies and individuals is now some four or five points lower than before Christmas. We hope shortly to see the drop in interest rates being reflected in a lower mortgage rate for house purchase. All the trends of the main economic indicators point in the right direction. The Chancellor, in allowing himself leeway for the future, has made the correct economic judgment, and I hope that in the longer term it will prove to be the correct political judgment.
The debate on the Budget has centred on two main issues. There has been a dispute between the monetarist policies of the right hon. Member for Down, South (Mr. Powell), and to some extent of the hon. Member for Blaby (Mr. Lawson), and those who believe in an incomes policy. What the right hon. Member for Down, South did not show in his analysis of the monetarist theory was that it involved nothing more than simple facts and figures and the pressing of buttons in economic management. I see the distinction between his view, and, indeed, the view of the right hon. Member for Leeds, North-East (Sir K. Joseph), and those of us on the Government Benches who believe in an incomes policy as being a somewhat more fundamental matter
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than the mere pressing of the buttons or the pulling of the levers of economic management.
The basic difference is that we believe in the concept of fairness in incomes policy, whereas the right hon. Members for Leeds, North-East and Down, South believe basically that market pressures will control incomes. Most of us on the Government Benches are not prepared to accept that the incomes of people in the different sectors of industry should be determined solely by the market place. I personally believe that there is a need for a permanent incomes policy and for permanent guidelines to ensure that there is fairness. That involves Government controls or guidelines to determine the growth of incomes overall within the economy. There is that fundamental divide. It is not simply a question of pulling levers in certain directions. The matter is more fundamental than that. There is a strong political content in the difference between the two arguments. Therefore, it is of fundamental importance that the Government reach another agreement with the trade union movement and employers founded on phase 3 of the incomes policy.
I was surprised that the hon. Member for Blaby spoke as though this country for a period of time had been without an incomes policy. He gave the impression that we had undergone a period when the freedom of the market place was allowed to operate to create economic growth. But if the hon. Gentleman studies history he will discover that we have had an incomes policy in most of the years since the Second World War. We remember Selwyn Lloyd's pay freeze and all the pauses and the norms imposed by various Chancellors, including those brought in by Conservative Governments. Various policies have been introduced and put into operation, and more often than not they have involved incomes policies.
I believe that the prices and incomes policy pursued in the late 1960s, with the establishment of a National Board for Prices and Incomes under Aubrey Jones, was the policy to follow. That gave us many benefits, and I believe that we should return to such a policy. I know that the trade unions object to the establishment of a body to arbitrate and police incomes, but I do not think that

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that course can be avoided. I believe that the two sides in price and pay negotiations must be brought together because the relationship between the two cannot be denied—nor can the relationship between prices and jobs.
It is important to ensure the closest possible link between prices policy and pay policy, not only for the reason that if people agreed to restrain their incomes they would feel some confidence in the fact that there was restraint on prices, but because of the direct link between price increases and pay levels. Furthermore, pay levels and the impact on prices are reflected in the number of available jobs. These are matters for the negotiators when dealing with pay matters.
It was most unfortunate that in 1970 the incoming Conservative Government abolished the National Board for Prices and Incomes. The reports of that body on relativities and other sectors of the economy are classics and still have great relevance today, even following the demise of the Board. We now need a body that can draw up criteria which are acceptable to trade unionists and which will embrace deep trade union involvement. The trade union movement must accept—and, indeed, has implicitly accepted in the last two years—that there should be discrimination in favour of the weaker unions.
Certainly the TUC must accept that point. Its pay policy has discriminated, for example, in favour of unions like USDAW. That union has received a £6 pay increase, but it would never have had that treatment under a free system of collective bargaining. We can find many other sectors in which lower-paid workers have received wage increases which they would never have obtained by free collective bargaining. Implicitly the TUC, by adopting the flat-rate policy initially, acted in favour of its weaker members. I believe that that principle should be enshrined in pay policy with TUC involvement, so that trade union members can be confident that it is being carried out fairly and without discrimination, otherwise workers will not tolerate such a system.
The trade unions and the people of this country must accept that there is a limit to the amount that the Government
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can do to restrain price increases. If the Government adopt policies urged by some people and by Opposition Members who are very much against Government intervention, there will not be sufficient funds available for investment or for the development of business and, therefore, there will be fewer jobs. If a company has to borrow because its prices are held down artificially, it will go bust and will go out of existence, and the jobs which it has provided will also disappear.
When we examine the experience of the public sector, we see what nonsense it is to artificially restrain prices in an industry such as the Post Office, an organisation for which I worked for three and a half years. At a stroke its prices were restrained. As a result, demand was artificially stimulated by the fact that telephone and postal charges were kept down. Such charges can be kept down by order or by whatever means the Government like to impose, but that policy will result in larger losses which have to be financed by the taxpayer. That is madness both for the customer and for the people working in the Post Office.
On the telecommunications side—the postal side has its separate problems—the Post Office will have to find this year £670 million for investment for new equipment and the renewal of equipment in order to keep the telephone system at least reasonably modern. If people object to Post Office price increases being made at the moment, let them tell us where the Post Office is to get that money. Profits of £400 million may sound substantial for the telecommunications side, but it has been estimated that in the short term the telecommunications business will need an investment of £1 billion a year.
Where is that money to come from? Should it be borrowed on the market at substantial rates of interest, with the public paying more in that way? Should it be borrowed from the Government, thereby increasing the public sector borrowing requirement, with all that that means in terms of inflation? Where is the Post Office to find the money? The simple answer is that the price of the service should be economic, which can be justified in the market place and will not stimulate artificial demand. I take the Post Office as an example of the nationalised industries. One could make the

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same sort of argument for the others. Where is the Post Office's money to come from if it is not to come from economic prices and investing the profits that are made?
Mr. Peter Fry: I am following the hon. Gentleman's speech with interest. Would he use the same argument in respect of agriculture and food prices, or in respect of the £500 million subsidies to British Rail? I am sure that the House would be interested to hear.
Mr. Wrigglesworth: I have two farms in my constituency, both owned by Wimpey, and both, I understand, are about to be developed into housing estates. I do not claim to be an expert on the farming industry. My hon. Friend the Member for Gloucestershire, West (Mr. Watkinson) might be able to tell the hon. Gentleman something about that.
But I would pursue my argument in the case of British Rail as well. I think that there is a straightforward and simple policy to be operated in that case. If the Government and British rail—or any other nationalised corporation—decide that a certain service should be kept going for social reasons, the Government should pay for it on that basis and the corporation should get a subsidy for it from the Government. For the rest, however, the business should charge the full economic price for providing its services. The prices to rail travellers from London to Edinburgh or elsewhere should be at the proper commercial rates, related to the cost of running the services properly and to the need for investment in electrification, new rolling stock and so on. If one keeps the prices of these services artificially low, one will not get investment and one will get demoralisation of staff. One will get bad service because there will not be the new equipment, new track and so on. That applies to virtually every corporation in the public sector.
The same thing applies equally to the private sector. I am not discriminating in favour of the public sector. But the public sector comes under fire on the prices front more than the private sector does, so I take the public sector as the example. The argument is equally strong in the private sector, however. One cannot hold down prices to any substantial extent.
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It would be misleading to trade unionists to give them the impression that by the waving of a magic wand prices can be kept down. It is much better to be absolutely open and honest, as the Government have been in the discussions they have had with the TUC and as I hope they will continue to be publicly. For example, if the pound drops in the exchange markets by four points, I believe that the retail price index goes up by one point. That simply cannot be avoided. If the Government had introduced subsidies to cover the fall on the exchange rate and to keep prices at a level which would have shielded the consumer from the impact of that fall in the value of the pound, since the period just before Christmas it would have cost about £2 billion to £3 billion. That gives some indication of the size of the problem.
There is no way in which the Government can raise that kind of money in order to keep prices down. There is no way in which the Government can stop price increases caused by a fall in the value of the pound from getting through to the consumer, except, of course, by getting the pound to move up again by taking such measures as they took on 15th December. The rise in the value of the pound, from $1·52 to $1·72, has made a considerable impact since then, which will work through in due course on the prices front.
That is one factor, but there are many others, wage increases among them, which affect price increases in the shops, and it would be misleading for the Government or this House to give the impression that simply at a stroke prices can be held down. They cannot be held down to the extent that some trade unionists and certainly many housewives would like.
We have never misled the country in the last two years, in introducing the incomes policy, into thinking that there would be anything other than a fall in the standard of living. Both my right hon. Friend the Member for Huyton (Sir H. Wilson) and the present Prime Minister went on television and made speeches in the country talking about the hard time that the country would have to go through. I recall my right hon. Friend the Chancellor of the Exchequer making the same sort of speech. We have never tried to mislead anyone into thinking that the

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incomes policy would be matched by price reductions or by prices being held at the same level over the same period.
Admittedly we hoped that the price levels would go down rather more than they have done, and one knows the reasons why they have not done so. The main cause was the fall in the value of the pound towards the end of last year. The fact is, however, that everyone acknowledged that there was going to be a drop in the standard of living over the past two years. What people did not realise was that the way in which their standard of living would drop was that prices would increase faster than their wages. Price increases are getting through with a vengeance now, but that is what the Government have been telling the country would happen over the past two years, and it is somewhat peculiar that some people should now be expressing surprise that it should be happening.
The strategy which the Government adopted in the 15th December package and in the Budget will help to keep down prices in the long term, but it would be wrong to get the trade union movement to reach an agreement on any hope that the Government can somehow magically stop price increases from taking place.
I have two more points to make. The first is on the way in which the pound has risen in recent months and the implications of that movement. As my right hon. Friend the Chief Secretary knows, I am concerned that we have seen an inflow of hot money into London, which could give rise to problems if it were allowed to continue. Many of us on this side of the House were very pleased when the safety net agreement was reached. We were looking forward to the time when London would cease to attract that sort of money, or when it would be held in such a way as not to have radical effects on the value of the pound at a moment's notice. This can have an enormously damaging effect on the economy, as I have already mentioned.
There is considerable evidence that the Bank has been keeping the pound down in value by buying dollars. One has the impression that possibly a good deal of foreign money is flowing back into London. That is a rather worrying situation, because at some future time there
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might be vast withdrawals. If, for instance, pay scares suddenly blow up in the newspapers, we shall possibly have great withdrawals which could have an enormous impact. I should be grateful if the Chief Secretary, in his reply, would give us some information about that and tell us whether the Government are aware of the problem and are able to do anything to alleviate any difficulties that might arise from it.
There is ample evidence that industry has benefited considerably from the pound falling in the way that it did. Its competitive position on the export front has been improved enormously. Whether industry has taken all the advantages flowing from that is somewhat open to question. With inflation in this country still at a very high rate, however, it is important that we do not allow the pound to rise because of the prospect of oil coming in much faster than at present and thereby giving us a balance of payments surplus on current account which makes everything in the garden appear rosy. As a result of this, the pound could well float up again and be at complete variance with the facts of life for our exporters. If they have to face the problems of a 15 per cent. rate of inflation, their competitiveness is being eroded all the time. It would be very dangerous if the pound were allowed to go further and further up. We do not want to see the competitive position of exporters eroded because the situation is being masked by North Sea oil flowing in at a greater rate and improving the balance of payments.
Sir John Hall: Does not the hon. Gentleman agree that it is probably even more dangerous for exporters to rely on price advantage through keeping the pound at an artificially low value? As the Chancellor of the Exchequer stressed, we should be relying on quality, design, service and all the other things which create a long-term market, which price advantage would not do.
Mr. Wrigglesworth: I accept the point that the hon. Gentleman makes. I think that too much stress is laid on the value of the pound. I know that my hon. Friend the Member for Southampton, Test (Mr. Gould)—I did not hear his speech—takes the view that the pound should be allowed to flow down and down, and that it could be devalued even

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more than it already has been in order to give our industries greater competitiveness. We could debate endlessly what is a competitive level for British industry. What is the starting point from which we take our judgment? At what point do we say that all industries are reasonably competitive—at what exchange rate and at what point of time? These are very difficult judgments to make.
I think there was general agreement that the pound was too high. It probably came down a little too low. All I am saying is that at present we have a good competitive edge, and I should not like to see that eroded by the pound rising on the strength of increased flows of North Sea oil. That competitive edge is already being eroded by inflation at 15 per cent., making the lives of exporters that much more difficult.
I hope that the Chancellor of the Exchequer and the Chief Secretary will endeavour to keep the pound at the sort of level that it has reached at the moment and will not allow it to rise up. I support their policy. As the year goes on, however, and if inflation continues at the sort of level that we have at the moment, I see no reason why the pound should not be allowed to float down in order to retain the present competitive edge.
There was one slight disappointment that I felt in the Budget concerning industrial strategy, although many of the things within it went along the industrial strategy road and were intended to help the various sectors of industrial strategy and back up the NEDC policy. I think that possibly more could have been done by the Government to support some of the work that the sector working parties in the NEDC have been doing and to support individual industries.
Some of the working parties had made specific requests to the Government for help. We need to have demonstrated in the trade union movement and on the part of Government that all Government Departments, including the Treasury, are working very closely with the Department of Industry and with the work going on in the NEDC so that we may have a comprehensive industrial strategy. We do not want strategy comprised of little bits and pieces, with the Department of Trade doing its thing, the Department of Industry doing its thing, the NEDC working parties going off and doing their things
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and the whole process not knitting together with the support from the Treasury that our industrial strategy will need in order to be a success.
Mr. Deputy Speaker (Mr. Bryant Godman Irvine): I understand that the Front Bench speakers will start at 9 p.m. Six hon. Gentlemen were trying to catch my eye when I made the last count. I leave the rest to the good judgment of hon. Members.
8.27 p.m.
Mr. Dafydd Wigley: I will indeed, Mr. Deputy Speaker, be somewhat shorter than the previous speaker. It is a reflection on the times that the eulogies of the hon. Member for Thornaby (Mr. Wrigglesworth) on the Budget followed the comment by the hon. Member for Blaby (Mr. Lawson) that it was a Tory Budget. The main argument we have just heard was in favour of economic pricing. This is an apposite reflection on the time of "Lib-Labery" that we are living through.
With regard to the lack of strategy as seen from my part of Wales, we feel very much the transfer of resources that the Government have been pursuing over recent months—and it is continued in the Budget—from rural areas to the inner city areas. This has come out very clearly in the Budget. The Government have been quite open about it. But to have it following on the cutting back of the regional employment programme will mean devastating effects in areas such as mine. They will be underlined even more by the effect of the increase in the cost of petrol, to which I shall return.
The strategy we were looking for was one to deal with unemployment. As the hon. Member for Norfolk, North (Mr. Howell) said only a few moments ago, one of the important things to secure is the best possible ratio of people in productive employment to the total population, yet we have not seen any strategy in the present Budget for achieving this. We would have looked for that sort of strategy, particularly trying to use the 20 or 30 per cent. available capacity that exists, as well as the available manpower in the people who are presently unemployed or who are in the labour reserve.
With regard to petrol prices, the proposed increase will affect my area very

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badly. We do not have, as London does, a Tube service, and we barely have a railway service. Our bus service has been devastated. Because of this, car ownership in my area is well in excess of the United Kingdom average, yet the average personal income levels are about 55 per cent. of those in the United Kingdom. Cars are not luxuries in my area but necessities for everyday life and for getting to work.
The increase in the cost of petrol means that some people will have to move their homes and others will choose not to go to work because the differential between what it is possible to get by being out of work and what one gets for working will have been eroded. Only a couple of weeks ago some pensioners from the tip of the Lleyn Peninsula in my constituency came to see me. They were over 70 and partially disabled and they lived two miles from the nearest shop. They could not get transport assistance under the mobility allowance, because they were too old. They had to keep a car, which will now be priced out of their reach. Presumably, the Government's strategy for them is that they should go back to the horse.
The Government's policy will also be a great disincentive to new employment in these areas. The input of transport costs for companies moving there is greater than the average for companies throughout the economy.
One aspect of this increase which has not so far been mentioned is that, as the price of petrol goes up, petrol stations have a problem with their pumps. The cost of replacing some will be about £1,000 each, a substantial sum for small petrol stations. Indeed, even the most recent pumps, which can be adapted, will cost £300 each to be adapted when they go over the 92p per gallon mark, which is being rapidly approached in areas like mine.
On pay policy in stage 3, we should prefer the abandonment of any attempt to fix so-called "fair" wages by a bureaucracy out of touch with reality. Instances in my constituency of the lack of fair play in the present system go to the heart of the matter. For instance, when the two sides of the present water authority were brought together in 1974, they had different pay structures. The
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difference now between workers doing exactly the same work side by side is over £15 a week. People cannot be expected to tolerate that sort of unfairness much longer. Greater flexibility is needed, if not an end to the present system altogether.
I have one comment on the empty Liberal Bench in front of me. The vote or the lack of a vote by the Liberal Party on petrol costs tonight—the main Division that we shall have—will be noted in my constituency, throughout rural Wales and, I suspect, throughout rural Britain. Every time people fill their petrol tanks, that extra 5½p will be the price of the Liberals.
8.32 p.m.
Mr. John MacGregor: I wish to deal with two points—the Chancellor's tax strategy and one aspect of the pay policy. I had the overwhelming impression from listening to the Chancellor last week—an impression which has been reinforced by all the thinking that I have since given to the Budget—that this was an illustration of a sinner repenting his past sins, but only just. It was like an alcoholic who announced that he had decided to reform and that in future he would drink only three-quarters of a bottle of whisky a day rather than a whole bottle.
Although I welcome the switch, back from direct to indirect taxation as far as it goes, as do so many of my hon. Friends—we have been pressing for it for so long—there is still a long way to go. From the many complaints that I have heard in my constituency, I know that the tax burden is now one of the main items worrying people. When the fog of the Government's smokescreen about what they have done to help on direct taxation this year blows away, it will be seen that the Budget has made only a small dent in the problem, that it has probably left most people roughly back to where they were in taxation terms this time last year, and that for the coming year they will only stand still. Thus, the three groups with whom we are particularly concerned on the tax front are still relatively unaffected, and their problems still need to be tackled.
The first group is those affected by the problem of the poverty trap and the fact that it now often pays people on

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lower incomes to stay out of work rather than be in work. We shall have time in Committee to debate this matter thoroughly and to consider all the figures, but my early calculations suggest that, although the Chancellor and the Chief Secretary promised before the Budget to do something about this problem in the Budget, they have done very little, particularly when one takes into account the fact that social security tax-free benefits will be uprated next November.
I am not surprised that the Chief Secretary hedged last week about how the benefits would be uprated. If we knew the figures now and compared them with the tax reliefs given to the lower paid who are in work, I believe that we should see that this poverty trap problem and the problem of people being better off out of work will be exacerbated and not improved come next November by the measures in the Budget.
Secondly, there is the problem of differentials. This is dealt with only in tax terms in this Budget by the 2 per cent. provisional concession on the standard rate. After all, increases in allowances will apply to the lower paid as well as to the skilled. When one sees that that tax relief amounts to only £20 per £1,000 of extra income gained by the better paid, the skilled and so on, one can see that in tax terms the Budget has not greatly dealt with that differential problem.
Finally, there is the management group. Although it looks as though in general money terms big concessions have been given to various levels of management, when we look at the realities, both in relation to inflation since 1974 and in terms of international comparisons, we see again that it is only a small dent in the problem. The starting point for the higher rate of taxation, to go back to the 1974 level, would not be far short of £10,000. That is some illustration of the scale of the problem still to be tackled.
When we compare all the international tax levels, as illustrated in the forceful speech of my hon. Friend the Member for City of London and Westminster, South (Mr. Brooke), from his special knowledge and experience, we see again that the difference made in this Budget in making British levels more competitive
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is very small, especially when we take into account that for many management groups there will be disadvantages in the coming year. There will be claw-backs on the child benefit, an extra impost for some on company cars, and the increased national insurance contributions for most in the higher income ranges.
The burden of direct taxation is now leading to fairly massive evasion, not avoidance, of the tax system throughout the country at all income levels, notably at the average level and below. When I look at the general figures for what should have been the reduction in the standard of living and compare price increases with income increases within the past year, and when I look at what is happening in the shops, I wonder how anyone can afford to buy things such as expensive furniture and so on. Yet massive buying is still going on.
So this is becoming a cash economy and people in a cash position and able to evade tax have kept their standard of living moving ahead. It is the ordinary people, the PAYE workers, who are suffering, unless they moonlight and get cash. Moonlighting is going on on a large scale throughout the country. It is only by much bigger tax reductions that we shall see it reduced.
I do not believe that anyone will be fooled in the long run by what the Chancellor has done by this switch of direct taxation. Everyone knows that it results from a deliberate policy of high taxation, high Government spending and high Government borrowing over the past three years. The Chancellor has been boxed in today by the steps he has taken over the past three years, and as a result he will cover people only for inflation in the coming 12 months.
This has been a poor Budget too for the rural areas. I do not need to elaborate the point about petrol, because it has already been well put. Except to say that I do not believe that the Government understand that the car is becoming even more of a necessity in rural areas. Over recent years, as things have become worse and public transport has practically disappeared, the car has become more important.
I should have hoped that the Government would learn their lesson as a result of the 25 per cent. increase in VAT which they imposed two years ago and which

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had such differentially damaging effects for certain areas of the economy. By putting so much of the strain of the increase in indirect expenditure on perol the Government have repeated the same mistake. This is a mistake in terms of the political reaction and the economic consequences.
I do not agree with those who say that it would be the wrong time today, with the negotiations for a new pay policy coming forward, to seek to raise VAT to 10 per cent. I believe that spread across the board in that way, people would have accepted the extra impost much more than they will by way of this high concentration on petrol tax.
I regret that all the measures affecting the construction industry have been concentrated on the urban areas. None will touch the rural areas, where levels of unemployment in the industry are as high proportionately, as in the inner urban areas.
I regret that the Chancellor did nothing in tax terms to help the farmers who are facing rising costs. The petrol increase will hit them particularly hard. Some months ago the Minister of Agriculture, in compensation for the fact that he would do nothing else to assist farmers to overcome their declining incomes and rising costs, said that he thought there was a great deal of merit in the tax proposals to average out profits or losses over a three-year period. That would at least have done something to encourage farmers and I regret that the Minister of Agriculture, Fisheries and Food failed, if indeed he tried, to persuade the Chancellor to introduce that measure at this time.
I hope that there will be opportunities in Standing Committee on the Finance Bill to say some of the many other things that I wanted to say about the Budget. I want to conclude by making one point on the question of pay policy, which has dominated so much of our discussion during this three-day debate. If my right hon. Friend the Member for Down, South (Mr. Powell) will forgive me, given the shortage of time, I shall not enter into the argument about whether there should be a pay policy at present.
I shall concentrate on one point. If there is a pay policy, and even after the
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flexible phase 3 disappears and there is either no pay policy or a semi-statutory pay policy, the biggest area of difficulty will be the difference between the private sector and the public sector. I believe that in the private sector, whether the pay policy is flexible or whether, indeed, there is no pay policy, the realities of the economic situation and the sanction of the need to make profits will do a great deal to ensure that such pay increases as are granted are kept at levels that the economy can afford.
The danger is the public sector, where there is not the sanction of profits and where there are also at present strong monopolistic unions trying to exert influence over the formulation of forthcoming policy. My hon. Friend the Member for Blaby (Mr. Lawson) said that he thought that the system of cash limits was the answer. I believe that that is right. But any such system would have to be heavily reformed to make it into the proper weapon that is needed.
It is easy to stick to cash limits, particularly the block units relating to pay, when there is a fixed pay policy. It may even be comparatively easy next year, because most of the pay negotiations in the public sector will take place at the end of this fiscal year and, therefore, will not greatly increase the cash limits laid down in the White Paper. The problem will come after the forthcoming year. The cash limits will be settled after the negotiations on pay for that forthcoming year have taken place. It should be the other way round.
Cash limits are a system designed to carry out what the economy can afford in terms of the public expenditure in each of the different units. That is how the system should be used, but for that to be done effectively and to ensure that we have a sanction in the public sector equivalent to that in the private sector and in the nationalised industries, provided that the latter subsidies are not allowed to run away, it must be a reformed cash limits system.
If it is to be changed into such a weapon, a start must be made now. It will be too late to think in terms of changing the system in the autumn. I hope that the Government will apply their minds to reforming the cash limits into that system now.
8.37 p.m.
Mr. John Watkinson: I endorse what the hon. Member for Norfolk, South (Mr. MacGregor) said about the possible tax concessions which the Chancellor could have made to agriculture. I know that the Minister of Agriculture, Fisheries and Food was keen that "the rolling system" of the payment should be incorporated in this year's Finance Bill. I can only assume that he has had to spend so much time in Europe that he has been unable to catch the Chancellor's ear. It is a very important advantage which could be given to farmers, and it would benefit the community at large.
I also agree very much with the hon. Member for Caernarvon (Mr. Wigley) about the problem of rural areas and the imposition of the petrol tax. In my constituency in West Gloucestershire the vast majority of the workers must use cars to get to work. It may be argued that the majority of people have to use cars. The point about rural areas is that there is no choice: there is no option. This is the fundamental point that I suspect that the Chancellor did not grasp. So in a real sense this imposition will mean an increased burden on those who must travel to work in rural areas.
One of the most depressing things I saw today was the statement issued by Chancellor Schmidt at the Labour summit over the weekend in which he indicated that West Germany would not expand its economy to mop up the unemployment in the rest of Europe. I find that disappointing in this sense: as has been spelled out by President Carter and, indeed, by hon. Members, unless countries which are in surplus and which have their inflation rates under control are prepared to expand their economies, it will become virtually impossible for an economy such as ours to expand.
Each of the Keynesian booms engineered in this country has foundered on the fact that the balance of payments is destroyed and we go into vast deficit. Unless countries such as the United States and Germany which are in surplus are prepared to expand, there will be no scope for us to expand our exports into their markets. Therefore, I should like the Prime Minister and President Carter at the coming summit to put all possible
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emphasis on the argument that economies in surplus should expand to allow economies such as ours to expand. I am aware that it may well be possible in 18 months for us to undertake an expansion in Keynesian terms because of the oil which will be flowing in and because our balance of payments can be protected in that way, but with our present disastrously high level of unemployment it is virtually impossible for us to go for expansionist policies unless other economies expand.
I turn briefly to the question of incomes policy, which has dominated this debate. Like my hon. Friend the Member for Thornaby (Mr. Wrigglesworth), I would welcome another round in the pay policy. I appreciate the difficulties. It is sometimes said "If we do not have a stage 3, there is no incomes policy". There is an incomes policy and it is dead similar to that which would be proposed by the Opposition. It was delineated in the letter to the IMF in which we indicated that we would have to keep our money supply within certain very strict limits. If we do not have a pay agreement, the limit will operate, and that money supply limit is the incomes policy.
In those circumstances, the strong, such as the miners, may be able to get their wage increase, but the weaker unions will not. There will be a limited amount of money available if we adhere to the IMF Letter of Intent. The strong will succeed and the weak will go to the wall. The prospect will be even more unemployment in key sectors of the economy. This is why I am in support of an incomes policy.
The hon. Member for Blaby (Mr. Lawson) made some sensible comments. In time we shall have to move towards an understanding in terms of incomes policy. My hon. Friend the Member for Thornaby suggested that we should have a permanent incomes policy. In a free society like ours it is very difficult to sustain for long an incomes policy of that institutionalised nature. A process of education and awareness must be gone through. However, at present I would support the Government's efforts to obtain a new incomes policy.
One of the duties of hon. Members is to serve on Select Committees. I serve on the Public Accounts Committee.

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Recently Lord Ryder gave very instructive evidence to the Committee. He indicated that our present financial institutions were not able to cope with the small firm which wanted to obtain finance and that the National Enterprise Board was stepping in to fill the gap, and filling it successfully. Therefore, it is for this reason that I advocate and support even more expenditure being set aside for the NEB.
I conclude with this remark: It is absolutely crucial, if the Western world is to go forward and expand, that it be made clear at the economic summit in London later this year that the German economy in particular should follow the path that President Carter is presently pursuing in the United States, to the benefit of us all.
8.55 p.m.
Mr. David Price: In the few moments that I have available to me, I wish to comment on the intervention that I made during the speech of the Chancellor of the Duchy of Lancaster, referring to the standard of living. This is my major point. The figures given by the Chancellor of the Exchequer in his Budget and in the Red Book amount to a reduction in the standard of living of the average Briton.
Ministers made odd faces at me when I intervened, but the Chancellor is expecting a minimum growth rate of 1½ per cent. The growth in manufacturing industry is put at 2½ per cent.—but I shall come back to that in a moment. The best estimates of the Chancellor show that by the fourth quarter of 1977 the rate of increase of inflation will be 13 per cent. We can assume that over the whole year the increase will be higher than 13 per cent. This must mean a reduction in the average standard of living. That does not make the chances of the Government negotiating a stage 3 on pay very hopeful.
I now take up a point with the Chancellor on the growth of manufacturing industry. At the beginning of August last year the Government announced scenario 2, their great industrial strategy. It involved a growth rate for manufacturing industry of 7·9 per cent., sustained over five years. I have questioned that in the House on a number of occasions and
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I spoke on it during one of the Christmas Adjournment debates. Out of that it has emerged that these figures are totally unattainable and that in order to reach that scenario 2 target, because the first year has gone by with an average growth rate of 0·8 per cent., all the other figures must be revised upwards. I was in correspondence with the Minister of State during the Christmas Recess. He admitted that my revised figures were correct and that, if I had erred in any way, I had underestimated the increases that would have to take place in order to meet scenario 2 targets.
However, the Chancellor in his Budget Statement said that aim for manufacturing industry in 1977 is 2½ per cent. I therefore ask what has happened to scenario 2. I hope that it has been completely forgotten, because it was a completely illusory set of targets. Where, therefore, is the Government's industrial strategy now? The House will recall that during the recent no-confidence debate the Prime Minister made a great deal of the importance of the Government's industrial strategy. I ask again, where is that strategy? It seems to me that the Prime Minister's attitude is like that of the Fiddler on the Roof—"If I were a rich man"—"If I had an industrial strategy."
This year's Budget has brought out the truth that most of us knew but did not always put together in a simple proposition—namely, that inflation is a tougher taxing master than the Chancellor. The Chancellor has made considerable modifications to income tax. I certainly welcome them, but at the end, when all the modifications have been implemented, they will not restore in real terms the position that the majority of taxpayers had a year ago, let alone three years ago.
I also wish to draw the attention of the House to capital gains tax. Whatever may be the arguments for or against the tax or any particular rate, all of us would agree that the tax should be on real gains and not on paper gains. Since the present Government have been in power there has been 70 per cent. inflation. Therefore, a person who owned an asset worth £1,000 three years ago—assuming that the asset merely kept its market value—would have made a paper gain of £700, upon which he would be liable for capital gains tax. In reality, there would be no gain.

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Thus, our system of capital gains tax has been turned into a wealth tax. Whatever one thinks of a wealth tax, it should be operated openly and cleanly. It should not be disguised as a capital gains tax. No effort has been made by the Government to correct paper gains by any form of indexing so that chargeable gains are real and not paper gains. We see the same thing with income tax.
I should like to refer to the across-the-board problems of middle management. I declare an interest because I have been a middle manager for most of my working life. I profoundly agree with what has been said about the importance of manufacturing industry. There is a lot of talk about the TUC and the CBI, but we must consider the man in the middle, the manager.
In order to show the House the seriousness of the situation, I should like to quote from a survey by Opinion Research Centre entitled "Motivation of Management". It says of British managers:
"They are embittered, demoralised, and demotivated. The majority are undergoing real hardship in view of the financial squeeze on them caused by high taxation, salary freeze, narrowed differentials, and inflation."
The Budget assists them only marginally.
As regards tonight's vote, a lot has been made of the imposition of the increased petrol tax on motorists, particularly those in rural areas. The hon. Member for Gloucestershire, West (Mr. Watkinson) may not have agreed with the earlier part of my speech, but he will agree with what I have just said because he has made the same point himself. What will be the attitude of the Liberals tonight? None of them is here at the moment. Perhaps they are taking their abstention to the point of not being in the House at all.
In the recent no-confidence debate, the Leader of the Liberal Party made a great point of wishing to see stability. He said that if the Government were to have a fair chance they required stability, and he and his party would provide it. Having seen the posturings and apings of the hon. Member for Cornwall, North (Mr. Pardoe) on our television screens over the weekend, one wonders where that stability is now. The hon. Member was behaving like an infant Malvolio. Some are born great, some achieve greatness and some have greatness thrust upon
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them, but the hon. Member seemed to feel himself great in all three respects.
The Liberal Benches are empty, but perhaps I could offer that phantom party the advice of an extremely acute political journalist who said:
"He who is the cause of another becoming powerful is ruined."
That was written in 1513 by Nicolo Machiavelli, who, the House will recall, was the Robin Day of his times. There is little doubt that the Liberal Party will live to regret having taken up the cause of rural transport and then having abandoned it on the grounds of a spurious deal with the Government.
9.0 p.m.
Mr. John Nott: It is a pleasure to open my speech by congratulating my hon. Friend the Member for City of London and Westminster, South (Mr. Brooke) on his excellent maiden speech. He will bring to our debates much-needed experience of management and management recruitment where he has clearly learned that short speeches endear a speaker to an audience even more than a curriculum vitae as impressive as his own.
I never had the privilege of serving in the House with the hon. Gentleman's distinguished father. I joined the House with Mr. John Smith, who was his predecessor but one. I think that he was one of the most modest and witty speakers that all of us can remember in the House.
I am sure that my hon. Friend will be his equal in every way. My hon. Friend represents, as he said, a vital sector of our economy, namely, the City of London, which is possibly as successful as our manufacturing sector has been unsuccessful in recent years. Since he represents the second most prominent constituency in the country—my own is the most prominent—I am sure that he will be a worthy Member of the House, and we certainly welcome him here to our debates.
I have a feeling that the House tonight is possibly rather more interested in politics than in economics. In spite of this, I hope that I shall be able to refer briefly to the Budget, since some of this debate has been concerned with the Budget and not with wider matters.
Reversing my normal practice, I want to spend rather more time on the subject

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of the tax changes and Budget Resolutions than on the Budget strategy, but I shall say a few words about the Budget strategy at the outset. I shall take last Wednesday's speech by the Chief Secretary to the Treasury as my text for some comments on the Budget strategy. The Chief Secretary, echoing the words of the Labour Chancellor, said:
"The Budget will, I believe, be seen as an important turning point in progress towards achieving our objectives of full employment, steady economic growth and inflation no higher than our competitors'."—[Official Report, 30th March 1977; Vol. 929, c. 446.]
That was a modest claim. There were no miracles there, no economic breakthroughs, no rose-tinted dawns, simply a turning point, a turn. That is a phrase more usually used to describe a sharp twinge of indigestion than a shift of economic circumstances. But I am prepared to examine the claim on its merits.
The Press suggests—and for all I know the Leaders of the Labour and Liberal Parties actually believe it—that if they can hang on, whatever the humiliation and indignities, until 1978, the Government can hope for better things. I shall return to the subject of hope in a moment. With that in mind, I went to the Red Book to see what I could find.
I examined the turning point towards full employment. The House should not be deluded either by the private forecasts of some Cabinet Ministers of 2 million unemployed or by the figures of the past two months, which have been more satisfactory. The Chancellor was wise to end his speech with a note of caution on the unemployment figures. The Red Book is very illuminating on this. On page 10 it states clearly:
"The prospect is for a continued modest increase in demand and output at a rate below the prospective growth of productive potential."
Even economic illiterates, who have been referred to by Ministers, must know from the Red Book's own figures, that that means rising unemployment, according to the Government's belief. I cannot see much of a turning point there.
I come now to the Chief Secretary's phrase "steady economic growth". Table 5 of the Red Book shows that the index for gross domestic product stood at 100 in 1974 and that in 1977 it was 99·9.
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There is not much steady economic growth there. The GDP had actually fallen. In the first half of 1978 it is forecast to rise to 101·1, which is growth of a sort, but which is at half the rate experienced in the past 10 years. Quite frankly, I do not see the turning point there, either.
Finally, the Chief Secretary said that we might be able to anticipate a turning point towards inflation which was no higher than that of our competitors. The forecast in the Red Book for inflation is 13 per cent. from the fourth quarter of 1976 to the fourth quarter of 1977—
The Chancellor of the Exchequer (Mr. Denis Healey): No.
Mr. Nott: Perhaps the Chancellor will correct me.
Mr. Healey: The rate to the fourth quarter of 1977, which is the year we are now in—I believe that the hon. Member's enthusiasm betrayed him there—is the rate for the fourth quarter of this year, and very likely the figure given would be that for November this year.
Mr. Nott: The Chancellor clearly needs the assistance of the hon. Member for Cornwall, North (Mr. Pardoe), who now advises him on these things. I think the Chancellor confirms what I actually said.
If 13 per cent. inflation is progress, it is hardly acknowledged as such by anyone outside the Labour Government, not least because the people in the country have been repeatedly told to expect single-figure inflation. With each forecast single-figure inflation recedes further into the distance, and even the forecast for the future is higher than the rate at which inflation was running when the Labour Government assumed office. In fact, the latest forecast is so hedged about with qualifications that it is almost worthless. The Red Book's forecasts are estimated on the basis
"that an agreement on pay increases after July 1977 holds the rate of increase of earnings close to that experienced under the present pay limit."
That is around 12 to 13 per cent.
Many of my right hon. and hon. Friends—including my right hon. Friends the Members for Chipping Barnet (Mr. Maudling) and Worcester (Mr. Walker) and my hon. Friends the Members for

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Croydon, South (Mr. Clark), Horsham and Crawley (Mr. Hordern) and Blaby (Mr. Lawson)—have discussed the rate of inflation and the effect of the pay deal upon it. My party has been constantly challenged to say what its pay policy is. My hon. Friend the Member for Croydon, South tried to find out from the Chief Secretary during the second day of our debate precisely what is the Government's pay policy. My hon. Friend asked the Chief Secretary:
"The Government have said that the reduction in the standard rate of tax from 35p to 33p is dependent upon a satisfactory incomes policy being arranged. … Will the right hon. Gentleman be a little more explicit about the conditions that are attached to the ordinary taxpayer paying a standard rate of 35p or 33p?"
The Chief Secretary replied:
"Clearly that depends upon the Government remaining in office, which I am sure they will do for a very long time. Equally, I am confident that we shall be able to negotiate a satisfactory pay deal."
My hon. Friend the Member for Horsham and Crawley then intervened and said:
"As the right hon. Gentleman is so interested in our incomes policy, perhaps he would be good enough to tell us what the Government's incomes policy is."
The Chief Secretary then replied:
"It was crystal clear to me and my hon. Friends that, subject to our achieving a satisfactory pay deal, there would be a 2p reduction in the basic rate of tax."
My hon. Friend the Member for Guildford (Mr. Howell) then came to his feet and said:
"As the right hon. Gentleman is being so coy about the contents of his cash limits White Paper, will he confirm to my right hon. Friend the Member for Worcester (Mr. Walker) that the figure he has in mind is a 10 per cent. increase in gross earnings for 1977–78"?
To which the Chief Secretary replied:
"Hon. Members should know better than that about cash limits. The cash limits White Paper contains assumptions not forecasts, of what will happen in a pay deal."
He then concluded his remarks with the comments:
"I am paid to answer questions".—[Official Report, 30th March, 1977; vol. 929, c. 453–5.]
That brings me to the Chancellor of the Duchy of Lancaster. He spent more time intervening in the speeches of my hon. Friends and asking them questions than he did in giving way in his speech on the subject of conservation. I shall return to these comments in my perora-
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tion, which also embodies the Liberal Party as well.
In contrast to the Chief Secretary, my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) was clear and explicit about what we hope to see in this area. In his speech on the second day of the Budget debate he made it absolutely clear that the money supply should be firmly and steadily controlled. In early 1976 the domestic supply of money far exceeded the demand for it. In fact, M3 was held only because of a substantial cash outflow on the balance of payments.
The Government's deficit should be firmly controlled and we are unhappy about the size of the public sector borrowing requirement this year and next year. Cash limits over Government expenditure should be firmly controlled, and this requires political will. Cash limits for public sector pay should be equally firmly controlled.
We must redesign the cash limits system or the public sector pay settlement arrangements so that the timetable embodies the cash limits to act as some kind of regulator of public sector pay, rather than the arrangements that exist now whereby the pay settlements are put into the cash limits after the event. There is a serious point of the redesignation of the cash limits system to help us use it for public sector pay. These explicit suggestions made by my right hon. and learned Friend the Member for Surrey, East went far further than anything that we have heard from the Government in this debate about phase 3.
The right hon. Member for Down, South (Mr. Powell) appears to have left the Chamber, but I shall answer his point and he can read it in Hansard in the morning. He said that Government policies were, on the whole, correct, but that they could be damaged by an impractical and dangerous phase 3. He did not want phase 3 at all. Earlier he implied that phase 2 had been ineffective and that the settlements under it were just as high as they would have been had the pay policy not existed.
But the Government must have phase 3 because, effective or not, it has been announced to the world as a vital necessity for the health of our economy. I predict that the Government's proposals

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when announced will be so loosely drawn that they will constitute the mere shadow of a pay policy rather than the substance of one. However we must wait for that and see what the Government produce in due course.
In one or two respects the Budget has been an encouragement to us as my hon. Friend the Member for Blaby has said. I refer particularly to the pointers the Budget has given towards a more sensible all-party consensus about the levels of direct taxation. It was welcome to hear a Socialist Chancellor admit for the first time that I can remember in this House that a reduction in the burden of direct personal taxation can contribute to the attack on inflation and to the improvement of industrial performance.
At one stage the Chancellor waxed lyrical about incentives. In my 10 years as a Member of this House I have never before heard a Socialist Treasury Minister admit that incentives existed. That was an important departure. We are delighted that the high flyer of £25,000 a year will benefit by a reduction in tax of £900 this year, or £18 a week. It will make it easier for us to extend this process when we come to office.
The raising of the limits for self-employed annuities were also very welcome, and we give the Chancellor particular credit for that. The rise in the corporation tax threshold for small companies is also welcome, as is the partial raising of the threshold for the surcharge on savings income.
But I regard the lowering of the starting point for the so-called investment income surcharge as probably the meanest act ever perpetrated by any Socialist Government. I take a personal example. I have never understood why my father, who saved all his working life for his retirement and never inherited very much, should pay tax at a marginal rate of 50 per cent. on his savings income, at a level of retirement income about one-third that of the national average wage. [Interruption.] "The marginal rate of tax" is what I said, not the "average" rate.
What is Socialist about the process I have just described? I have heard a succession of Socialist Treasury Ministers, far richer than my father will ever be, justify it as fair to the working man.
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Where is the justice in that? If there is bitterness in our society, Labour Ministers might sometimes contemplate the plight of the thrifty among the elderly retired and what has been their fate under this Government.
I have to leave tonight the other major casualties of Socialism. As always, the main casualties are the poorest sections of our community. There were references to the widening of the poverty trap this year in a very useful speech by the right hon. Member for Blackburn (Mrs. Castle), a good speech by the hon. Member for Thurrock (Dr. McDonald), and speeches today by the hon. Member for Huddersfield, West (Mr. Lomas) and my hon. Friends the Members for Norfolk, South (Mr. MacGregor) and Norfolk, North (Mr. Howell). Following the uprating in social security benefits in November, and on the assumption that they will rise broadly with inflation, the poverty trap will be greater as a result of this Budget, not less. Once again the poorer sections of the community have suffered at the hands of a Socialist Chancellor.
I must now come to what are perhaps more controversial matters—shall we say "more inflammatory matters"?—such as the petrol tax and in particular the mysterious working of that most important constitutional innovation, the consultative committee, or the Foot Committee, which has now been charged with the governance of Britain. I do not know where the author of that great work, and certainly the author of most of our misfortunes, is now. Perhaps he is in my constituency in the Isles of Scilly preparing his successor's Dissolution Honours List. I do not know where else he might be. Not even he, not even the right hon. Member for Huyton (Sir H. Wilson), with his talent for manipulation, could have foreseen that the right hon. Member for Ebbw Vale (Mr. Foot) would eventually have risen to supreme power in the land, not with the unanimous approval of the Tribune Group, but by the approval of 20 members of the Liberal Shadow Cabinet, 10 of them Members of the House of Lords.
Mr. Pardoe: That is not true. The hon. Gentleman should get his figures right.
Mr. Nott: I have in my notes "Lord Byers, Lord Wigoder, Lord "Aviary"

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and Lord Henry of Minced Morsels, Caligula's horse. Another is "Lord Mackie of Banshee". I thought that Banshee was in the Punjab. The Sun newspaper dealt with the matter very well when it said the other day:
"To be the Liberal Shadow Minister without portfolio implies a still emptiness hitherto only achieved by the holy men of the East."
I thought that that put it particularly well. I hope that it is not indecent of me to recall that the right hon. Gentleman's distinguished father—Mr. Isaac Foot was certainly a very distinguished man, a West Country Liberal of considerable repute—was defeated in my constituency of St. Ives in the 1930s. That was the loss of a traditional Liberal seat by an unknown National Liberal called Mr. Alec Beech-man. The association of the Foot family with Liberalism, although distinguished, has not always found favour with the electorate of St. Ives. That now appears to be the case with the electorate of Stechford.
I speak with all the authority of being the ex-Leader of the National Liberal Party in the House of Commons. I was the last National Liberal Member of the House of Commons and I appointed myself Leader. My family all became members of the National Liberal Shadow Cabinet. My right hon. and learned Friend the Member for Huntingdonshire (Sir D. Renton) gave our room to the Liberal Party. I am trying to get it back again. If there is any split in the Tory Party on policy, it is on this very subject.
The only justification that we have had for the Chancellor's policies is that the FT index apparently rose at the moment when it looked at if the Tory Party was about to win the vote of no confidence. I never thought that I should hear the member of any Cabinet, let alone a Socialist one, justify Socialist policy by the movement of the FT index within one Stock Exchange account. It proves that the Government have the vision of the third-rate stockbroker. It proves absolutely nothing else.
If the FT index is that important to the Government, I quote from the financial page of The Guardian of several months ago:
"Uncertainties created by Mr. Wilson's planned resignation sent a nervous shudder through the markets which had the largest fall for 18 months."
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It seems that shortly before the present Prime Minister was to assume office the FT index fell by an even greater amount than the other day.
I turn specifically to the Budget Resolutions, especially the increased tax on petrol. Shortly after the oddest marriage of convenience and perhaps the shortest political honeymoon in history, described in the most graphic phrase by the Liberal candidate for Stechford, which I cannot repeat, the hon. Member for Cornwall, North made one of his several hundred statements on the marriage. The hon. Gentleman, like some young, inexperienced bridegroom gloating over a rich but raddled old spouse, said:
"We give notice to the Labour Government here and now that we have not come along just for the ride—we are in this business to get things done."
Three days later, as we know, the Labour Chancellor took the Liberal Party for the most expensive ride in history.
According to the RAC, the cost of motoring for the average driver has risen by £5 a week in the past year. The general increase in prices since February 1974 has been about 70 per cent., whereas the tax on petrol has doubled, as has the Excise duty. Both taxes have risen considerably faster than has the Index of Retail Prices.
Yet despite universal derision for the statements and counter-statements by a whole string of the Liberal Shadow Cabinet and against public blackmail by the Chancellor of the Exchequer—the headline in The Observer yesterday said "Callaghan Bullies Liberals into line"—and contrary to every word uttered and every vote cast on the subject, it appears that the Liberals tonight will pluck up their courage and abstain.
That is an odd state of affairs, because they have always criticised the Back Benches of both main parties for supporting loyally their Governments in office. But Back Benchers support their Governments because they want to keep them in power. That is power with responsibility. The Liberals have obtained responsibility with no power at all. They have no power over the Labour manifesto—and it will not be a social democratic manifesto. It is all set out in a little red book which I have in my hand entitled "Labour Programme for 1976".

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But it will not be the Prime Minister or the Chancellor of the Exchequer who drafts that manifesto. It will be drafted by hon. Gentlemen below the Gangway. Furthermore, there is a report printed within a lavender cover setting out the proceedings of the Labour Party Conference. It is the Labour textbook and shows what the next Labour Party manifesto will contain.
The Liberals will have no power over the timing of the election. The policy to be adopted by Labour at the next election will not be formulated by the "Foot Committee"—in other words, by the consultative committee—but will come out of this red book.
I do not understand why the Chancellor, who presumably wants this support of the Liberals, did not know that he would gravely embarrass the Liberals by the way in which he has acted. The only explanation I can find is that he has contempt for Liberals and equal contempt for his own party, as the Stechford result has shown. It is true that the late Mr. Jenkins—or should I say Mr. Jenkins late of Stechford?—did his worst for Dudley and Meriden in 1968. There is an honourable tradition in the Labour Party for Chancellors to ignore their colleagues. But it is odd in these circumstances, because the Chancellor knew that the Liberals, the rear end of the theatrical horse, would have supported an increase in VAT to 10 per cent., and he also knew that the Conservative Party would have supported such a move.
In every speech made by the Chancellor in the last year he has extolled the non-regressive nature of VAT which, he said, because of zero-rating should not fall on essential goods, such as food. Having prepared the country for an increase in VAT which people were expecting, he slaps a major increase on the most essential item of all—essential to the rural commuter, the shift worker and in many cases the elderly retired person.
Energy savings will be highly restricted, as everybody, except the Chancellor of the Duchy of Lancaster, well knows. The Chancellor of the Duchy should have taken the trouble to consult the Departments of Energy and Environment before he came to the debate. I have read evidence given by the Department of the
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Environment to a Select Committee in which it clearly sets out its view. I shall pass that report across the table to the right hon. Gentleman, if that is not contrary to the procedures of the House. He will there read the answer he should have given in this debate. Obviously the right hon. Gentleman was not properly briefed.
Why did the Chancellor, having prepared the country, his colleagues, and the voters in Stechford for an increase in VAT, change his mind? I can find no other explanation than that Mr. Jack Jones and the trade union leaders told him to do so. This was meant to be the year of the beaver—but it is a beaver that is now employed because of the existence of the temporary employment subsidy and the selective investment scheme. Why did the right hon. Gentleman, instead of increasing VAT, put an impost on petrol duty? It makes no sense to any of us.
I shall quote some words by Mr. Scargill:
"I am sick of hearing all the whining that the trade unions must sustain a Labour Government; I must say that I am not prepared to support policies which harm those I represent."
I conclude by quoting some comments made by one of my neighbours in another constituency. The headline in the local newspaper the Western Morning News, was "Climbdown Backlash Hits Libs". Then there is a quote from the hon. Member for Cornwall, North—namely, that he does not regard the petrol duty as so bad after all. Inside the paper, the hon. Member for Truro (Mr. Penhaligon), his neighbour, addressing a very large Liberal meeting—100 people, according to the report—said that the Liberal Party was now in control. The report quoted him as saying:
"We have never been anywhere near it since the 1920s. We have got power today like we never had it before."
I hope that the Liberals enjoy their power, because it will be short lived. The Prime Minister will not consult them on the timing of the election, nor on his manifesto. He will go to the country at the moment when the Labour Party can emerge from that election as a viable political entity to fight again another day.
Mr. Dan Jones: And so would the hon. Gentleman.
Mr. Nott: Yes, and I would go sooner rather than later, because the later the Government carry on with the support of the Liberals, the worse they will do.
I hope that the Chancellor will take my advice. He has never taken it before, but I offer it in a constructive spirit. I say to him "Go now. Emerge as a viable entity. Do not destroy the Labour Party altogether, and maybe we shall see each other across the Benches in different positions very shortly."
9.31 p.m.
The Chancellor of the Exchequer (Mr. Denis Healey): First, I must congratulate the hon. Member for St. Ives (Mr. Nott) on his excellent and uproarious speech. I do not think that the House has laughed so much during an Opposition winding-up speech for several weeks, or, perhaps I should say, for 10 days. I was particularly surprised by his final words, in which he said that he was both sick and tired. He gave no signs of it tonight. I think that all of us will be grateful for the fact that he cemented in his speech his alliance with Mr. Arthur Scargill, an alliance to which I shall have cause to return a little later.
I think that the House also enjoyed the speech by the right hon. and learned Member for Surrey, East (Sir G. Howe) very much more than it has enjoyed most of his earlier speeches. The only conclusion we can draw is that the occupants of the Opposition Front Bench are entertaining only when they are not even trying to be serious.
This has been an interesting debate in two respects. It has been marked by far less real party confrontation than most such debates that I remember. To my astonishment, there has been unanimous support from all quarters of the House for my Budget speech in at least one aspect—its brevity. The only thing on which we would all agree in the speech of the hon. Member for St. Ives is that my Budget was certainly not an electioneering one. [Interruption.] I welcome the sniggers which have come so characteristically from the hon. Member for Chingford (Mr. Tebbit) when I say that.
Now that a week has passed, the House can see that the Budget has fully achieved its immediate objective. The
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immediate objective was not Stechford; it was to reinforce the success of my December measures in strengthening confidence in our financial position, both at home and throughout the world.
The right hon. and learned Member for Surrey, East rightly referred to the new robustness of our currency. It is worth noting that the only occasions on which the pound has been under pressure in recent weeks have been those when the markets shuddered at the faintest prospect that this Government might be unable to remain in power to see their policies through, and that the right hon. and learned Gentleman might be speaking from the position that I now occupy—first, when the Leader of the Opposition's motion of no confidence seemed to have a passing prospect of winning a majority in the House just a fortnight ago, and, second, last Friday when similar fears caused a similar tremor in financial circles. I am not surprised that the only moment of embarrassment that the hon. Member for St. Ives showed in an entertaining and enlivening speech was when he had to admit that the Conservative Party has been deserted by all its traditional allies, both at home and abroad, in financial markets.
Today's figures, which the hon. Member for St. Ives took care to ignore, show Britain's official reserves at a record level, and they do not include the substantial inflow which took place following my Budget speech. They will appear in next month's figures. I have made it clear many times that the Government do not intend to use private inflows of foreign currency to finance their remaining deficit on current account. We have already taken steps to make such inflows less attractive to the foreigner concerned, and I have this afternoon given the House details of the new foreign currency bonds on offer to official holders.
Meanwhile, the size of our reserves guarantees that we can now protect the sterling rate of exchange against the sort of sudden or erratic pressures which afflict it when there seems to be some faint possibility of the Conservative Party taking power. I believe that at least a majority of hon. Members on both sides will support us in doing so, provided that we can continue to maintain our present competitiveness. The only disagreement between myself and my hon. Friend the

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Member for Southampton, Test (Mr. Gould) is, what is the level at which we protect our competitiveness? He made that clear.
However, I should remind the House that there is nothing new, as some observers have claimed to detect, in what I said last week about the need to maintain competitivity by higher productivity and to improve our performance in areas other than prices. I made the same point at considerably greater length in my speech to Birmingham Chamber of Commerce on 18th January, nearly three months ago.
The new stability of sterling is a matter of concern not only to bankers and business men. It affects the living standards of every man and woman in the country. As I told the House last week, because of the recovery of sterling from the low point that it reached last October, the retail price index at the end of this year will be three points lower than it would otherwise have been. To achieve the same improvement in the cost of living by Government subsidies would have cost the taxpayer between £2,000 million and £3,000 million.
We have also taken steps to ensure the orderly financing of our internal deficit. By adding last week's short gilt stock to the earlier long stock and arranging to defer most of the payment, we should cover our internal financing needs for the next three months and thereby give ourselves further protection against possible inflationary pressures.
Finally—this answers a point made in an intervention a second or two ago—our new financial strength has enabled the Bank of England to re-engage the formula for determining the minimum lending rate at 9½ per cent., 5½ per cent. below the high point that it reached last October and 3 per cent. below the level which I inherited from my Conservative predecessor.
The fall in interest rates will help the cost of living in every way. The whole House can now rightly look to the building societies for a reduction in their interest rates next week, while maintaining reasonable levels of lending. Therefore, mortgages should be cheaper and easier to obtain in a fortnight's time. Meanwhile, the fall in interest rates has
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already reduced the cost of bank borrowing by manufacturing and construction industries by one-quarter or more. So we should see an increase in activity in investment as a result.
The success of the Budget in achieving-its immediate financial objectives will bring us real and visible benefits in the fight against inflation for many months to come, through both lower prices and lower interest rates. [Interruption.] I think that this is common ground. I do not think that even the hon. Member for Croydon, South (Mr. Clark), who is used to addressing the House in a recumbent position, will deny that.
Mr. William Clark Mr. William Clark rose—
Mr. Healey: The hon. Gentleman has already interrupted from a recumbent position. I do not propose to test his ability to stand on his feet by allowing him to ask me a question.
The main issues on which the debate has concentrated have been whether the total amount of net tax relief offered in the Budget is right, and whether it has been rightly distributed between direct and indirect taxation and between the different groups of the community which it affects. There has also been the question whether the Budget will help us to reach an agreement on a third phase of the pay policy and whether a third phase is desirable. I shall deal with these questions in turn.
My right hon. Friend the Member for Dartford (Mr. Irving) suggested that there should be more discussion in advance of the Budget about the possible tax changes. I do not think anyone can deny that I have encouraged more discussion on this matter than any previous Chancellor of the Exchequer. It may well be that the reaction of the public to the decisions I took last week was less joyous than it might have been simply because they had been led to believe that I would take the sort of measures which I have taken.
I do not believe that it would have been right, at this time, to offer larger net relief on taxes than I have done, namely, £1,500 million in a full year, adding about £1,000 million to the public sector borrowing requirement in 1977–78. It is true that I have left some margin within the ceiling for next year's public sector borrowing requirement, which I announced

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in my December measures. The House knows that the public sector borrowing requirement estimates are notoriously uncertain, possibly the most uncertain of all the statistics that the Government have to guess in advance.
The balance of payments figures have been swinging widely in recent months. It will be a month or two yet before I feel confident of our performance in this area. Negotiations on a new pay policy have not even begun. For all these reasons, I believe that I was right to err on the side of caution. I know that the Opposition will be as pleased as my hon. Friends if circumstances permit me to relax a little some time later in the year.
The £1,500 million net tax reliefs is made up roughly of cuts in income tax amounting to £2,250 million, offset by an increase in indirect tax amounting to £750 million. I shall take each of these in turn. The reduction in income tax is about 25 per cent. more than the £1,800 million which would have been required to offset the so-called fiscal drag between 1976–77 and 1977–78 which was caused by inflation. I think that the House would agree that this is more than most people expected before the Budget.
I felt it necessary to aim at this amount of relief in income tax because any sum under £2 billion would have made it impossible for me to distribute the relief so that every section of the working population received significant help, with special help going to those at the bottom of the earnings ladder and those towards the higher end, particularly the highly-skilled workers and middle managers. I have no doubt that every hon. Member will feel that, in one respect or another, he could achieve a better distribution of tax relief, but someone has to decide and that can only be the Chancellor of the Exchequer.
As I explained to the House last week, the introduction of a reduced rate band would have left no room for adequate raising of the tax thresholds which was essential to help the poorest in our community. It would have prevented me from offering help to those on average earnings and above who will gain from the 2p reduction in the basic rate.
I know that many of my hon. Friends believe that it was unnecessary to raise the higher rate thresholds at all, but I
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hope they will at least agree that it was essential to extend the basic rate band in order to save 800,000 working people earning only half more than the average from paying the higher rate.
The total of income tax relief due to the introduction of a more regular progression of higher-rate bands beyond that costs only £185 million out of the £2,250 million total relief, and to have done nothing would have been a blow not only to management but to many skilled workers in key areas of our economy, which would have been immensely damaging to our industrial strategy. As it is, even after the raising of their thresholds, people on the higher rate will still be paying a slightly higher proportion of the total income tax bill than if I had not cut income tax at all.
Much of the criticism of the Budget has centred on the proposals for increases in indirect taxation, particularly petrol. As I have already explained, it would have been impossible for me to offer so wide-ranging a relief from income tax if I had been unable to recoup some of the money from indirect taxation. In seeking the additional money from indirect taxes, I was guided by three principles—first, to choose areas of indirect taxation which would have the least impact on the cost of living; secondly, to concentrate on taxes whose yield does not rise automatically with inflation as does the yield of value added tax, which is a percentage of the selling price; and, thirdly, to choose areas where failure to act would have damaged important objectives of national policy.
It was those three considerations which led me to focus on cigarette tobacco, where the health arguments for a real increase in taxation are in my view decisive; heavy oil, where energy policy indicated an increase and the effect on the retail price index is very small and slow to come through; and, finally, excise duty and petrol, where the arguments arising from energy policy are reinforced by considerations of transport policy.
Most of the criticism has focused on the increase in the taxation of road users, and it is on these that I wish to concentrate in the next few minutes. First, let me remind the House that the increase in the price of petrol is only just sufficient to restore the tax to the level of a year ago in real terms. Incidentally, I was a

999
little surprised at the hon. Member for St. Ives talking about the increase in the price of petrol over the past three years without even mentioning the 400 per cent. increase in the price of petrol charged by the OPEC countries. I really think that that was a little unworthy of him. We respect the hon. Gentleman when he is trying to be serious, but it was quite unrealistic of him not to refer to the increase promulgated by the OPEC countries.
Mr. Nott: I did not refer to the price of petrol. I referred to the fact that the Chancellor had doubled the tax on petrol, which is quite different.
Mr. Healey: When the hon. Gentleman comes to look at what he actually said, he will find that my criticism is fully justified.
The increase in the car licence fee is only two-thirds as much as would be required to restore it to the real value it had when it was last raised in 1975. However, I do not see how anyone who has been committed to the indexation of taxes for a long time, as have been the Tory Party and the Liberal Party, can complain about these adjustments. It is too often forgotten that inflation, besides increasing the real burden of income tax from fiscal drag, also reduces the real burden of the specific duties by what is called fiscal boost. Broadly speaking, fiscal boost has decreased real revenue from indirect taxes by about £500 million in the past year, while fiscal drag has increased the real value of revenue from direct taxes by about £1,800 million.
My Budget proposals go somewhat further than what would be required to deal with the effects of inflation on direct and indirect tax. I must confess, having listened carefully to the debate and read all the speeches to which I have not had an opportunity to listen personally, including an account of the excellent maiden speech by the hon. Member for City of London and Westminster, South (Mr. Brooke), that to have sought the increase in indirect taxation by raising the standard rate of VAT from 8 per cent. to 10 per cent. instead of by the proposals I put forward would have been double perverse in this situation.
In the first place, VAT is not subject to fiscal boost like the specific duties.
1000
The real burden that it imposes on the taxpayer has already been maintained in line with inflation, so if I had increased VAT I would have been increasing that burden in real terms. In the second place, as my right hon. Friend the Chief Secretary pointed out last Wednesday, to increase VAT to 10 per cent. would raise about the same amount of revenue next year as the increase in duties on petrol, heavy oil and vehicle excise duty but would add 50 per cent. more to the retail price index than those duties. I see that the Leader of the Liberal Party agrees with me. Moreover, an increase in VAT would fall more heavily on the housewife.
On the other hand, the Government recognise the special difficulties created by the increase in the taxes on those who have to use their cars to get to work—many hon. Members made much of this point—particularly in the rural areas and will consider what can be done to alleviate them. My right hon. Friend the Secretary of State for Transport will give special consideration to this problem in his forthcoming White Paper. Meanwhile, as my right hon. Friend the Chancellor of the Duchy of Lancaster pointed out this afternoon, right hon. and hon. Members will have a further opportunity of considering the detailed proposals for tax increases when the Finance Bill is debated in Committee.
I hope that those who have difficulties about these elements in my proposals will prefer to raise them in Committee at the appropriate time and will accept the need to compensate by tax increases in other fields if their views prevail. I cannot believe that they would wish to vote against the relevant resolutions tonight when this would mean voting simultaneously against some proposals of which they fully approve and, if they succeeded, would produce a degree of administrative anarchy for which the country would be slow to forgive the House.
Mr. William Clark: Why is it that the Chancellor thinks that in introducing his Budget last week he had to increase the petrol tax at 6 o'clock on Tuesday? Why did he not increase the tax on petrol at 6 o'clock tomorrow? That would have avoided the administrative muddle. It is unbecoming of the right hon. Gentleman to say that because there would be an

1001
administrative muddle, because of his ineptitude, the Liberal Party should vote with him.
Mr. Healey: The hon. Gentleman is experienced in these matters, and I believe that he supported the last Government. He will know that the last Government, when they increased specific duties, always made the increase operate from the day on which it was announced. [Interruption.] The last Government did not have a majority for a large part of the time. Secondly, any party in office has a right to believe that its Budget Resolutions will receive the approval of the House, and I believe that in 10 minutes' time the present Government's confidence in that belief will prove to be justified.
I am grateful for what the Leader of the Liberal Party—
Mrs. Audrey Wise Mrs. Audrey Wise (Coventry, South West) rose—
Mr. Healey: I shall give way in a moment.
I am grateful for what the Leader of the Liberal Party said on this matter this afternoon. I can certainly give him the three assurances for which he asked. First, we shall ensure that the increase in petrol duty is taken in Committee on the Floor of the House and, with luck, on the first day that we take the Committee stage, which will be around 10th May. Secondly, petrol duty will be considered separately from the duty on heavy oil. Thirdly, the Government will, of course, accept any decision that is finally taken by a majority of the House and, if necessary, will seek administratively to raise the equivalent revenue by other means.
I have already explained why I believe that my proposals are best calculated to meet the nation's needs. I know that the Leader of the Liberal Party will not blame me if I do my best to convince the House accordingly when we come to debate the matter in Committee.
Mrs. Wise: Does the Chancellor accept that the easiest way to find extra money to do something about petrol tax and to wipe the smiles off the faces of Opposition Members would be not to increase the thresholds for the higher rates
1002
of taxation, because that benefits only those earning well over £7,000 a year? Those earning £22,000 a year will actually do best out of the Budget. Will my right hon. Friend consider that as an alternative?
Mr. Healey: I am most grateful to my hon. Friend for that interesting suggestion, and I shall certainly consider it carefully if the House is misguided enough to decide that it wants to change the proposal to increase petrol duty which I put to the House last week.
Mr. William Clark: Will the Chancellor get the facts right before he distorts them? When the Conservative Government increased taxation and put duty up they did so at 6 o'clock on the evening of the Budget, but the Conservative Government had a majority in the House. My point was that the Chancellor has a minority Government of at least two without the Liberals and that he should not have put the tax up on the same day as the Budget without giving the House an opportunity to debate the matter.
Mr. Healey: Of course, what the hon. Member has just suggested could apply to all the income tax changes that I put forward in the House last week and to the improvement in the higher rate thresholds. In putting these resolutions down I was expressing not arrogance but confidence. We shall see in a few minutes' time whether my confidence was justified. I think that, on reflection, the hon. Member will recognise that he was raising an issue that is of no consequence whatever and that was certainly not worth putting to me now.
I conclude by saying that the main issue around which public discussion on this Budget has circulated is not the tax on petrol or the increase in licence duty. It is what the Budget will do to improve the prospect of a rising standard of living and of improving employment for people in this country. Of course everyone wants a higher standard of life, but there is no route for obtaining and sustaining higher living standards except through higher efficiency, higher output and higher sales. No Government alone can guarantee the improvement in our industrial problems upon which this depends, but I believe that the country will soon learn that this

1003
Budget will at least increase the chances of achieving that improvement.
Question put and agreed to.
Resolved,
That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance; but

(a) this Resolution does not extend to the making of amendments with respect to the surcharge imposed by the National Insurance Surcharge Act 1976 other than amendments for affording relief to charities; and

(b) without prejudice to any authorisation by virtue of any Resolution relating to value added tax, this Resolution does not extend to the making of amendments with respect to that tax so as to provide—

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

(ii) for refunding any amount of tax;

(iii) for reducing the rate at which tax is for the time being chargeable on any supply or importation otherwise than by reducing that rate in relation to all supplies and importations on which tax is for the time being chargeable at that rate; or

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

Mr. Speaker: I am now required under Standing Order No. 94(2) to put successively, without further debate, the Question on each of the Ways and Means motions numbered 2 to 35 and on the three motions on procedure, on all of which the Finance Bill will be brought in. Instead of reading out each motion, I propose to follow the procedure of the House in recent years. Thus, I shall first take the title of the motion and then put the Question "That the motion be agreed to."
Further, and by leave of the House, I believe that there are blocks of these motions that it is possible for me to read

Description of wine (in strengths measured by reference to the following percentages of alcohol by volume at a temperature of 20C.)

Rates of duty (per gallon)

£

Wine of an alcoholic strength—

not exceeding 15%

…

3·2500

exceeding 15 but not exceeding 18%

…

3·7500

exceeding 18 but not exceeding 22%

…

4·4150

exceeding 22%

…

4·4150 plus

£0·4700 for every 1% or part of 1% in excess of 22%; each of the above rates of duty being, in the case of sparkling wine, increased by £0·7150 per gallon.

out and put together, although if anyone wishes to divide on any motion which, by accident, I put with others, I am sure that he will indicate the fact to me.

2. SPIRITS
Motion made, and Question,
That as from 30th March 1977 the rates of duty specified in section 9 of the Finance (No. 2) Act 1975 shall be increased from £24·6300 and £24·7050 per proof gallon to £27·0900 and £27·1650 per proof gallon respectively.
And it is hereby declared that it is expdient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Healey.]
put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

3. BEER
Motion made, and Question,
That as from 30th March 1977 the rates of duty specified in section 10(1) of the Finance (No. 2) Act 1975 shall be increased—

(a) from £15·8400 for every 36 gallons to £17·4240 for every 36 gallons;

(b)from £0·5280 for each additional degree of original gravity exceeding 1,030 degrees to £0·5808 for each additional degree.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Healey.]
put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

4. WINE
Motion made, and Question,
That as from 30th March 1977 the rates of duty under section 14 of the Finance (No. 2) Act 1975 shall be as follows:—

1005
And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Healey.]
put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

Description of wine (in strengths measured by reference to the following percentages of alcohol by volume at a temperature of 20°C.)

Rates of duty (per gallon)

£

Made-wine of an alcoholic strength—

not exceeding 10%

…

2·1100

exceeding 10 but not exceeding 15%

…

3·1600

exceeding 15 but not exceeding 18%

…

3·4750

exceeding 18%

…

3·4750 plus

£0·4700 for every 1% or part of 1% in excess of 18%; each of the above rates of duty being, in the case of sparkling made-wine, increased by £0·3300 per gallon.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Healey.]
put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

6. CIDER
Motion made, and Question,
That as from 30th March 1977 the rate of duty specified in section 2(1) of the Finance Act 1976 shall be increased from £0·22 a gallon to £0·242 a gallon.
And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Healey.]
put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

7. TOBACCO
Motion made, and Question,
That as from 30th March 1977—

(a) the rates of the duties of customs and excise chargeable under the provisions of subsection (1) of section 8 of the Finance Act 1976 and the provisions mentioned in subsection (2) of that section shall each be increased by £0·585 per pound;

(b) as respects tobacco on which there have been paid duties of customs or excise at the said increased rates, the rates of drawback allowable under those provisions shall each be increased by the like amount per pound;

5. MADE-WINE
Motion made, and Question,
That as from 30th March 1977 the rates of duty under section 15 of the Finance (No. 2) Act 1975 shall be as follows:—
but without prejudice to the powers conferred on the Treasury by section 1(4) of the Finance Act 1973.
And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Healey.]
put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

8. TERMINATION OF SURCHARGE
Motion made, and Question,
That the Surcharge on Revenue Duties Order 1976 shall cease to have effect on 30th March 1977.
And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Healey.]
put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

9. TOBACCO PRODUCTS
Motion made, and Question,
That the following provisions shall have effect as from 4th April 1977—
(1) For the Table in section 4(1) of the Finance Act 1976 there shall be substituted—
'TABLE

1. Cigarettes—An amount equal to 22 per cent. of the retail price plus £1·410 per thousand cigarettes.

2. Cigars—£3·0415 per pound.

3. Hand-rolling tobacco—£3·8250 per pound.

1007

4. Other smoking tobacco and chewing tobacco—£1·7050 per pound.'

(2) For the purposes of paragraph 1 of the Table in the said section 4(1) any cigarette more than 9 cm. long (excluding any filter or mouthpiece) shall be treated as if each 9 cm. or part thereof were a separate cigarette; and for the purposes of section 6 of the said Act of 1976 (power to alter rates of duty) the percentage and the amount per thousand cigarettes in that paragraph shall be treated as separate rates of duty.
(3) The Tobacco Products Duty (Increase) Order 1976 shall cease to have effect.
And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Healey.]
put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

10. ALTERATION AND REORGANISATION OF TOBACCO DUTIES
Motion made, and Question,
That—

(a) the period during which orders may be made under section 1(4) of the Finance Act 1973 shall be extended to the end of 1977;

(b) on the repeal at the end of that year of the duties charged by section 4 of the Finance Act 1964 provision may be made for terminating drawback in respect of those duties and for further increasing the duty charged under section 4 of the Finance Act 1976; and

(c) provision may be made for enabling the Treasury to make orders specifying products that are or are not to be treated for the purposes of that duty as cigarettes, cigars, hand-rolling tobacco, other smoking tobacco or chewing tobacco.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

11. HYDROCARBON OIL ETC.
Motion made, and Question,
That the following provisions shall have effect as from 6 o'clock in the evening of 29th March 1977—

(1) In section 11 of the Finance (No. 2) Act 1975 (excise duty on hydrocarbon oil etc.) for the words '£0·3000 a gallon' there shall be substituted the words £0·3500 a gallon'.

(2) In section 9 of the Hydrocarbon Oil (Customs & Excise) Act 1971 (rebate on heavy oil) for the words 'at a rate of 1p a gallon less than the rate at which the duty is for the time being chargeable' there shall be substituted the words 'at a rate—

(a) in the case of kerosene other than aviation turbine fuel, of 1p a gallon less than the rate at which the duty is for the time being chargeable;

(b) in the case of aviation turbine fuel and heavy oil other than kerosene, of 2½ p a gallon less than the rate at which the duty is for the time being chargeable."

(3) The provisions of the said section 9 as amended by paragraph (2) above shall become subsection (1) of that section and after those provisions there shall be added—

'(2) In this section—
"aviation turbine fuel" means kerosene which is intended to be used as fuel for aircraft engines and is allowed to be delivered for that purpose without being marked in accordance with the regulations made for the purposes of this section;
"kerosene" means heavy oil of which more than 50 per cent. by volume distils at a temperature not exceeding 240°C.'
(4) In section 12(1) of the said Act of 1971 (rebate on light oil for use as furnace fuel at a rate of 1p a gallon less than the rate at which the duty is charged) for '1p' there shall be substituted '2½ p'.
And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Henley.]
put forthwith pursuant to Standing Order No. 94 (Ways and Means motions):—
The House divided: Ayes 290, Noes 281.

Division No. 100]

AYES

[10.00 p.m.

Abse, Leo

Bates, Alf

Bray, Dr. Jeremy

Allaun, Frank

Bean, R. E.

Broughton, Sir Alfred

Anderson, Donald

Bennett, Andrew (Stockport N.)

Brown, Hugh D. (Provan)

Archer, Peter

Bidwell, Sydney

Brown, Robert C. (Newcastle W.)

Armstrong, Ernest

Bishop, E. S.

Brown, Ronald (Hackney S.)

Ashley, Jack

Blenkinsop, Arthur

Buchan, Norman

Ashton, Joe

Boardman, H.

Buchanan, Richard

Atkins, Ronald (Preston N.)

Booth, Rt. Hon. Albert

Butler, Mrs. Joyce (Wood Green)

Atkinson, Norman

Boothroyd, Miss Betty

Callaghan, Rt. Hon. J. (Cardiff SE)

Bagier, Gordon A. T.

Bottomley, Rt. Hon. Arthur

Callaghan, Jim (Middleton & P.)

Barnett, Guy (Greenwich)

Boyden, James (Bish Auck)

Campbell, Ian

Barnett, Rt. Hon. Joel (Heywood)

Bradley, Tom

Canavan, Dennis

Cant, R. B.

Hughes, Mark (Durham)

Pendry, Tom

Carmichael, Neil

Hughes, Robert (Aberdeen N.)

Perry, Ernest

Carter, Ray

Hughes, Roy (Newport)

Prentice, Rt. Hon. Reg

Carter-Jones, Lewis

Hunter, Adam

Prescott, John

Cartwright, John

Irvine, Rt. Hon. Sir A. (Edge Hill)

Price, C. (Lewisham W.)

Clemitson, Ivor

Irving, Rt. Hon. S. (Dartford)

Price, William (Rugby)

Cocks, Rt. Hon. Michael

Jackson, Colin (Brighouse)

Radice, Giles

Cohen, Stanley

Jackson, Miss Margaret (Lincoln)

Rees, Rt. Hon. Merlyn (Leeds S.)

Coleman, Donald

Janner, Greville

Richardson, Miss Jo

Colquhoun, Ms Maureen

Jay, Rt. Hon. Douglas

Roberts, Albert (Normanton)

Concannon, J. D.

Jeger, Mrs. Lena

Roberts, Gwilym (Cannock)

Conlan, Bernard

Jenkins, Hugh (Putney)

Robinson, Geoffrey

Cook, Robin F. (Edin C.)

John, Brynmor

Roderick, Caerwyn

Corbett, Robin

Johnson, James (Hull West)

Rodgers, George (Chorley)

Cowans, Harry

Johnson, Walter (Derby S.)

Rodgers, Rt. Hon. W. (Stockton)

Cox, Thomas (Tooting)

Jones, Alec (Rhondda)

Rooker, J. W.

Craigen, Jim (Maryhill)

Jones, Barry (East Flint)

Rose, Paul B.

Crawshaw, Richard

Jones, Dan (Burnley)

Ross, Rt. Hon. W. (Kilmarnock)

Cronin, John

Kaufman, Gerald

Rowlands, Ted

Crowther, Stan (Rotherham)

Kelley, Richard

Ryman, John

Cryer, Bob

Kerr, Russell

Sandelson, Neville

Cunningham, G. (Islington S.)

Kilroy-Silk, Robert

Sedgemore, Brian

Cunningham, Dr. J. (Whiteh)

Kinnock, Neil

Selby, Harry

Davidson, Arthur

Lambie, David

Shaw, Arnold (Ilford South)

Davies, Bryan (Enfield N.)

Lamborn, Harry

Sheldon, Rt. Hon. Robert

Davies, Denzil (Llanelli)

Lamond, James

Shore, Rt. Hon. Peter

Davies, Ifor (Gower)

Latham, Arthur (Paddington)

Short, Mrs. Renée (Wolv NE)

Davis, Clinton (Hackney C.)

Leadbitter, Ted

Silkin, Rt. Hon. John (Deptford)

Deakins, Eric

Lee, John

Silkin, Rt. Hon. S. C. (Dulwich)

Dean, Joseph (Leeds West)

Lestor, Miss Joan (Eton & Slough)

Silverman, Julius

de Freitas, Rt. Hon. Sir Geoffrey

Lever, Rt. Hon. Harold

Skinner, Dennis

Dell, Rt. Hon. Edmund

Lewis, Ron (Carlisle)

Small, William

Dempsey, James

Lipton, Marcus

Smith, John (N Lanarkshire)

Doig, Peter

Lomas, Kenneth

Snape, Peter

Dormand, J. D.

Loyden, Eddie

Spearing, Nigel

Douglas-Mann, Bruce

Luard, Evan

Spriggs, Leslie

Dunn, James A.

Lyon, Alexander (York)

Stallard, A. W.

Dunnett, Jack

Lyons, Edward (Bradford W.)

Stewart, Rt. Hon. M. (Fulham)

Dunwoody, Mrs. Gwyneth

Mabon, Rt. Hon. Dr. J. Dickson

Stoddart, David

Eadie, Alex

McCartney, Hugh

Stott, Roger

Edge, Geoff

McDonald, Dr. Oonagh

Strang, Gavin

Edwards, Robert (Wolv SE)

McElhone, Frank

Strauss, Rt. Hon. G. R.

Ellis, John (Brigg & Scun)

MacFarquhar, Roderick

Summerskill, Hon. Dr. Shirley

Ellis, Tom (Wrexham)

McGuire, Michael (Ince)

Swain, Thomas

English, Michael

MacKenzie, Gregor

Taylor, Mrs. Ann (Bolton W.)

Ennals, David

Maclennan, Robert

Thomas, Jeffrey (Abertillery)

Evans, Fred (Caerphilly)

McMillan, Tom (Glasgow C.)

Thomas, Mike (Newcastle E.)

Evans, Ioan (Aberdare)

McNamara, Kevin

Thomas, Ron (Bristol NW)

Evans, John (Newton)

Madden, Max

Tierney, Sydney

Ewing, Harry (Stirling)

Magee, Bryan

Tinn, James

Faulds, Andrew

Mahon, Simon

Tomney, Frank

Fernyhough, Rt. Hon. E.

Mallalieu, J. P. W.

Torney, Tom

Fitch, Alan (Wigan)

Marks, Kenneth

Tuck, Raphael

Fitt, Gerard (Belfast W.)

Marquand, David

Urwin, T. W.

Flannery, Martin

Marshall, Dr. Edmund (Goole)

Varley, Rt. Hon. Eric G.

Fletcher, Ted (Darlington)

Marshall, Jim (Leicester S.)

Wainwright, Edwin (Dearne V.)

Foot, Rt. Hon. Michael

Maynard, Miss Joan

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

Forrester, John

Meacher, Michael

Walker, Harold (Doncaster)

Fowler, Gerald (The Wrekin)

Mellish, Rt. Hon. Robert

Walker, Terry (Kingswood)

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

Mendelson, John

Ward, Michael

Freeson, Reginald

Mikardo, Ian

Watkins, David

Garrett, John (Norwich S.)

Millan, Rt. Hon. Bruce

Watkinson, John

Garrett, W. E. (Wallsend)

Miller, Dr. M. S. (E Kilbride)

Weetch, Ken

George, Bruce

Miller, Mrs. Millie (Ilford N.)

Weitzman, David

Gilbert, Dr. John

Mitchell, R. C. (Solon, Itchen)

Wellbeloved, James

Ginsburg, David

Moonman, Eric

White, Frank R. (Bury)

Golding, John

Morris, Alfred (Wythenshawe)

White, James (Pollok)

Gould, Bryan

Morris, Charles R. (Openshaw)

Whitehead, Phillip

Gourley, Harry

Morris, Rt. Hon. J. (Aberavon)

Whitlock, William

Graham, Ted

Moyle, Roland

Willey, Rt. Hon. Frederick

Grant, George (Morpeth)

Mulley, Rt. Hon. Frederick

Williams, Rt. Hon. Alan (Swansea W.)

Grant, John (Islington C.)

Murray, Rt. Hon. Ronald King

Williams, Alan Lee (Hornch'ch)

Hamilton, W. W. (Central Fife)

Newens, Stanley

Williams, Rt. Hon. Shirley (Hertford)

Hardy, Peter

Noble, Mike

Williams, Sir Thomas (Warrington)

Harrison, Walter (Wakefield)

Oakes, Gordon

Wilson, Alexander (Hamilton)

Hattersley, Rt. Hon. Roy

Ogden, Eric

Wilson, Rt. Hon. Sir Harold (Huyton)

Hatton, Frank

O' Halloran, Michael

Wilson, William (Coventry SE)

Hayman, Mrs. Helene

Orbach, Maurice

Wise, Mrs. Audrey

Healey, Rt. Hon. Denis

Orme, Rt. Hon. Stanley

Woodall, Alec

Heffer, Eric S.

Ovenden, John

Woof, Robert

Hooley, Frank

Padley, Walter

Wrigglesworth, Ian

Horam, John

Palmer, Arthur

Young, David (Bolton E.)

Howell, Rt. Hon. Dents (B'ham, Sm H)

Park, George

Hoyle, Doug (Nelson)

Parker, John

TELLERS FOR THE AYES:

Huckfield, Les

Parry, Robert

Mr. Joseph Harper and

Hughes, Rt. Hon. C. (Anglesey)

Pavitt, Laurie

Mr. James Hamilton.

1010

1011

NOES

Adley, Robert

Gilmour, Rt. Hon. Sir Ian (Chesham)

Maudling, Rt. Hon. Reginald

Aitken, Jonathan

Gilmour, Sir John (East Fife)

Mawby, Ray

Alison, Michael

Glyn, Dr. Alan

Maxwell-Hyslop, Robin

Arnold, Tom

Godber, Rt. Hon. Joseph

Mayhew, Patrick

Atkins, Rt. Hon. H. (Spelthorne)

Goodhart, Philip

Meyer, Sir Anthony

Awdry, Daniel

Goodhew, Victor

Miller, Hal (Bromsgrove)

Bain, Mrs. Margaret

Goodlad, Alastair

Mills, Peter

Baker, Kenneth

Gorst, John

Miscampbell, Norman

Bell, Ronald

Gow, Ian (Eastbourne)

Mitchell, David (Basingstoke)

Bennett, Sir Frederic (Torbay)

Gower, Sir Raymond (Barry)

Moate, Roger

Bennett, Dr. Reginald (Fareham)

Grunt, Anthony (Harrow C.)

Molyneaux, James

Benyon, W.

Gray, Hamish

Monro, Hector

Berry, Hon. Anthony

Grieve, Percy

Montgomery, Fergus

Biffen, John

Griffiths, Eldon

More, Jasper (Ludlow)

Biggs-Davison, John

Grist, Ian

Morgan, Geraint

Blaker, Peter

Grylls, Michael

Morgan-Giles, Rear-Admiral

Body, Richard

Hall, Sir John

Morris, Michael (Northampton S.)

Boscawen, Hon. Robert

Hall-Davis, A. G. F.

Morrison, Charles (Devizes)

Bottomley, Peter

Hamilton, Michael (Salisbury)

Morrison, Hon. Peter (Chester)

Bowden, A. (Brighton, Kemptown)

Hampson, Dr. Keith

Mudd, David

Boyson, Dr. Rhodes (Brent)

Hannam, John

Heave, Airey

Braine, Sir Bernard

Harrison, Col Sir Harwood (Eye)

Nelson, Anthony

Brittan, Leon

Harvie Anderson, Rt. Hon. Miss

Neubert, Michael

Brocklebank-Fowler, C.

Hastings, Stephen

Newton, Tony

Brooke, Peter

Havers, Sir Michael

Normanton, Tom

Brotherton, Michael

Hawkins, Paul

Nott, John

Brown, Sir Edward (Bath)

Hayhoe, Barney

Onslow, Cranley

Bryan, Sir Paul

Heath, Rt. Hon. Edward

Oppenheim, Mrs. Sally

Buchanan-Smith, Alick

Henderson, Douglas

Osborn, John

Buck, Antony

Heseltine, Michael

Page, John (Harrow West)

Budgen, Nick

Hicks, Robert

Page, Rt. Hon. R. Graham (Crosby)

Bulmer, Esmond

Hodgson, Robin

Page, Richard (Workington)

Burden, F. A.

Holland, Philip

Paisley, Rev Ian

Butler, Adam (Bosworth)

Hordern, Peter

Parkinson, Cecil

Carlisle, Mark

Howe, Rt. Hon. Sir Geoffrey

Pattie, Geoffrey

Chalker, Mrs. Lynda

Howell, David (Guildford)

Percival, Ian

Channon, Paul

Howell, Ralph (North Norfolk)

Pink, R. Bonner

Churchill, W. S.

Hunt, David (Wirral)

Powell, Rt. Hon. J. Enoch

Clark, Alan (Plymouth, Sutton)

Hunt, John (Bromley)

Price, David (Eastleigh)

Clark, William (Croydon S.)

Hurd, Douglas

Prior, Rt. Hon. James

Clarke, Kenneth (Rushcliffe)

Hutchison, Michael Clark

Pym, Rt. Hon. Francis

Clegg, Walter

Irving, Charles (Cheltenham)

Raison, Timothy

Cockcroft, John

James, David

Rathbone, Tim

Cooke, Robert (Bristol W.)

Jenkin, Rt. Hon. P. (Wanst'd & W'df'd)

Rawlinson, Rt. Hon. Sir Peter

Cope, John

Johnson Smith, G. (E Grinstead)

Rees, Peter (Dover & Deal)

Cordle, John H.

Jones, Arthur (Daventry)

Rees-Davies, W. R.

Cormack, Patrick

Joseph, Rt. Hon. Sir Keith

Reid, George

Corrie, John

Kaberry, Sir Donald

Renton, Rt. Hon. Sir D. (Hunts)

Costain, A. P.

Kellett-Bowman, Mrs. Elaine

Renton, Tim (Mid-Sussex)

Craig, Rt. Hon. W. (Belfast E.)

Kershaw, Anthony

Rhodes James, R.

Crawford, Douglas

Kilfedder, James

Rhys Williams, Sir Brandon

Critchley, Julian

Kimball, Marcus

Ridley, Hon. Nicholas

Crouch, David

King, Evelyn (South Dorset)

Ridsdale, Julian

Crowder, F. P.

King, Tom (Bridgwater)

Rifkind, Malcolm

Dean, Paul (N Somerset)

Kirk, Sir Peter

Rippon, Rt. Hon. Geoffrey

Dodsworth, Geoffrey

Kitson, Sir Timothy

Roberts, Wyn (Conway)

Douglas-Hamilton, Lord James

Knight, Mrs. Jill

Rodgers, Sir John (Sevenoaks)

Drayson, Burnaby

Knox, David

Rossi, Hugh (Hornsey)

du Cann, Rt. Hon. Edward

Lamont, Norman

Rost, Peter (SE Derbyshire)

Durant, Tony

Langford-Holt, Sir John

Royle, Sir Anthony

Dykes, Hugh

Lawrence, Ivan

Sainsbury, Tim

Eden, Rt. Hon. Sir John

Le Marchant, Spencer

St. John-Stevas, Norman

Edwards, Nicholas (Pembroke)

Lester, Jim (Beeston)

Scott, Nicholas

Elliott, Sir William

Lewis, Kenneth (Rutland)

Scott-Hopkins, James

Emery, Peter

Lloyd, Ian

Shaw, Giles (Pudsey)

Eyre, Reginald

Loveridge, John

Shelton, William (Streatham)

Fairbairn, Nicholas

Luce, Richard

Shepherd, Colin

Fairgrieve, Russell

McAdden, Sir Stephen

Shersby, Michael

Farr, John

MacCormick, Iain

Sillars, James

Fell, Anthony

McCrindle, Robert

Silvester, Fred

Finsberg, Geoffrey

McCusker, H.

Sims, Roger

Fisher, Sir Nigel

Macfarlane, Neil

Sinclair, Sir George

Fletcher, Alex (Edinburgh N.)

MacGregor, John

Skeet, T. H. H.

Fletcher-Cooke, Charles

MacKay, Andrew James

Smith, Dudley (Warwick)

Fookes, Miss Janet

Macmillan, Rt. Hon. M. (Farnham)

Speed, Keith

Forman, Nigel

McNair-Wilson, M. (Newbury)

Spence, John

Fowler, Norman (Sutton C'f'd)

McNair-Wilson, P. (New Forest)

Spicer, Jim (W Dorset)

Fox, Marcus

Madel, David

Spicer, Michael (S Worcester)

Fraser, Rt. Hon. H. (Stafford & St)

Marshall, Michael (Arundel)

Sproat, Iain

Fry, Peter

Marten, Neil

Stainton, Keith

Galbraith, Hon. T. G. D.

Mates, Michael

Stanbrook, Ivor

Gardiner, George (Reigate)

Mather, Carol

Stanley, John

Gardner, Edward (S Fylde)

Maude, Angus

Steen, Anthony (Wavertree)

1012

1013

Stewart, Rt. Hon. Donald

Townsend, Cyril D.

Welsh, Andrew

Stewart, Ian (Hitchin)

Trotter, Neville

Whitelaw, Rt. Hon. William

Stokes, John

Vaughan, Dr. Gerard

Wiggin, Jerry

Stradling Thomas, J.

Viggers, Peter

Wigley, Dafydd

Tapsell, Peter

Wakeham, John

Wilson, Gordon (Dundee E.)

Taylor, R. (Croydon NW)

Welder, David (Clitheroe)

Wood, Rt. Hon. Richard

Taylor, Teddy (Cathcart)

Walker, Rt. Hon. P. (Worcester)

Young, Sir G. (Ealing, Acton)

Tebbit, Norman

Walker-Smith, Rt. Hon. Sir Derek

Younger, Hon. George

Thatcher, Rt. Hon. Margaret

Walters, Dennis

Thomas, Dafydd (Merioneth)

Watt, Hamish

TELLERS FOR THE NOES:

Thomas, Rt. Hon. P. (Hendon S.)

Weatherill, Bernard

Mr. Michael Roberts and

Thompson, George

Wells, John

Mr. Nigel Lawson.

Question accordingly agreed to.

12. UNITS OF MEASUREMENT IN CUSTOMS AND EXCISE ACTS
Motion made, and Question,
That provision may be made for amending the customs and excise Acts so as to replace any unit of measurement by a metric unit and the proof system of ascertaining the alcoholic strength of spirits and other liquids by a system of measurement by reference to percentages of alcohol by volume.—[Mr. Healey.]
put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

13. SURCHARGES AND REBATES IN RESPECT OF REVENUE DUTIES
Motion made, and Question,
That the period after which orders under section 9 of the Finance Act 1961 may not be made or continue in force shall be extended until the end of August 1978.—[Mr. Healey.]
put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

14. VALUE ADDED TAX
Motion made, and Question,
That the enactments relating to value added tax may be amended so as to give effect to Community obligations, and that charges to that tax may be imposed by other amendments not affecting the rates at which the tax is chargeable or the treatment, for purposes of the tax, of goods or services of any specified description.—[Mr. Healey.]
put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

15. VEHICLES EXCISE DUTY
Motion made, and Question,
That the Vehicles (Excise) Act 1971 and the Vehicles (Excise) Act (Northern Ireland) 1972 shall have effect with the amendments set out below.
But this Resolution shall not authorise the making of amendments that would result in different provisions being in force in different parts of Great Britain.
And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

(1) In the said Acts of 1971 and 1972—

(a) for the provisions of Part II of Schedules 1 to 5 (annual rates of duty) there shall be substituted the provisions set out below;

(b) in paragraph 1(2) of Part I of Schedule 4 for the words following if a goods vehicle' there shall be substituted the words is use for drawing a trailer, the annual rate of duty applicable thereto in accordance with the foregoing sub-paragraph shall, according to the unladen weight of the vehicle as set out in the first and second columns of Table B in Part II of this Schedule, be increased by the amount specified in the third column of that Table.';

(c) in section 16 (trade licences) for '£20' and '£3·35' there shall be substituted respectively '£25' and '£5;

(d) in section 2(1)(b) (four month licence for vehicles with annual rate exceeding £8) for '£8' there shall be substituted '£18'.

(2) Paragraph 1 above has effect in relation to licences taken out after 29th March 1977.

PROVISIONS SUBSTITUTED FOR PART II OF SCHEDULE 1 TO ACT OF 1971 AND ACT OF 1972

Description of vehicle

Rate of duty

£

1. Bicycles and tricycles of which the cylinder capacity of the engine does not exceed 150 cubic centimetres; electrically propelled bicycles; electrically propelled tricycles which do not exceed 165 pounds in weight unladen

5·00

2. Bicycles of which the cylinder capacity of the engine exceeds 150 cubic centimetres but does not exceed 250 cubic centimetres; tricycles (other than those in the foregoing paragraph) and vehicles (other than mowing machines) with more than three wheels, being tricycles and vehicles neither constructed nor adapted for use nor used for the carriage of a driver or passenger

10·00

3. Bicycles and tricycles not in the foregoing paragraphs

20·00

PROVISIONS SUBSTITUTED FOR PART II OF SCHEDULE 2 TO ACT OF 1971 AND ACT OF 1972

Description of vehicle

Rate of duty

£

Hackney carriages

…

…

…

25·00

with an additional 50p for each person above 20 (excluding the driver) for which the vehicle has seating capacity.

PROVISIONS SUBSTITUTED FOR PART II OF SCHEDULE 3 TO ACT OF 1971

Weight unladen of vehicle

Rate of duty

1.

2.

3.

4.

5.

Description of vehicle

Exceeding

Not exceeding

Initial

Additional for each ton or part of a ton in excess of the weight in column 2

£

£

1. Agricultural machines; digging machines; mobile cranes; works trucks; mowing machines; fishermen's tractors.

—

—

8·50

—

2. Haulage vehicles, being showmen's vehicles

—

7¼ tons

84·00

—

7¼ tons

8 tons

101·00

—

8 tons

10 tons

118·00

—

10 tons

—

118·00

18·00

3. Haulage vehicles, not being showmen's vehicles.

—

2 tons

100·00

—

2 tons

4 tons

180·00

—

4 tons

6 tons

260·00

—

6 tons

7¼ tons

340·00

—

7¼ tons

8 tons

415·00

—

8 tons

10 tons

415·00

70·00

10 tons

—

555·00

80·00

PROVISIONS SUBSTITUTED FOR PART II OF SCHEDULE 3 TO ACT OF 1971

Weight unladen of vehicle

Rate of duty

1.

2.

3.

4.

5.

Description of vehicle

Exceeding

Not exceeding

Initial

Additional for each ton or part of a ton in excess of the weight in column 2

£

£

1. Agricultural machines; digging machines; mobile cranes; works trucks; mowing machines; fishermen's tractors.

—

—

8·50

—

2. Haulage vehicles, being showmen's vehicles

—

7¼ tons

84·00

—

7¼ tons

8 tons

101·00

—

8 tons

10 tons

118·00

—

10 tons

—

118·00

18·00

3. Haulage vehicles, not being showmen's vehicles.

—

2 tons

90·00

—

2 tons

4 tons

160·00

—

4 tons

6 tons

230·00

—

6 tons

7¼ tons

300·00

—

7¼ tons

8 tons

370·00

—

8 tons

—

370·00

80·00

PROVISIONS SUBSTITUTED FOR PART II OF SCHEDULE 4 TO ACT OF 1971

TABLES SHOWING ANNUAL RATES OF DUTY ON GOODS VEHICLES

TABLE A

GENERAL RATES OF DUTY

Weight unladen of vehicle

Rate of duty

1.

2.

3.

4.

5.

Description of vehicle

Exceeding

Not exceeding

Initial

Additional for each ¼ ton or part of a ¼ ton in excess of the weight in column 2

£

£

1. Farmers' goods vehicles

—

12 cwt.

30·00

—

12 cwt.

16 cwt.

32·00

—

16 cwt.

1 ton

35·00

—

1 ton

3 tons

35·00

4·00

3 tons

6 tons

67·00

3·00

6 tons

10 tons

103·00

2·00

10 tons

—

135·00

4·00

2. Showmen's goods vehicles

—

12 cwt.

30·00

—

12 cwt.

16 cwt.

32·00

—

16 cwt.

1 ton

35·00

—

1 ton

3 tons

35·00

4·00

3 tons

6 tons

67·00

3·00

6 tons

10 tons

103·00

4·00

10 tons

—

167·00

6·00

3. Electrically-propelled goods vehicles (other than farmers' goods vehicles or showmen's goods vehicles); tower wagons.

—

12 cwt.

40·00

—

12 cwt.

16 cwt.

44·00

—

16 cwt.

1 ton

50·00

—

1 ton

4 tons

50·00

50·00

4 tons

6 tons

110·00

6·00

6 tons

10 tons

158·00

5·00

10 tons

—

238·00

8·00

4. Goods vehicles not included in any of the foregoing provisions of this Part of this Schedule.

—

16 cwt.

50·00

—

16 cwt.

1 ton

56·00

—

1 ton

4 tons

56·00

14·00

4 tons

10 tons

224·00

25·00

10 tons

—

824·00

30·00

TABLE B

RATES OF DUTY ON GOODS VEHICLES

USED FOR DRAWING TRAILERS

Weight unlanden of vehicle

3.Rate of duty

1.

2.

Exceeding

Not exceeding

£

—

1½ tons

30·00

1½ tons

3 tons

40·00

3 tons

4 tons

67·00

4 tons

6 tons

90·00

6 tons

—

112·00

PROVISIONS SUBSTITUTED FOR PART II OF SCHEDULE 4 TO ACT OF 1972

TABLES SHOWING ANNUAL RATES OF DUTY ON GOODS VEHICLES

TABLE A

GENERAL RATES OF DUTY

Weight unladen of vehicle

Rate of duty

1.

2.

3.

4.

5.

Description of vehicle

Exceeding

Not exceeding

Initial

Additional for each ¼ ton or part of a ¼ ton in excess of the weight in column 2

£

£

1. Farmers' goods vehicles

—

12 cwt.

30·00

—

12 cwt.

16 cwt.

32·00

—

16 cwt.

1 ton

35·00

—

1 ton

3 tons

35·00

4·00

3 tons

6 tons

67·00

2·00

6 tons

8 tons

91·00

1·00

8 tons

—

99·00

2·00

2. Showmen's goods vehicles; electrically-propelled goods vehicles (other than farmers' goods vehicles); tower wagons.

—

12 cwt.

38·00

—

12 cwt.

16 cwt.

40·00

—

16 cwt.

1 ton

43·00

—

1 ton

6 tons

43·00

3·00

6 tons

10 tons

103·00

4·00

10 tons

—

167·00

5·00

3. Goods vehicles not included in any of the foregoing provisions of this Part.

—

16 cwt.

50·00

—

16 cwt.

1 ton

56·00

—

1 ton

3 tons

56·00

10·00

3 tons

4 tons

136·00

16·00

4 tons

6 tons

200·00

21·00

6 tons

10 tons

368·00

24·00

10 tons

—

752·00

28·00

TABLE B

RATES OF DUTY ON GOODS VEHICLES

USED FOR DRAWING TRAILERS

Weight unlanden of vehicle

Rate of duty

1.

2.

3.

Exceeding

Not exceeding

£

—

1½ tons

30·00

1½ tons

3 tons

40·00

3 tons

4 tons

67·00

4 tons

6 tons

90·00

6 tons

—

112·00

PROVISIONS SUBSTITUTED FOR PART II OF SCHEDULE 5 TO ACT OF 1971

Description of vehicle

Rate of duty

£

1. Electrically propelled vehicles; vehicles not exceeding 7 horse-power, if registered under the Roads Act 1920 for the first time before 1st January 1947

36·00

2. Vehicles not included above

50·00

PROVISIONS SUBSTITUTED FOR PART II OF SCHEDULE 5 TO ACT OF 1972

Description of vehicle

Rate of duty

£

1. Electrically propelled

36·00

2. Not electrically propelled—

(a) if first registered under the Roads Act 1920 before 1st January 1947, or which, if its first registration for taxation purposes had been effected in Northern Ireland would have been so first registered as aforesaid under the Act as in force in Northern Ireland—

(i) not exceeding 6 horse-power

30·00

(ii) exceeding 6 horse-power, but not exceeding 9 horse-power—for each unit or part of a unit of horse-power

5·00

(b) other vehicles

50·00

—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions):—
The House divided: Ayes 290, Noes 61.

Division No. 101]

AYES

10.20 p.m.

Abse, Leo

Cartwright, John

English, Michael

Allaun, Frank

Clemitson, Ivor

Ennals, David

Anderson, Donald

Cocks, Rt. Hon. Michael

Evans, Fred (Caerphilly)

Archer, Peter

Cohen, Stanley

Evans, Ioan (Aberdare)

Armstrong, Ernest

Coleman, Donald

Evans, John (Newton)

Ashley, Jack

Colquhoun, Ms Maureen

Ewing, Harry (Stirling)

Ashton, Joe

Concannon, J. D.

Faulds, Andrew

Atkins, Ronald (Preston N.)

Conlan, Bernard

Fernyhough, Rt. Hon. E.

Atkinson, Norman

Cook, Robin F. (Edin C.)

Fitch, Alan (Wigan)

Bagier, Gordon A. T.

Corbett, Robin

Fitt, Gerard (Belfast W.)

Barnett, Guy (Greenwich)

Cowans, Harry

Flannery, Martin

Barnett, Rt. Hon. Joel (Heywood)

Cox, Thomas (Tooting)

Fletcher, Ted (Darlington)

Bates, Alf

Craigen, Jim (Maryhill)

Foot, Rt. Hon. Michael

Bean, R. E.

Crawshaw, Richard

Forrester, John

Bennett, Andrew (Stockport N.)

Cronin, John

Fowler, Gerald (The Wrekin)

Bidwell, Sydney

Crowther, Stan (Rotherham)

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

Bishop, E. S.

Cryer, Bob

Freeson, Reginald

Blenkinsop, Arthur

Cunningham, G. (Islington S.)

Garrett, John (Norwich S.)

Boardman, H.

Cunningham, Dr. J. (Whiteh)

Garrett, W. E. (Wallsend)

Booth, Rt. Hon. Albert

Davidson, Arthur

George, Bruce

Boothroyd, Miss Betty

Davies, Bryan (Enfield N.)

Gilbert, Dr. John

Bottomley, Rt. Hon. Arthur

Davies, Denzil (Llanelli)

Ginsburg, David

Boyden, James (Bish Auck)

Davies, Ifor (Gower)

Golding, John

Bradley, Tom

Davis, Clinton (Hackney C.)

Gould, Bryan

Bray, Dr. Jeremy

Deakins, Eric

Gourley, Harry

Broughton, Sir Alfred

Dean, Joseph (Leeds West)

Graham, Ted

Brown, Hugh D. (Provan)

de Freltas, Rt. Hon. Sir Geoffrey

Grant, George (Morpeth)

Brown, Robert C. (Newcastle W.)

Dell, Rt. Hon. Edmund

Grant, John (Islington C.)

Brown, Ronald (Hackney S.)

Dempsey, James

Hamilton, W. W. (Central Fife)

Buchan, Norman

Doig, Peter

Hardy, Peter

Buchanan, Richard

Dormand, J. D.

Harrison, Walter (Wakefield)

Butler, Mrs. Joyce (Wood Green)

Douglas-Mann, Bruce

Hattersley, Rt. Hon. Roy

Callaghan, Rt. Hon. J. (Cardiff SE)

Dunn, James A.

Hatton, Frank

Callaghan, Jim (Middleton & P)

Dunnett, Jack

Hayman, Mrs. Helene

Campbell, Ian

Dunwoody, Mrs. Gwyneth

Healey, Rt. Hon. Denis

Canavan, Dennis

Eadie, Alex

Heffer, Eric S.

Cant, R. B.

Edge, Geoff

Hooley, Frank

Carmichael, Neil

Edwards, Robert (Wolv SE)

Horam, John

Carter, Ray

Ellis, John (Bragg & Scun)

Howell, Rt. Hon. Denis (B'ham, Sm H)

Carter-Jones, Lewis

Ellis, Tom (Wrexham)

Hoyle, Doug (Nelson)

Huckfield, Les

Marshall, Jim (Leicester S.)

Silkin, Rt. Hon. S. C. (Dulwich)

Hughes, Rt. Hon. C. (Anglesey)

Maynard, Miss Joan

Silverman, Julius

Hughes, Mark (Durham)

Meacher, Michael

Skinner, Dennis

Hughes, Robert (Aberdeen N.)

Mellish, Rt. Hon. Robert

Small, William

Hughes, Roy (Newport)

Mendelson, John

Smith, John (N Lanarkshire)

Hunter, Adam

Mikardo, Ian

Snape, Peter

Irvine, Rt. Hon. Sir A. (Edge Hill)

Millan, Rt. Hon. Bruce

Spearing, Nigel

Irving, Rt. Hon. S. (Dartford)

Miller, Dr. M. S. (E Kilbride)

Spriggs, Leslie

Jackson, Colin (Brighouse)

Miller, Mrs. Millie (Ilford N.)

Stallard, A. W.

Jackson, Miss Margaret (Lincoln)

Mitchell, R. C. (Soton, Itchen)

Stewart, Rt. Hon. M. (Fulham)

Janner, Greville

Moonman, Eric

Stoddart, David

Jay, Rt. Hon. Douglas

Morris, Alfred (Wythenshawe)

Stott, Roger

Jeger, Mrs. Lena

Morris, Charles R. (Openshaw)

Strang, Gavin

Jenkins, Hugh (Putney)

Morris, Rt. Hon. J. (Aberavon)

Strauss, Rt. Hon. G. R.

John, Brynmor

Moyle, Roland

Summerskill, Hon. Dr. Shirley

Johnson, James (Hull West)

Mulley, Rt. Hon. Frederick

Swain, Thomas

Johnson, Walter (Derby S.)

Murray, Rt. Hon. Ronald King

Taylor, Mrs. Ann (Bolton W.)

Jones, Alec (Rhondda)

Newens, Stanley

Thomas, Jeffrey (Abertillery)

Jones, Barry (East Flint)

Noble, Mike

Thomas, Mike (Newcastle E.)

Jones, Dan (Burnley)

Oakes, Gordon

Thomas, Ron (Bristol NW)

Kaufman, Gerald

O'Halloran, Michael

Tierney, Sydney

Kelley, Richard

Orbach, Maurice

Tinn, James

Kerr, Russell

Orme, Rt. Hon. Stanley

Tomney, Frank

Kilroy-Silk, Robert

Ovenden, John

Torney, Tom

Kinnock, Nell

Padley, Walter

Tuck, Raphael

Lamble, David

Palmer, Arthur

Urwin, T. W.

Lamborn, Harry

Park, George

Varley, Rt. Hon. Eric G.

Lomond, James

Parker, John

Wainwright, Edwin (Dearne V.)

Latham, Arthur (Paddington)

Parry, Robert

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

Leadbitter, Ted

Pavitt, Laurie

Walker, Harold (Doncaster)

Lee, John

Pendry, Tom

Walker, Terry (Kingswood)

Lestor, Miss Joan (Eton & Slough)

Perry, Ernest

Ward, Michael

Lever, Rt. Hon. Harold

Prentice, Rt. Hon. Reg

Watkins, David

Lewis, Ron (Carlisle)

Prescott, John

Watkinson, John

Lipton, Marcus

Price, C. (Lewisham W.)

Weetch, Ken

Lomas, Kenneth

Price, William (Rugby)

Weitzman, David

Loyden, Eddie

Radice, Giles

Wellbeloved, James

Luard, Evan

Rees, Rt. Hon. Merlyn (Leeds S.)

White, Frank R. (Bury)

Lyon, Alexander (York)

Richardson, Miss Jo

White, James (Pollok)

Lyons, Edward (Bradford W.)

Roberts, Albert (Normanton)

Whitehead, Phillip

Mabon, Rt. Hon. Dr. J. Dickson

Roberts, Gwilym (Cannock)

Whitlock, William

McCartney, Hugh

Robinson, Geoffrey

Willey, Rt. Hon. Frederick

McDonald, Dr. Oonagh

Roderick, Caerwyn

Williams, Rt. Hon. Alan (Swansea W.)

McElhone, Frank

Rodgers, George (Chorley)

Williams, Alan Lee (Hornch'ch)

MacFarquhar, Roderick

Rodgers, Rt. Hon. W. (Stockton)

Williams, Rt. Hon. Shirley (Hertford)

McGuire, Michael (Ince)

Rooker, J. W.

Williams, Sir Thomas (Warrington)

MacKenzie, Gregor

Rose, Paul B.

Wilson, Alexander (Hamilton)

Mackintosh, John P.

Ross, Rt. Hon. W. (Kilmarnock)

Wilson, Rt. Hon. Sir Harold (Huyton)

Maclennan, Robert

Rowlands, Ted

Wilson, William (Coventry SE)

McMillan, Tom (Glasgow C.)

Ryman, John

Wise, Mrs. Audrey

McNamara, Kevin

Sandelson, Neville

Woodall, Alec

Madden, Max

Sedgemore, Brian

Woof, Robert

Magee, Bryan

Selby, Harry

Wrigglesworth, Ian

Mahon, Simon

Shaw, Arnold (Ilford South)

Young, David (Bolton E.)

Mallalieu, J. P. W.

Sheldon, Rt. Hon. Robert

Marks, Kenneth

Shore, Rt. Hon. Peter

TELLERS FOR THE AYES:

Marquand, David

Short, Mrs. Renée (Wolv NE)

Mr Joseph Harper and

Marshall, Dr. Edmund (Goole)

Silkin, Rt. Hon. John (Deptford)

Mr James Hamilton.

NOES

Adley, Robert

MacCormick, Iain

Shaw, Giles (Pudsey)

Brocklebank-Fowler, C.

Madel, David

Shepherd, Colin

Brotherton, Michael

Marten, Neil

Shersby, Michael

Burden, F. A.

Mates, Michael

Sillars, James

Clegg, Walter

Mawby, Ray

Smith, Dudley (Warwick)

Emery, Peter

Maxwell-Hyslop, Robin

Spicer, Jim (W Dorset)

Eyre, Reginald

Meyer, Sir Anthony

Stanbrook, Ivor

Fairbairn, Nicholas

Miller, Hal (Bromsgrove)

Steen, Anthony (Wavertree)

Fairgrieve, Russell

Miscampbell, Norman

Stewart, Rt. Hon. Donald

Fry, Peter

Moate, Roger

Stewart, Ian (Hitchin)

Glyn, Dr. Alan

Monro, Hector

Thomas, Dafydd (Merioneth)

Goodhew, Victor

Montgomery, Fergus

Thompson, George

Gower, Sir Raymond (Barry)

Morgan, Geraint

Watt, Hamish

Grieve, Percy

Morris, Michael (Northampton S.)

Welsh, Andrew

Hannam, John

Morrison, Charles (Devizes)

Wiggin, Jerry

Henderson, Douglas

Mudd, David

Wigley, Dafydd

Hicks, Robert

Nelson, Anthony

Wilson, Gordon (Dundee E.)

Kershaw, Anthony

Normanton, Tom

Kilfedder, James

Page, John (Harrow West)

TELLERS FOR THE NOES:

Kitson, Sir Timothy

Price, David (Eastleigh)

Mr Douglas Crawford and

Knox, David

Rees, Peter (Dover & Deal)

Mrs. Margaret Bair.

Langford-Holt, Sir John

Reid, George

Question accordingly agreed to.

16. INCOME TAX (CHARGE AND RATES FOR 1977–78)
Motion made, and Question,
That income tax for the year 1977–78 shall be charged at the basic rate of 35 per cent.; and—

(a) in respect of so much of an individual's total income as exceeds £6,000 at such higher rates as are specified in the Table below; and

(b) in respect of so much of the investment income included in an individual's total income as exceeds £1,500 at the additional rates of 10 per cent. for the first £500 of the excess and 15 per cent. for the remainder;

except that, in the case of an individual who shows that, at any time within that year, his age or that of his wife, living with him was sixty-five years or more, paragraph (b) above shall have effect with the substitution for the reference to £1,500 of a reference to £2,000.

TABLE

Part of excess over £6,000

Higher rate

The first £1,000

…

…

40 per cent.

The next £1,000

…

…

45 per cent.

The next £1,000

…

…

50 per cent.

The next £1,000

…

…

55 per cent.

The next £2,000

…

…

60 per cent.

The next £2,000

…

…

65 per cent.

The next £2,000

…

…

70 per cent.

The next £5,000

…

…

75 per cent.

The remainder

…

…

83 per cent.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Healey.]
put forthwith pursuant to Standing Order No. 94 (Ways and Means motions):—
The House divided: Ayes 369, Noes 54.

Division No. 102]

AYES

[10.33 p.m.

Abse, Leo

Crawshaw, Richard

Glyn, Dr. Alan

Adley, Robert

Cronin, John

Golding, John

Anderson, Donald

Crouch, David

Goodhew, Victor

Archer, Peter

Crowther, Stan (Rotherham)

Gould, Bryan

Armstrong, Ernest

Cryer, Bob

Gourlay, Harry

Ashley, Jack

Cunningham, G. (Islington S.)

Gow, Ian (Eastbourne)

Ashton, Joe

Cunningham, Dr. J. (Whiteh)

Graham, Ted

Atkins, Rt. Hon. H. (Spelthorne)

Davidson, Arthur

Grant, George (Morpeth)

Bagier, Gordon A. T.

Davies, Bryan (Enfield N.)

Grant, John (Islington C.)

Barnett, Guy (Greenwich)

Davies, Denzil (Llanelli)

Grieve, Percy

Barnett, Rt. Hon. Joel (Heywood)

Davies, Ifor (Gower)

Hamilton, W. W. (Central Fife)

Bates, Alf

Davis, Clinton (Hackney C.)

Hampson, Dr. Keith

Beith, A. J.

Deakins, Eric

Hannam, John

Benyon, W.

Dean, Joseph (Leeds West)

Hardy, Peter

Berry, Hon. Anthony

de Freitas, Rt. Hon. Sir Geoffrey

Harrison, Col Sir Harwood (Eye)

Bishop, E. S.

Dell, Rt. Hon. Edmund

Harrison, Walter (Wakefield)

Blenkinsop, Arthur

Dempsey, James

Hattersley, Rt. Hon. Roy

Boardman, H.

Dodsworth, Geoffrey

Hatton, Frank

Booth, Rt. Hon. Albert

Doig, Peter

Hawkins, Paul

Boscawen, Hon. Robert

Dormand, J. D.

Hayman, Mrs. Helene

Bottomley, Rt. Hon. Arthur

Douglas-Hamilton, Lord James

Healey, Rt. Hon. Denis

Boyden, James (Bish Auck)

Douglas-Mann, Bruce

Heath, Rt. Hon. Edward

Bradley, Tom

Drayson, Burnaby

Hicks, Robert

Braine, Sir Bernard

Dunn, James A.

Hodgson, Robin

Brocklebank-Fowler, C.

Dunnett, Jack

Horam, John

Brooke, Peter

Dunwoody, Mrs. Gwyneth

Howe, Rt. Hon. Sir Geoffrey

Brotherton, Michael

Durant, Tony

Howell, David (Guildford)

Broughton, Sir Alfred

Dykes, Hugh

Howell, Rt. Hon. Denis (B'ham, Sm H)

Brown, Hugh D. (Provan)

Eadie, Alex

Howells, Geraint (Cardigan)

Brown, Robert C. (Newcastle W.)

Eden, Rt. Hon. Sir John

Huckfield, Les

Buchanan, Richard

Elliott, Sir William

Hughes, Rt. Hon. C. (Anglesey)

Budgen, Nick

Ellis, Tom (Wrexham)

Hughes, Mark (Durham)

Butler, Adam (Bosworth)

Emery, Peter

Hughes, Robert (Aberdeen N.)

Butler, Mrs. Joyce (Wood Green)

English, Michael

Hunt, David (Wirral)

Callaghan, Rt. Hon. J. (Cardiff SE)

Ennals, David

Hunter, Adam

Campbell, Ian

Evans, Ioan (Aberdare)

Hutchison, Michael Clark

Cant, R. B.

Ewing, Harry (Stirling)

Irvine, Rt. Hon. Sir A. (Edge Hill)

Carlisle, Mark

Eyre, Reginald

Irving, Rt. Hon. S. (Dartford)

Carter, Ray

Fairbairn, Nicholas

Jackson, Colin (Brighouse)

Cartwright, John

Fairgrieve, Russell

Jackson, Miss Margaret (Lincoln)

Channcn, Paul

Faulds, Andrew

James, David

Clark, Alan (Plymouth, Sutton)

Finsberg, Geoffrey

Janner, Greville

Clark, William (Croydon S.)

Fitch, Alan (Wigan)

Jay, Rt. Hon. Douglas

Clarke, Kenneth (Rushcliffe)

Foot, Rt. Hon. Michael

Jenkin, Rt. Hon. P. (Wanst'd & W'df'd)

Clegg, Walter

Forrester, John

John, Brynmor

Cocks, Rt. Hon. Michael

Fowler, Gerald (The Wrekin)

Johnson, James (Hull West)

Cohen, Stanley

Fowler, Norman (Sutton C'f'd)

Johnson, Walter (Derby S.)

Coleman, Donald

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

Jones, Alec (Rhondda)

Concannon, J. D.

Freeson, Reginald

Jones, Barry (East Flint)

Conlan, Bernard

Fry, Peter

Jones, Dan (Burnley)

Cooke, Robert (Bristol W.)

Garrett, John (Norwich S.)

Kaufman, Gerald

Cope, John

Garrett, W. E. (Wallsend)

Kershaw, Anthony

Corbett, Robin

George, Bruce

Kilfedder, James

Cowans, Harry

Gilbert, Dr. John

Kitson, Sir Timothy

Cox, Thomas (Tooting)

Ginsburg, David

Knox, David

Lamborn, Harry

Neubert, Michael

Spence, John

Lamont, Norman

Newton, Tony

Spicer, Jim (W Dorset)

Lawrence, Ivan

Noble, Mike

Spriggs, Leslie

Lawson, Nigel

Normanton, Tom

Stallard, A. W.

Leadbitter, Ted

Nott, John

Stanbrook, Ivor

Lester, Jim (Beeston)

Oakes, Gordon

Stanley, John

Lestor, Miss Joan (Eton & Slough)

Ogden, Eric

Steel, Rt. Hon. David

Lever, Rt. Hon. Harold

O'Halloran, Michael

Steen, Anthony (Wavertree)

Lewis, Ron (Carlisle)

Onslow, Cranley

Stewart, Ian (Hitchin)

Lipton, Marcus

Oppenhelm, Mrs. Sally

Stewart, Rt. Hon. M. (Fulham)

Lomas, Kenneth

Orbach, Maurice

Stoddart, David

Luard, Evan

Orme, Rt. Hon. Stanley

Stott, Roger

Luce, Richard

Osborn, John

Stradling Thomas, J.

Lyons, Edward (Bradford W.)

Padley, Walter

Strang, Gavin

Mabon, Rt. Hon. Dr. J. Dickson

Page, John (Harrow West)

Strauss, Rt. Hon. G. R.

McCartney, Hugh

Page, Rt. Hon. R. Graham (Crosby)

Summerskill, Hon. Dr. Shirley

McCrindle, Robert

Page, Richard (Workington)

Tapsell, Peter

McCusker, H.

Palmer, Arthur

Taylor, Mrs. Ann (Bolton W.)

McElhone, Frank

Pardoe, John

Taylor, Teddy (Cathcart)

MacFarquhar, Roderick

Park, George

Tebbit, Norman

MacGregor, John

Parker, John

Thatcher, Rt. Hon. Margaret

McGuire, Michael (Ince)

Pavitt, Laurie

Thomas, Jeffrey (Abertillery)

Mackay, Andrew James

Pendry, Tom

Thomas, Mike (Newcastle E.)

MacKenzie, Gregor

Penhaligon, David

Thomas, Rt. Hon. P. (Hendon S.)

Mackintosh, John P.

Percival, Ian

Tierney, Sydney

Maclennan, Robert

Perry, Ernest

Tinn, James

McMillan, Tom (Glasgow C.)

Pink, R. Bonner

Trotter, Neville

McNamara, Kevin

Prentice, Rt. Hon. Reg

Tuck, Raphael

Magee, Bryan

Price, David (Eastleigh)

Urwin, T. W.

Mahon, Simon

Price, William (Rugby)

Varley, Rt. Hon. Eric G.

Mallalieu, J. P. W.

Pym, Rt. Hon. Francis

Vaughan, Dr. Gerard

Marks, Kenneth

Radice, Giles

Viggers, Peter

Marquand, David

Rathbone, Tim

Wainwright, Edwin (Dearne V.)

Rees, Rt. Hon. Merlyn (Leeds S.)

Wakeham, John

Marshall, Dr. Edmund (Goole)

Rees, Peter (Dover & Deal)

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

Marshall, Michael (Arundle)

Rees, Davies, W. R.

Walker, Harold (Doncaster)

Marten, Neil

Reid, George

Walker, Rt. Hon. P. (Worcester)

Mates, Michael

Renton, Rt. Hon. Sir D. (Hunts)

Walker, Terry (Kingswood)

Mather, Carol

Rhys Williams, Sir Brandon

Walker-Smith Rt. Hon. Sir Derek

Maude, Angus

Rifkind, Malcolm

Ward, Michael

Mawby, Ray

Roberts, Albert (Normanton)

Watkins, David

Mayhew, Patrick

Roberts, Michael (Cardiff NW)

Watkinson, John

Meacher, Michael

Robinson, Geoffrey

Weatherill, Bernard

Mellish, Rt. Hon. Robert

Roderick, Caerwyn

Weetch, Ken

Mendelson, John

Rodgers, Sir John (Sevenoaks)

Weitzman, David

Mayer, Sir Anthony

Rodgers, Rt. Hon. W. (Stockton)

Wellbeloved, James

Millan, Rt. Hon. Bruce

Ross, Stephen (Isle of Wight)

White, Frank R. (Bury)

Miller, Hal (Bromsgrove)

Ross, Rt. Hon. W. (Kilmarnock)

White, James (Pollok)

Miller, Mrs. Millie (Ilford N.)

Rossi, Hugh (Hornsey)

Whitehead, Phillip

Mills, Peter

Rowlands, Ted

Whitelaw, Rt. Hon. William

Miscampbell, Norman

Ryman, John

Whitlock, William

Mitchell, R. C. (Soton, Itches)

Sainsbury, Tim

Wiggin, Jerry

Monro, Hector

Sandelson, Neville

Willey, Rt. Hon. Frederick

Montgomery, Fergus

Sedgemore, Brian

Williams, Rt. Hon. Alan (Swansea W.)

Moonman, Eric

Shaw, Arnold (Ilford South)

Williams, Alan Lee (Hornch'ch)

More, Jasper (Ludlow)

Shaw, Giles (Pudsey)

Williams, Rt. Hon. Shirley (Hertford)

Morgan, Geraint

Sheldon, Rt. Hon. Robert

Williams, Sir Thomas (Warrington)

Morgan-Giles, Rear-Admiral

Shepherd, Colin

Wilson, Alexander (Hamilton)

Morris, Alfred (Wythenshawe)

Shersby, Michael

Wilson, Rt. Hon. Sir Harold (Huyton)

Morris, Charles R. (Openshaw)

Shore, Rt. Hon. Peter

Wilson, William (Coventry SE)

Morris, Rt. Hon. J. (Aberavon)

Short, Mrs. Renée (Wolv NE)

Woodall Alec

Morris, Michael (Northampton S.)

Silkin, Rt. Hon. John (Deptford)

Wrigglesworth, Ian

Morrison, Charles (Devizes)

Silkin, Rt. Hon. S. C. (Dulwich)

Young, David (Bolton E.)

Morrison, Hon. Peter (Chester)

Silvester, Fred

Young, Sir G. (Ealing, Acton)

Moyle, Roland

Sims, Roger

Younger, Hon. George

Mudd, David

Sinclair, Sir George

Mulley, Rt. Hon. Frederick

Small, William

TELLERS FOR THE AYES:

Murray, Rt. Hon. Ronald King

Smith, Cyril (Rochdale)

Mr. Joseph Harper and

Neave, Airey

Smith, Dudley (Warwick)

Mr. James Hamilton.

Nelson, Anthony

Snape, Peter

NOES

Allaun, Frank

Fernyhough, Rt. Hon. E.

Lamond, James

Atkinson, Norman

Flannery, Martin

Latham, Arthur (Paddington)

Bennett, Andrew (Stockport N.)

Fletcher, Ted (Darlington)

Lee, John

Callaghan, Jim (Middleton & P)

Heffer, Eric S.

Loyden, Eddie

Canavan, Dennis

Hoyle, Doug (Nelson)

Lyon, Alexander (York)

Carter-Jones, Lewis

Hughes, Roy (Newport)

McDonald, Dr. Oonagh

Colquhoun, Ms Maureen

Jeger, Mrs. Lena

Madden, Max

Cook, Robin F. (Edin C.)

Jenkins, Hugh (Putney)

Marshall, Jim (Leicester S.)

Craigen, Jim (Maryhill)

Kelley, Richard

Maynard, Miss Joan

Edge, Geoff

Kerr, Russell

Newens, Stanley

Ellis, John (Brigg & Scun)

Kilroy-Silk, Robert

Ovenden, John

Evans, Fred (Caerphilly)

Kinnock, Nell

Parry, Robert

Evans, John (Newton)

Lamble, David

Prescott, John

1030

1031

Price, C. (Lewisham W.)

Selby, Harry

Torney, Tom

Richardson, Miss Jo

Skinner, Dennis

Wise, Mrs. Audrey

Roberts, Gwilym (Cannock)

Smith, John (N Lanarkshire)

Woof, Robert

Rodgers, George (Chorley)

Swain, Thomas

TELLERS FOR THE NOES:

Rooker, J. W.

Thomas, Ron (Bristol NW)

Mr. Sidney Bidwell and

Rose, Paul B.

Thorne, Stan (Preston South)

Mr. Ian Mikardo.

Question accordingly agreed to.
Mr. Speaker: By leave of the House, and only by leave of the House, I will put motions Nos. 17 to 35 without reading the titles.

17. INCOME TAX (ALTERATION OF PERSONAL RELIEFS)
Motion made, and Question,
That—

(1) In section 8 of the Income and Corporation Taxes Act 1970 (personal reliefs)—

(a) in subsection (1)(a) (married) for '£1,085' there shall be substituted '£1,225';

(b) in subsection (1)(b) (single) and (2) (wife's earned income relief) for '£735' there shall be substituted '£805';

(c) in subsection (1A) (age allowance) for '£1,555' and '£1,010' there shall be substituted '£1,695' and '£1,080' respectively.

(2) In section 14(2) and (3) of that Act (additional relief for widows and others in respect of children) for '£350' there shall be substituted '£420'.

but this Resolution shall not require any change to be made in the amounts deductible or repayable under section 204 of the said Act of 1970 (pay as you earn) before 1st June 1977.
And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Healey.]
put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

18. CHILD BENEFIT &C. (INCOME TAX)
Motion made, and Question,
That—

(1) In section 219(2) of the Income and Corporation Taxes Act 1970 (social security benefits exempt from tax) the word 'and' shall be omitted and after '1971' there shall be inserted the words 'and payments of child benefit'.

(2) The amendments of the Income Tax Acts made by section 32(2), (3)(a) and (d), (4), (5) and (6) of the Finance Act 1976 shall not have effect.

(3) Where for the year 1977–78 an individual is (or apart from this paragraph would be) assessable to income tax in respect of payments in respect of a child, being payments to which this paragraph
1032
applies, his income shall for the purposes of the Income Tax Acts be deemed to include only so much, if any, of the payments in respect of that child as exceeds £52 or, if the payments in question are payments for a part only of the year, a proportionate part of that amount.

(4) Paragraph (3) above applies to payments by way of—

(a) child's special allowance or guardian's allowance under the Social Security Act 1975 or the Social Security (Northern Ireland) Act 1975; or

(b) an allowance under section 70 of either of those Acts; or

(c) an increase under Chapter III of Part II of either of those Acts of a widow's allowance, widowed mother's allowance, child's special allowance, retirement pension or invalid care allowance.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Healey.]
put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

19. CHILD TAX ALLOWANCES FOR 1977–78
Motion made, and Question,
That—

(1) Except in the cases of a child to whom either of the next two Resolutions applies, the appropriate amount to be deducted from the claimant's total income under subsection (1) of section 10 of the Income and Corporation Taxes Act 1970 (children) for the year 1977–78 shall, instead of being determined in accordance with subsection (3) of that section, be determined in accordance with paragraphs (2) and (3) below; and in those paragraphs 'first child' means a child shown by the claimant to be the only or eldest child in respect of whom he is entitled under that section to a deduction of an amount determined in accordance with those paragraphs.

(2) The appropriate amount for the child shall vary according to the age of the child at the commencement of the year of assessment and according to whether or not he is a first child and, subject to subsection (5) of the said section 10—

(a) for a child shown by the claimant to have been over the age of sixteen at the commencement of that year, shall be £261 in the case of a first child and £235 in the case of any other child;

(b) for a child not so shown but shown by the claimant to have been then over the age of eleven, shall be £231 in the case of a first child and £205 in the case of any other child;

1033

(c) for a child not falling within the foregoing paragraphs, shall be £196 in the case of a first child and £170 in the case of any other child.

(3) Where the appropriate amount for a child is required to be apportioned under section 11 of the Income and Corporation Taxes Act 1970 between two or more individuals and the child is the first child in relation to any but not each of them, that amount shall be determined as if he were the first child in relation to each of them.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Healey.]
put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

20. CHILD TAX ALLOWANCES: CHILDREN LIVING ABROAD
Motion made, and Question,
That—

(1) If, in the case of a child in respect of whom a claim is made under section 10 of the Income and Corporation Taxes Act 1970 (children) the claimant proves that the conditions in paragraph (2) below are fulfilled, the appropriate amount to be deducted from the claimant's income under subsection (1) of that section for the year 1977–78 shall be determined in accordance with subsection (3) of that section as amended for the year 1976–77 by section 29(2) of the Finance Act 1976.

(2) The conditions referred to in paragraph (1) above are—

(a) that the child is outside the United Kingdom throughout the year of assessment and does not in that year normally live in a country or territory specified in paragraph (3) below; and

(b) that he is under the age of nineteen years at the end of that year; and

(c) that no child benefit is paid in respect of the child for any week (as defined in the child benefit legislation) beginning in that year; and

(d) that no child benefit for any such week is (or if a claim were made would be) payable in respect of the child by virtue of Part II of the Child Benefit (Residence and Persons Abroad) Regulations 1976 or Part II of the Child Benefit (Residence and Persons Abroad) Regulations (Northern Ireland) 1976.

(3) The countries and territories referred to in paragraph (2)(a) above are Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany (Federal Republic), Gibraltar, the Irish Republic, the Isle of Man, Israel, Italy, Jersey, Luxembourg, the Netherlands, New Zealand, Norway, Spain and Sweden.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Healey.]
put forthwith pursuant to Standing Order No. 94 (Ways and Means motions) and agreed to.

21. CHILD TAX ALLOWANCES: STUDENTS
Motion made, and Question,
That—

(1) If, in the case of a child in respect of whom a claim is made under section 10 of the Income and Corporation Taxes Act 1970 (children) the claimant proves that the conditions in paragraph (2) below are fulfilled, the appropriate amount to be deducted from the claimant's income under subsection (1) of that section for the year 1977–78 and the two following years of assessment shall be determined in accordance with subsection (3) of that section as amended for the year 1976–77 by section 29(2) of the Finance Act 1976.

(2) The conditions referred to in paragraph (1) above are—

(a) that on 31st December 1976 the child was following a full-time course at a university, college, school or other educational establishment; and

(b) that he was then over the age of nineteen years or that the course was an advanced course; and

(c) that he is following such a course as is mentioned in sub-paragraph (a) above in an academic year beginning in the year of assessment and either—

(i) is not in receipt of any grant from a government department or local authority or otherwise out of public funds in respect of that course for that academic year or any period determined by reference to it; or

(ii) is in receipt of such a grant, being a grant which is calculated in accordance with provisions for taking account of parental income but the amount of which does not fall to be reduced under those provisions.

(3) In paragraph (2)(b) above 'advanced course' means—

(a) a course in preparation for a degree, a diploma of higher education, a higher national diploma or a teaching qualification;

(b) a course of post-graduate or post-diploma instruction; or

(c) any other course, being a course of a standard above ordinary national diploma, general certificate of education (advanced level) or Scottish certificate of education (higher level);

and if any question arises whether a course falls within the above definition, the Board may consult the Secretary of State for Education and Science.

(4) In the application of paragraph (3) above to Scotland and Northern Ireland the Secretary of State and the Department of Education for Northern Ireland shall respectively be substituted for the Secretary of State for Education and Science.

1035
And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Healey.]
put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

22. RELIEF FOR INTEREST (LIMIT FOR 1977–78)
Motion made, and Question,
That the limit imposed by paragraph 5 of Schedule 1 to the Finance Act 1974 shall, subject to any reduction to be made under that paragraph, be £25,000 for the year 1977–78.—[Mr. Healey.]
put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

23. EARNINGS FROM WORK DONE ABROAD (INCOME TAX)
Motion made, and Question,
That provision may be made for amending or replacing the rules contained in Schedule 2 to the Finance Act 1974.—[Mr. Healey.]
put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

24. ACCOMMODATION PROVIDED FOR EMPLOYEES (INCOME TAX)
Motion made, and Question,
That charges to income tax may be imposed in respect of living accommodation provided by reason of a person's employment.—[Mr. Healey.]
put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

25. CORPORATION TAX (CHARGE AND RATE FOR FINANCIAL YEAR 1976)
Motion made, and Question,
That corporation tax shall be charged for the financial year 1976 at the rate of 52 per cent.—[Mr. Healey.]
put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

26. ADVANCE CORPORATION TAX (RATE FOR FINANCIAL YEAR 1977)
Motion made, and Question,
That the rate of advance corporation tax for the financial year 1977 shall be thirty-five sixty-fifths.—[Mr. Healey.]
put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

27. CORPORATION TAX (SMALL COMPANIES)
Motion made, and Question,
That—

(a) the small companies rate for the financial year 1976 shall be 42 per cent.; and

(b) the fraction by which corporation tax charged on income is reduced under section 95(2) of the Finance Act 1972 shall for that financial year be four twenty-fifths.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

28. COMPANY RECONSTRUCTIONS AND AMALGAMATIONS (CAPITAL GAINS TAX AND CORPORATION TAX)
Motion made, and Question,
That charges to capital gains tax and corporation tax may be imposed by provisions restricting the operation of paragraphs 6 and 7 of Schedule 7 to the Finance Act 1965 and section 267 of the Income and Corporation Taxes Act 1970.—[Mr. Healey.]
put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

29. TRANSFER OF BUSINESS TO NON-RESIDENT COMPANY (CORPORATION TAX)
Motion made, and Question,
That charges to corporation tax in respect of chargeable gains may be imposed by provisions applying where a business is transferred to a non-resident company.—[Mr. Healey.]
put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

30. VALUE-SHIFTING (CAPITAL GAINS TAX AND CORPORATION TAX)
Motion made, and Question,
That charges to capital gains tax and corporation tax may be imposed by provisions relating to schemes or arrangements whereby there is a change in the value of an asset and a tax-free benefit is conferred on the person disposing of it or on other persons.—[Mr. Healey.]
put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

31. ANNUAL PAYMENTS FOR NON-TAXABLE CONSIDERATION (INCOME TAX AND CORPORATION TAX)
Motion made, and Question,
That charges to income tax and corporation tax may be imposed by provisions relating to annual payments made under a liability incurred for non-taxable consideration.—[Mr. Healey.]
put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

32. DISPOSALS OF CONDITIONALLY EXEMPT PROPERTY (CAPITAL TRANSFER TAX)
Motion made, and Question,
That charges to capital transfer tax may be imposed by amendments of sections 32(2) and 34(4) of the Finance Act 1975 and section 78(3) of the Finance Act 1976.—[Mr. Healey.]
put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

33. PETROLEUM REVENUE TAX (TRANSACTIONS BETWEEN PARTICIPATORS)
Motion made, and Question,
That charges to petroleum revenue tax may be imposed by provisions relating to certain transactions between participators in oil fields.—[Mr. Healey.]
put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

34. ANNUITIES UNDER TITHE ACTS 1936 AND 1951
Motion made, and Question,
That provision may be made for doubling the amounts payable on 1st October 1977 on account of annuities under the Tithe Acts 1936 and 1951.—[Mr. Healey.]
put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

35. RELIEF FROM TAX (INCIDENTAL AND CONSEQUENTIAL CHARGES)
Motion made, and Question,
That it is expedient to authorise any incidental or consequential charges to any duty or tax (including charges having retrospective effect) which may arise from provision designed in general to afford relief from tax.—[Mr. Healey.]
put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

PROCEDURE (MUTUAL ASSISTANCE IN RECOVERY OF CUSTOMS DUTIES ETC.)
Motion made, and Question,
That, notwithstanding anything to the contrary in the practice of the House relating to matters which may be included in Finance Bills, provision may be made in any Finance Bill of the present Session for giving effect to the Directive of the Council of the European Communities dated 15th March 1976 No. 76/308/EEC.—[Mr. Healey.]
put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

PROCEDURE (EXCHANGE CONTROL)
Motion made, and Question,
That, notwithstanding anything to the contrary in the practice of the House relating to matters which may be included in Finance Bills, any Finance Bill of the present Session may make amendments of the Exchange Control Act 1947, being amendments to extend and supplement section 30(3) of that Act and to incorporate in that Act so much of section 55 of the Finance Act 1968 as relates to exchange control.—[Mr. Healey.]
put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

PROCEDURE (FUTURE TAXATION)
Motion made, and Question,
That, notwithstanding anything to the contrary in the practice of the House relating to matters which may be included in Finance Bills, any Finance Bill of the present Session may contain provisions, taking effect in a future year, with respect to the circumstances in which a person's employment is to be treated as director's or higher-paid under Chapter II of Part III of the Finance Act 1976.—[Mr. Healey.]
put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.
Bill ordered to be brought in upon the foregoing Resolutions relating to Ways and Means and the Orders relating to Procedure made this day by the Chairman of Ways and Means, the Chancellor of the Exchequer, Mr. Eric G. Varley, Mr. Albert Booth, Mr. David Ennals, Mr. Joel Barnett, Mr. Roy Hattersley, Mr. William Rodgers, Mr. Harold Lever, Mr. Robert Sheldon and Mr. Denzil Davies.

FINANCE
Bill to grant certain duties, to alter other duties, and to amend the law relating to the National Debt and the Public

1039
Revenue, and to make further provision in connection with Finance, presented accordingly by Mr. Robert Sheldon and read the First time; to be read a Second time tomorrow and to be printed. [Bill 101.]

EUROPEAN COMMUNITY (DRIVERS' HOURS)
10.49 p.m.
The Under-Secretary of State for Transport (Mr. John Horam)The Under-Secretary of State for Transport (Mr. John Horam) rose—
Mr. Speaker: Order. I do not like hon. Members to stand this side of the Bar of the House: it is disorderly. If hon. Members can stand there, they can stand anywhere.
Mr. Horam: I beg to move,
That this House takes note of EEC draft Regulation R/642/76 of 10th March 1976 on the harmonisation of certain social legislation relating to road transport, the Minister for Transport's explanatory memorandum of 23rd April 1976 and the Secretary of State for Transport's supplementary memorandum of 31st March 1977.
The regulation which covers the question of drivers' hours and rest periods is Regulation 543, which was introduced in 1969. This limits most drivers' hours to a maximum of eight as opposed to 10, which is the number in this country. As the House knows, we have sought and achieved successive deferments of the application of Regulation 543.
Draft Regulation 642 covers a number of modifications to Regulation 543, such as working time, mini-buses and the 450 kilometre rule, but it has raised the possibility of further deferment of the drivers' hours regulation. This draft regulation was proposed in March 1976, but progress has been slow. Thus, at the last Council meeting in December six questions were put by the Committee of Permanent Representatives to obtain the views of Ministers so that there should be, in effect, guidelines.
Three of the questions—Nos. 3, 4 and 5—which are listed in the supplementary explanatory memorandum before the House do not matter as much as the others to the United Kingdom. On No. 6 there was no agreement at the meeting of the Council of Ministers. No. 1 raises the question of a different regime in each of the countries of the EEC, and there was almost no support
1040
for it. No. 2 raises again the question of a longer transitional period, and discussions on it proceed. Therefore, I thought it worth while adding to the explanatory memorandum in order to explain what had transpired at the last meeting of the Council of Ministers so that hon. Members might be clear about the basic questions confronting us on the draft regulation.
It may help hon. Members if I say a few words to put the EEC social regulations in their chronological context. The United Kingdom has a long—and, I think I may say, honourable—record in this field. We have had legislation controlling hours of driving and rest periods for commercial vehicle drivers since the early 1930s, which one may reasonably call the dawn of commercial road transport as we know it today. That legislation survived with little change until 1968, when the foundations of our present law on the subject were laid.
The Transport Act 1968 maintained the emphasis on protecting the public from the dangers which arise when a driver becomes overtired, but it carried the idea a stage further by introducing a control over the other duties on which a driver may be engaged in the course of his employment and over the length of his working day. Behind this concept lay the desire not only to improve road safety but to improve the lot of those who work in what had become one of the most important industries of the country.
Road freight carries more than 65 per cent. of goods transport in the United Kingdom in terms of tonne/kilometres. Transport by bus and coach has, of course, been giving place to the private car but still accounts for 12 per cent. of all passenger/kilometres. Bus patronage in Great Britain is the highest in the European Community, on the basis both of the absolute number of trips and of the number of trips per head of population.
The Transport Act 1968 had its critics. But when this House passed the Bill it was giving its approval to a progressive measure, recognising at the same time that everything could not be achieved in one leap. Provision was made for a stage-by-stage implementation. Even with this relatively cautious approach, Ministers found that a very sensitive judgment was needed to determine the point at

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which progress towards better conditions for the drivers could affect the capacity of the industry to provide a particular service to its customers. With the regulations made at that time a balance was achieved. It did not meet everybody's wishes or long-term ambitions by any means, certainly not those of the trade unions, but it is a practical compromise.
While that was going on in this country, the European Community was pursuing a somewhat different course. Moved principally by Article 75 of the Rome Treaty and the Council decision of 13th May 1965, the Community was seeking to harmonise the conditions affecting competition in transport by road, rail and inland waterway, to achieve a measure of social progress for those working in transport, and to improve road safety. One of the earliest achievements of this policy was the Council Regulation No. 543 of 1969 which regulates driving time and rest periods for commercial vehicle drivers, but not working time. The Community always intended to regulate working time at a later stage.
Regulation 543/69 is the regulation currently in force for most of the heavier types of commercial transport in the original six member States of the Community and more recently in Denmark. It does not apply to regular passenger transport on routes not exceeding 50km.
When the United Kingdom acceded to the Community we accepted Regulation 543, together with the rest of the existing EEC legislation. There were misgivings on the part of transport experts because Regulation 543 is considerably more limiting than existing United Kingdom law, and it was no doubt in response to those misgivings that a period of grace was negotiated. The regulation was to come into force for international transport only from 1st April 1973. This gave us no problem, and its application to national transport operations was postponed until 1st January 1976.
On 1st January 1976, Article 5 of the regulation was given effect for national transport; this deals with minimum ages and professional qualifications of drivers. But it had been realised for some time that the provisions on driving time and rest periods would raise very great problems when applied to United Kingdom national transport. The Government had
1042
therefore addressed a request to the Commission for deferment, under the transitional provisions of Article 135 of the Treaty of Accession. The Commission granted this request, and the deferment has since been extended to 31st December this year.
These difficulties continue and are so large that it is of great importance to obtain—if we can—a further period of grace for the United Kingdom before the Community regulation is put into full effect for national transport. That has been a prime objective of Government policy. And I shall return to the point later.
Mr. John Evans: My hon. Friend made the point that the British Government had sought and obtained successful derogation from Regulation 543 of 1969. Can he confirm that the British Government cannot obtain any further derogations from it after 31st December this year, and that if the United Kingdom regulation does not come into force on 1st January 1978 Regulation 543 of 1969 will automatically operate in full?
Mr. Horam: My hon. Friend is entirely correct. Only this regulation that we are now debating raises the possibility of further deferment being achieved. If we do not get this regulation, the existing regulations will come into effect on 1st January 1978, replacing the current law on drivers' hours.
It must not be imagined that Regulation 543 has not created difficulties for other member States too. Knowledge of this enabled us early in 1975 to join with others in suggesting that the regulation needed to be made simpler and more flexible. The Commission initiated a review, making it clear that any formal proposals for amendment of Regulation 543 would have to include the proposals that the Commission had already placed before the Council for supplementing the provisions on driving time and rest by provisions to control working time. They were not covered in the original regulations. In the result the Commission produced draft Regulation R/642 of 1976—the document which is the subject of this debate. The draft would consolidate Regulation 543 with the provisions proposed to control working time and with amendments proposed to make the regulation more flexible.

1043
Although R/642/76 contains some useful ideas, it may have fallen into the trap of going too far too soon. My impression is that most member States are unwilling in present economic circumstances to take this substantial step towards further social progress. Most would like for immediate purposes to do no more than make the relatively minor changes in Regulation 543 on which there is already fairly general agreement. I make this point now so that hon. Members may be aware in advance that some of the articles on which they may wish to express views, such as limits of working time, are in fact unlikely to come before the Council for decision in the immediate future. But, of course, I would still be very interested to hear hon. Members' views.
In these circumstances, the policy of the United Kingdom while it has the Presidency of the Council is to seek to bring forward those proposals for revision of Regulation 543 which stand a chance of adoption at a Council in June, following the guidelines laid down by the Council of 16th December 1976, outlined in the six basic questions in the supplementary explanatory memorandum. This would be only a first stage in the revision of the regulation and would not preclude other changes at a later date.
Among the items in this first stage, the most important from our point of view would be a provision to spread the impact of Regulation 543 on national transport in the United Kingdom and Ireland over a further period of years. I emphasise that this will be extremely difficult to negotiate, not only because of legal problems inherent in the transitional provisions of the Treaty but because of the political situation in other member States. I would not be surprised if we found it necessary to lay down in the regulation dates for a staged progress towards full compliance.
The problems for this country are real. They are basically problems of cost and of manpower. In addition, there are practical operational difficulties which are felt particularly acutely in the passenger sector of the industry. These will be difficulties for the transport manager, the tours organiser, the clerk who makes up the duty roster, the driver, maybe the driver's wife, and certainly the bus passenger who may find that the last bus
1044
leaves one hour sooner. The basic necessities for sorting out these difficulties are time and money. These difficulties are now better understood by our European partners.
Mr. Hamish Watt: Do our partners in the EEC recognise the present political situation in this country? Do they recognise that many of these regulations are abhorrent to the people of Scotland because they will put up the cost of transport immeasurably?
Mr. Horam: We do our best to take account of all opinions. That is one of the reasons why we are trying to obtain a further transitional period before the full force of the measures takes effect in this country. I cannot say now what else might be included. All member States have a list of amendments they would like to make, and we shall have to move within the sphere of common agreement, which may be quite small.
Mr. Nigel Spearing: Since there are likely to be many changes before the final document is agreed, has my hon. Friend approached the Lord President to see whether we shall be able to debate the final document?
Mr. Horam: I have not yet tackled the Lord President. I believe in getting one agreement at a time. When we see what happens after this debate, we can consult the Lord President. No doubt my hon. Friend the Member for Newham, South (Mr. Spearing) will have his own views to put.
I do not, however, envisage that the Council will be ready to accept amendments which would in any case intensify the difficulties of conforming to the social regulation.
I should now turn to the amendment put down by Opposition Members. I should say at once that I have considerable sympathy with the ideas underlying it. I can see a good case in principle for arguing that this EEC legislation which I have been discussing is more appropriate to the control of international traffic than the control of national traffic under the varying circumstances of the individual member States. At one stage, specific proposals of the Economic and Social Committee were put forward to this effect, but they foundered through lack of support.

1045
Most member States argued that it would be basically wrong for driving hours, which are basically a social provision, to be different in each member State. Member States have adhered to this, and Denmark has only recently joined the list of countries which have agreed to this approach. It is, after all, an object of social progress which most trade unionists and most countries have long desired—namely, a reduction in driving hours.
The amendment calls upon us to ensure that there is a different regime in each country, but, of course, the problem is in accepting the wording "ensure" Given the fact that there is so little support among member countries for the proposal that each country should have a different regime, it is almost impossible—since we have to get agreement between all European countries—to ensure that the Opposition's wishes are met in this matter.
This is not something that is in the discretion of the Government. Given the Council's reaction in December, we are unlikely to find the general acceptance that would be required to meet the spirit and wording of the opposition's amendment. Furthermore, the Government of the day accepted the obligation to implement Regulation No. 543/69.
Our discussions at Brussels have been on the basis that we need a further transitional period and further power to deal with vital national problems but that overall we recognise that we must in due time honour our commitments.
The amendment refers to "certain limits." There appear to be reasonably good prospects for ensuring that in all the member States national Governments have power to take certain kinds of traffic out of the scope of the regulation. I would hope, for example, to exclude minibuses, milk floats and people making deliveries of milk, ambulances and certain other categories.
I am anxious to get reasonable flexibility in this sector. I think that we can hope for reasonable progress. I do not think, however, that that is what the Opposition have in mind in their amendment. This is an area where we could meet not only the spirit of their amendment, to which I am sympathetic, but
1046
the letter of the amendment. But I do not see any prospect of agreement that we should retain powers to take all or most of our national traffic out of the scope of the regulation.
I return to the point made by my hon. Friend the Member for Newton (Mr. Evans). If we do not get agreement on the regulation, the existing unamended Regulation No. 543/69 comes into operation from 1st January 1978.
Mr. Roger Moate: We have had two or three deferments of the application of the previous regulation. Can the Minister say why we would be prevented from having yet another deferment if we sought one?
Mr. Horam: I understand that, basically, it is a provision of the regulations. Under existing provisions the Commission can no longer give us a derogation after 31st December this year. That is the position as I understand it. I cannot go any further than that.
Mr. Douglas Jay: If that is the situation, is it not possible for the Government to ask for amendment of this regulation?
Mr. Horam: I understand that that is not possible.
Mr. John Evans: Does my hon. Friend accept that the regulation lays down that derogation can be given only until 31st December 1977 unless the Council unanimously agrees to amend the regulation? Does he accept that there is not a snowball's chance in hell of the full Council unanimously adopting a proposal that Regulation No. 543/69 should be amended?
Mr. Horam: My hon. Friend has considerable knowledge of these matters and I cannot compete with that. But my judgment of whether the Opposition's proposal has a chance of getting through in the unanimous terms that he suggests is that it has no such chance. That is why we are proceeding in the way that we are.
It is the Government's judgment that the best course for achieving the aims on which there is general agreement on both sides of the industry, and probably on both sides of the House, is to get an affirmative answer on the question of the transitional period. I think that that is also the position of the trade unions,

1047
which want deferment for a further period of years.
Hence I hope that the Opposition, while accepting that I am sympathetic to their broad position, will accept my view that their approach might cause some damage in leaving us in the "Catch 22" situation referred to by my hon. Friend the Member for Newton. I hope they will agree that the Government's approach is the best in the foreseeable circumstances, and I hope therefore that they will not press their amendment.
11.11 p.m.
Mr. Norman Fowler: I beg to move, as an amendment to the Question, at the end to add:
"but calls upon the Government to ensure that, within certain limits and following a Community procedure, less restrictive provisions should apply for national transport than for intra-Community transport."
I shall speak briefly. I think that there is a great merit in what the hon. Member for Newham, South (Mr. Spearing) said on this point: that once the negotiations have been completed the Minister should come back to the House with the new proposals. That would go a long way towards allaying fears on this specific matter.
Basically, the House is being asked to give its views on the new proposed rules for road passenger transport and road haulage. The fact that the next meeting of the Transport Ministers is in June will give us an opportunity of stating our views.
The Minister has clearly recognised that the crucial proposals are those concerned with hours of work for drivers and the distances that drivers may travel. There is no scope for disputing the fact that these rules, if applied, would have a highly damaging effect on our bus and coach industry. They would increase costs and, therefore, put up prices and fares. Services would have to be reduced, and the deficit of passenger transport operators would be made worse. It is for these reasons that the proposals are opposed in one way or another by the Road Haulage Association, the Freight Transport Association, the Confederation of Passenger Transport and the T & GWU.
Some of the greatest difficulties are faced by the bus and coach industry.
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Britain still has the highest level of bus patronage in Europe, both on the basis of total number of journeys and per head of population. In Britain there are about 8 million passenger journeys by stage carriage bus services a year compared with 6 million in West Germany. It follows, therefore, that any regulations of this sort will have a greater effect in Britain than elsewhere.
The main regulations proposed are reasonably well known. In particular, there is the regulation which would reduce the allowed driving time from 10 hours, which is the current rule in Britain, to eight hours. It also lays down more restrictive hours on a weekly and bi-weekly basis. The effect would be to reduce the time that drivers can drive. This would reduce the earnings of the drivers and it would impose a manpower demand which would push up total costs. The passenger transport industry puts the total cost at between £100 million and £150 million a year.
The net effect would be to increase fares or to have more support and subsidy. Probably it would be a mixture of the two. Certainly this would affect the number of passengers travelling, because if fares are increased there are many who will choose other means of transport.
These rules generally apply to journeys of over 50 kilometres, and the assumption may be made that this excludes the stage carriage services. Nothing could be further from the truth. Many stage carriage journeys come within the rules as they are. They also affect excursions and long-distance coach services. Many of these services fall into the four to five-hour category—a return journey in 10 hours—and under these rules, if they are applied immediately, such services would be barred.
Tourist services using old-established routes, rather than motorways, such as Liverpool to London via Chester, a journey which takes nine to 10 hours' driving time, would be barred. Day excursions run by the National Bus Company, such as the Manchester to Scarborough trip with a stay of five and a half hours at the destination, would have to be changed. The stay would have to be cut down to three and a half hours, and it is highly dubious whether such excursions would continue.

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Three reactions to the regulations make the point about the effect on the passenger transport industry. The Scottish Bus Group commented that in its type of operation it would be impractical to have a section of drivers wholly employed on routes of less than 50km and another section on routes of over 50 km. The Wallace Arnold company has said that the imposition of the regulations would have a completely destructive effect on the leisure services enjoyed by the public. Some local authority undertakings, Bournemouth for example, calculate that overall the proposals will add about 41 per cent.—or £550,000—to their wages bill, excluding the cost of additional administrative staff.
The position is similar in the road haulage industry. There is a restriction on drivers' hours, and heavy lorries are restricted to distances of 450 km, or 280 miles. This means that some journeys will not be practical. The Freight Transport Association estimates that the additional cost will be between £350 million and £450 million a year.
Another effect will be the complete reorganisation of the freight distribution industry in this country. Faced with this position, it seems that there are broadly two choices when it comes to the negotiations. We can seek a further deferment of the regulations, or we can seek to negotiate changes in them. We welcome what the Minister said about the Government seeking a further deferment.
The House is put in real difficulties when it comes to the Government motion. It was put down only on Friday, and the first sign that there was to be such a debate was given on Wednesday of last week. Since then we have sought as best we can to have consultations with the industry, but the industry wants more than that.
The Confederation of Passenger Transport has said that any relaxation falling short of British law will be of little or no practical value. The Freight Transport Association wants to see EEC legislation applied only to international journeys, or maximum powers of delegation to member States. It is true that there is widespread dissatisfaction with the first regulation, No. 543/69, in member States of Europe.
Mr. John Ellis: There are all these bodies making representations, and the hon. Gentleman is saying "Horror, horror" about all the regulations, yet Conservative Members were advocates of our entry into the Common Market, which states that we must have harmonisation. As my hon. Friend the Minister pointed out, there is no way out of this impasse. It is a bit rough of the hon. Gentleman saying on behalf of himself and his party "We're in this mess" when the Conservatives got us into it.
Mr. Fowler: I shall come on to that. What the hon. Gentleman says about R/543/69 must be substantially correct. I am not seeking to dispute that that is the position. I am trying to help the Government. I think that that would be a reasonable attitude for hon. Members on both sides of the House to take. It seems to me that what would help the Government most in the negotiations that they are to continue would be an indication of how the industries and the public feel about the regulation in order to add to the representations that the Under-Secretary is making. I see that the Under-Secretary assents to that.
Mr. Jay: If the regulation is so exceedingly damaging, will the hon. Gentleman explain why the previous Conservative Government apparently accepted it?
Mr. Fowler: We have tried to explain that. It seems to me that there are two things we can do tonight. We can have a debate that goes over the old Common Market ground, and if that is what the right hon. Gentleman wants he is entitled to it. But I am trying to help his Government by taking that debate a little further and trying to strengthen the Minister's hand in the negotiations which we all know must take place.
It is worth stressing again that it is clear that in several countries in the Common Market Regulation 543/69 has not been enforced. In putting forward our amendment we asked for a change, and there seems little doubt that this carried great support. It had the industry's support, and it seemed that it also had the Government's support.
When giving evidence to the Select Committee on Statutory Instruments, the

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then Minister for Transport, the hon. Member for Dudley, East (Dr. Gilbert), said:
"Two years ago"—
he was speaking in May 1976—
"it seemed extremely unlikely that there was any possibility of change, whereas now I think it is agreed that the need for change is universally recognised."
Those words were not forced out of the Minister but were used in his opening statement to the Committee. It is that change that we are urging upon the present Minister.
Mr. Horam: Was not my hon. Friend talking about the need for new regulations, on which I think there is general agreement? That is why we have the possibility of new regulations covering this subject. I think that there is dissatisfaction with the general way in which R/543/69 has worked. I am sure that my hon. Friend was referring to that.
Mr. Fowler: If the hon. Gentleman looks further back in his hon. Friend's evidence, he will see that the matter is more fundamental than that. In an earlier passage—I emphasise again that this was his opening statement—his hon. Friend said:
"There is, as the Committee will be aware, widespread dissatisfaction with the first regulation 543/69, throughout the member states of the Community. It has been variously described as 'unrealistic', 'inflexible' and very difficult to enforce' …."
He later described the "unenforced 450 kilometre limit" as "universally unpopular."
Mr. John Evans: Will the hon. Gentleman follow the logic of what my hon. Friend the Under-Secretary said? We are discussing a new regulation stemming from the unhappy workings of R/543/69. That is why we are here.
Mr. Fowler: I should not have given way to the hon. Gentleman. Of course I recognise that, but I am arguing that the previous Minister's attitude was to suggest that a more fundamental change was appropriate and possible.
Mr. Horam Mr. Horam indicated dissent.
Mr. Fowler: I urge the Under-Secretary to read the evidence given to the Select Committee by his hon. Friend.
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I am very conscious of what the Under-Secretary has said tonight. We on this side of the House wish to be as helpful to him as we can be. We want to reinforce the case that he will make in June. We want everybody concerned to be aware of the great concern on this issue in the road haulage and passenger transport industries and, above all, among passengers and the public generally.
Although we shall not force a Division tonight, we only take that view following the Minister's assurance, and we urge him to take note of the views expressed in this debate. Indeed, it would satisfy the House even further if the Minister were to accept the proposition put by his hon. Friend the Member for Newham, South (Mr. Spearing)—that the Minister should undertake to consult the House further following his negotiations. We wish him well in those negotiations, and we hope that we shall hear more about this subject at a later stage.
11.26 p.m.
Mr. John Evans: On a point of order, Mr. Deputy Speaker. I did not hear the hon. Member for Sutton Coldfield (Mr. Fowler) move the amendment.
Mr. Deputy Speaker (Mr. Oscar Murton): The hon. Member did so at the beginning of his speech.
Mr. Evans: This is a tremendously important debate on a matter that will have far-reaching consequences on the transport industry of the United Kingdom. This matter touches not merely road transport but very much wider considerations of transport policy within the EEC. Not only does it embrace road haulage. It covers rail, inland waterways and air transport.
There is considerable dissatisfaction within the European institutions, particularly in the European Parliament—of which Opposition Members think so highly that they want to elect Members there directly—about the lack of realistic progress in the implementation of a common transport policy. The whole concept of transport policy involves the removal of the distortions of competition—which is a favourite expression among many Europeans. Indeed, the effects of the regulations on road haulage in terms of cost will be high, and it could alter the

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whole system of costings of transport in this country.
It surprises me that the NUR and other railway unions have not examined more closely the implications of the EEC regulations on road transport. If our trade unions were to pay close attention to those implications, I am sure that they would fall into line with their colleagues on the Continent who are demanding implementation of the EEC regulations on road haulage because of the unfair competition between road haulage and rail. It may be that sooner or later the railway unions in the United Kingdom will wake up to this fact. It is important to point out that many sections of organised workers on the Continent—sections not within road haulage—are demanding implementation of these proposals.
It is true to say that Regulation 642/76 replaces Regulation 543/69. There is controversy over the success of Regulation 543/69. Much of the content of that regulation was demanded by the Continental trade unions to protect them from some of the practices of Continental employers. However, the situation in this country is different because we have a powerful trade union movement which has always been able to protect the interests of the workers. Now that the British trade union movement is playing its full part in the Economic and Social Committee of the EEC, I hope that we shall have a profound influence on the thinking of fellow workers on the Continent.
There is a "Catch 22" situation in regard to the regulations. My hon. Friend the Minister has said that if we do not succeed in getting Regulation 642/76 on to the statute book, Regulation 543/69 will automatically come into force. That will mean a limitation on the length of journeys allowable to heavy lorries, and it is on that subject that I want to concentrate.
The new regulation lays down that, if a tachograph is not fitted following the implementation of the regulations, it will be illegal to drive a lorry for a full eight hours with a second crew member and that the journey will have to end after 450 km. My right hon. and hon. Friends on the Front Bench and right hon. and hon. Members on the Opposition
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Front Bench have to face the difficulty that in this country transport workers are wholly opposed to the whole concept of the use of tachographs.
Thus, if the new regulation is not passed and the old regulation comes into force, it will not be legal to drive heavy goods vehicles in Britain for more than 450 km in one eight-hour stretch, and that will obviously cover a considerable number of journeys within the United Kingdom. It is worth pointing out that it is on the removal of this provision of the 1969 regulations that employers and trade unions on the Continent are united. Plainly, modern vehicles can be driven much further than 450 km in an eight-hour day, which is a nine-hour day with a spreadover. That is why employers and trade unionists on the Continent are anxious to have the new regulations introduced.
I was interested to hear the Minister say that amendments had been proposed by other countries. These are technical amendments, but I am sure my hon. Friend will agree that, quite apart from ourselves and Ireland, those countries do not like the spirit or the substance of the regulations. For the United Kingdom and Ireland there are serious problems. It is fair to point out that when the European Parliament adopted these regulations in 1969 some parliamentarians accepted that the United Kingdom faced difficulties with these regulations.
The Conservative amendment is at best hypocritical and at worst dishonest. The wording seems to be closely similar to that used by the European Conservative Group in the European Parliament in December when, under pressure from me, that amendment was withdrawn on the ground that it was unrealistic and utterly unacceptable to our European counterparts. I am sure that the hon. Member for Arundel (Mr. Marshall) would like to make it clear that everyone who spoke in that debate made it clear that the amendment proposed by the European Conservative Group was utterly unacceptable.
Some of my hon. Friends mentioned the discussions when we joined the European Community. It is fair to point out that the information given to me as Chairman of the Transport Committee of the European Parliament was that there were no deliberations in 1972 on transport policy

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or these regulations. Colleagues within the European Parliament have made it clear that there were no discussions during the renegotiations. It seems that both sides were silent about the ramifications of Regulation 543/69 and its possible effects on the British transport industry.
Whatever the arguments for and against joining the Community, it increasingly seems that those who fought on an anti-Market platform were logical throughout. The new transport policy is a logical extension of our joining the European Economic Community. Amendments of this nature suggest that we can have the best of two worlds. It is not possible to have two worlds. Whether we like it or not—and I do not like it so very much—we are members of the EEC. This regulation has been in force since 1969, and it is dishonest and hypocritical to suggest that a second set of regulations should be laid down for us.
I moved an amendment in the European Parliament to give a further derogation of three years to Britain because of our special problems. With our regional policies and our economic problems, this regulation presents problems to us. The European Parliament accepted the situation and agreed that we should have a further derogation of up to three years. I hope that my hon. Friend the Under-Secretary of State will confirm that this is the line that the Government will take. We need this provision written into the regulation. If this regulation does not come into force, the earlier one will remain and it will be worse for us. If we do not get a further period of derogation, I suspect that the British people will again feel that they have been severely conned by our entry into the EEC.
11.36 p.m.
Mr. Peter Fry: I am grateful that the hon. Member for Newton (Mr. Evans) mentioned the tachograph. It was my impression that, in theory at least, the law on the tachograph applied here, although it may be that the law is not being enforced. This is in line with the Alice-in-Wonderland position of our transport policy, and my doubts and fears are not allayed by the Secretary of State's memorandum.
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For example, in outlining the six questions which the Department of Transport put, it stated Question 6 as:
"Does the Council think that the minimum total rest time per week provided by Regulations (EEC) 543/69 is adequate or not?"
The reply was:
"No Member State opposed the principle of an increase in the minimum total rest time per week, and the Council asked that a practical proposal regarding the minimum total rest time per week and provisions concerning spreadover should be drawn up and submitted to them."
It is just this question of weekly rest which concerns our bus and coach industry. Indeed, it goes so far as to say that perhaps the minimum thing is to establish that a period of weekly rest or daily rest can begin in one week and end in the next. As the regulation stands, it would mean a weekly rest period of 39 to 40 hours. On the present running of the British bus and coach industry, it is impossible to fit that period of rest into the six-day week which most firms operate.
If this kind of regulation applied to factories, it would make many of their working hours illegal. For example, it would be impossible to work the hours from 6 a.m. to 1400 Monday to Friday, alternating with weeks of working 1400 to 2100 hours Monday to Friday. The bus and coach industry has misgivings about what has been conceded already. It is not just a question of negotiating new or better terms. It would appear that in this respect the pass has been sold already. I hope that we shall get some explanation, or at least encouraging words for our industry, from the Minister. I am restricting my remarks to the bus and coach industry because other hon. Members want to take part in the debate.
We cannot stress too much how dangerous the situation is. The cost has been caluculated at between £100 million and £150 million, but that kind of figure is purely theoretical. If these new hours were brought in there would simply not be enough people with the proper PSV licences to fulfil the need.
This is clearly shown in information provided by one of the National Bus Company subsidiaries, giving rotas at four of its depots in the East of England. To start with, they show 12 different systems

1057
of rota weeks, of which, if everything went according to plan, only three in one case and six in another would conform to the EEC regulation. However, because no week is perfect, because some men are ill and some buses break down, in no case at all do the rotas in the four depots conform to the regulation.
In those circumstances, the bus industry could not maintain its present fares structure or, probably, anything like its present level of service. In many rural areas particularly, services would virtually end. In view of the vote on the Budget Resolution earlier tonight, that is of great importance to many millions of people.
Therefore, we must impress on the Minister that what he already appears to have agreed is a serious threat. Unless something like the existing British Law is decided, the Minister—or, by that time, my hon. Friend—will be confronted with truncated services and an inevitable shortfall in passengers. There will be the enormous problem of how large a subsidy will have to be found from the taxpayer or the ratepayer.
When the bus industry is in what the Minister recognised to be a delicate situation, this could be a death blow to public transport in many areas. I cannot believe that Labour Members want that. Although we know that in many areas people have to rely on their private cars, we on the Conservative Benches realise that a section of the community will always need public transport if its to have any mobility at all.
I make no excuse for concentrating on this small area. Unless this decision is taken quickly—preferably before the Secretary of State ceases to be Chairman of the Council—we may have lost our chance for good. Hon. Members on this side have a high regard for the Secreteary of State—I am delighted to see that he has joined the debate—but in this instance we must be united as a country and as intransigent as possible in the deliberations in Brussels.
Otherwise, not only will the British taxpayers have to pay ever-increasing amounts for proper service but there will be enormous problems in co-ordinating public transport which will vitiate whatever ideas the right hon. Gentleman puts in the White Paper that he hopes to
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present next month. With those words, underlining what I regard as a serious position, I look forward to some reassurance from the Minister.
11.45 p.m.
Mr. Hamish Watt: It is too bad that this regulation should have to be debated at such a late hour and that we should have such a short time in which to debate it. It is vital that the Minister should be aware of the damage that it can do to remote areas, particularly those I know best, in the North-East of Scotland. Damage can be caused to coach tour operators, who have to travel considerable distances in the North of Scotland to reach any large centre. Areas such as my own, and others further north, are particularly affected.
A group of people may wish to charter a bus to visit Glasgow or Edinburgh for the day. It is impossible for the coach to get to one of those cities and return in the same day and remain within the hours and mileages laid down in the regulation.
Tremendous damage will be done to the livestock hauliers in the North-East of Scotland. There are nearly 450 miles to travel from Thurso, where many of the lambs are sold, and Carlisle where they are taken. It is impossible for the lorry driver to keep within the times and mileages laid down and make such a journey. Often there have to be several pick-up points before the driver can set off on his journey south. Because there are few motorways in Scotland the time taken to cover the distances in the North of Scotland is much greater than that taken to complete the other part of the journey when the motorway is reached.
I impress on the Minister the need to go to Europe and insist on a derogation clause for all livestock transport north of a line of the Edinburgh-Glasgow motorway.
Mr. Peter Mills: What about us?
Mr. Watt: I have mentioned the lamb sales and the same applies to calf sales. If a derogation clause is not possible, I plead with the Minister to obtain a derogation covering say, 12 weeks, particularly in the autumn, when the young and immature lambs or calves are moved further

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south to the fatteners in England and the South of Scotland.
There is another section of livestock transport that is particularly vulnerable—the livestock hauliers who take live pigs from the North-East of Scotland down to the factories in Carlisle and Manchester. The lorry driver has to start off early in the morning and may have up to 10 pick-up points before he can begin his journey south. It is impossible for him to get to his destination within the time and hours laid down in the regulation. Is the driver to stop somewhere and allow the pigs to wait in the lorry for the night, or will someone else have to take over? We must have an answer to these serious questions.
There is another section of the hauliers in the North-East of Scotland who will be particularly hard-hit—the hauliers who carry whisky. Whisky often has several origins. It is common for a blender to require a lorry-load of six, seven or eight different whiskies, which are picked up from the excellent distilleries around the north. That means that the lorry has several pick-up points. By the time that the driver roots out the Exciseman or the manager, or whoever is in charge of the bond, he is unable to pick up his load and take it to his destination. As the load is excisable, it cannot stop along the road, because there are no bond transport parks where the lorries can be kept safely. It is vital, in the interests of security, that the load goes straight to its destination. It will be impossible for the hauliers to observe the rules stipulated in the document we are discussing.
For these reasons, I ask the Minister to pay special attention to the needs of the North-East of Scotland. The lorry drivers in all these cases are well aware that there are times when, because of the seasonal nature of their work, they must work long hours. However, if taken over a full years they do not work excessive hours. They have no objection to the lorry owners having a harvest, as it were, at their harvest time, which is at the time of the lamb sales or the cartage of the pigs at various seasons. It is the wish of the lorry drivers as well as the wish of the hauliers that this regulation be changed to take account of the special circumstances pertaining throughout the North of Scotland.
11.15 p.m.
Mr. John Ellis: I know that the hon. Member for Banff (Mr. Watt) will forgive me if I do not directly take up the points he made in his speech.
I have had communications with the Transport and General Workers' Union, of which I am a sponsored Member, to discover the union's views on this regulation. The union has sundry and diverse problems arising on the document and is up to its neck with consultation. I believe that the ideas spelt out by my hon. Friend the Member for Newton (Mr. Evans) would be advantageous to the union if there could be derogation so that these weighty matters could be thrashed out.
How can a driver's hours whilst travelling with the lorry in a ferry be taken into account? This point has not been raised so far.
I thought that the best speech made so far tonight was that by my hon. Friend the Member for Newton. My hon. Friend told the House that he had had an amendment accepted by his colleagues in Europe to secure a further derogation for three years. I hope that that will be the Government's posture when they return to the negotiations, because my hon. Friend the Member for Newton has been a friend and ally in this matter.
It has been said in the debate that this regulation comes on top of the Budget proposals in relation to transport. To put it rather differently, the House is indeed a strange place. This affects the whole of our transport policy against which what the Budget does is as peanuts. The majority of Members have gone home, however. This always happens before debates such as this take place. We see only about a tenth of the documents that go to the Scrutiny Committee, yet those of us who take an interest in the various measures that do come before us invariably sit here getting crosser and crosser at the lack of interest.
I am sorry that the hon. Member for Wellingborough (Mr. Fry) has gone. He waxed lyrical about the dangers of this document, saying how careful the Minister should be and lecturing my hon. Friend the Minister, as did the hon. Member for Sutton Coldfield (Mr. Fowler). Hon. Members say "How did

1061
we get into this position? Who did the negotiating?". Both Front Benches have been implicated. Hon. Members on the Opposition Front Bench, when attacking the Minister, suddenly realise their own dodgy ground. As my hon. Friend the Member for Newton said, it is a Catch-22 situation. It is no good pounding the poor chap and saying "This is potentially disastrous. If we do not do something we shall get EEC Regulation 543 because there is no other way out, short of getting the whole of the Commission to agree"—and there is not a snowball's chance in hell of that.
Members on the Government Front Bench do not take that line. They know what they are stuck with. It is atrocious for hon. Members to make party political or constituency speeches and then rush out of the Chamber to make sure that they are printed in tomorrow's newspapers when often—[Interruption.] I am talking about the hon. Member for Wellingborough.
Mr. Moate: I agree with almost everything that the hon. Gentleman has said, but, in fairness to my hon. Friend the Member for Wellingborough (Mr. Fry), it should be pointed out that he was one of those who voted against the principle of United Kingdom membership of the EEC.
Mr. Ellis: I apologise unreservedly to the hon. Member for Wellingborough. He is one of those noble souls in the House who can, with good heart, lay about him, but I wish that he would not just lay about my hon. Friend the Minister. In fairness, he should clobber his own Front Bench as well.
Let us have many more of these occasions. Perhaps more hon. Members will attend the debates and perhaps they will be reported in the Press. It is often said what a marvellous thing the Common Market is, but when it comes to individual measures hon. Members see the holy light and say "This is dodgy. The Minister had better watch it. He had better be intransigent and hold up the matter and wave the flag", after having sold the pass on the principle of the Common Market.
I hope that we shall have many more occasions like this. I hope that somebody will hear our voices crying out from this
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Mother of Parliaments and that we shall get through to the public the fact that the Common Market has its problems and that the snags are many, as some of us at least expected.
11.58 p.m.
Mr. Peter Mills: The hon. Member for Brigg and Scunthorpe (Mr. Ellis) has had his little bit of fun, but this is a serious debate, or it should be, and I certainly shall not speak in criticism of the Government or of the Minister. I accept that they are in a very difficult position, but we should try to be helpful and should strengthen the Minister's hand in the difficult negotiations.
There is no doubt that the regulation will have serious effects on certain areas, particularly in the South-West. I am always horrified when I listen to members of the Scottish National Party. They consider only their own areas, wanting derogation for just one area. These problems affect many areas, particularly in the South-West. It will be difficult to send our produce to London and other parts because of the regulation.
I am in favour of harmonisation. There should be overall harmonisation. However, I cannot understand why there cannot be variations in each of the countries concerned. In Germany and other countries, where a lot of trailers operate, it is probably necessary to have a second man and various other restrictions.
We have a good safety record in this country and I should have thought that with careful and persistent negotiations we could arrive at regulations that were suitable for the needs in this country. This is what I hope the Government will do. In Committee—I sit as a member of our Select Committee on this matter—we found that there was real opposition from all sides of industry. That continues. There has been no change, and both management and men are concerned at what is going on.
I hope that this will reinforce the Minister in his desire and efforts to obtain the change or derogation that is required. The Government were previously optimistic about the prospect of securing favourable changes. I take it that the Minister is not now so optimistic. That is what worries me. We ought to be able to do something.

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I criticise the Government on this, because if one is a member of a European club and wants to obtain changes, one must show that one has been a good European. Unfortunately, it always seems that this Government are bad members of the club. It is no wonder that they cannot obtain any concessions at all. It is much easier to obtain a concession if one has been a good member of a club. In agriculture and other areas we have not been good European members, and that does have an effect. People say this country is always opposed to everything.
I certainly wish the Government well in these negotiations and changes and I hope that they will be successful because unless they are it will have a dramatic effect on certain areas of this country.
I cannot for the life of me see why there cannot be these variations to suit the needs of certain countries. I hope that the Government will take that line strongly. After all, if we can get a derogation for a certain length of time, who knows what will happen in that period? It may be that through careful negotiations it will be seen that some of the things that have been instituted are not working out in practice and that we shall then obtain the necessary changes. I wish the Government well, because much is at stake.
12.3 a.m.
Mr. David Penhaligon: I wish that when we talk about European regulations everyone would not parade their European records before speaking. I voted for Europe and I think that this regulation is absolute, total nonsense. There is no illogicality in saying that. I am a Member of Parliament, and much here is nonsense, as well. I do not see why, because one is a member of something, one must defend every full stop and capital letter of it.
What is so strange about the regulation? I cannot understand the provision about the 280-mile limit. I cannot believe that a regulation is more sensible in Europe than here in Britain. The distance from my front door, in my constituency, to this House is 302 miles via the new, expensive motorway. Using the ancient and much-criticised A30, the distance is 264 miles. This regulation means that in order to comply with the law
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somebody driving from my house to the House—although I cannot imagine why he should wish to do so—would be forced to go by the old single-carriageway route linking West Cornwall with London and would not be able to use the motorway because of the distance.
Mr. John Evans: Does the hon. Gentleman appreciate that the new regulation does away with the 450-kilometre limit it a tachograph is fitted?
Mr. Penhaligon: I am glad that the hon. Member for Newton (Mr. Evans) has attended tonight, because he explained many of the regulations in his speech. That would be an improvement. I have never been able to understand why the transport workers in this country are so vehemently opposed to tachographs. I can appreciate the emotiveness of the spy-in-the-cab angle, but I do not think that they have anything to fear from tachographs in their cabs. Perhaps they would solve the problem.
I do not understand the pressures for 450 kilometres. In Europe, especially in France, I imagine that the regulation is ignored and that no attempt is made to implement it from Monday to Friday. Perhaps the French approach of ignoring regulations that do not make sense should be followed in this country on occasions.
I have yet to hear any good reasons for the criteria on which hours and distances are based. I have seen no accident statistics to suggest that there is anything wrong with the regulations in this country. What do the people in Brussels say when the Minister puts that argument? Do they deny it? Do they say that we have more accidents in this country or that we should have fewer if we adopted their regulations?
12.6 a.m.
Mr. John H. Osborn: I intervene because in a debate on 17th December I was the only Member of the European Parliament to anticipate the tone of this debate.
I respect the work of the Chairman of the Transport Committee, but he asked me to withdraw my amendments. I found it difficult to summarise the objections of the Conservative Group at that time and, to a certain extent, I had to speak for myself. There were differences of attitude

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among Conservative Members in the Parliament and in my Committee. I said in the Parliament:
"we have no alternative but to reject Mr. Seefeld's report".
Mr. Seefeld, a German Social Democrat, was rapporteur in respect of the draft regulation that we are discussing. Throughout, he gave the impression of complacency and, in my view, did not reflect the views of many employers and trade unionists—although the whole matter had been discussed by representatives of employers and trade unions in the Economic and Social Committee.
There has, therefore, been considerable thought given in the European Parliament the Council of Ministers and the Economic and Social Committee to the differences, particularly to the differences affecting the new members—Denmark, Ireland and the United Kingdom.
The hon. Member for Newton (Mr. Evans) as chairman of the Committee, implored me to remove my first amendment. He spoke forcibly, but I was asked by the President to maintain the amendment.
A German Christian Democrat, Mr. Mursch, referred to the fact that we had been rushed, and when I summarised the position of the Conservative group I mentioned that we had been rushed, because the meeting of the Council of Ministers was to follow shortly. I withdrew the amendment on one condition—that the Commission gave a factual report on the difficulties that would be faced in the new year.
Mr. John Evans: Does the hon. Gentleman accept that if he had not withdrawn his amendment it would have been overwhelmingly defeated?
Mr. Osborn: That is an important point. Yes. The hon. Member for Newton is in the Social Democrat Group, and since members of that group were obviously pressed by trade union representatives, he had to go along with them.
This is the dialogue in the European Parliament. The hon. Member for Newton was the chairman. He may have been neutral, but the Commission realised these difficulties.
The Minister has given us an excellent set of questions that were put to the
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Council. There are several possibilities before us. The first is the derogation for three years. Another is the amendment that seeks to differentiate between national and international transport. There were discussions that the three-year derogation might be extended to five years, hut, as hon. Members have said, the Minister, as President of the Council at this time, has a difficult task with other countries in the Community, although he has considerable support from Denmark and Ireland. But even in the Assembly, let alone the Committee, there is good will towards us in the predicament in which we find ourselves.
Obviously this amendment once again refers to the use of the tachograph. I make my view clear. If I believe in production control in a factory or in orderliness in a factory, in the long term I cannot resist the concept of both those who manage and those who are managed learning the benefits of the tachograph.
When I speak to German trade union leaders who point out the value of tachographs for their members, I must listen to them, as I must listen to Mr. Jack Jones, who says exactly the opposite. There are arguments on both sides. In the Committee, in Europe, we have a chance of doing something. I think that hon. Members will accept that in the long term some form of order, if it applies in the factory, may well be of benefit in the cab of a lorry as well.
My hon. Friend has put forward an amendment in Europe so that we can see the advantages and have some trials. I hope that the Commission will again put forward proposals to the Parliament. But, meanwhile, the Minister has to engage in difficult negotiations to provide some form of derogation. I fully support the contention of the amendment that was put forward by the Irish, which I presented for them, as a way out of this problem for the three countries of Denmark, Ireland and ourselves. I hope that the Minister will accept this amendment.
12.13 a.m.
Mr. Horam: I think that all hon. Members agree that, as was stated by the hon. Member for Devon, West (Mr. Mills) and my hon. Friend the Member for

1067
Newton (Mr. Evans), this is a very important subject that will have far-reaching consequences if we do not get it right.
I wish to thank the hon. Member for Sutton Coldfield (Mr. Fowler) for the general tenor of his remarks and his willingness to consider withdrawing his motion. There is a general recognition of the need for a change in Regulation No. 543/69, which is not as wide or as fundamental as that suggested in the hon. Gentleman's remarks. It concentrates on the 450-kilometre rule but does not extend to the tachograph.
I do not think that the remarks of my hon. Friend the then Minister for Transport suggested that he thought that every country in the EEC should be different, even given my hon. Friend's views on the Common Market. My hon. Friend accepted that we should fall into line once we decided to go into the Common Market.
I should like to give the hon. Member for Sutton Coldfield an assurance that I shall certainly make representations to my right hon. Friend the Lord President about a debate, but finally it is for my right hon. Friend to decide in his own due time.
I say to the hon. Member for Wellingborough (Mr. Fry) that we have not yet sold the pass, as he suggested, and we have not yet agreed any specific figures on the issue about which he was talking. We have accepted that there will be some increase in rest periods, but we have not agreed hard figures and that is what really matters.
From the trade union point of view we think that there should be some improvement in this matter. There is not just one side to the question, however. I say that also in relation to the remarks by the hon. Member for Banff (Mr. Watt). Drivers as well as operators should be considered. My heart leapt when he said that we should pay special attention to the needs of the North-East, but then I realised that he was talking about the North-East of Scotland. I shall, however, look into his comments.
In answer to my hon. Friend the member for Newton, I say that of course we accept his point about the sort of period we would want by way of deferment.
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Three years is the very least we would ask for. This matter is too important for us to consider a short transitional period. The costs which have been mentioned by the Opposition are perhaps exaggerated, but we accept part of that case. We must, therefore, have as long as we can to adjust to the new regulations, but I accept the general thrust of his point and I would not want to be tied to the number of years we might ask for.
I say in reply to the hon. Member for Truro (Mr. Penhaligon) that there is no evidence that the eight-hour period produces a greater safety record than the 10-hour period. We have consistently argued this in the council. There is no evidence that we are wrong and that they are right. The general case is made out by them on the social issue rather than specifically on safety grounds.
I must now conclude my speech since we are running out of time. If there are other points to which I have not replied I shall find them by studying the Official Report and I shall reply to the hon. Members concerned.
12.16 a.m.
Mr. Norman Fowler: I am grateful for the manner in which the Under-Secretary has replied to the debate. I am particularly grateful for the assurance that he will seek another debate when the position on the regulation is clear. It may reinforce the hon. Gentleman in his representations to the Leader of the House if I say that that approach would find approval in all parts of the House.
We in the Opposition seek to be helpful in the amendment. In view of the assurance that the Minister will press the negotiations on behalf of the road haulage and passenger transport industries on which we place particular importance, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Main Question put and agreed to.
Resolved,
That this House takes note of EEC draft Regulation R/642/76 of 10th March 1976 on the harmonisation of certain social legislation relating to road transport, the Minister for Transport's explanatory memorandum of 23rd April 1976 and the Secretary of State for Transport's supplementary memorandum of 31st March 1977.

VILLAGE SCHOOLS (NORTHUMBERLAND)
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Coleman.]
12.18 a.m.
Mr. A. J. Beith: I am glad to have the opportunity to bring before the House the future of village schools in Northumberland. The need to retain local primary schools is keenly felt in the rural areas, and where the distances between the villages are as great as they are in Northumberland, the case for the village school is particularly strong.
Two factors have made me feel that the problem should have urgent consideration in this House. One is that further school closures have been contemplated in Northumberland, and even in those small schools which have not been proposed for closure, teachers and parents are getting uneasy that they may be next on the list.
Last week the county council gave a three-year reprieve to one of the threatened schools, Glanton, and agreed to a shared headmaster experiment which could save another—Harbottle. But in each case the security of knowing that closure plans have been shelved indefinitely is what is really needed.
Schools threatened with closure tend to suffer a slow death, and when closure is eventually seriously discussed it becomes almost inevitable. If there is a fear that schools will not survive teachers will not stay. They look for places in schools with secure futures. Parents start to send their children to other schools since they do not want a change in the children's education. I saw that in one school at Elsdon, a school which was closed. I hope that it will not happen to Glanton. I hope that the managers of that school will fight to secure its future. The sword hanging over a school often brings a situation in which formal closure proposals, when they come, are treated as inevitable.
The Secretary of State has issued a draft circular on the closure of small schools which, unless it is modified, could be the writing on the wall for thousands of village schools all over England. If that is not the Government's
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intention—and I sincerely hope that it is not—the House would be greatly helped by some positive assurance from the Minister that she recognises the importance of village schools.
In my constituency there are 50 primary schools. Many of them are small because the villages are small, and are separated in many cases by long distances. Half of these schools have fewer than 50 pupils, and there are many with between 15 and 30 pupils. North Northumberland has been faced with steady depopulation for many decades. The elderly represent an increasing proportion of the remaining population, and that fact threatens the future of the remainder of these schools.
The situation is made worse by the fact that when the Conservative-controlled county council decided to go comprehensive some years ago, it chose the "middle school" system under which children leave primary schools at the age of nine instead of 11. That decision has meant that every village primary school loses one-third of its pupils, and in a school of only 25, that brings immediate fear of closure.
Northumberland County Council has many village schools of which it can be proud. So have the education authorities of the Newcastle Diocese of the Church of England, which are involved in the running of a great many village schools. These are fully integrated, and in no case are there Church and State schools side by side. I have had occasion to criticise both bodies in the past over school closures, of which perhaps the worst was the closure of the village school at Elsdon, which I have already mentioned. This case illustrates all too well that if the threat of closure hangs over a school for long enough, it becomes almost impossible to prevent it. The fact that the Church authorities, which had such difficulty in keeping the school in good repair, have now found that they can afford to turn it into a conference centre is viewed with understandable resentment in the village.
There have been other damaging closures, such as Carham School, at Wark-on-Tweed, as well as some for which a better case can be made. I do detect, however, that the opinion of the council is swinging firmly against the closure of viable schools, as the reprieve of Har-

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bottle and Glanton illustrates. The county councillors recognise the positive advantages of small numbers, which outweigh the disadvantages. These positive advantages are not mentioned in the draft circular.
Surely it is desirable that children, particularly the under-nines, should be educated in their own villages near their own homes without having journeys of many miles to school. The individual attention given to pupils in small schools outweighs the disadvantages of not having many other children in their own age group. I remind the House that many primary schools have moved over to all-age-group teaching which it is supposed to be such a problem in small schools.
The involvement of parents can be close and fruitful if the school is in their own village. If it is many miles away it becomes difficult for parents to keep in touch, go to meetings, and make themselves helpful to that school.
In a village school the education of children can be integrated much more effectively with the life of the community through involvement in local activities and local community projects. The village school often plays a big part in the life of the village and in local activities to the benefit of both the village and the children.
It is said that it is difficult to find suitable teachers for teaching a wide age range such as that found in a village school. I do not believe that argument is well founded. We have serious teacher unemployment at present. Local authorities can obtain good staff and can be selective about it. There are many teachers of outstanding ability who are prepared to forgo some promotion prospects and salary benefits offered by bigger schools in exchange for the satisfaction of running a small school in a small community.
I can point to many teachers whom I know in my constituency who could have got on very well in larger schools, to their financial advantage, but who enjoy working in the small school and stay there from choice. It is only when the future of a school is in doubt that it begins to have difficulty in keeping staff, and such teachers move on, because they want to ensure that they have a job in the future.
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The loss of the village schoolmaster or schoolmistress is one of the many consequences communities suffer if the school closes. Very often he or she is an active worker for the church or chapel, or takes a leading part in village organisations, and cannot be replaced. He or she is often one of the key members of the community. Often when a school closes the building ceases to be available as a meeting place for local organisations, although in some cases in Northumberland we have been fortunate enough to retain old schools as village halls.
Perhaps the most important of the adverse effects of closure is that it speeds up the vicious spiral of decline and depopulation. Young families look for council houses in the towns, because they know that there is a school for their children. The absence of a school tends to be used as an argument by the planning authorities and other authorities against any attempt to maintain other community services. They begin to say "This is no longer a viable community. It has no school, so there is no logic in maintaing public transport services to it. We must treat it as a village that will die a natural death."
Newcomers with young children are reluctant to go to a village with no school. Recently we spent nearly two years looking for a vicar for one of our isolated villages. Several of the potential applicants did not come because there was no school for their children, or because they feared that the nearby school would be closed before they got there. The problem becomes worse if newcomers do not come, and the village dies. Nowadays it is not so much an obvious death as a kind of living death, with the village becoming a weekend retreat consisting of townspeople's holiday cottages and the houses of a few remaining elderly residents.
I recognise that there are practical difficulties when school numbers fall. What worries me is that the Ministry slide rule in the form of the draft circular will take the place of a commonsense approach which recognises the special problems of rural areas. "Economies of scale", the supposed
"educational advantages of large schools".
and other figments of the bureaucratic imagination loom large in the document.

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Flexibility of approach should be the key. There are various things that can be done when numbers are low. One is that the opportunity can be used to provide some nursery education, which is often greatly needed in rural areas when children come from isolated farms and benefit from the company of other children from an early age. Northumberland has already shown flexibility in admitting four-year-olds, and this should be encouraged when it can be done economically with an existing school.
Secondly, staffing arrangements could be more flexible. Here I mention again the shared headmaster experiment at Harbottle and Netherton, which deserves encouragement. It is easier for one teacher to travel between villages some miles apart than it is for a whole class of young children. Nor is it right for the one-teacher school to be dismissed out of hand, as is sometimes the case. There are two one-teacher schools in my constituency, and they stand comparison with any of the larger schools for the quality of education they provide.
If the hon. Lady the Minister would care for a pleasant day out, I could take her up into the Cheviot Hills to the tiny hamlet of Windyhaugh, where she would find a one-teacher school doing a magnificent job with only about 10 children, all from extremely isolated shepherds' cottages miles up in the hills. She would see one teacher doing a first-class job in a very small school. There are circumstances in which the one-teacher school is perfectly acceptable and every bit as good as a larger school.
There may be scope for that, but parents feel that the retention of local schools is the first priority and to seek to reduce ancillary services, such as school meals, which add greatly to costs. There is scope for experiment in those situations where the alternative is no school at all. This is not a matter to be advanced as a general proposition, but it is worth trying in one or two cases where parents feel that they could provide the meals, and would prefer to have no school meals service than to have no school at all.
I put these points to the Minister in the hope that she will give positive encouragement to the retention of village schools and will reconsider her draft circular
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in order to make sure that it is not taken as the signal for wholesale closures. Perhaps the circular was conceived with only urban areas in mind—indeed, I believe its starting point was the Secretary of State's reference at Newcastle to
"the half empty classrooms in the infant schools of some of our new towns and big local authority estates as well as in inner city areas."
However, the draft is not limited to town schools and it contains the disturbing phrase:
"The Secretary of State expects that authorities will look resolutely"
at the possibility of closing schools, it then goes on with the apparent intention of discouraging parents or school managers from exercising their right to object to the Secretary of State when a closure is proposed; it lists factors which will be taken into account in such cases in such a way as to make closure the odds-on favourite, and makes no reference at all to the community importance of village schools. Their only hope is in the phrase
"in some instances other factors not listed may be important."
I hope that the Minister will redraft the circular so as to correct the impression that she wants to apply the axe to village schools, and will give strong positive encouragement to education authorities to retain village schools and to adopt a flexible approach to the problems created by small numbers. I hope that she will not allow the opportunity provided by this debate to pass without giving to the village schools of Northumberland, and to the parents and teachers for whom they are so important, some sense of security for the future.
12.32 a.m.
The Under-Secretary of State for Education and Science (Miss Margaret Jackson): I am grateful to the hon. Member for Berwick-upon-Tweed (Mr. Beith) for giving me this opportunity to comment on the subject of the closure of village schools in the context of this debate. As the hon. Gentleman said, in the light of the dramatic fall in the school population expected over the next 10 to 15 years, local education authorities and other bodies were asked to comment on a draft document on school closures. Their comments were sought by 31st March,

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and we are now considering their observations. That matter was announced in the House on 21st February.
When we have considered those observations we shall decide whether to issue further guidance on the main factors my right hon. Friend will take into account when considering closures. We have no wish to give the impression that we are pre-empting the objections of parents or any other group in respect of any school closure. We merely intend to issue guidance to indicate to local authorities the sort of issues we shall expect them to consider. I repeat that there is no wish to seek to pre-empt the situation. We shall merely outline to local authorities the factors we feel they should consider when envisaging the closure of a school.
Local circumstances dictate whether it is necessary to consider schools individually or in groups, and whether it will be necessary in each case for local education authorities to assess the unit cost of providing education in a particular school. Where this is significantly higher than in the rest of the area, the authority will need to consider whether there are special reasons why the difference should be borne or whether the school should be closed.
I emphasise that it is a matter for the authority to decide whether there are reasons for embarking on extra expenditure or whether it should close the school.
It is also necessary to look at detailed projections of the numbers of pupils—not only those in the schools at present, but those likely to be there, and to compare the premises of the schools involved. Factors such as unit costs are not the only ones to be taken into account. They are only factors in guide lines and are by no means a set or rigid rules to be applied without consideration to any given situation. Although the draft document asks local education authorities, in consultation with the managers or governors of voluntary schools, as need be to examine systematically their stock of schools my right hon. Friend fully recognises that in some cases it may be desirable to keep schools open which when judged on educational and economic factors alone, might be suitable for closure.
Northumberland is a very sparsely populated county and it has for some
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time had to face up to the effects of a declining as well as scattered population, which produces, on the one hand, small pockets of school-age children and, on the other, problems in trying to bring communities together for their mutual benefit. So for some time the authority has had to decide between keeping travelling to a minimum, thereby accepting several small educational units, and requiring children to travel to provide them with a broader educational experience in fewer but larger units. I gather from the Northumberland county structure plan that a considerable number of first schools were closed between the end of the war and local government reorganisation but that the rate of closure has declined in recent years.
I understand that the Northumberland local education authority has no hard and fast rules about village schools. Before it comes to a conclusion about the desirability of keeping a village school in existence or closing it, I am told it carries out a very full investigation in the area of the school concerned, consulting parents and managers of the school. One of the general considerations that guide the authority is that it would not normally expect a child of first school age to be required to undertake a journey of more than half an hour by school transport. Because of the geography of Northumberland and the low population density, this means that some small schools need to be retained and for this reason there is no minimum size for a school laid down by the authority. Here again, we understand that the Authority adapts its view and recognises the need to deal with particular situations.
There are in Northumberland 22 schools with fewer than 30 pupils. Some of these are extremely small, with fewer than 20 pupils, which means an average of three or four pupils per group, or even fewer.
Clearly, in Northumberland, as elsewhere, finance and the economic use of staff must play their part in decisions on the future of village schools. I have no doubt that the Northumberland local education authority and my right hon. Friend, when proposals for closure come to her for approval, as they must, will attempt to strike a balance between what is reasonable in financial terms and what is desirable from the point of view of

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the children's education. The need in nearly every case of a school closure in Northumberland to provide transport for the children to the next nearest school may offset some of the financial advantages associated with closure and put more weight on the educational considerations, which is by no means a bad thing. It has worked to the benefit of village schools in Northumberland.
As the hon. Member realises, my right hon. Friend can take no initiative on school closures, and it is for the local education authority to decide whether to propose the closure of a school. If it decides on closure, it must publish notices of its intention in accordance with Section 13 of the Education Act 1944, which provides for a two-month period during which objectors may make their views known to the Secretary of State. The final decision on closure rests with her and each proposal is considered carefully on its merits. In addition to the educational and economic factors she will consider other factors, such as the effect of a school closure on a small community.
The hon. Member commented on the form of the circular and the fact that it made no reference to considerations other than structural educational and financial.
I agree that the references were a little cursory, but the last section of the draft circular states that it must be shown that "due consideration" has been given to any social or other problems that may arise, and that these appear to be out weighed by financial and education benefits. I assure the hon. Gentleman, as one who looks at these cases when they come to the Department, that there is no question that these cases are ever passed over or treated lightly, or that we take into account only or primarily financial
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and educational considerations. We are well aware of the tremendous importance that the village school may have in a community. We try hard to look at each case completely on merit weighing carefully all the factors involved, including those such as travel by children who may be transferred to another school, and the importance of the school to the community.
The decisions are never taken lightly and without careful consideration of all the factors and objections, and, indeed, every conceivable comment which could have relevance to the question of closure. The question of the closure of a school is one that we take very seriously.
I hope that I have managed to reassure the hon. Gentleman. We must, since we are using public money and seeking to do so efficiently, look at the financial factors. We must, in the interests of the children, look at the educational consideration, because there is no question that sometimes there can be a balance of advantage to children in being with larger groups. But we look at all these factors in the light of the circumstances involved, and we take fully into account any other circumstances, such as the role of the school in the area and the community life of the village.
As I have said, we look at every case on its merits. I will look again at the draft circular in the light of the hon. Gentleman's comments. I hope that he will accept that neither we nor, as far as I know, any authority has rules that are inflexible and cannot be changed. We seek to examine these cases as fully and sympathetically as we can.
Question put and agreed to.
Adjourned accordingly at eighteen minutes to One o'clock.