Commons Sitting of 8 November 1977

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

EXPERIMENTS ON LIVING ANIMALS
Return ordered,
of Experiments performed under the Act 39 and 40 Vict. c.77, during 1976.—[Mrs. Ann Taylor.]

ORAL ANSWERS TO QUESTIONS
  ORAL ANSWERS TO QUESTIONS
  Mr. Speaker: Before we start Questions, I remind :he House of the exchanges we had yesterday at the end of Questions and ask for co-operation, with briefer supplementary questions. I fear that I shall be able to call fewer supplementary questions if I am to meet the wish of the House to move on to other Questions.
  DEFENCE

    Exercise Purple Oyster
    Mr. Edwin Wainwrightasked the Secretary of State for Defence if he will make a statement on the results of the recent Purple Oyster exercise in the North Sea.
    The Under-Secretary of State for Defence for the Royal Navy (Mr. A. E. P. Duffy): Exercise Purple Oyster 77 was the latest in a series of exercises to test arrangements for the protection of offshore oil and gas installations. Many procedures for dealing with a terrorist incident were practised, and I am satisfied with the progress made in training personnel who would be involved in a real incident.
    Mr. Wainwright: My hon. Friend must be aware that there are strong doubts
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    throughout the country as to whether the safeguards about which he talks are satisfactory. Could he say more about the recent exercise to test means to safeguard the rigs, to show the country that we are controlling them and making certain that no damage can be done to them?
    Mr. Duffy: Perhaps I may briefly explain what happened and then offer an assessment of the result. It was assumed that terrorists had captured an installation in the Indefatigable Field some 50 miles off the Norfolk coast. Surveillance flights were made and reaction forces were deployed to the area. Hon. Members will not expect me to give the detailed results of the exercise, but it was possible to test arrangements for dealing with this type of situation, and all those involved gained useful experience and training.
    Mr. Wall: Can the Minister say what was the participation of the Royal Marines in the exercise? May I take this opportunity to congratulate his right hon. Friend the Secretary of State on saving a Royal Marine Commando?
    Mr. Duffy: The hon. Gentleman will know that it is the Royal Marines who provide the military response—the quick reaction force—together with an associated Royal Navy helicopter airlift, backed up as necessary by explosive disposal teams and other units of the Armed Services. This exercise followed the pattern of previous ones. However, as with previous exercises, it was understood that these units could act only at the request of the civil power

    Cruise Missile
    Mr. Arnoldasked the Secretary of State for Defence what plans he has for the development of a cruise missile.
    The Secretary of State for Defence (Mr. Frederick Mulley): We are examining cruise missiles so as to be able to participate in discussions within the Alliance concerning their potential. We have no plans to develop or acquire them.
    Mr. Arnold: What representations were made by the Government to the Americans when they apparently agreed with the Russians not to transfer cruise missile technology? Why do the Government now believe that the development

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    of the new deterrent force has become unnecessary?
    Mr. Mulley: The hon. Gentleman's questions are not necessarily related. As far as I am advised, no final agreements have been reached between the Soviet Union and the United States. If I were the hon. Gentleman, I would not necessarily accept all the Press reports as to what may or may not be part of such agreements. Naturally, consultations that we have within the Alliance must remain confidential. The reason why we are satisfied with the Polaris force is that it will have a useful life for many years to come.
    Mr. Robin F. Cook: As my right hon. Friend has said that we have no plans to develop the cruise missile, can we take it that the British Government are entirely behind the move to place a restriction on the range of cruise missiles within the context of the SALT talks, which clearly is necessary if any agreement is to be an effective disarmament agreement?
    Mr. Mulley: As my hon. Friend knows, we are not a party directly involved in the discussions and negotiations for a SALT II agreement, but our United States allies keep us and all members of NATO informed about progress. The detailed arrangements are, I think. still to be finally settled.
    Mr. Gwynfor Evans: Will the right hon. Gentleman and the Government take into consideration the fact that the use of cruise missiles would blur the distinction between conventional and nuclear war and that their use could well lead to a full nuclear war, employing strategic nuclear weapons?
    Mr. Mulley: I understand the hon. Gentleman's concern, but I do not think that he has fully understood what the function of a cruise missile in the Alliance would be. It is essentially a means of delivery. It is not itself a weapon. The character of the weapon and the target would be the important factors. I would agree that if at some time cruise missiles were to be introduced within the NATO framework the existing political control over use would have to be retained.

    Industrial Capability
    Mr. Hal Millerasked the Secretary of State for Defence what arrangements he has made for his Department to assess the country's industrial capability for defence.
    The Minister of State, Ministry of Defence (Dr. John Gilbert): In conjunction with my right hon. Friend the Secretary of State for Industry, we from time to time review the capabilities of those industries that are involved in defence production.
    Mr. Miller: When did the last review take place? Is the Minister aware that there is widespread concern amongst defence contracting firms about the difficulty of maintaining, let alone replacing, existing plant?
    Dr. Gilbert: There is no simultaneous overall review of industry. Reviews take place from time to time of situations in individual industries. On the capabilities of our defence industry, all I can say is that the Ministry of Defence places only 10 per cent. of its contracts with non-United Kingdom firms.
    Mr. Pattie: Does the Minister feel that decisions to purchase foreign equipment without first ensuring reciprocal purchases from this country assist or hinder our industrial capability for defence procurement?
    Dr. Gilbert: One simply has to look at these matters on a case-by-case basis. Sometimes we try to get offset within a particular procurement, and on other occasions it is more appropriate to seek an offset by selling another country a completely separate system.

    NATO Defence Ministers
    Mr. Blakerasked the Secretary of State for Defence when he last met the other NATO Defence Ministers.
    Mr. Mulley: At the Nuclear Planning Group meeting in Italy on 11th and 12th October 1977. A copy of the communiqué has been placed in the Library.
    Mr. Blaker: In view of the more optimistic statements we have recently had from the Prime Minister and the Chancellor of the Exchequer about Britain's economic future, will the Government

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    now assure our NATO partners that they accept, without reservation, the agreed NATO target of an increase in defence spending of 3 per cent. per year in real terms?
    Mr. Mulley: As the hon. Member knows, the NATO aim of a 3 per cent. increase is to take effect from 1979–80, but reservations were made, on the one hand, for countries with difficult economic circumstances and, on the other hand, that where a country's expenditure was well below average it might be able to do better than 3 per cent. In the normal way, we shall be considering public expenditure for 1979–80 later this year, and this is one of the relevant considerations we shall take into account.
    Mr. Frank Allaun: Did not my right hon. Friend the Prime Minister last week make clear that we are spending well over our share of resources compared with other Western European nations? If that is the case, to go ahead at 3 per cent. for five years--a more than 15 per cent. increase—is clearly in conflict with that statement by the Prime Minister. I hope that the Secretary of State will stick to the Prime Minister's point of view.
    Mr. Mulley: I am obliged to my hon. Friend for letting me have his views on the matter. As he knows, the percentage of our GDP devoted to defence, almost all of it to NATO, is higher than that of most of our European allies. But this also depends on the size of the GDP. I am optimistic that, as a result of Government measures, we shall have a growth in our economy which will also have a bearing on these figures.
    Mr. Anthony Grant: At the last meeting, was the question of the cruise missile discussed? If so, did the Secretary of State urge that the NATO Alliance should have this weapon, since it is just about the most effective weapon that has become available to the West in the last decade? If not, why not?
    Mr. Mulley: In all the meetings of the Nuclear Planning Group, the United States Secretary of Defence gives a full report on the nuclear balance within the Alliance and in developments in the Warsaw Pact countries. In that context there was some discussion about new technology. However, it would be premature to form any judgments about the
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    rôle of the cruise missile because, as the hon. Member knows, it is still under development in the United States and there are still tests to be made—indeed, there is also controversy—on the various possibilities of its having conventional as well as nuclear uses.
    Mr. Watkinson: Was there any discussion of the mutual and balanced force reduction talks in Vienna? Does my right hon. Friend hold out any hope of development in that area, and is there any possibility of injecting some urgency into those talks?
    Mr. Mulley: No, Sir. Those talks were not discussed in the Nuclear Planning Group as they would be more relevant for the full meeting of Defence Ministers on conventional matters. But I share my hon. Friend's anxiety that we should try to make progress there. I welcomed, and have done so publicly, the forthright statements made by the Federal German Chancellor and others on the need, as we hope, for progress on the nuclear side and that we should make progress on the conventional side, too, towards arms control arrangements.
    Sir Ian Gilmour: In view of the humiliating rebuke that the right hon. Gentleman and the Government recently received from the Secretary-General of NATO, why did not the right hon. Gentleman succeed in persuading the Chancellor of the Exchequer to devote even one single penny of his mini-Budget to defence or the Armed Forces? Is this not just another example of the fact that the Government put defence right at the bottom of their priorities?
    Mr. Mulley: I am much impressed by the right hon. Gentleman's remarks, but I would be more so if I did not recall that, in the one year of 1973, he was party to three cuts greater than we have made. The NATO authorities have examined the basis of the cuts that we propose to make for next year and have agreed with us that they do the minimum damage to our contribution to the Alliance. As my right hon. Friend the Chancellor of the Exchequer has made clear several times—indeed, I gathered that it was the policy of the Conservative Party, although in a more extreme form—we are not yet in a position to relax the restraints on public expenditure.
    Sir Ian Gilmour: I know that the Secretary of State's case is very weak, but surely he does not have to try to buttress it by saying something that is quite untrue. He must know perfectly well that the Government's cuts are infinitely greater than those imposed by the Conservative Government. Will he conic clean and tell the truth?
    Mr. Mulley: We have gone into these factual matters and I showed in previous debates that, in real terms, in 1973 the Conservative Government exceeded in actual cuts those that we have made in the current year.

    Armed Forces (Pay)
    Mr. Croninasked the Secretary of State for Defence what preliminary arrangements he has made to increase the pay of the Armed Forces when the time is appropriate to do so.
    Mr. Goodhartasked the Secretary of State for Defence when he expects to receive the next report from the Armed Forces Pay Review Board.
    Sir Anthony Royleasked the Secretary of State for Defence what action he is taking to increase Service men's pay in view of the damaging slump in morale throughout the three fighting Services.
    Mr. Mulley: The Armed Forces Pay Review Body is responsible for recommending increases in forces' pay. It has already begun the work of collecting the necessary information on which to base a recommendation to take effect from 1st April next year.
    Mr. Cronin: While the Armed Forces must, like everyone else, conform to the Government's pay policy for the time being, will my right hon. Friend ensure that when they receive their next pay increase it will be the substantial one that they justly deserve? Furthermore, will he make sure that the Armed Forces are not penalised because they do not have trade unions or because they adopt an attitude of disciplined restraint and consideration for the public interest?
    Mr. Mulley: I am sure that the considerations my hon. Friend mentions are well worth stressing, because they are very important factors in the situation. But, as he says, the Armed Forces, like
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    other sectors, have to conform to Government pay policy, and, in particular, to the procedure whereby the Armed Forces Pay Review Body makes recommendations. These are due to be implemented on 1st April after 12 months.
    Mr. Goodhart: Is the Secretary of of State aware that many soldiers are paid less than the firemen whom they will probably be replacing in our cities next week? Is he aware of the widespread feeling that Service men have fallen badly behind in the last two years? Will the Armed Forces Pay Review Body be bound by the Government's 10 per cent. guideline in April?
    Mr. Mulley: As the Armed Forces Pay Review Body was informed at the time of the statement regarding future pay policy, it will be for it to make recommendations. For our part in the Ministry of Defence, we are supplying the Review Body with all the information we can so that it may form a judgment. I know that there is real difficulty about the question of comparability, which is very strongly felt in the Services.
    Sir Anthony Royle: Is the Secretary of State aware that there is grave danger of serious demoralisation throughout the Services at present, that his own people inquiring into Service pay have discovered that some officers are drawing social security and rent allowances, that there are officers in great difficulties in their own areas and that many of them, so it is reported in the Press, have been moonlighting? Will the Secretary of State comment on the fact that this is gravely demoralising many Service wives and Service families?
    Mr. Mulley: I appreciate, and I think we all understand, that there is strong feeling among the Armed Forces that their pay has lagged behind. However, as we all know from our constituency experience, many other sectors also feel that their pay has left them with serious financial problems. But it is totally untrue to say that any member of the Armed Forces is drawing social security benefit, because a condition of such benefit is that one is not in employment. A number are drawing rent and rate rebates, but I remember that when those rebates were introduced by the Conservative Government it was proclaimed that there should be

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    no question of anyone's being ashamed to do so. They are designed particularly to help very large families. Officers and other ranks with large families qualify for the rent and rate rebates. The numbers are about 10 officers and 6,000 men.
    I have no information on moonlighting. By definition, we do not have information about how many people do jobs on the side, but I suspect that the practice is not confined to the Armed Forces.
    Mr. Edwin Wainwright: Will my right hon. Friend take into account the fact that when a large number of people are unemployed there is a greater likelihood of young men and women going into the Armed Forces? Will he ensure that when full employment returns the rate of pay for people in the Armed Forces will not create such dissatisfaction that they will want to come out?
    Mr. Mulley: It is our object, as soon as conditions permit, to restore the full comparability of the military salary.
    Mr. Shersby: Is the Secretary of State aware that a senior aircraftman, married with two children, at RAF Uxbridge, in my constituency, earns only £56·57 per week gross and that after paying tax, rent, national insurance and RAF benevolent fund contributions he receives not more than £34 per week plus £2·50 child benefit? Is that the kind of payment that the Secretary of State feels is right and proper for a senior aircraftman whose job is an integral part of defending this country? If the right hon. Gentleman does not think so, will he do something about it—and do it quickly?
    Mr. Mulley: The hon. Gentleman will understand that it is for the Armed Forces Pay Review Body to determine these matters. I should be most grateful if he would let me have the details that he read out, together with any supplementary information he may wish to let me have privately about his constituents, because we want them brought to the attention of the Review Body.
    Mr. Loyden: In view of the statements made from both sides of the House about members of the Armed Forces not being eligible to join trade unions, and the great disability that this imposes on them, will my right hon. Friend now agree to open up trade union membership and begin
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    negotiations with the Armed Forces about pay?
    Mr. Mulley: I am not at all sure that that would solve our problem of dealing with the Armed Forces within the Government's pay policy. On the other hand, I have no objection in principle to the Armed Forces, if they are so minded, seeking such representation.
    Sir Ian Gilmour: The right hon Gentleman's ridiculously complacent answers will have done yet further damage to the morale of the Armed Forces. Is he definitely ruling out any interim settlement before next April? Does he realise that unless he takes the shackles off the Armed Forces Pay Review Body a 10 per cent. increase—which I understand is all it is allowed to recommend—will leave the Armed Forces about 30 per cent. behind comparable people in civilian life?
    Mr. Mulley: The right hon. Gentleman has enough experience to know that it would be most unwise to predict now what the Review Body might recommend in April. What we are doing is pursuing the matter of Armed Forces pay within Government pay policy, exactly as the right hon. Gentleman did in 1973 and 1974, when he required the Armed Forces to be subject to the then statutory incomes policy.

    Northern Ireland
    Mr. Farrasked the Secretary of State for Defence what steps he is taking to improve the living accommodation of soldiers serving in Northern Ireland.
    Mr. Gowasked the Secretary of State for Defence what proposals he has for improving the living accommodation of members of the Armed Forces serving in Northern Ireland.
    Mr. Mulley: Much effort and expenditure have already been devoted to improving, as far as is possible in field service conditions, the accommodation of Service men in Northern Ireland. There are, however, a few locations where we have to remain for operational reasons which could not, even by substantial expenditure, be brought up to the standards I would wish. These problem locations, which house about 5 per cent. of the force, are a matter of active concern.
    Mr. Farr: Does not the Minister agree that it is totally disgraceful that our soldiers in Northern Ireland, who are doing such a heroic job, should have to live in substandard accommodation at any time? Beginning with some of the more difficult areas where accommodation is worst, such as South Armagh, will the right hon. Gentleman ensure that their accommodation is brought not only up to standard but above it, which would be in line with the difficult and arduous tasks that our men are performing?
    Mr. Mulley: The first test of the accommodation for our Forces—one that I know they accept themselves—is operational. They must be in locations where they can quickly respond to security demands. In South Armagh in particular—as the hon. Gentleman mentioned —there are few places that provide adequate accommodation. Secondly, in a number of cases additional restraints of security have had to be put on the accommodation—for example, on making them waterproof—because there have been instances when they have been subjected to attack. Operational and security considerations must always prevail in matters of amenities, and the troops accept that. We recognise that the troops are in field service conditions, which by definition cannot come up to those which we should expect in peace time.
    Mr. Powell: Will the Secretary of State and the Government bear in mind that Army strength in Northern Ireland, from which these conditions largely arise, was a response to an emergency, however long-continued and however tragic? As the Royal Ulster Constabulary and the Ulster Defence Regiment constantly increase in strength, in confidence and in acceptance, will the Government keep their minds open to the adjustment of Army strength in Northern Ireland to the changing circumstances of the threat with which that strength is required to deal?
    Mr. Mulley: I am grateful to the right hon. Gentleman, because that is another aspect of the problem. While we have made clear that we shall keep as many troops as are necessary for security reasons in Northern Ireland, if—as we hope—the continuing improvement in security circumstances permits, we should
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    wish, subject to the advice of my right hon. Friend the Secretary of State for Northern Ireland, to reduce the permanent forces there. That is a consideration which makes it difficult to put up permanent barracks, particularly in locations where they may not be wanted in the future. Indeed, the nature of the security threat means that we have to change people from one location to another. However, we have already vacated six poor places of accommodation in the last year and we are constantly looking for ways of improving the bad conditions that are, I know, much resented by hon. Members.
    Mr. Litterick: Would not my right hon. Friend agree, however, that the simplest and certainly the cheapest way to improve the living conditions of the troops would be to remove them from Ireland altogether, as the majority of the British people now wish?
    Mr. Mulley: I agree that it would solve any accommodation problems if the troops were not there, but the problems that would be created in their stead would be much more serious. The Government are determined to provide Army support to the civil authorities for as long as that is necessary.

    Weapons Systems (Cost)
    Mr. Tebbitasked the Secretary of State for Defence if he will ensure that Parliament is given an equivalent amount of information concerning the costs of defence weapons systems to that which is available in the United States.
    Dr. Gilbert: It is the Government's intention to continue to be as forthcoming as possible in these matters, but each case must be judged on its own merits.
    Mr. Tebbit: Is the Minister aware that the United States Congress and taxpayers are told in considerable detail the costs of the defence equipment which is bought for the United States forces? Why are the British Parliament and taxpayer denied similar information about identical equipment when it is purchased from the United States for the British forces?
    Dr. Gilbert: There are many circumstances in which our position is different from that of the United States. First, the United States probably has a monopoly

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    position in supplying many types of equipment, which gives it a much greater bargaining position in world markets. We have to consider the position both of our customers, who are reluctant to have such information published, and of our suppliers when the information is given in commercial confidence.
    Mr. Robin F. Cook: Is my hon. Friend aware that I have in my hand the annual statement to Congress of procurement costs, which runs to over 130 pages of tabulated information? Why cannot our Minister be as forthcoming as the Pentagon in America and give us the information we need so that we may properly scrutinise his own decision-making?
    Dr. Gilbert: From time to time we give additional information, and my hon. Friend will be pleased to know that I have today approved the draft of a letter to the hon. Member for Tynemouth (Mr. Trotter) giving the annual operational costs of the different classes of ships. As regards development costs and actual procurement costs, it is very difficult to give those at an early stage in the procurement process.

    Through-deck Cruiser
    Mr. Pattieasked the Secretary of State for Defence, when he expects to announce the placing of the order for the third through-deck cruiser.
    Dr. Gilbert: I am not yet in a position to announce a decision.
    Mr. Pattie: But as the Government know that an agreement is required for more through-deck cruisers, would it not be more efficient and cost-effective to place a follow-on-order now with one of the yards where the work is being satisfactorily carried through, and where a need is already manifest for further work to be placed?
    Dr. Gilbert: I hope that it will not be too long before I take a decision, but we have not yet decided where the next order will be placed.

    BAOR
    Mr. Sainsburyasked the Secretary of State for Defence what was the pay, including local overseas allowance, in deutschemarks of a married sergeant with two children serving in the British Army
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    of the Rhine in October 1976 and October 1977.
    Mr. Mulley: The hon. Member will be aware that both pay and local overseas allowance are normally expressed in sterling and are never drawn entirely in deutschemarks. However, expressed in deutschemarks, the gross weekly pay including local overseas allowance of an average married sergeant with two children serving in BAOR was 549·36 DM in October 1976 and 532·77 DM in October 1977. This reflects a change in the Forces fixed rate of exchange on 1st November 1976.
    Mr. Sainsbury: Will the Secretary of State accept that to face Service men with an actual cut in their gross pay after a year of inflation both in Germany and in Britain will have a totally disastrous effect upon morale? Can he assure the House that he will take steps regarding the level of the local overseas allowance without waiting for next April?
    Mr. Mulley: I have already announced that there are to be no reductions in the level of local overseas allowance, which is calculated on the basis of comparison between the rate of inflation in Germany and the rate of inflation in this country, pending further inquiries and discussion during the next 12 months. Expressed in sterling, the local overseas allowance for the same sergeant was increased from £37·59 to £48·93, because the fall in the pound against the mark last autumn was very dramatic. Since only 70 per cent.. on average, of a soldier's pay is drawn in deutschmarks—his rent and so on are in sterling—I would not accept that any one has suffered a real loss, although I accept that the increase was offset by increased accommodation and other charges.
    Mr. Ronald Atkins: Does my hon. Friend agree that it would be greatly in the interests of this country if the whole of the expenditure relating to British Army of the Rhine were in sterling and not in deutschmarks?
    Mr. Mulley: If my hon. Friend's inference is that we should bring the soldiers back to this country, I must refute that. The presence of British Army of the Rhine is an important part of our NATO defence policy, and, as has been frequently said, we have no plans to reduce the size of BAOR except as, we hope,

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    agreements can be reached in the context of the Vienna discussions.
    Mr. Churchill: But is it not a scandal that men serving in the Armed Forces in British Army of the Rhine should be worse off in effective purchasing terms this year than they were last year? Will the Secretary of State give an undertaking, such as has been given in respect of police pay, that the Armed Forces Pay Review Body will be in no way restricted in the recommendations that it may make next April, while always bearing in mind that the Government have it in their power not to implement them fully right away?
    Mr. Mulley: I think it is understood that the Review Body is an independent body and that it will make such recommendations as it sees fit. It will be a question then for the Government, in the light of that report, to determine what policy should be pursued. Until we see the report, however, it is impossible to say what any reaction might be.
    Mr. Gwilym Robertsasked the Secretary of State for Defence what are the latest figures available for the number of British troops stationed in West Germany, the number of German civilians employed and the balance of payments cost of maintaining these troops in Germany ; what offset agreement has been arrived at with the West German Government ; and what further steps he is taking to obtain additional offsets from the West German Government.
    Mr. Mulley: British Forces Germany, which comprise BAOR and RAF (Germany), total some 66,000 men, supported by some 28,000 locally-employed civilians. We estimate that the foreign exchange costs of British forces in Germany in 1977–78 will be in the region of £540 million but the actual cost of our commitments depends on movements in exchange rates throughout the whole of the financial year. As my right hon. Friend the Prime Minister told my hon. Friend the Member for Sheffield, Heeley (Mr. Hooley) on 26th October, a terminal bilateral offset agreement was signed during his visit to Bonn on 18th October. Details of this are set out in Cmnd. 6970, which has been laid before Parliament by my right hon. Friend the
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    Secretary of State for Foreign and Commonwealth Affairs.
    Mr. Roberts: Would not my right hon. Friend agree that the offset agreement that has been reached is derisory and suggests that we are again being taken for a ride by the West German Government? Will he not accept from me that the only sort of offset agreement which is acceptable to the large majority of Members on this side of the House is one that would at least meet the great bulk of our balance of payments costs? Will he look at this matter again urgently?
    Mr. Mulley: As my hon. Friend knows, the negotiations were conducted by my right hon. Friend the Foreign Secretary, but I do not accept that it is a derisory agreement. In fact, I think it is a satisfactory outcome to a very difficult problem. In actual money terms, taking account of the rate of exchange, it provides in the current year, for example, £62½ million against the £13 million under the previous agreement, which ran from 1971 to 1976, and over the whole period of the three years represents in cash terms about 50 per cent. more than the previous agreement, which has now been renegotiated.
    Sir Ian Gilmour: In his final answer on Question No. 9, which also related to Germany, the right hon. Gentleman said something very important, whether he intended to or not. The Armed Forces Pay Review Body made it quite plain this year that it felt totally bound by the Government's pay policy. The right hon. Gentleman said earlier this afternoon that it would not be so bound this coming year. Did he really mean to say that? If so, we greatly welcome it.
    Mr. Mulley: I am resting myself on the basis of the letter that my right hon. Friend the Prime Minister sent to the Chairman of the Pay Review Body at the time the present pay policy was brought into being. I shall arrange for the right hon. Gentleman to receive a copy of that letter.

    Canberra Aircraft Accident
    Sir David Rentonasked the Secretary of State for Defence what is the cause of the long delay in announcing the result of the inquiry into the crash at Huntingdon on 3rd May 1977 of an RAF

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    Canberra aircraft causing loss of life as a result to the pilot and observer and three young children.
    The Under-Secretary of State for Defence for the Royal Air Force (Mr. James Wellbeloved): There is no doubt that the inquiry into this tragic accident has taken longer than I would have wished, and, indeed, longer than was expected. However, any inquiry must be painstaking and meticulous, and in this case, where the crew lost their lives and the aircraft was almost totally destroyed, the investigation by the board of inquiry was particularly difficult to conduct and it inevitably took time. It was necessary to reconvene it twice to take supplementary evidence which emerged later in the inquiry. But throughout the period the inquiry was progressed with the utmost urgency consistent with the need to ensure the accurate diagnosis of the cause. As I have told the right hon. and learned Member, the report has now been received, and I have had the opportunity to study it. I am considering with my right hon. Friend whether a further statement should be made to the House.
    Sir D. Renton: Is the hon. Gentleman aware that the long.; delay has greatly increased public anxiety about the cause of the accident? Will he give an undertaking that the fullest possible public statement will be made, when he is able to do so, which I hope will be soon. Meanwhile, can he give a further undertaking that the particular type of landing practice which was being followed when this tragic accident occurred is not taking place any longer and will not take place?
    Mr. Wellbeloved: In response to the right hon. and leaned Gentleman's first question, when I have had an opportunity to consult my right hon. Friend, either he or I will endeavour to give the fullest possible statement to the House on the whole of this accident. I deeply sympathise with the right hon. and learned Gentleman's constituents in the tragic occurrence they have endured.
    With regard to the use of the Canberra PR9, there is at present in progress a review of the basic flying patterns that have been in use at that air station for the last 10 years. We have, however, prohibited further right-hand visual circuits over the Oxmoor estate until such
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    time as we have further reviewed the Wyton and Alconbury air traffic procedures.

    Warships
    Mr. Wallasked the Secretary of State for Defend' how many British warships are now past their designed effective lives and in need of major refits or replacement.
    Mr. Duffy: There is no precise designed effective life for a warship. The date at which ships are phased out depends on a number of factors, including the condition of the ship, the performance of the new construction industry and the current assessment of the number and quality of ships needed to meet our requirements in the light of the threat.
    Mr. Wall: The assessment has been made that about 40 out of 180 of our warships are obsolete. Does not the hon. Gentleman agree that we now have the smallest Navy in our history and that, due to the Government's defence cuts, the rate of replacement is nowhere near overtaking the rate of obsolescence?
    Mr. Duffy: No, I cannot agree with the hon. Gentleman's assertions. The average age of the major units of the Fleet—frigates, submarines and above—is about 12 years. I should like to assure the hon. Gentleman that we have a modern and effective Navy and that a continuing and impressive programme of new construction, about which I could send him a letter, as well as modernisation will ensure that the fleet remains fully able to meet the tasks required of it.
    Mr. Newens: Can my hon. Friend give the House any idea what the total cost would be of carrying out the major refits and replacements for warships for which the hon. Member for Haltemprice (Mr. Wall) is asking? Would it not mean a vast increase in public expenditure, and is there not a blatant contradiction between the views of those on the Opposition Benches who call for tax cuts and cuts in public expenditure and the views of those who demand enormous increases in military expenditure?
    Mr. Duffy: It would not require a vast increase in public expenditure, but its absence would increase the level of

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    unemployment. Nevertheless, I shall repeat my letter to my hon. Friend.
    Rear-Admiral Morgan-Giles: With British shipbuilders on their knees for orders, would it not be sensible for the Government to order some warships now, and thus be sooner able to replace some clapped-out wrecks like the "Blake" and the "Tiger"?
    Mr. Duffy: I remind the hon. and gallant Gentleman that the present major new construction programme includes nuclear-powered Fleet submarines as well as the construction of five new classes of surface warships, including the new ASW cruiser—the first, incidentally, of a new class—" Invincible ", which was launched only in May this year. This programme, as I have said, is intended to maintain a modern and balanced Fleet.

    NATO Air Exercise
    Mr. Wyn Robertsasked the Secretary of State for Defence whether he is satisfied with the results of the recent NATO air exercise based on Upper Hey-ford.
    Mr. Wellbeloved: By testing the operational readiness of an Fill unit based in the United Kingdom, this United States Air Force exercise has made a direct contribution to the effectiveness of the NATO defences.
    Mr. Roberts: Will the Minister confirm that the discomfort caused by low flying from Upper Heyford, which I think is in the constituency of my hon. Friend the Member for Banbury (Mr. Marten), to my own was borne with fortitude by the majority of people on the ground? Can he also confirm that it is very unlikely that a similar extensive exercise involving low flying will occur again in the near future over the same areas?
    Mr. Wellbeloved: I cannot give an absolute undertaking in respect of the second part of the hon. Gentleman's question. There will be a number of exercises from time to time which will encompass the whole of the United Kingdom low-flying areas. I appreciate very much the forbearance of the people of this country and the people of Wales in the discomfort and inconvenience that low flying causes to them. But I must emphasise to the House and the country
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    that low flying is a vital part of the United Kingdom's defence and that without that exercise and training we would not be able to fulfil our duty to defend this country and the world.
    Mr. Roderick: Is my hon. Friend aware that, while my constituents and most of the people living in Mid-Wales have suffered inconvenience from low flying exercises, a new dimension has been added to the problem with the recent tragic accident? Will my hon. Friend now call off the exercise called Avon Express until a full-scale inquiry has been conducted into the need for, and value of, such exercises?
    Mr. Wellbeloved: I sympathise with my hon. Friend and his constituents, but, as I have already said, low flying and exercises of this nature are a vital part of our defence capability, and I cannot give him the undertaking that we should call off any future exercises. When we authorise exercises in low flying we take the utmost care to ensure that very strict controls are exercised by the command and the crews to avoid inconvenience to people on the ground.
    Mr. Marten: Does the Minister recognise the stoical way in which my constituents living near the airfield have borne the noise of continual flying over the last week? Does he realise that they do that because they realise that support of NATO is vital to the defence of this country?
    Mr. Wellbeloved: I recognise that, and I welcome the widespread support from the general public in the very difficult task that the RAF has to discharge in undertaking low flying. I assure those who do not appreciate this vital defence need that their complaints and representations are fully considered and that we take every step open to us to avoid inconvenience.

  PRIME MINISTER (ENGAGEMENTS)
  Mr. Silvesterasked the Prime Minister if he will list his engagements for 8th November 1977.
  The Prime Minister (Mr. James Callaghan): In addition to my duties in the House, I shall be holding meetings with ministerial colleagues and others.
  Mr. Silvester: As many of those meetings will concern wage claims in the public sector, would it be helpful if the Prime Minister were to consider making an announcement—in view of a wage settlement for the miners exceeding 10 per cent., for whatever reason—on whether other employees in the public sector who currently settle at about the guideline figure might reasonably be expected to come back for a second bite of the cherry after such a settlement?
  The Prime Minister: The miners' present pay settlement does not expire until the end of February or the beginning of March, and it would be wrong for us to anticipate anything about a settlement at this stage.
  Mr. Roy Hughes: In the course of his busy schedule of engagements, will my right hon. Friend look into the parlous nature of the steel industry? Will he and his colleagues give some consideration to restricting foreign imports of steel, which would certainly help the British Steel Corporation at this time?
  The Prime Minister: I am well aware of the difficulties of the steel industry. There is a problem about imports and exports at present. For example, there are interests in the United States which are pressing the United States Government to restrict exports of steel from this country to the United Stales. We must achieve a balance here and be very careful before we rush into action on these matters.
  Mrs. Thatcher: Will the Prime Minister take time today to reconsider the reply he gave to my hon. Friend the Member for Chingford (Mr. Tebbit) last Thursday, when he said that the family man on average earnings was as well off today as he was at the time of the last General Election? We all know that that just is not so. Would not the Prime Minister agree that the standard of living has been cut back by 5 per cent, in a year?
  The Prime Minister: The right hon. Lady is putting together two separate things. I quite agree that the standard of living has been cut back during the last 12 months. Indeed, I have said so on many occasions. But the statement that I made last Thursday is exact in every particular, and I have had it checked since.
  Mrs. Thatcher: Perhaps the Prime Minister would care to look at what he said as reported in column 40 of Hansard, when my hon. Friend put to him a direct question. My hon. Friend asked the Prime Minister "to tell the House"[Hon. Members: "Reading ".] I am quoting from the question to the Prime Minister. The question was put directly to the Prime Minister whether the average man,
  " with two young children, will be as well off now as he was at the time of the last General Election."
  The Prime Minister's reply was:
  "The answer is Yes ' ".—[Official Report, 3rd November 1977 ; Vol. 938, c. 40.]
  What the Prime Minister has now said is that his answer ought to have been "No ".
  The Prime Minister: I do not object to the right hon. Lady reading my words. I hope that she will go on reading them, and reading them in the country. I do not think I can take offence at that. What I said last Thursday was complete in every particular. It is for the right hon. Lady to run away and check her figures.

  TUC
  Mr. Arnoldasked the Prime Minister when he next expects to meet the leaders of the TUC.
  The Prime Minister: I met the General Council of the Trades Union Congress when I addressed the TUC on 6th September. Further meetings will be arranged as necessary.
  Mr. Arnold: When the Prime Minister next sees the TUC, will he remind it just how important it is that the benefits of North Sea oil should be used for strengthening Britain's industrial face and not for increasing public expenditure or public services?
  The Prime Minister: The next meeting of the NEDC in early December will be considering this matter, and, of course, that point of view will be expressed. It is certainly Government policy, although we hope to have more discussion about this, that there should be a very strong bias in favour of the industrial strategy and industrial regeneration of this country. But I do not think that we should rule out entirely some bonus to

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  either public expenditure or private consumption if it seems appropriate. This must be a question of balance in the end. The first priority, I agree with the hon. Gentleman, is the regeneration of British industry.
  Mr. Loyden: Will my right hon. Friend discuss with the TUC the use of oil reserves for the purpose of refurbishing the regions from an industrial point of view, and particularly regions of high unemployment, such as Merseyside, as it appears that none of the Government's policies is penetrating that problem?
  The Prime Minister: The first problem is to overcome inflation. That is the No. I priority. The other benefits will begin to flow from that. My right hon. Friend the Secretary of State for the Environment will be making a statement at the end of Questions, I understand, if he catches your eye, Mr. Speaker, about refurbishing industrial areas. Merseyside is a particular case and has, and will continue to have, special attention.
  Mr. McCrindle: As the Prime Minister compares the industrial situation this winter with the industrial situation of 1973–74, will he find any reassurance from the fact that at least he is not confronted by an Opposition prepared to support every last inflationary wage claim?
  The Prime Minister: What has happened, I believe, is that a general will has been mobilised in favour of the Government's policy, and I am not surprised that the Opposition actually follow that expression of public opinion.
  Mr. Ashley: Is the Prime Minister aware that the settlement with the police and the progress made with the power workers reflect very great credit on the Government's attitude, and that the Conservatives' attempts to exploit the present spate of industrial unrest reflect very great discredit on them and their attitude to the trade unions? The country should bear this in mind at the General Election.
  The Prime Minister: We are fighting a battle that is crucial, and I certainly do not reject or spurn any allies in it. Therefore, I make no attacks on anybody in the matter. I believe that it is vital, and I believe that so far the country is standing together on the issue. Everybody has his own particular interest, but we are an interdependent society—pretty well every-
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  body nowadays is a key worker, whoever he may be. It is our task as a House of Commons and as a country to mobilise the general will against the particular interest.
  Mr. Cartwrightasked the Prime Minister when he next plans to meet the TUC.
  The Prime Minister: I refer my hon. Friend to the reply which I gave earlier today to the hon. Member for Hazel Grove (Mr. Arnold).

  HEMEL HEMPSTEAD
  Mr. Corbettasked the Prime Minister whether he will pay an official visit to Hemel Hempstead.
  The Prime Minister: I have at present no plans to do so.
  Mr. Corbett: As my right hon. Friend is unable to visit, will he try to arrange to speak to my courageous constituent, Mr. John Prestwich, who is paralysed from the neck down and therefore relies upon electricity for life and yet telephoned me yesterday to urge that the Government should stand firm against the unofficial action of the power workers? While I recognise that the power workers have a sense of grievance, may I ask whether my right hon. Friend agrees that it would be better for them, for Mr. Prestwich and for everyone else if they were to use the proper trade union procedures, even if those procedures also need improving?
  The Prime Minister: I am aware that many who suffer, as well as the general public, are in favour of there being a broad acceptance of the general guidelines for moderate increases in pay and earnings this year. The Government will adhere to this policy as long as the policy maintains public support. Without public support, we cannot succeed. With it, I believe that we can succeed, and we shall endeavour to do so.
  I am grateful to my hon. Friend for what he said, because I think that the power workers have recognised the force of public opinion in this matter. I hope that they and their union, and, of course, the Central Electricity Generating Board, will get together to iron out whatever difficulties there may be on a tripartite

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  basis, provided that they can do so within the general guidelines, which I hope will be accepted by all.
  Mr. Tebbit: If the Prime Minister should change his mind and go to Hemel Hempstead, could I persuade him to come and visit my home in that constituency so that I could show him my file of answers from the Chancellor of the Exchequer? Those answers show conclusively that the man on average earnings with two young children was, by early summer of this year, some £8·70 a week worse off than at the time of the last General Election. The Prime Minister could then tell me in private, if he is afraid to say so in public, whether he was just flummoxed and got it wrong or whether he really believes the wrong answers that he gave me on Thursday.
  The Prime Minister: I should be very happy to have a cup of tea with the hon. Member. He is always clear in his criticism, even if he is not always accurate. I shall be glad to go along sometime. I do not promise that it will be next week. When I go I shall not have to take a huge volume of files. I shall just take one foolscap sheet that will flummox the hon. Gentleman once and for all.
  Mr. Cartwright: In view of the nation's improving financial situation, can my right hon. Friend offer the TUC any hope that some of the recent cuts in public services will soon be made good? Is there not a case for some selective relaxation of financial and manpower controls—in local government, for example—so as to improve employment opportunities and also to make good the falling standards of public service?
  The Prime Minister: My hon. Friend seems to have overlooked the fact that there was a relaxation the week before last to the tune of El billion next year, and "that ain't hay ". There will be £400 million going to the construction industry and £600 million going elsewhere. Therefore, there has been a relaxation ranging over a number of Departments.
  However, I should like to make one thing clear, about which I feel very strongly. Public expenditure is devised not as a means of giving employment but as a means of giving services to people.
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  It is upon that basis that we have to look at it.
  Mr. Crouch: When the Prime Minister meets the TUC and its leaders, will he ask them whether they will give him their full-hearted support in supporting his guideline of 10 per cent. for wage increases and not allow the unions, of which they are leaders, to put in grossly inflated demands, as is happening at the moment? I know of one case where the largest union in the country, the TGWU, has put in a demand of 42 per cent. to the oil industry.
  The Prime Minister: The TUC at its annual Congress undertook something voluntarily that is of very great value, namely, the observance of the 12-month rule. Full credit should be given to all the unions that are observing that 12-month rule, because it is enabling us to make an orderly return.
  As regards what the TUC should allow its unions to do, the TUC does not have control in these matters. The TUC advises unions, but unions take their own decisions. As we have seen recently, and it is part of the problem we have, it is not necessarily the leaders or officers of the unions who are putting in these pay claims. In the case of the fire brigades, it was the rank and file who decided what they wanted to do, despite the expressed view of their leaders. This is a problem for democracy as a whole. We have to give a firm lead, and we intend to do so.
  Mr. Mendelson: Although it is undoubtedly true that local government services are provided and their financing is designed to assist people in their daily lives, is it not equally true that, when the instruction was sent out some months ago that local authorities must cut expenditure, that was done on financial grounds and not because the services were unnecessary? Therefore, is it not correct now to send other instructions to the local authorities to restore those services? If the Government do not do that without delay, will there not be the inevitable consequence that more people will be made, unemployed this winter?
  The Prime Minister: I accept my hon. Friend's correction on that. It was done for financial reasons. However, let me also remind the House and my hon.

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  Friend that a year ago the complaint that was being made by both sides of the House was that local authorities were being extravagant in the use of manpower and they were being asked to cut down on it. Now, the pendulum seems to be swinging to the other extreme. I agree that there are some authorities which have used the financial restrictions in an unwise way and in a way that is designed to reduce services where they might not need to be reduced. Of course we want to see those services restored. My hon. Friend does not have to press me on the question of public expenditure. As regards the desirability of providing services for people, I stand fair square behind that

QUESTIONS TO THE PRIME MINISTER
Mr. Rifkind: On a point of order, Mr. Speaker. I tabled a Question to the Prime Minister for answer today asking whether he would visit the headquarters of the International Monetary Fund. The Question was accepted by the Table Office, but I was informed recently that it had been transferred to the Chancellor of the Exchequer. It appears on the Order Paper today as Question No. 48.
I had understood—indeed, I think the House had understood—that the Prime Minister was anxious to receive Questions of a detailed nature, rather than routine Questions relating to his engagements. This was a Question of important national interest, yet we find that. at the request of the Prime Minister, it has been transferred to the Chancellor of the Exchequer. May we be given some clear guidance on the Questions that the Prime Minister is prepared to answer?
Mr. Tebbit: Further to that point of order, Mr. Speaker. You were kind enough yesterday to make a statement on the practice that you intend to follow in allowing supplementary questions on substantive, and what you called indirect, Questions to the Prime Minister. Since then there has been this interesting new development that today's Order Paper shows that yesterday substantive Questions from the hon. Members for Newcastle upon Tyne, East (Mr. Thomas), Coventry, North-West (Mr. Robinson), Peterborough (Mr. Ward), Birmingham, Stechford (Mr. MacKay), and Edinburgh,
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Pentlands (Mr. Rifkind) were transferred by the Prime Minister.
The Question from the hon. Member for Peterborough was No. Q.3 on the Order Paper, so had he put down an indirect Question of the type that is rightly deplored by the Select Committee on Procedure, by yourself, and by the Prime Minister, he would have been able to question the Prime Minister. The fact that he put down a substantive Question has been used as a device for preventing the hon. Member for Peterborough from asking his Question.
Almost all the Questions on the Order Paper which the Prime Minister could reach today are of an indirect nature. Perhaps, Mr. Speaker, not only could you take this into account in deciding your policy towards supplementary questions, but, at some stage, the Prime Minister will let us know what sort of Questions he does dare to answer.
Mr. MacKay: Further to that point of order, Mr. Speaker. Many of us have taken note of the Prime Minister's wish to be asked substantive Questions, and I have tabled a Question asking him when he next intends to meet officers of the National Union of Mineworkers. That is something which, in view of the ballot of the mineworkers last week I should have thought was of national importance, and I was dismayed to find that the Question has been transferred to the Secretary of State for Energy. I am sure that Members on both sides of the House would appreciate guidance on how we can table substantive Questions without having them transferred.
The Prime Minister (Mr. James Callaghan): Further to that point of order, Mr. Speaker. Up to the end of July, 532 Questions were addressed to me, and I transferred 14. [HON. MEMBERS : "Which 14? "] I have attempted to help the House in this matter, but I have a feeling—and I shall offend certain of them by saying it—that some hon. Members are trying to make things as difficult as they can. [Interruption.] I do not resent that, but hon. Members must not mind, either, if I defend myself when that happens.
Questions will be transferred, because I cannot undertake to answer over the whole range—[Interruption.] There is nothing awkward about visiting the International Monetary Fund. One is given

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an agreeable lunch, and I should have a much more intelligent conversation than I would ever have with the hon. Member for Gillingham (Mr. Burden).
I cannot undertake to answer Questions covering the whole range of Government policy. I shall go on considering the matter. It might be that the easiest thing to do would be to go back to having a charade for 15 minutes—hon. Members merely putting down indirect Questions, and my giving the answers. That is a matter for you, Mr. Speaker. I do not mind, but when I try to go halfway to meet the Opposition and find this sort of reaction, it does not make me feel that some Members of the Opposition want to try to make this system work.
Mrs. Thatcher: The Questions that were transferred were direct, specific Questions to the Prime Minister, of the kind that we thought he wanted. Which criteria did he use to transfer Questions about unemployment and a personal meeting with the National Union of Mineworkers?
The Prime Minister: I am unable to give a clear answer to the right hon. Lady on these matters, but if I am to be questioned in this way every week I should prefer to go back to the old system and to transfer every Question so that my Question Time will consist wholly of "Whom shall I meet? ", "What are my engagements? "and other questions of that sort.
I cannot answer for the whole range of Government responsibility on these matters, and it is not reasonable to expect me to do so. I shall have to see what is the best thing to do. But from now on—and I shall say so now, Mr. Speaker, if it will help—I shall transfer every substantive Question that does not bear directly upon the responsibilities of the Prime Minister or the First Lord of the Treasury. Perhaps that will help.
Several hon. Members Several hon. Members rose—
Mr. Speaker: Order. There is no point in pursuing this argument across the Floor, because that will not settle it. Mr. Maxwell-Hyslop.
Mr. Maxwell-Hyslop: On a point of order, Mr. Speaker. To what extent is the Prime Minister's Office or the Table Office—I do not know which office is involved—entitled not just to transfer
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a Question but to alter its whole substance? Asking the Prime Minister whether he will go to the IMF is not the same as asking somebody else—the Chancellor of the Exchequer—not when the Prime Minister will go to the IMF. but when the Chancellor of the Exchequer will go to the IMF. That is an entirely different Question.
Mr. Speaker: At last there is a question I can answer. The hon. Gentleman knows that it is a very old custom—as old as I am—that when a Question is transferred it is put down to the Minister to whom it is transferred. That has always happened in my time.
Mr. English: On a point of order, Mr. Speaker. There must be some strength in the Prime Minister's case, and it is very simple. If he were always asked Questions within the responsibility of individual Ministers, no Questions would be directed to those Ministers. The criterion must be something different from that. That, surely, is the strength of the Prime Minister's case.
May I therefore ask you, Mr. Speaker, whether you will have a meeting with both the Prime Minister and the Leader of the Opposition to try to introduce some sense into the system? It is not sensible to have the charade to which my right hon. Friend refers. Nor is it sensible, on the other hand, to have a system whereby he is forced to answer Questions that should be answered by his colleagues. Could we not have a system whereby, for example, he answers Questions that deal with the responsibilities of several Departments, not just one?
Mr. Speaker: I am very much obliged for the hon. Member's help.
Mr. Cormack Mr. Cormack rose—
Mr. Speaker: Is the hon. Gentleman also seeking to help me?
Mr. Cormack: Yes, Mr. Speaker. Following what the Prime Minister said, I presume that all geographical questions, such as whether he will visit Hemel Hempstead, will now be transferred to the Department of the Environment.
The Prime Minister: In accordance with what we used to do in this House, that is exactly what would have happened.

INNER CITIES
The Secretary of State for the Environment (Mr. Peter Shore): With permission Mr. Speaker, I should like to make a statement on the development of Government policy for the inner cities.
In my previous statement of 6th April I announced the Government's decision to increase the Urban Programme, to assist the inner cities in grant-aided expenditure, from the existing level of £30 million to £125 million in 1979. Five partnership areas were then announced—in Liverpool, Birmingham, Manchester/ Salford and, in London, Lambeth and Docklands—and on 24th October I made provisional allocations to them of £50 million a year for a three-year period from the starting date.
I also told the House on 6th April that we would be giving further consideration to the case put by other authorities for assistance with their urban problems.
I have studied carefully all the evidence which has been put forward by some 25 authorities, and my colleagues and I have had meetings with most of the authorities concerned. We have reached these conclusions: outside London, the area of Newcastle upon Tyne and Gateshead stands out as having in sufficient degree the concentration, intensity and scale of problems to which partnership arrangements are directed ; accordingly I propose to offer a partnership to the authorities in this area. Inside London, the adjacent boroughs of Hackney and Islington stand out in a similar way, and I propose to offer a partnership to the authorities here as well.
I intend to make £5 million available immediately to each of the two new partnership areas out of the £100 million announced in the Chancellor's March Budget Statement. This is for inner-city construction works to be undertaken in this and the next financial year. I shall also be discussing with the new partnership authorities the basis on which they should plan for 1979 onwards.
In addition, I intend to make at least £1 million available to each of the seven partnership areas for 1978–79 for new projects of the traditional urban programme type and for other schemes, such as minor environmental works, that can
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be set in hand while inner area programmes are being prepared.
Outside the partnership areas we have identified a number of other authorities with inner urban problems which, while they do not justify partnership treatment, nevertheless merit special attention. These are i.e., North Tyneside, South Tyneside, Sunderland, Middlesbrough in the Northern Region.
Bolton, Oldham, Wirral, in the North-West Region.
Bradford, Hull. Leeds, Sheffield, in the Yorkshire and Humberside Region.
Wolverhampton, in the West Midlands Region.
Leicester, Nottingham, in the East Midlands Region.
Hammersmith, in London.
I intend that these 15 authorities should receive the powers to make loans and to declare industrial improvement areas set out in the White Paper, Cmnd. 6845.
In addition, I have concluded that up to £25 million should be provided from 1979–80 onwards from the Urban Programme to assist these areas. This would represent in total a six-fold increase in their urban aid and be a continuing commitment over several years.
Many of these authorities, and the Government, too, feel that their inner area problems can best be tackled through a comprehensive programme of action, and I shall therefore be inviting them to prepare their own inner area programmes in time for implementation from April 1979. Unlike in the partnership arrangements, Ministers and Government Departments will not be involved directly in their preparation.
I am well aware that many other authorities have urban problems in varying degrees. Individual projects will continue to be eligible for assistance under the Urban Programme as they are now. I can now announce that in 1978–9 I shall be inviting additional bids from authorities outside the partnership areas for new urban programme projects to a total value of £10 million. A circular inviting applications will be issued shortly.
As the House will know, the Urban Programme, rising, as it will, to £125 million in 1979, is in addition to the Government's major contribution through the

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main programmes of Departments, including the rate support grant.
The White Paper announced the Government's decision on IDC policy in London and Birmingham. The existing partnership areas in both these cities, together with the new partnership in Islington and Hackney, will in future take precedence, after the assisted areas and in front of the new and expanding towns, in consideration of applications for industrial development certificates for mobile projects coming forward from the relevant region. Furthermore, IDC policy will continue to be operated flexibly over the whole of inner London.
Finally, the additional local powers promised in the White Paper to which I referred earlier will be presented to this House, in the form of an Inner Urban Areas Bill, before the Christmas Recess.
Mr. Heseltine: Will the Secretary of State recognise that the wins that he is offering are so small, and are so spread over the years in relation to the scale of the problem itself, that he is giving a false impression in suggesting that they are any real solution to the problem? Will the right hon. Gentleman recognise also that the policies that he is pursuing of highly selective, centralised subsidy are diverting attention away from the need for policies which offer incentive and reward for investment in city centres, which tackle the problems of public sector land hoarding and which bring a new sense of urgency to our planning procedures?
Finally, will the Secretary of State recognise that there is a grave danger of adding to the patronage of Government. to the process to which he now seems committed, whereby individual towns or districts are being selected by him for preferential treatment without any known or objective criteria? How is he able to judge that the 15 cases he has announced today have problems of a different scale from those of the authorities that are still in the queue? Can he, therefore, publish the factual basis for his choice, so that all hon. Members whose authorities have not been selected shall know the method by which they can make successful applications?
Mr. Shore: I do not think that the tone of the hon. Gentleman's comments entirely reflects what I thought was a rather helpful debate on 17th July, in which the Opposition spokesman, the hon. Member for Birmingham, Hall Green (Mr. Eyre), gave a very broad welcome to what we were doing and simply urged us to make our efforts stronger and more extensive.
On the question of resources, £125 million a year is, in my view, what we can at present see our way to afford, but it is not, as I see it, the ceiling on what is needed by the areas concerned. However, I ask the hon. Gentleman to remember that that is a big difference from the £30 million a year which we inherited from the Urban Programme of his Government. I also ask him to consider all that he has said now against the background of his general complaints about the level of Government spending.
On the two other points that the hon. Gentleman raised, I assure him that a substantial part of this increased urban grant will be spent by the local authorities on broad support for industry and for environmental purposes. That is contained in our White Paper, and we have been consulting local authorities on this matter in preparation for the Bill which I hope soon to present to the House.
Finally, I take up the hon. Gentleman's question about the difficulties of making a judgment between the many different authorities with broadly similar claims. I do not believe that anyone has yet contested that the partnerships are, in a sense, almost self-selecting. Indeed, at least three of them arose out of studies set in hand by the right hon. Member for Worcester (Mr. Walker) when he was Secretary of State for the Environment. I do not believe that anyone will quarrel with that, or with the other partnership arrangements.
Of course, we shall give as much information as possible, but the Government are faced with a problem. We are only too willing to take the House into our confidence, to debate the matter, and to explain whenever the House wishes us to do so. But throughout all policies where an element of selection is required, whether regional policy or inner city policy, the question of drawing frontiers and making definitions is one that the

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Government must face and about which they must be responsible to the House.
Mr. Cledwyn Hughes: I appreciate that my right hon. Friend does not speak for Wales or Scotland, but can he say whether we may expect a similar statement from my right hon. and learned Friend the Secretary of State for Wales in respect of urban areas in the Principality?
Mr. Shore: I shall ensure that my right hon. and learned Friend is aware of my right hon. Friend's question. I expect that he will have something further to say about the urban programme in the Principality.
Mr. Stephen Ross: I assure the Secretary of State that we understand the urgency of dealing with the Urban Programme and therefore welcome the measures he has announced today. Can he tell us what monitoring will be undertaken to see that the money is properly and fairly spent, because there has been a feeling that London has had too great a share of it? Can he also hold out some hope for the rural areas which are in some parts becoming depressed? Is there some hope, through the rate support grant or some other measure, that the Department can offer to us in the coming months?
Mr. Shore: The rural areas have their problems and I do not seek to minimise them, but the character of those problems is clearly different from the problems of the inner cities. There are many different ways in which those problems can be eased, but, if the hon. Gentleman will forgive me, I would rather not be drawn too far along that path at present.
As regards monitoring, I believe that. particularly for the partnership areas, the monitoring of the carrying-out of the programmes is an important part of the whole exercise. We are, therefore, discussing with those areas effective arrangements to that end.
Mr. George Cunningham: Is the Secretary of State aware that, with only limited resources so far, Islington has been doing a great deal to improve the housing conditions of its people, some of which work he saw recently on site? Does he also realise that what we need now to back that up is a programme to pre-
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serve jobs in the inner city and that Islington Borough Council will express its gratitude to him for the obvious and helpful response that he has made to that request and will make good use of the arrangement he now suggests?
Mr. Shore: I am grateful to my hon. Friend. I believe that, on any serious judgment, Islington and Hackney deserve their place as a partnership authority.
Mr. Fletcher-Cooke: Will the Minister resist the temptation of regarding the dead centre of a conurbation as necessarily the worst hit? In talking about inner cities, does he realise that the outlying boroughs of Greater Manchester, such as Bolton, on any yardstick are just as badly hit as Salford and Manchester? In those circumstances, although we are grateful for the help to Bolton, would the Minister consider making that help a partnership agreement, because figures show that it is in just as bad a condition as Salford or the old centre of Manchester?
Mr. Shore: I understand the hon. and learned Gentleman's point, but one of the major factors to influence us has been the scale and intensity of the problem, and I do not believe that the problems of Bolton equal the problems which exist in the heart of our major conurbations. In a sense I accept his accusations, because it is true that I am concentrating more on the heart areas of the conurbations than on the outlying areas, but I believe that to be justified.
Mr. Urwin: Whilst I welcome my right hon. Friend's statement, and especially his second thoughts about the inclusion of Sunderland in this programme, will he accept that there will be some reluctance in Sunderland at the knowledge that it has been placed in the Second Division—like a football team—even though it has vitally important questions of high unemployment to resolve, together with the related question of stimulation of industrial development? Second, can my right hon. Friend give some consolation to authorities such as Durham County Council—if only an assurance that they will be taken care of in relation to rate support grant?
Mr. Shore: As my hon. Friend knows, I must not anticipate what I shall say about the rate support grant. As my hon.

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Friend also knows well, in terms of unemployment policy Sunderland is indeed in the First Division, and very near the top. It is a special development area. But the inner city problem is not simply an unemployment problem, although that is an important aspect of it. It is the combination of this and many other factors that has brought us to a specific inner city policy and has led us to make the distinction that we have made. I am glad to have been able to give some assistance to Sunderland, but I do not think that the scale of its problem matches that of the partnership areas.
Mr. Steen: Will the Minister agree that one of the things learned from the last 10 years of poverty programmes is that people should be consulted when they arc to be affected by decisions, before a decision is taken rather than afterwards? Why was it, therefore, that when the right hon. Gentleman came to Liverpool on Friday he talked about the big bureaucracies and ministerial committees rather than insisting that people, and the inner city communities, should be part of the process? Was he thrown off balance when he missed his train from London to Liverpool?
Mr. Shore: I met. the elected representatives of the city of Liverpool. The hon. Gentleman, whose contributions I have studied, had better make up his mind whether he is backing representative government at local and national level, or whether he sees urban area policies being conducted as a straight dialogue between Government and voluntary bodies and agencies of all kinds. I believe that voluntary bodies and other interests have a most important part to play at the local level, but it is not at the level of the partnership committees themselves.
Mr. Heifer: Is my right hon. Friend aware that most people on Merseyside will accept without question that voluntary bodies cannot solve the problem of Merseyside? Is he also aware that it is understood on Merseyside that its problems are quite different from those of Henley-on-Thames, although the hon. Member for Henley (Mr. Heseltine) perhaps does not understand that we have, for example, 12·1 per cent. unemployed, vast areas lying derelict, tremendous housing problems, and a lack of small
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businesses? All these things are understood perfectly on Merseyside. Therefore, the general attitude would be one of pleasure if the problems of Liverpool were only those of Henley-on-Thames. Will my right hon. Friend also consider the fact that many of us feel that £15 million over three years, with the type of problems that Liverpool has, is not sufficient? We shall need a much greater allocation. We shall certainly need a far more intensive programme of development of small businesses in the centre. We shall also need much more money to help solve our serious housing problems.
Mr. Shore: We allocated £30 million to Liverpool for the three-year period 1979–1982, following on the construction package. But I should like to emphasise that I do not see the boosted Urban Programme as being in any sense the main contribution made by Government.
May I make this point directly to my hon. Friend, because he represents part of the city of Liverpool. In the last year for which we have figures-1976–77 —the Government made contributions totalling £118 million to the city of Liverpool. Much of that went on the whole range of services, and included between £30 and £35 million on housing aid.
Several Hon. Members Several Hon. Members rose—
Mr. Speaker: Order. May I appeal to the House? Questions from now on should be directed to seeking any further information that hon. Members want on the statement. If they are brief and to the point, I shall be able to call some hon. Members who otherwise are unlikely to be called.
Mr. Mike Thomas: My colleagues and I in Newcastle upon Tyne—indeed, in the whole Northern Region—will be grateful for my right hon. Friend's statement. We are in dire need of the help that he offers, and the partnership between Newcastle and Gateshead is welcome. We appreciate his readiness to meet not only ourselves but others involved. We are grateful for his announcement today, and we are anxious that the expenditure of money involved —and, more importantly, the development between his civil servants and those who are to put constructive ideas into our programme, which has already begun

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—should start at the earliest possible moment.
Mr. Shore: I thank my hon. Friend and assure him that we shall try to get going with the Newcastle-Gateshead partnership at the earliest moment.
Mr. Alan Clark: The right hon. Gentleman has not even tried to answer my hon. Friend the Member for Henley (Mr. Heseltine), who asked what criteria are being applied in the dispensation of this patronage, and, in particular, how are the special projects to be evaluated and what guidance is he to give to local authorities prior to their submission?
Mr. Shore: We have debated the criteria in the House. We have referred specifically to loss of population, to loss of jobs, to the actual social composition of population in the inner city areas, and to a number of quantifiable and, to some extent, admittedly. difficult to quantify, social factors. We have discussed all these factors and we are prepared to give such information as we can. But I do not think that it would be fair to accuse us, as the hon. Gentleman has done, of considering these matters in any light and ill-considered way. We have done our best.
Mr. Faulds: On what possible basis can my right hon. Friend have come to the conclusion that Sandwell does not merit exactly the same tr,:iitment as he has announced for some of those areas needing.special attention? Is he not aware that we have exactly the same concentration in that area of inner city problems as many of the other areas that he has mentioned?
Mr. Shore: I understand my hon. Friend's point and his feeling, because Sandwell clearly has problems. The difficulty always at the margin is to decide those whom we can help as distinct from those whom we are not able to help. Sandwell was certainly considered carefully by us but it did not quite match the degree of need which we found in the areas that I have announced.
Mr. Anthony Grant: I welcome the right hon. Gentleman's relaxation of the IDC policy, but why will he not further relax the ODP policy, or, better still, abolish it altogether, because commer-
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cial development has as important a part to play in dealing with inner area decay as has industrial development?
Mr. Shore: We have relaxed the ODP policy. We raised the threshold to 30,000 square feet only two months ago, and, in addition, we have given, as it were, entirely new terms of reference to the Location of Offices Bureau.
Mr. Jay: While I welcome the spirit of my right hon. Friend's statement, is he aware that there will be surprise as well as disappointment at his exclusion from the London list of the borough of Wandsworth, which has the same problems as Lambeth, Hammersmith, Islington and Hackney? Can he tell us of any problems that those boroughs have that arc not also to be found in Wandsworth?
Mr. Shore: My knowledge and affection for the borough of Wandsworth is well known, and so it should be, because I live there. But I did not feel, on examining the criteria as fairly as I could, that it had the same intensity of need as I had already discovered in Hammer-smith, on the one hand, and in Islington and Hackney, on the other.
Mr. Charles Morrison: To what extent will the new inner city programme affect the prospects for development, both industrial and in terms of population expansion, of those newer towns which until now have been assumed to be expanding, such as the borough of Thamesdown?
Mr. Shore: I should like notice of a question relating to a particular area. In general, however as the hon. Gentleman will understand, we developed our inner city policy at the same time as we developed our revised policy towards the new towns. I have made statements and announcements to the House during the past few months covering the future of the new towns.
Mr. McNamara: Is my right hon. Friend aware that his announcement will be welcomed in Hull? Can he now give the House some indication of how this new urban scheme should be programmed, because he said it is to be left in the hands of the local authorities? What sort of time scale will there be. and what sort of aid will come from his

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Department to hard-pressed areas such as Hull to enable them to take full advantage of the offer which has now been made to it?
Mr. Shore: The partnership arrangements arc well in hand already. As far as the second group of authorities which I mentioned is concerned, we shall, I hope, be exchanging views with them in the near future. Beyond that, our main request of them is that they should draw up for themselves inner area programmes, and that will be the basis on which we shall start further studies.
Mr. Michael Latham: If I may be the spectre at the feast, is it not clear that throwing money al the problem has not worked in the past and is not likely to work in the future? Would it not be a lot better if the right hon. Gentleman did something to implement the report of the Select Committee on Planning Procedures, chaired by my hon. Friend the Member for Daventry (Mr. Jones), rather than just throwing more public money around?
Mr. Shore: It may well have something to do, say, with planning procedures as well. However, I hardly consider it to be throwing good money after bad. The plain truth of the matter is that this country, and this House, has not so far had a fully developed urban programme— an inner city programme. Insofar as we have one at all, this is due to the initiatives taken by the then Home Secretary, my right hon. Friend the present Prime Minister.
Mr. Loyden: Will my right hon. Friend accept, in spite of the churlish remarks with which his statement has been received by the Opposition Froat Bench, that these are the first positive steps that have been taken to deal with districts which have been selected as inner city areas? Will my right hon. Friend first bear in mind that the geographical criteria of inner cities ought to be left sufficiently flexible for areas of stress in other parts of those districts to be able to come within the scope of inner area action? Will the innovations and ideas for community industry flowing from the local people in such areas be taken on board and considered seriously as a way of dealing with industry and unemployment?
Mr. Shore: I assure my hon. Friend that we need the ideas and co-operation of the people living in the inner areas, and we must find ways of tapping the contribution which I know they can make. Flexibility in the definition of inner areas will be permitted, but it will be a restricted flexibility. I appreciate my hon. Friend's special interest and, following my visit to Liverpool on Friday, I was glad to find that the local authorities were including in their definition of the inner area there at least the dock area of Garston.
Mr. Geoffrey Finsberg: I think that in the last paragraph or two of his statement the Secretary of State made reference to IDCs and to inner London. Before he brings in the Bill that he promised, will he have another look at that definition, which is different from the definition of inner London that most of us recognise, for example in respect of the Inner London Education Authority? His definition, as put forward when we discussed the Office Development Act, excluded, for instance, the London borough of Camden, in parts of which unemployment has trebled over the last two and a half years. Will the Secretary of State at least see whether he can make his definition of inner London conterminous with inner London as stated in statutory terms?
Mr. Shore: I shall have a further look at that matter. However, I must tell the hon. Gentleman—who, of course, knows London as well as I do—that I believe that at present we are right to give this, as it were, intra-regional preference to the partnership areas in London.
Mr. Pavitt: Does my right hon. Friend recall that, following his previous statement, I pressed him on the inner city deprivation experienced by Willesden—most of it built by Queen Victoria, though not personally. Sixty-six factories have closed in the last six years and 50 per cent. of the population of Harlesden was born outside the United Kingdom. Would my right hon. Friend now see what more can be clone to help with the tremendous problems of that area?
Mr. Shore: I shall indeed look at the problems of Willesden, as my hon. Friend has urged me to do. I regret that, in the consideration that we gave to the various

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claimants, we were unable to include that district in the list that I announced.
Mr. Budgen: It occurs to me that one of the causes of Wolverhampton's problems is the regional policies which have been pursued by successive Governments and which have succeeded in driving economic activity away from the West Midlands. Does the Minister agree that it would be better fundamentally to reconsider these regional policies rather than engage in further interference by the State, and, indeed, counter distortion by subsidies?
Mr. Shore: Over a period of time all policies should be, and indeed are, reviewed. The problem, as we have found it in most of our major cities, is not the impact of regional policy in taking industry out. It is much more a problem of firms dying, as it were, in situ, and the failure to generate new growth in the area. In other words, I do not believe that industrial rundown in the major cities is the result of regional policy.
Mr. Cant: I agree with inner city policies, but may I ask my right hon. Friend whether the time has not come to back some of the winners among the older cities? I am referring to Stoke-on-Trent. Could not Stoke be given an industrial development site grant to supplement land reclamation? Should it continue to be penalised because of its low unemployment? Does my right hon. Friend propose to continue the policy of further penalising Stoke-on-Trent and Staffordshire by reducing the rate support grant to shire counties in order to help to finance his inner urban area plans?
Mr. Shore: My hon. Friend must not tempt me on the rate support grant question on this occasion, but he is right to refer to the important programme of land reclamation which has taken place in Stoke and in the area around, which has undoubtedly been beneficial. All I can say to my hon. Friend is that I very much hope that he and the city that he represents will continue to enjoy the success that they have already achieved.
Mr. Michael Morris: What assurance can the Secretary of State give to those county councils with new towns within their counties which are fast gaining the opinion that they are being milked to
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provide extra help for the inner city areas?
Mr. Shore: We have as tender a regard for new towns as we have for other areas of the country, but the one thing about new towns is that they are not part of the inner city problem.
Mr. Palmer: May I, as one who represents much of the inner part of the city of Bristol, ask my right hon. Friend how he now sees the needs of the city of Bristol?
Mr. Shore: I assure my hon. Friend that we looked very carefully at the problems of Bristol—and obviously there are problems. What I had to do, in terms of this statement and within the allocations of available money, was to establish priorities, and that is what I have tried to do.
Several Hon. Members Several Hon. Members rose—
Mr. Speaker: There are five hon. Members who wish to speak. I shall try to call them all, but it depends on whether they are brief.
Mr. Hal Miller: Can the right hon. Gentleman say whether the amounts mentioned for the partnership areas are grants, or merely permission to borrow? Can he also tell the House whether, in discussions with the partnership areas, attention has been paid to the fact that they are getting increased resources, and that they should not, therefore, export people to other areas?
Mr. Shore: I can hardly limit the export of people in this country—it happens to be a free country. I very much welcome the first part of the hon. Gentleman's question, because I want to make it clear that the sums of money that we are discusing are eligible for grant aid. That is the point. The normal rate of grant is, of course, the 75 per cent. rate of the urban grant.
Mr. Arthur Jones: The right hon. Gentleman has referred on a number of previous occasions, when talking about the inner city areas, to the private sector. How does he see that sector in the context of his announcement today? What are his thoughts on the artificial level of inner city land values?
Mr. Shore: On both those questions I shall have more to say when we debate

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the Bill which, as I said, I hope to present to the House before Christmas. The Bill will seek to enhance the powers of local authorities to assist industry in their areas.
Mr. Sainsbury: Will the Secretary of State accept that it is now more than ever apparent that however clear he may think the criteria are for identifying the areas to be selected for aid, there will be a great deal of disagreement about whether they have been fairly selected? Will the Secretary of State, therefore, consider helping to put everybody's minds at rest by ensuring that the monitoring programme to which he referred can monitor precisely the quantified objectives which he is hoping to achieve by each of the programmes to which he has referred?
Mr. Shore: We are thinking hard about what would be an effective monitoring system but one which, I hope, would not involve masses of paper work. I shall think further about that, and if I can report to the House on the matter I shall be only too pleased to do so.
Mr. Kenneth Lewis: Is the Minister aware that if this is new, fresh money, this proposal must be good? Can he assure us that when the rural areas come to negotiate their grant he will not say to the rural area county and district councils that they cannot have any extra because of the money that he has spent on this scheme?
Mr. Shore: That is an imprecise question, and I am afraid that, for fear of misinterpreting it, I had better say that it is not a question that I can reasonably answer.

INNER CITIES
  NEW MEMBER
  The following Member took and subscribed the Oath: Eric John Sever, Esq., for Birmingham, Ladywood.
ORDERS OF THE DAY

  DEBATE ON THE ADDRESS
  [FOURTH DAY]
  Order read for resuming adjourned debate on Question [3rd November].
  That an humble Address be presented to Her Majesty, as follows:
  Most Gracious Sovereign,
  We, Your Majesty's most dutiful and loyal subjects, the Commons of the United Kingdom of Great Britain and Northern Ireland in Parliament assembled, beg leave to offer our humble thanks to Your Majesty for the Gracious Speech which Your Majesty has addressed to both Houses of Parliament.—[Mr. Bradley.]
  Question again proposed.

  INDUSTRY AND COMMERCE
  Mr. Speaker: Before I call the right hon. Member for Leeds, North-East (Sir K. Joseph) to speak, I should tell the House that I have a very long list of hon. Members who have indicated that they will be trying to catch my eye. Yesterday two hon. Members took 49 minutes between them, and if that happens today it will repeat yesterday's performance of cutting out some hon. Members who wish to speak.
  I have selected the amendment on trade in the names of the right hon. Lady the Leader of the Opposition and her right hon. Friends.
  4.18 p.m.
  Sir Keith Joseph: I beg to move, at the end of the Question, to add:
  But humbly regret that the policies being followed by the Government as well as those outlined in the Gracious Speech will not enable industry and commerce to achieve the level of performance necessary to maintain, let alone to improve, the standard of life and social services.
  I am during my speech today to ask the Secretary of State who has now been in his present job for nearly two and a half years, I think,—
  The Secretary of State for Industry (Mr. Eric G. Farley): Longer.
  Sir K. Joseph:—five questions, and I hope that they are sufficiently central

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  to the subject of the standard of living and the employment of the British people for him to be able to answer them.
  The present position—I do not believe that there will be any disagreement on this between the sides of the House—is that we have many fine firms of all sizes from the giants through to the one-man firm both in manufacturing and in services. We have these fine firms despite the misunderstanding by Government, particularly the Labour Government, of the needs of industry. We have production that has been flat since the end of 1973 and as one encouraging factor we have an export volume that has increased more than import volume during the past few years.
  I suggest—I think that the Secretary of State will agree—that rising productivity is the source of an improved standard of living for any society and of competitiveness. The Prime Minister, in his speech at Blackpool a year ago, emphasised to the Labour Party Conference that employment in our society and a rising standard of living both depend upon our being internationally competitive. With that my right hon. and hon. Friends and I can thoroughly agree, and I hope that right hon. and hon. Members opposite also agree.
  We shall be competitive, and therefore have increased numbers of jobs, a rising standard of living and improved social services, to the extent that we are competitive in trade and industry, to the extent that our productivity rises, and to the extent that we encourage innovation. Innovation and competitiveness are the key to jobs and to an improved standard of living.
  I hope that this either is or can be made common ground between the two sides of the House, because nothing would be better for the future welfare of the people than that there should be common ground on the essential question of the management of the economy so as to enable private enterprise, and indeed the public sector, to produce the best results for consumers, savers and workers.
  The classic view about how to achieve rising productivity and innovation is that they flourish best in a framework of competition and of laws, taxes and services which are designed to encourage people to do in their own and their
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  family's interests that which is in the public interest—a framework which is designed to achieve co-operation within firms and competition between firms, a framework that has built into it safety nets, laws that, for instance, inhibit pollution or noise or, perhaps, Sunday trading or trading in hard drugs, a framework that contains laws which match the spirit of the times and services which are designed to look after casualties and to help people without diluting the incentives necessary to an enterprising society.
  In the last analysis, supply—and an increased supply of what people want is what we call growth—is a matter of individual initiative and effort. At best Governments only create the conditions for initiative and effort. I happily espouse the very last sentence of a book produced by the Secretary of State's own Department to which he contributed a foreword and which says that improvements in performance can be brought about only by action at the level of the boardroom, the office and the shop floor.
  We on this side of the House believe—I that a number of right hon. and hon. Members opposite believe this also —that this framework and this encouragement to people can best be achieved by allowing people to spend more of their own earnings, by allowing differentials to operate to encourage enterprise, effort, responsibility and skill, and by allowing the rewards of success to come through to those who, by a combination of character, skill and luck, are successful in creating jobs and wealth—wealth which helps them but which also helps the whole of society.
  The profit and loss competitive structure is, we believe, the framework best adapted to harness the self-interest of men and women to the public interest. But the Socialists do not in general seem to share this understanding. Historically, they found the free enterprise system ready to be milked and, very understandably, they set about milking it. But they did not, and do not, seem to understand the conditions necessary to keep the cow—if that be the animal that can be milked—of profitable, successful, competitive free enterprise in flourishing condition. Right hon. and hon. Members opposite and their predecessors have condemned free enterprise. denounced profits, stigmatised competition and exalted conflict.

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  The Leader of the House has in his previous incarnations been a leader of this school of rhetoric and denunciation. The general attitude and philosophy of Socialist writers—I am not for a moment impugning their sincerity or their belief at the time—has been, in the words of the late Herbert Morrison, that the problem of production is solved, that there is no problem of production, that the only problem that faces society is that of distribution. In the interests of allowing production to continue to be solved and in the interests of dealing with the problems of distribution, as they saw them, the Socialists have pushed the panaceas —so called—of nationalisation, of planning, of controls and, above all, of high Government spending.
  This afternoon we have had another example, as one of my hon. Friends said, of throwing public money at a problem when enormous amounts of public money have already been unsuccessfully and in vain thrown at that problem. The result of high public spending is high direct taxes, with all the consequences to which they lead. Now, over 13 years, for 10 of which the Socialists have provided government, the wage earners have had in real terms an average increase of 1 per cent. a year in real household spending power. That is despite a much better performance during three-and-a-half years of Tory government.
  So the Socialists have no coherent analysis or understanding of how the standard of living rises and jobs are created spontaneously in a free society if the right framework is created. Far from the problems of production having been solved, today, with production totally flat after three and a half years of Labour Government, the problems of production are worse than ever and supply constraints, inhibiting people at every level of income and education and activity from contributing more of their efforts, abound.
  We have now more unemployment under Labour and yet—I think that Socialist Ministers understand this—there is little scope for expansion without running into shortage of skills as well as worse inflation. If it is true—I think that the Secretary of State is bound to agree with this—that rising productivity is the source of an improved standard of living. the Socialists tend to give this fact very
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  little emphasis indeed in their speeches and their approach to the people and to the problems. In fact, by their rhetoric the Socialists seem to have misled themselves, trade union leaders and shop stewards into believing that there is some crock of gold out of which the standard of living and the social services can be improved.
  None of this would matter a jot if the Socialists were at the same time preaching to the people that they must make do with the existing standard of living, that we must forgo materialism. But, as we all know, the Socialists are constantly raising expectations for increased earnings, increased spending power, increased public spending and increased expectations in every field.
  It is true—I must accept this, otherwise the Secretary of State will rightly criticise me—that our productivity has internationally lagged for about a century. It is true that it has risen faster since the war than it did before the war. But the fact is that recently productivity has been rising, if at all, at a very dismal level.
  Between 1970 and 1973 productivity rose relatively sharply by historical standards in this country. During the last year of Tory rule in 1973 productivity—admittedly, there were other factors which have to be taken into account—rose by about 9 per cent. How much worse, therefore, is the Socialist performance over the 10 years out of the past 13 years in which they have formed the Government when I tell the House that our productivity has risen at less than half the rate at which productivity has risen in the five larger countries of the Common Market over the last 15 years?
  Is that surprising? After all, there are no incentives. Labour high spending has led to high deductions from pay packets, and the wage-earners are asked by Socialist Ministers to be content with a social wage—that is, with money being withdrawn from their pay packet to be spent on items which the individual wage-earners have not chosen and might not choose were they to have their own money. We live now with a new manifestation of the old truck, under which Ministers, not employers, decide how to spend the wage-earners' money.
  Why is there inefficiency in the use of labour—that is, low productivity? There

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  are, of course, notable exceptions. The whole of agriculture is remarkably high in productivity—amongst the top in the world. There are industries in this country, such as food processing and chemicals, to choose two, in which our productivity is internationally very respectable indeed. There are many firms—giant, large, medium, small—where productivity is high. But overall the results are all too clear.
  Let me give the House the table, which I draw from the last bulletin of the National Institute of Economic and Social Research, of what has happened to productivity in manufacturing over the past three years, since Labour came into office. In this country we have had an increase of under 3 per cent. in manufacturing productivity, output per man-year for men and women in manufacture. The United States of America has had a 10 per cent. increase over the same period. France has had a 10 per cent. increase, Italy a 12 per cent. increase, Japan a 14 per cent. increase and Germany a 15 per cent. increase.
  So let not any Minister say that our poor performance has been the result of the oil price increases. On the contrary, during the same period of three to three and a half years the productivity increases from which the standard of living, the jobs and the social services of the country flow have been four to five times higher in our most comparable industrial countries than they have been under Socialism here.
  Why has this been so? It is true that responsibility must in part fall on management. We have management of all qualities, from the outstanding through to the less than good. While management must take the responsibility, I hope that the House will remember that the wet blanket of high taxation has stifled initiative and effort, risk-taking and enterprise at every level of responsibility from the boardroom through to the floor cleaner in industry. It is not only that our capacity used is below potential in this country under the Socialist Government, but that the effort in the factories, in manufacturing and the service trades. is below potential capacity.
  Of course, there are devoted minorities, devoted individuals, devoted teams, devoted work forces, but time and again
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  in every establishment one comes across the attitude in management that it is not worth it, that the risk and effort are too much to be justified by the miniscule rewards left after high taxation and inflation. One comes across the attitude in middle management, from the foreman and from the operative, that the effort is not worth while for the same reason.
  On top of all this discouragement from Government action there is the attitude of the trade unions and shop stewards. There are some trade unions and shop stewards who are models of co-operation and understanding. There are individual firms that praise very highly the output, performance and productivity in this country. But, in general, there is on the part of many trade unions and shop stewards a hostility to, and a misunderstanding of, the processes of prosperity embodied in the free enterprise system and a lack of understanding of the common interest which makes high productivity in the interests of the workers of this country, the savers, who are now to a large extent the same as the workers, the managers and the consumers as well as the users of the social services.
  Mr. Tom Litterick: The right hon. Gentleman's last point is interesting, but it would be informative if he could explain how it is that the agricultural workers—who have indeed increased their productivity per man-hour, year in, year out, by more than virtually every other occupational group in the British economy—remain, in spite of his argument, the worst-paid occupational group in Britain.
  Sir K. Joseph: I pay tribute to the farmers themselves and to their entrepreneurial spirit despite the difficulties imposed by the Government. the green pound and so on. I pay tribute to the farm workers, who are not organised in mass obstructive battalions by trade unions and shop stewards. I pay tribute to both.
  Time and again, we see that where there is not—I must be careful or I shall generalise too far today —I think I should stick to what I have said—[Laughter.] I was about to say that the smaller the firm and the less the presence of trade unions, the higher tends to be the productivity and the benefit to the consumer. the social services and our society.

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  I am not looking to the Secretary of State for any plan to increase productivity on a national scale overall, because I believe that the NEDC, little Neddies, sector working parties, planning agreements and nationalised industries in themselves are useless instruments for this purpose.
  But I say to the Secretary of State that, in the rationalised industries for which he and his colleagues are responsible, he and his colleagues should be trying to set an example of rising productivity. They should he encouraging it everywhere by cutting the marginal rate of taxation. Above all, perhaps, they should be constantly expressing in their speeches not the outmoded obsolete class war rhetoric but the fact that higher productivity and co-operation between wage earners and good management is the way to a better standard of living, more jobs and better social services.
  Mr. Litterick: As in agriculture.
  Sir K. Joseph: In agriculture there is first class co-operation between farm workers and farmers, and that accounts for the high performance.
  Mr. Litterick: That is why so many,of them are on supplementary benefit.
  Sir K. Joseph: The hon. Gentleman knows that traditionally in the trade union movement the farm worker's pay is treated as the base on which all differentials are erected. As other trade unions raise their basic incomes, farm workers are always near the bottom because of that historic fact. As the House knows, many farm workers receive non-pay perquisites. They do not all receive them, and those who do receive them to a varying extent.
  I ask the Secretary of State, first, does he agree with the Prime Minister, does he agree with me and does he agree with all of us on this side that competitiveness is the key to employment, to the standard of living and to the social services? Does he agree that productivity and innovation are the key to competitiveness? That is my first question.
  The cumulative effect of obstruction by those trade unions and shop stewards who obstruct, and the discouragement,of enterprise by the high marginal rate of
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  tax and by the general hostility of the Socialist Party to the free enterprise system are bound to make us less competitive. If I had to sum it up in one sentence, I should say that the twin policies of over-man and over-tax are suicidal for the standard of living and the social services of this country. They will lower the standard of living. They will lead to fewer jobs, lower pensions, less for the disabled and less for the casualties of our society. The damage done by these twin policies of over-man and over-tax will more than offset the benefits of North Sea oil.
  From what does this industrial inefficiency, which some of us in an inaccurate verbal shorthand call over-manning, come? It does not come from any philosophy. Restrictive labour practices are not capitalist and they are not Socialist either. They are opportunist on the part of this Government, and they are defeatist because this Government do not understand how to create conditions which will lead to the creation of more jobs. That is why they are so passionate to defend existing jobs. Indeed, the Government are making the situation far worse by refusing to allow scope for the winners among our industrial and service firms, while overtaxing all of them in order to finance the losers in our economy.
  The way to raise productivity—I hope that the right hon. Gentleman will agree —is to use the wastage, which is considerable, in most of the nationalised industries and in many firms to de-man where there is overmanning, while simultaneously encouraging new firms and expansion of existing firms by cutting the top rates of tax to encourage the risk-takers, the job creators, to get into action.
  This is the way to increase productivity and, at the same time, to reduce unemployment. At the moment the Government are aborting the new jobs that could exist by all the Socialist obstacles that they have erected in the path of enterprise, particularly by the high rates of marginal taxation which make the risk-reward ratio so discouraging. Here, then, is the test. We witnessed last week a welcome move by the Socialist Government to try to encourage small businesses. Some things have been done that we thoroughly welcome. But many things remain to be done.

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  One thing above all remains to be done, and that is to cut the top rates of taxation. The way to help the poor of this country, paradoxically enough, is to release the talents of the job and wealth creators by cutting the top rates of taxation. We shall have more resources, more jobs and better social services if we emulate our neighbouring countries and do not burden the successful with such vicious and vindictive rates of taxation.
  I hope that the team of the Chancellor of the Duchy of Lancaster and the Under-Secretary of State for Industry will recognise the importance of cutting the top rates of taxation in the next instalment of what they do for small businesses. Indeed, the start-up—start-up is the technical phrase for the creation of new businesses—of businesses and the expansion of existing small businesses depend more for finance on the capacity to save of the entrepreneur himself, if he were able to save out of net income, and the capacity of those who might have high net incomes to invest in such businesses than on any other gadgets that the Government can contrive.
  Mr. Arthur Palmer: The right hon. Gentleman quoted, as I understood, France and Italy as models that we might well emulate. France and Italy have two of the largest Communist Parties outside the Soviet Union, which would not seem to show any great devotion to the principles of free enterprise.
  Sir K. Joseph: I did not quote them as examples. I said simply that productivity had risen three and four times as fast in those countries as in ours.
  My second question to the right hon. Gentleman, therefore, is, whether the Government will encourage the use of wastage in their own sector to raise productivity. Will they encourage new jobs by cutting the top rates of tax to motivate the risk-takers?
  The third subject which I believe is central to this debate is the level of profits. I shall not spend time justifying to the House the place of profits earned in competition in a free society, but I point out to the House that profits are almost catastrophically low in real terms. The
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  last figures 1 have are for 1975—I take my information from the DTI Gazette.
  In metal manufactures the net profit, at replacement cost after providing for stock appreciation, was under 1 per cent. In engineering, shipbuilding, vehicles and metal goods it was only just over½ per cent. In textiles, leather, clothing and footwear, it was 0·3 per cent., and even in total manufacturing as a whole it was 2½ per cent. I hope that the right hon. Gentleman will accept, as the CBI's graph in its conference document so vividly shows on page 37, the close relationship between net profit and investment. They follow very closely, one from the other.
  So, without going into the questions that I might raise—without pointing out that investment is not a panacea in itself. that we compare very well with other countries in quantity of investment but not in quality or in output from the investment installed—without embroidering on all those basic truths, which I could easily prove to hon. Gentlemen who doubt them, I limit myself to asking the Secretary of State whether he will agree that profits are far too low in real terms now and whether he will agree that even if they were to rise by 30 per cent. during this year or the next, they would still be at a catastrophically low rate in real terms—only at the level of about 3 per cent. overall in manufacturing.
  The fourth question I put to the right hon. Gentleman is about the spending of taxpayers' money.
  Mr. J. Enoch Powell: The right hon. Gentleman gave a series of percentages of profit. These are percentages of what capital?
  Sir K. Joseph: They are drawn from the capital in use from company accounts after replacements of assets at replacement cost and after providing for stock appreciation.
  With regard to the spending of taxpayers' money, the Secretary of State has presided over a great increase in public spending in the nationalised industries, in subsidies, in rescue schemes and in special schemes under both Industry Acts. He has tended to back losers rather than allow society to back the winners.
  It may well be sensible occasionally for money to be provided by the taxpayer to help a company genuinely to

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  become more competitive so that it can quickly become independent. Is there any evidence of that having happened with any of the companies that the right hon. Gentleman has tried to help with taxpayers' money? I grant him that in Ferranti—a rather special case—that may be true, but I should like to know whether there are any other examples.
  My right hon. and hon. Friends believe with me that rescues and subsidies do great harm because the expectation, or hope, of rescue tends to prevent companies putting their own house in order and they tend to create a pursuit of subsidy in firms rather than a pursuit of profit. They blunt competitiveness in that way. I believe that the Government are doing great harm by buying business abroad with the taxpayers' money, such as we are witnessing happening with ships in Poland and, as reported in the Press today, in India.
  It is generally bad for business to buy turnover. The cost is paid not only by the taxpayer but by people such as British seamen, who will find some of their merchant carrying transferred to Polish and, perhaps, to Indian ships on the backs of our own taxpayers' subsidies.
  The point I put to the right hon. Gentleman—and it leads to my fourth question—is that all these operations have a price. The Opposition want to know whether the right hon. Gentleman and the Government are aware how many jobs are lost by the taxes raised in order to provide subsidies. rescues and all the other operations for which the Government try to take credit. Jobs are lost elsewhere by the net effect of the taxes levied in order to increase Government spending. If it is not by increased taxes, it is by increased borrowing, which tends to raise the interest rate above what it would otherwise be.
  We ask the right hon. Gentleman and all Ministers to tell us not only how much a scheme will cost, but who pays and how many jobs will be lost as a consequence. It is the old question that Lenin used to put: "Who whom? "" Who pays?" in two senses—who finds the money and who loses his job? Although the jobs rescued are dramatically identified—a firm or an industry—the jobs lost
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  are probably just as numerous. They are spread invisibly through the economy so that they cannot be identified, but the remorseless increase in the unemployment figures, despite the spending of taxpayers' money by the Government, shows how ineffective are the rescues and subsidies.
  If the right hon. Gentleman tells us that things would be worse but for what the Government have done, I have to reply that he cannot possibly be sure of that, because he is weakening sound firms, often by higher taxes, to rescue unsound and precarious firms.
  The fourth question is whether the right hon. Gentleman will tell us, whenever he announces the expenditure of some public money, whence the money comes and how many jobs are destroyed? If his brief today contains yet another catalogue of public spending, will he tell us in each case how many jobs will be destroyed to find that money for public spending?
  It is natural that I turn now to the British Steel Corporation and to British Leyland. In connection with British Leyland I wish to state that I respect Sir Richard Dobson. I respect Michael Edwardes who has become Executive Chairman. I hope that the Government, the NEB and the new management will review the Ryder plan. I hope that they will decide to taper the amount of taxpayers' money going to Leyland. I hope they will back the new management and I ask them whether it is not now perhaps time to consider making British Leyland to a holding company so that the viable parts—there are some very successful parts of British Leyland—can be separated as business entities from the areas where there are heavy problems. I do not mean total independence at this stage, although that may come later.
  I hope that the right hon. Gentleman will tell us about British Leyland and about the British Steel Corporation where, in the new circumstances, it surely must be necessary to review the plan that was established under the Conservative Government and ratified, after a delay, by the Socialist Government. I hope he well tell us the prospects for the British Steel Corporation and for British Leyland and that he will tell us two things. Are the cash limits still as

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  they were for the British Steel Corporation? Are the taxpayers' money commitments still as they were for British Leyland? Will the right hon. Gentleman tell us whether the funds for investment in both those cases can be, and are being, raided for current expenditure on wages, earnings, overheads, and so on?
  I wish to draw those five questions together. I hope that the right hon. Gentleman will answer them all. I do not believe that the Socialist Party or the people have any perception of the steepness of decline in our competitiveness as manifested by our productivity. I do not believe that it is wise of the Government to use oil to support consumption while, at the same time, making us industrially and commercially less and less competive by their hostility to free enterprise when they cannot substitute anything better. Their hostility is manifested by excessive marginal rates of taxation, by a refusal to encourage the job creators, by backing losers with taxpayers' money, by making productivity lower by their own feather-bedding measures, and by the incessant stream of over-legislation and over-regulation.
  All these ingredients blunt our competitiveness, our standard of living, our jobs and our social services. They drown the benefits of oil, just as the benefits of North Sea gas have already been drowned and lost from sight.
  Nor can sound and sustainable jobs be created by the Government's present policies. Subsidies have to be paid for. As the subsidised sector grows, so the subsidising sector becomes more heavily burdened. The rush for rescue can swamp the lifeboat. Nothing is more important for the economy than common ground on this analysis, or one very close to it. Only a decisive change to a pro-enterprise, high-productivity innovating economy can reverse the downward trend.
  If the Socialists ignore these realities—[Interruption.] I hope that the Lord President will listen, because I remember warning him in the autumn of 1970 that, if his party won the General Election and put into practice the policies of higher public spending on which he was fighting that election, he, as Secretary of State for Employment, if he continued in that job, would find himself presiding over the largest increase in unemployment since
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  the war. He scoffed at me. I was right, so let the Lord President not ignore what I am saying now.
  If the Socialists ignore the realities, higher unemployment and a dismal growth in our standard of living will be the consequence for the British people, plus the bitterness that will come from disappointed expectations that the Socialists themselves have done much to create.
  4.55 p.m.
  The Secretary of State for Industry (Mr. Eric G. Varley): The House listened with its usual interest to the right hon. Member for Leeds, North-East (Sir K. Joseph). Speaking for myself, I look forward to the right hon. Gentleman's speeches, especially when he ranges into philosophical pronouncement, and today's speech was true to kind, and vintage stuff. I thought that he got into a little difficulty in trying to deal with the intervention of my hon. Friend the Member for Birmingham, Selly Oak (Mr. Litterick) on agriculture, and he ducked out of that fairly quickly.
  I, too, pay tribute to the magnificent productivity record of British agriculture and to the performance of our farmers and agricultural workers, but, objectively examined, what has helped to contribute to that is the kind of arrangements and financial dealings which the right hon. Gentleman so much despises. It has been done by subsidies, by interest-free loans, and by managed markets to a very great extent, and I find it extraordinary that the right hon. Gentleman has been led up the garden path in this way.
  Today the right hon. Gentleman did not say anything about controlling inflation and trying to bring down inflation. We know that it is traditional on the last two days of the debate on the Queen's Speech that the Opposition should take advantage of their amendments to try to lay before the House of Commons what they think should be the alternative policies. I am afraid, however, that there is one important question that they have failed to answer today. It is a question which has been most aptly published in a Conservative Research Department document of which, for greater accuracy, I have obtained a copy. It is called "Fifty Questions and Answers. "It costs 65p and contains 78 pages. It may be regarded as a bit steep in price, but it is well worth

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  having, if any of my hon. Friends are interested. I shall quote at random from some of its contents.
  Question No. 4 asks:
  " Haven't the Conservatives been thoroughly ineffective in opposition? "
  Hon. Members: Answer.
  Mr. Varley: I am coming to the answers. Hon. Members need not worry. Question No. 6 asks:
  " How will the Tories be able to put things right when they are so out of touch with ordinary men and women? "
  Question No. 8 is:
  "Why vote Conservative? Didn't they make a mess of things last time? "
  Question No. 36 is:
  "Why do the Tories always put up council rents?'
  But, first of all, and certainly the question that the right hon. Gentleman did not answer, is this one:
  " Do the Conservatives actually have any policies? "
  The answer is that they do not have any answers to these questions. [HON. MEMBERS: "Answer."] I have a whole collection of material that I should like to use if I had time to show that the Conservatives do not address themselves to these questions. They have been in opposition now for three years and eight months—exactly as long as they were in government from 1970—and throughout the whole of those three years and eight months they have shamelessly and thoroughly repudiated all their disastrous policies of 1970–74.
  The right hon. Gentleman made no mention today of matters for which he and his colleagues on the Front Bench were entirely responsible—the intervention policies and the good old Industry Act 1972, under which one could do all the things that the right hon. Gentleman now disparages. There was the nationalisation of Upper Clyde Shipbuilders and, I suppose for a different reason, Rolls-Royce. There was a whole series of matters that I could mention, but I shall not. However, I should have though that, with this new-found philosophy, the right hon. Gentleman would have been able to tell us toe ay exactly what an incoming Conservative Government would do.
  Mr. Terence Higgins Mr. Terence Higgins(Worthing)rose—
  Mr. Varley: I shall give way to the hon. Gentleman in a moment. I want to get on if I can, because I suspect that there will be a great many interruptions.
  From all that the right hon. Member for Leeds, North-East said today, the Opposition do not really believe in the industrial strategy. That is what he said. I do not know whether that goes for some of his right hon. Friends. It goes for the hon. Member for St. Ives (Mr. Nott), who is to wind up this debate. Whether it will go for the right hon. Member for Lowestoft (Mr. Prior) tomorrow, I do not know. I suspect that it will not.
  Mr. James Prior: Yes, it does.
  Mr. Varley: It does go, apparently. There has been instant consultation on the Opposition Front Bench, and they agree that, when it comes to the industrial strategy, they are opposed to it.
  Sir K. Joseph: The Secretary of State will find that in the document "The Right Approach to the Economy "a chapter on the industrial strategy in which we tear it to bits and in which my right hon. Friend the Member for Lowestoft (Mr. Prior), my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe), my hon. Friend the Member for Guildford (Mr. Howell) and I all agree. Surely the right hon. Gentleman has read the document.
  Mr. Varley: Yes. Frankly, although they criticise it, they neither tear it to bits nor repudiate it. Nor does it say that an incoming Conservative Government would still co-operate if they got the chance, as I understand it. The Leader of the Opposition has never said that. However, I shall come to that presently, because I want to demonstrate that there are inconsistencies between what the right hon. Member for Leeds, North-East said and what his right hon. Friends say.
  Mr. Higgins: The Secretary of State drew attention, rightly, to the fact that the present Government had been in power for almost exactly the same length

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  of time as the immediately preceding Conservative Government. Will he accept that under this Government, as against that previous Government, the rate of inflation has been almost double, that the rate of unemployment has gone up more than 50 per cent., and that, despite what the Prime Minister said today, the real standard of living has gone down, whereas it went up under the Conservatives by record amounts over the four-year period?
  Mr. Varley: I can also confirm that the hon. Member for Worthing (Mr. Higgins) was a Treasury Minister at that time, when the money supply was totally out of control and resulted in a great deal of the inflation that we have been trying to deal with since then.
  There is one aspect of the industrial strategy which the right hon. Member for Leeds, North-East has failed to take into account. I agreed with a great deal of what he said. He said that if we were really to improve international competitiveness and productivity it was not only what we did in the National Economic Development Council and the sector working parties but that it would be at the level of the shop floor. To suggest that we cannot have a forum through the NEDC and the sector working parties and to disparage them, as the right hon. Gentleman is doing, is not the view of the rest of British industry. It is not the view of the Confederation of British Industry. That body is completely behind the industrial strategy and wants to co-operate. I do not know whether the Opposition ever consult the CBI about it, but the right hon. Member for Leeds, North-East ignores some of the achievements which have come through the industrial strategy.
  Many of the Section 8 schemes that we are implementing under the Conservatives' Industry Act 1972 arise from and have their origins in the industrial strategy. They have triggered off about 750 industrial projects to the value of hundreds of millions of pounds—not necessarily Government money or taxpayers' money, but industry's own money. They have been used for industries like the ferrous foundry scheme and the machine tool scheme, and they will help transform those industries which have
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  been run down for so long. Yet if all these Opposition documents are examined, we get no answers from them.
  Sir K. Joseph: The right hon. Gentleman cannot assert, let alone prove, that most of that expenditure would not have occurred anyway and that most of those modernisations would not have occurred anyway if the Government had created encouraging conditions.
  Mr. Varley: If we examine some of the projects which have been brought forward under the selective investment scheme and the Accelerated Projects Scheme, it is clear that they would not have taken place—industrialists tell us that they would not have taken place—but for the industrial strategy and what we are doing.
  The speech of the right hon. Member for Leeds, North-East comes at the beginning of the fourth Session of this Parliament, and certainly I am still none the wiser about what his policy would be. I think that I understand some of the policies of some of his right hon. Friends. However, the basic question which the right hon. Gentleman posed fairly today is whether they themselves would intervene in industry if they had responsibility.
  In the present frame of mind of the right hon. Member for Leeds, North-East, I do not think that he would intervene. However, that does not go for some of his right hon. Friends. In fact, I do not think that Conservative Back Benchers have any idea. In some respects, they admit it, because in "The Right Approach to the Economy "they say:
  "The precise limits that should be placed on intervention by the State are reasonably the subject of debate within the Conservative Party."
  But while the Opposition have debates —and they have them on their Front Bench if today is anything, to go by—we have to deal with the problems. We know that, without State intervention and assistance, many of the pillars of private enterprise would never have weathered the recession—the worst recession since the 1930s. Whenever the Chairman of the Conservative Party comes to my Department or goes to the Department of Trade to see my right hon. Friend in his rôle as Chairman of the Radio Industry Council, he as good as acknowledges that.

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  It is the same in our approach to small companies. I have always believed the continuing prosperous existence of small firms to be essential for the country's future. This is demonstrated clearly by the fact that small firms employ more people than all the nationalised industries and central Government and local government put together. But, because of the difficulties of size, they have special problems which we fully understand, recognise and are doing something to help.
  The Labour Party has always taken this attitude to small firms—[HON. MEMBERS: "Oh ! "] But it has. The Opposition have very selective memories. I can tell them that it was the Labour Government who appointed the Bolton Committee and who followed up its recommendations. But we have not stopped at only those recommendations. Since 1974, we have introduced a host of measures to help small firms, including raising the ceiling on VAT, substantial concessions on capital transfer tax, the introduction of a counselling service, and the small firm:; employment subsidy.
  Our continuing concern has been highlighted by the study on measures to help small firms announced by my right hon. Friend the Prime Minister in September. My right hon. Friend the Chancellor of the Duchy of Lancaster and my hon. Friend the Under-Secretary of State in my own Department are conducting this study. A number of measures have been already incorporated and announced to the House by the Chancellor of the Exchequer in his statement on 26th October. They include tax reliefs, a new scheme to help firms develop overseas markets, and the extension of both the small firms employment subsidy and our counselling service. Other studies are in hand. My right hon. and hon. Friends are still continuing their studies into these areas, and in due course they will want to announce their conclusions to the House. These and other measures which the Government have already implemented will foster the right environment in which small firms may flourish further. There is no doubt that this in its turn will play a vital part in the recovery of our economy.
  There is another interesting question that I should like to pose to the Opposition, and I think it is fair to pose it
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  because the right hon. Gentleman asked me a lot of questions. What is the Opposition's real attitude to British Leyland? It certainly did not come out this afternoon. It is true that they voted against rescue two years ago, and they have expressed their doubts on many occasions, but here we come to the major differences on the Opposition Front Bench.
  The right hon. Member for Lowestoft sang a very different tune in an article in the Birmingham t a few days before the Ladywood by-election. I quote from the Birmingham Post of 16th August 1977:
  " It is rubbish to suggest that we would immediately cut the lifeline of State-assisted firms such as Leyland. They need help to get back on their feet. We are committed to finding a way to success for British Leyland for as long as its performance continues to justify it."
  That is what the right hon. Member for Lowestoft said when he was in Birmingham looking for votes in the Ladywood by-election.
  We are committed to helping Leyland achieve success. The recent ballot result is an encouraging development, although Leyland is still far from achieving the necessary objectives. I agree with what the right hon. Member said, and I believe that hon. Members would like to join me in wishing the new Chairman and Chief Executive of British Leyland, Mr. Michael Edwardes, great success in the task before him.
  Mr. J. W. Rooker: I support what my right hon. Friend has said, but will he elucidate the Government's position concerning National Enterprise Board money being used for working capital? I support to the hilt the State ownership of British Leyland, but I did not see it as the function of our rescue to pay the wages with that money. It was meant for new factories, machines and models. It is the customers' job to pay the wages at the end of the day. The arguments are the same as they were two years ago. There is great concern among the work force in British Leyland. They know that the moneys have had to be used for working capital. Is this to be allowed to continue?
  Mr. Varley: The reason that the National Enterprise Board had to pay in the £50 million in July was the very

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  damaging dispute in Joseph Lucas. For about 13 weeks the whole production line and all the models in British Leyland were severely disrupted. That was the reason for the measure that was taken, and a full statement of the reasons was given at the time. I want British Leyland to become profitable and to generate some of the investment that is necessary.
  Mr. Frank Tomney: Will my right hon. Friend agree that the problems are even wider than envisaged at present? If British Leyland is to have a future, it now has to look at its overseas prospects in terms of investment and trade. Volkswagen has just set up in Philadelphia a company to produce 200,000 vehicles per annum. That is a tremendous investment. We ought to be thinking in these terms before we develop the projected new Mini line. I do not believe that foreign firms will easily lose their share of the British market. The unions must look at this question in concert with the Government. There must be an empirical policy for investment.
  Mr. Varley: I agree with a good deal of what my hon. Friend has just said. I do not, however, go all the way with him in his criticism—if that is what it was—of the Mini programme. I think the Mini is essential for British Leyland's future, although at the end of the day it will be for British Leyland, in consultation with the National Enterprise Board, to inform the Government on how it envisages its development plan and its business plan. I want, and I hope the whole House wants, British Leyland to be a success.
  The right hon. Member for Leeds, North-East today still did not tell us what the Conservatives would do about the National Enterprise Board. A year ago we thought we knew because "The Right Approach to the Economy "was absolutely clear on the subject when it declared that
  " The NEB must be abolished."
  But again the right hon. Member for Lowestoft said something rather different in the Birmingham Post article. His version was:
  " we are committed to holding the firms now owned by the NEB until any hope of recovery is abandoned."
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  Therefore, the right hon. Member sees a very long-term rôle for the NEB.
  I am glad to say that today I am able to announce an expanded rôle for the NEB. The House will recall that in our guidelines for the NEB we gave it a specific job to do in the North and North-West. Offices have been set up in these regions and a useful start has been made. We have now decided that the right course is to build on the strength of the NEB, reinforcing the extensive work already undertaken by its regional directors in Newcastle and Liverpool. The NEB has made a careful study of the problems of these regions and has come forward with a range of measures which we believe will make an important contribution towards industrial development.
  The NEB will establish regional boards for the North-East and the North-West. These boards, under the leadership in due course of the NEB's new deputy chairman, will draw their members from trade unions, financial institutions, industrialists, and particularly those with strong local roots. Their task will be to decide on the NEB's investment in the regions. They will operate fairly and competitively, as the NEB guidelines require, providing flexible investment packages tailored to meet local needs.
  Mr. A. J. Beith: Does the Secretary of State recognise that in the nature of the kind of project that the NEB can support it can rarely be of help to the very scattered rural areas in regions such as the North-East and the North-West? Does he agree that the Development Commission will have to be able to work with the NEB on industrial development work for the rural areas?
  Mr. Varley: I know the work of the rural Development Commission. It does a fine job and there may be scope for expanding its rôle. We want to examine this matter closely within the Department. If the new regional boards of the NEB in the North-East and the North-West are to be a success, they will need to co-operate fairly closely, not only with the rural Development Commission, but with other agencies within the regions.
  Mr. Michael Grylls: As to the expanded rôle for the NEB, how much will this extra bureaucracy cost in money? How many extra

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  people will be needed in the offices for this?
  Mr. Varley: The cost will be infinitesimal in relation to the total expenditure of the NEB. It is impossible to calculate it at this stage. The hon. Member for Surrey, North-West (Mr. Grylls), is a severe critic of the NEB and comes to quite erroneous conclusions on occasion as to its rôle and activities. The expenditure on bureaucracy, as he describes it, will be tiny. I want to see effective organisations in the regions, and I believe that what I propose today will result in effective organisations.
  Mr. Higgins Mr. Higgins rose—
  Mr. Varley: I think that I should be allowed to get on, otherwise I shall take too much time in the debate, which has already been truncated.
  The two regions that I have just mentioned have important shipbuilding areas. We now have some idea of what the right hon. Member for Leeds, North-East would like to do about shipbuilding. He is opposed to the Government assistance in the shipbuilding areas. If I have followed him correctly, he is saying, in effect, that we can get rid of nearly all our shipbuilding industry. That is a dreadful thing to say about a country like ours which is a great maritime nation. On that basis we should sooner or later be the prisoners of overseas suppliers. I hope that those who work in the shipbuilding industry on Merseyside, Teesside, Clydeside and other similar areas will take note of what the right hon. Gentleman has said today.
  I know what the right hon. Gentleman is saying, but I am not sure about the organisational structure of the industry. I have examined closely what the Opposition are saying. The hon. Member for Henley (Mr. Heseltine), in those lamented far-off days when he spoke for his party on these matters, gave what we took at that time to be a very firm pledge. He said during the Third Reading debate on the Aircraft and Shipbuilding Industries Bill:
  " hon. Members should have no doubt that when we come to power we shall return these industries to the private sector as fast as possible."—[Official Report 29th July 1976; Vol. 916, c. 995.]
  That is not the case when I look at the speeches that have been made recently
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  by the right hon. Lady the Leader of the Opposition. I quote from a report in The Guardian of 2nd July, by Miss Hazel Duffy of the industrial staff:
  " On the day that the shipbuilding industry was formally nationalised, Mrs. Margaret Thatcher said that if the Tories were returned to power, there would be no swift moves to bring about denationalisation of the industry."
  Speaking to party supporters in the North-East, the right hon. Lady said:
  "I don't think we could do it in the early stages.
  I think we have very great problems to face in the economy."
  The hon. Member for Henley, in July of last year, wanted denationalisation of the shipbuilding industry immediately. The right hon. Member for Leeds, North-East does not want a shipbuilding industry at all and the Leader of the Opposition says that we need a shipbuilding industry and, what is more, that Conservatives would like it under nationalisation. The Conservatives ought to get themselves sorted out.
  Mr. T. W. Urwin: I am sorry to take time from my right hon. Friend's speech, but I wish to take him back to what he said a few moments ago. I thought that my right hon. Friend was about to develop his statement on the extension of the rôle of the National Enterprise Board in the Northern Region and in the North-West.
  My right hon. Friend will be fully aware that for a long time many of us have been campaigning for the establishment of a regional development agency in the Northern Region. Is my right hon. Friend entirely satisfied that the extension of the rôle of the National Enterprise Board in the Northern Region will adequately fill the industrial requirements of that region better than a regional development agency would do? Will my right hon. Friend be making a further explanatory statement about this move, because we really need to know how much additional investment there will be in the hands of the National Enterprise Board for this particular purpose?
  Finally, can my right hon. Friend say whether the expanded—
  Mr. Deputy Speaker (Mr. Oscar Murton): Order. The hon. Gentleman is asking a lot of questions.
  Mr. Varley: We have announced the measures—
  Mr. Urwin: On a point of order, Mr. Deputy Speaker. It was perhaps a long intervention, but it was at least relevant to what the Minister was saying in comparison with what is being said on the Opposition Benches.
  Mr. Deputy Speaker: Order. I must remind the House of what Mr. Speaker said about the large number of hon. Members who wish to speak in this debate.
  Mr. Varley: One of the reasons that I have today announced the extended rôle of the regional boards of the National Enterprise Board is to deal with some of the problems of the North-East, within Merseyside and, more broadly, the North-West. I shall certainly consider making more information available to my hon. Friend and other hon. Friends, as well as hon. Gentlemen opposite, if they think that it is necessary.
  I understand that the National Enterprise Board itself is taking some steps to publicise its own activities within those regions, but I shall undertake to meet any of my hon. Friends, if they want to go into this matter further, so that they may examine the prospects and possibilities for those regions.
  Before my hon. Friend's intervention, I was referring to the shipbuilding industry. So far our shipbuilding industry has weathered the international crisis remarkably well. I should have thought that the right hon. Member for Leeds, North-East would have paid tribute to that fact. Much of this success is due to the intervention fund—yes, if one likes, taxpayers' money—that we announced at the beginning of this year.
  With the support of that fund our industry took almost as many orders in the first nine months of this year as in the whole of last year and four times as many as in 1975. These orders are expected to provide about 13,000 man years of work in the shipyards and a similar amount in other supporting industries. The forthcoming Polish deal will give a major boost to the industry, and that would never have been possible without nationalisation.
  Mr. Norman Lamont Mr. Norman Lamont (Kingston upon Thames) rose—
  Mr. Varley: I do not think I can give way. I have already given way a great deal and another intervention will only prolong my speech.
  The right hon. Member for Leeds, North-East asked about the steel industry, another industry which is facing enormous problems. These problems have been caused primarily by the world recession—lack of demand and depressed price. There are no signs at the moment of an immediate upturn and we are therefore having to look very carefully at the British Steel Corporation's prospects.
  I know that many people are anxious about the Corporation's future. But I want to assure the House that we are proceeding in close consultation with both the Corporation and the steel trade unions and that no decisions have as yet been taken. However, I emphasise that we must consult fully those who work in the industry, and that is what is happening at the moment. It is because of this that we in the Department of Industry and those in the nationalised sector—that is why the Loyal Address mentioned it—attach so much importance to progress on industrial democracy ; in the aircraft industry where the first report of industrial democracy has just been completed, and was yesterday welcomed by the CSEU ; in the shipbuilding and steel industries, which will report to me on their progress by the end of the year ; and. above all. in the Post Office where on 1st January seven worker directors will take their place on the main board. I think hon. Members welcomed that when the matter was before the House earlier in the year.
  Sir K. Joseph: Will the right hon. Gentleman tell the House about the cash limits of the steel industry and whether they are to be changed?
  Mr. Varley: The cash limits this year remain exactly the same. There has been no change at all. The financial requirements of the British steel industry will have to be looked at next year in the light of the review that we are undertaking as well as all the other factors that will have to be taken into account. There are no changes whatsoever in these cash limits and we have no plans to change them. However, the financial requirements for next year will have to be looked at in the

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  light of the statement that I have just made to the House.
  I was trying to finish this prolonged and interrupted speech by referring to what we want to do to get workers much more involved in decision taking. The right hon. Gentleman and some of his hon. Friends have cribbed and carped again and again about lack of productivity and international competitiveness. They usually blame the trade unions and say that it is all because of their attitudes. If we are to improve industrial performance we must get workers much more involved in decision taking than they have been in the past.
  Sir K. Joseph: Incentives?
  Mr. Varley: Of course, incentives. But one of the biggest incentives that workers will be looking for is the role that they will have to play in the decision taking of these industries. I am sure that view is shared by some Conservative Members. That is why we have made it clear in our public statements that we want to see industrial democracy because it is only on the basis of efficiency, productivity and international competitiveness that we can create wealth. Here I agree with the right hon. Gentleman. We must create the wealth so that we can finance, expand and enhance our social services. Quite frankly, that is what we have been doing.
  The Opposition amendment today refers to the Government not being able to expand the standards of the social services, but the Conservatives really have a nerve if they imply that so far our industrial policies have not been able to sustain the social provision. The social provision, based upon our industrial policies, has not suffered under this Government. Either the Opposition are ignorant of the facts or they are deliberately suppressing or distorting them.
  The facts show that in our period of office the social services have expanded. Spending in real terms on health and personal social services has risen by 61 per cent. since we took Office, and a whole range of new benefits which it would not be appropriate for me to go into today have been introduced. Here again the Tories do not know what they are talking about, and their approach to social policy is as muddled as their approach to industrial policy. We shall continue with the policies that are gradually restoring, and
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  will restore, this country to the position of a major industrial nation. I ask the House to support these policies, and to reject the opposition amendment.
  5.31 p.m.
  Mr. Geraint Howells: Many right hon. and hon. Members will this afternoon refer to nationalised industries, to commerce, to unemployment and to the nation's economic ills, and quite rightly so. But I do not think that we shall solve our problems overnight. The only way to improve the economy of this country is to have a stable Government, and I believe that my colleagues and I have done a great job in that direction during the last six months.
  The majority of the electorate favours the agreement my party has with the Government. Therefore, I believe that over a period, given the stable Government the country needs, the economy will improve and we shall be able to solve our problems of unemployment. There is, therefore, no point in the Conservatives pressing for an early election.
  All sections of industry are doomed to failure unless we have a proper agricultural policy. Here I declare my interest under the traditions of the House in that I am a farmer. Agriculture is Britain's most important industry, and it is therefore fitting that it should be given its place in the Queen's Speech. I congratulate the Government on recognizing the need to aim for higher production in order to meet a greater proportion of our needs from our own resources. This is a most worthy aim and one that can be realised. But to bring it about the Government must take a number of practical steps to restore confidence to the industry and assure its long-term success. We in Britain pay more than £2,000 million a year for temperate foods.
  I am glad to note the Government's intention to reform the common agricultural policy. That is a matter on which the Liberals have been pressing the Minister for some time. I approve of the CAP in principle but feel that many of the systems it advocates are not only ineffective but wasteful when applied to British agriculture. Far too many directives involve bureaucratic interference on minor matters, that interference emanating from the CAP and causing unnecessary complications and ill will. I urge

  531
  the Government to press their colleagues in Europe to discard the intervention system. It is costly and wasteful and it denies the British public the right to buy the best, such as the best beef, when it is plentiful. The British consumer is justified in complaining about this.
  I have spoken to many European agriculturalists. They are coming round to our way of thinking about abolishing the intervention system and reintroducing the deficiency payments which operated in Britain for decades. It is wasteful to put best beef into intervention, to pay £50 or £60 per beast for keeping it there for six months and then to sell it off as manufacturing beef.
  Another sure way of restoring confidence in the industry will be to bring about a devaluation of the green pound. We can all see the short-term benefit of retaining the green pound at its present level, but that is being done at the expense of our long-term interest. In particular, it affects the beef sector which, if the value is upheld, allowing unfair competition from elsewhere, will steadily lose ground. That will lead to a serious shortage of beef in the 1980s. That is surely an expensive and disastrous situation.
  This brings me to one of the most important aspects of planning for the industry. It is absolutely essential to make long-term planning an inherent part of agriculture policy in order to avoid the frequent crises that arise from our present short-term arrangements. It happened this year in the pig industry. Now it is happening in the beef sector, and it may happen also in the dairy industry next year.
  The Liberals have been pressing the Government for some time to improve the availability of capital to the industry, and I am glad to see that our proposals are being seriously considered, as are our suggestions on tax reform, to aid the farmer in Britain.
  I should like to see more money spent on research into the problems of marginal and hill land development. Production in these areas could be vastly increased given the right scientific help and know-how. If we are to increase production let us turn our sights to the hills and uplands. There the potential is
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  great. We should help the marginal land farmer so that production may be increased by at least 100 per cent. over the next 10 years.
  There are also social problems on the hills and uplands. Unless the farmers on the hills and uplands recoup their costs they will leave, and once they go it will be very difficult to persuade them to return. It is a great pity that the Leader of the House has left the Chamber. Nevertheless, I am sure that the point will be made to him that we should have a debate on the livestock industry very soon—before it is too late.
  I turn to the question of the Milk Marketing Board. I read with interest that about 150,000 small producers may leave the dairy industry because, it is said, they are too small. It is a great pity that under the Treaty of Accession the Government of the day did away with the guaranteed price system. The dairy producers knew exactly what they would get for their milk in the years ahead under the old system, but now—
  Sir Stephen McAdden: On a point of order, Mr. Deputy Speaker. I understood that the reading of speeches was not allowed in the House. Although the hon. Member has been "noting with interest and dismay "he is still reading, and it is getting rather boring.
  Mr. Deputy Speaker: It is a well-accepted tradition that speeches must not be read but that use of copious notes is allowed.
  Mr. Howells: With respect, Mr. Deputy Speaker, I am afraid that hon. Members are worried that Liberal influence on this Government is so great that they fear for the prospects of their own party.
  Mr. Michael Marshall: On a point of order, Mr. Deputy Speaker. Are we not supposed to be debating industry? The Liberal Member is discussing agriculture, and he knows that there is no hope of getting a reply on agriculture.
  Mr. Deputy Speaker: The Chair was under the impression that agriculture is a part of industry. The hon. Member for Cardigan (Mr. Howells) must be allowed

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  to develop his speech in whatever way he wishes, within the rules of order.
  Mr. Howells: I agree with you entirely, Mr. Deputy Speaker. Agriculture is mentioned in the Queen's Speech and it is a very important matter. If the hon. Member for Arundel (Mr. Marshall) does not like listening to my views on agriculture it is up to him. We Liberals are worried about the food prospects for this country—
  The Secretary of State for Trade (Mr. Edmund Dell): It is true that the right hon. Member for Leeds, North-East (Sir K. Joseph) talked about milking cows in his opening speech.
  Mr. Howells: If I may continue, I hope that hon. Members on both sides will listen to my closing remarks. The Minister's main task must be to reform the common agricultural policy, and I urge him to persuade his European counterparts that if we are to live happily in the Community, it is essential that the CAP be made more flexible, effective, and acceptable to the British agriculture industry. We must convince our partners that over the past 30 years or so Britain has reaped the benefits of an excellent support system and guaranteed prices and we do not wish to do without them in the future.
  If the Government fail to do this, I cannot see how the Minister can maintain production at its present level, let alone get the industry to expand. My colleagues and I shall not support the Opposition amendment tonight. [HON. MEMBERS: "Surprise, surprise."] We believe that many Liberal proposals and policies have been accepted by the present Government. They have tried to solve the plight of the self-employed and of small firms, and in this we believe that the Government have taken the right step. We are delighted that the Government have accepted our policy on profit sharing in industry, and I hope that in the next year or two these policies will prove beneficial to both workers and employers. The Government commitment to reform the CAP and to increase production from the land is very welcome. Therefore, we shall support the Government tonight and not the Opposition amendment.
  5.43 p.m.
  Mr. Sidney Irving: I shall be brief, partly because a number of hon. Members are waiting to speak and partly because I do not intend to devote all my remarks to industry, and I hope that the House will forgive me for that.
  I want to express support for the measures in the Queen's Speech as a programme for the coming Session. It contains, in the main, the inescapable commitments entered into in the past, such as direct elections and devolution which must be completed, even if they are accepted by the House with varying degrees of enthusiasm.
  However, I am convinced that the economy is by far the most important thing—the overrding priority. It is a priority that we must get right— not just a temporary reflation for General Election purposes but the achievement of a period of sustained growth which has eluded this country since the war. I believe that this is what the Government are after and I am sure that nothing else will matter when the election comes.
  Central to the success of this is the pay policy, and no group of people should be allowed to wreck it. This means that the Government should have the support of all hon. Members in the difficult decisions that they are taking now and will have to take for some time yet.
  The only thing that disappoints me is that there is no reference in the Queen's Speech to the Co-operative Development Agency. In view of the efforts made to get the working party concluded and the report published, and the support given by the Prime Minister to this enterprise, it is difficult for the Co-operative Movement to understand why there has been no reference to the proposal in the Queen's Speech.
  In recent years there has been an increasing interest in the principles of co-operation and a recognition that these constitute a viable alternative form of public ownership which is relevant to the needs of our people. I hope that the Government will show some tangible proof of their intention to see that this proposal is the subject of legislation soon.
  On direct elections, the Prime Minister has fairly and squarely faced the House

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  with the true issues. The choice is either an election in May-June 1978 with proportional representation, or, if hon. Members insist on a simple majority, the elections will have to be postponed. Hon. Members, particularly Conservatives, will have to decide which is more important—direct elections or a simple majority system. I believe that when this is resolved there will be a majority for direct elections, for PR, and ultimately for the guillotine which is necessary to get the Bill through.
  Since the early summer there has been a remarkable development in the Labour movement's attitude to the EEC and our membership. The National Executive, the party conference and the TUC have all confirmed that Britain must stay in Europe, but there is to be an examination of certain problems. Even the most ardent enthusiast for the Community would be foolish not to concede that there are problems and that such an examination could be both constructive and beneficial.
  There has been an attempt to blame the EEC for most of the problems of the world economic crisis. I believe that this is wrong. If the EEC had not existed there would have been a much more significant move in this period of crisis to the catastrophic nationalist policies of protection of the inter-war years. There would have been no co-operation between European countries to resolve the problems afflicting us, and much less support for the under-developed world.
  I was pleased to see in the Queen's Speech the phrase:
  " Legislation will be introduced for the further development of transport policy to meet economic and social needs, including those of rural areas."
  This is a desperately urgent matter everywhere and especially in my constituency where, in addition to huge fare increases, there has been a decline in the services provided. A further serious decline is inevitable unless something is done.
  In Kent the county council, which already pays a smaller proportionate subsidy than a number of the Home Counties, has declined to increase the grant other than in respect of inflation. This means that the London County Bus Service, with a deficit of £1·5 million, will have little alternative but to close a depot and further to reduce its services—
  Mr. Clement Freud: On a point of order, Mr. Speaker. This was really a point of order for Mr. Deputy Speaker—
  Mr. Speaker: It is a point of order for whoever is in the Chair.
  Mr. Freud: My point of order is that I am surprised by the inconsistency of the Chair in not forcing the hon. Member for Southend, East (Sir S. McAdden) to make the point about hon. Members reading their speeches. After all, he did complain about my hon. Friend the Member for Cardigan (Mr. Howells) reading his notes.
  Mr. Speaker: Order. I am sure that what happened was that Mr. Deputy Speaker was referring to the copious use of notes. It is a formula which we use and which the House understands.
  Sir S. McAdden: Further to that point of order, Mr. Speaker. I did not complain to Mr. Deputy Speaker about the hon. Member for Cardigan (Mr. Howells) reading his notes. I complained about the fact that he was reading his speech —every word, comma, full stop included.
  Mr. Speaker: Order. The House must give me a chance. I did not have the pleasure and privilege of hearing the hon. Member for Cardigan (Mr. Howells).
  Sir S. McAdden: You are lucky.
  Mr. Irving: I am obviously the butt of an altercation about previous happenings. If I am keeping to my notes, it is to assist my mind in setting out as I said at the beginning of my remarks to be brief.
  I want to end on the note I was on when interrupted. The question of rural bus services, whether for the support of industry or the elderly, the sick, and those without cars, is of vital urgency. I hope that in the coming Session the Government will be able to do something to weal with this hardship by reorganising the finances of the National Bus Company to enable it to provide effective bus services in rural and other areas.
  5.52 p.m.
  Mr. Reg Prentice: I am grateful for having this opportunity to take part in this debate because one of the main reasons I decided

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  to cross the Floor of the House arose from my growing conviction that the relative failure of British industry compared with that in other Western countries was due in large part to the policies of the present Government, that this was a serious situation, and that it would become much more serious in the unfortunate event of the Labour Party winning the next election and carrying out further policies detrimental to industry which are in Labour's future programme.
  Many of us joined the Labour Party years ago because we wanted to see a better deal for the under-dog, higher pensions, better social services, a greater attack on bad housing, and better provision for the chronic sick and other deprived groups. But we have been forced to the conclusion—and I put this to Labour Members— that those countries which are now making a success of running a free enterprise system are doing more for their pensioners, homeless and chronic sick than we in Britain are doing, or are likely to do in the near future.
  At the end of a 12-year period in which our national output has risen only by a quarter and public spending has risen by two-thirds, everybody—including Labour Members—recognise that we have pretty well reached the end of the road in trying to deal with social problems by redistributive taxation. It is only by producing more wealth and in succeeding with the idea of a free enterprise society that we shall give better conditions and human dignity to the deprived in our society.
  I agree with the right hon. Member for Dartford (Mr. Irving) in his remarks about pay policy and on the need for no group to be allowed in the coming months to get away with the excessive use of industrial muscle to break that policy. When he spoke in the debate last Thursday the Prime Minister reaffirmed the Government's determination on those lines. If that is the case and if in the coming winter there are confrontations—and everybody must hope and pray that there will not be confrontations—and if the Government face up to them as a Government representing the whole community, I believe that the Government will deserve the support of Members on all sides of the House.
  Personally, I look back on the period 1972 to 1974 with great regret, and I have a sense of personal responsibility
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  since I occupied the Opposition Front Bench at the time. I feel that the Labour Party in retrospect should be ashamed of its attitude to the way in which the Conservative Government in those days tried to deal with these problems. But if the Government of the day face a similar situation, I believe that they deserve the support of the whole community. I refer to everybody across the political spectrum, not only the support of Opposition Members, but also the support of sponsored Labour Members in respect of trade unions whose members may be in dispute. Those sponsored Members will have a particular duty to put the national interest ahead of sectional interests and the spotlight should be particularly directed at them.
  I think that speaking, as I do, from the Opposition Benches, I am entitled to make at least one party political point arising from the present situation. What has been happening, and what may happen, destroys the myth that a Labour Government's relationship with the trade unions is somehow a guarantee of industrial peace and that a Conservative Government will lead to confrontation. The fact is that confrontation can occur between powerful unions and the Government of the day, no matter what that Government may be. If there ever were any truth—and I do not believe there was—in the myth to which I have referred, I think that it was destroyed by the failure of the present Government to obtain a phase 3 pay agreement with the TUC.
  If there are any tattered remnants of that myth lying around, I believe that they were destroyed by Arthur Scargill's victory in the mineworkers' vote on a productivity scheme. Mr. Scargill did not look with loving care at his Labour Party membership card, nor did he have great regard for the fact that the NUM is affiliated to the Labour Party. Perhaps we do not expect that from Mr. Scargill, but what is more serious is that the mineworkers as a whole, and by a substantial majority, took the same view. Therefore, I repeat that I hope we have heard the end of any nonsense that Labour holds the key to industrial peace.
  I turn to the more general subject of the performance of British industry. I wish to say how much I agreed with the analysis of my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph), who

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  opened the debate for the Opposition, and particularly with what he said about the relatively poor productivity of British industry in most sectors, though not all, when compared with other countries. It is an analysis that was recently supported by two articles in The Times, written by its editor, William Rees-Mogg. It was an analysis that was made industry by industry.
  I wish to quote two or three points from the second of those articles, which was published on 5th October. That article set out the facts that a Japanese steel worker produces 5½ tons for every ton produced by the British steel worker; that an employee of Pan-Am handles three times the traffic handled by an employee of British Airways; that in 1973 British Leyland produced 5·9 vehicles per man, while Renault produced 14·6 vehicles per man; that Dutch manufacturing productivity is twice the level of British manufacturing productivity and that the Dutch effort has risen two-and-a-half times as fast; and that in 36 productivity comparisons in industrial groups in EEC countries, Britain came bottom in 34. These are facts which should give deep concern to every Member in this House, and certainly to everybody who is concerned about the future of our country.
  Any exercise involving the apportionment of blame becomes complicated. Our people in all parts of industry and society should have fared better than they have been doing. Many of the causes of this poor performance are of a chicken and egg variety. Overmanning produces poor return on investment which, in turn, discourages investment, and low investment, in turn, means lower productivity.
  Many aspects of these problems cannot be solved by politicians. What we must do in this House. as far as we can in a non-partisan attitude—although there is a legitimate area for argument—is to identify those parts of the problem which are our responsibility and also to identify the interface between Government and industry and try to do something to improve our own performance in such a way as to help industry to produce better results.
  I believe that hon. Members throughout the House who have discussed these matters with people in industry, and par-
  540
  ticularly with managers at all levels in firms of all shapes and sizes, have had the same message loud and clear as I have had in discussing these matters. Those managers are saying to us, the politicians, that to some extent under all Governments, and particularly under a Labour Government, they have suffered from the fact that Parliament has legislated too much, controlled too much and taxed too much. The degree of complexity of the legislation that has been passed and the helter-skelter pace of change in these matters has been such that managers in large firms have found it extremely difficult to keep pace, while managers in small firms have found it totally impossible to do so. Not only that, but successive Governments have changed their policies on these vital matters so often—not only because of changes of Government, but because of new terms of successive Governments—that it has been impossible for managers to keep pace and profoundly difficult for them to plan ahead.
  We should see this problem against the information given in a recent survey conducted by the CBI on the planning requirements of management. A sample of 70 companies of different types showed that the average interval from the start of development of a new product to commercial production varied between two and a half and four years. We are talking about new products that might, after that interval, have a production run of 10, 15 or more years. Managers cannot make the necessary decisions if there is the degree of uncertainty from which they now suffer about the intentions of the Government in respect of legislation, controls and so on.
  I put that point to the House against a background in which the one thing that we in this country desperately need, if we are to achieve economic growth and reduce the level of unemployment, is the development of new products. That is because the redundancies that have taken place, in our old industries and larger firms are unlikely to be reversed, even if output goes up. Many larger firms are still overmanned and will need to shed further labour. If we are to have full employment, and that must come about through the maximum encouragement being given to new enterprises of all sizes, particularly among

  541
  small firms. If we are to achieve that, it is essential that we slow down the frantic pace of Government intervention and try to develop consistent policies that will stand the test of many years.
  An example of this can be given in industrial relations legislation. I choose that subject because it is one in which I have specialised in the House for many years, and I have helped to make the laws that have gone on to the statute book during the last few years—some of which I have campaigned for and supported. Ever since the Conservatives introduced the Contracts of Employment Act in the early 1960s, we have had a series of Acts on such matters as health and safety at work, industrial training, equal opportunities for women and racial discrimination. The Industrial Relations Act has come and gone, Employment Protection Act is on the statute book and there are other such pieces of legislation. Much of the legislation has been non-controversial and useful and has come to stay, but its total impact on the problems of employing people has been to put a burden on management, particularly the managers of small firms who are unable to employ specialists to advise them on these matters.
  I am asking not for a repeal of this legislation, but for a pause. The Government should recognise this need and should have said firmly in the Queen's Speech that there will be no proposals to implement the Bullock Report. It is quite clear, from the wording of the Gracious Speech, that there will not be a Bill on this subject this Session, but it would have been much better if the Government had buried that matter altogether.
  I believe in improving consultations and communications within industry, but not by massive legislation, not by imposing one rigid pattern of board membership on all companies over a certain size and, above all, not by legislating in such a way that there is blatant discrimination in favour of the trade unionists and against non-trade unionists. All that is wrong and it is recognised as wrong by the majority of people who have studied the matter—including many trade unions. Clearly the Bullock Report should have been dropped.
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  The Queen's Speech was almost a duplicate copy of the Gracious Speech of 12 months ago. That is a sign of the impotence of the Government, because they have had to bring forward again proposals that they brought forward 12 months ago and were unable to get passed into law. However, there is a danger that in this situation the Prime Minister, with his great flair for political stage management, will give the impression that this is all deliberate and that we are now going through a tranquil period. He may seek to use his own powerlessness to develop an appeal to the essentially conservative mood of the people of this country and to claim that this is, therefore, no longer a Government that believes in passing massive legislation and in interfering with private enterprise.
  To get the Queen's Speech in perspective, it is essential to look both backwards and forwards. In looking back, we should remind the country of the pace of legislation in this House between February 1974 and the summer of 1976. A great mass of legislation that was complex, hastily drafted, and expensive in money and manpower terms was pushed through this House with a majority of three, then by a majority of two and finally by a majority of one. It was not halted by any change of heart on the part of the Government or by the Lib-Lab pact. The most pertinent remark on that pact was made by the hon. Member for Rochdale (Mr. Smith)—in his capacity as the only Back-Bench Member of the Liberal Party—when on Thursday night he said, in speaking of the Liberal influence on the Government,
  " It is difficult to say owt about nowt' ". —[Official Report, 3rd November 1977; Vol. 938, c. 80]
  It was halted by the electors of North Walsall, Workington, Ashfield and Birmingham, Stechford, and by the fact that there is now a minority Government.
  It is even more important to look forward and to assess the kind of Queen's Speech that we could have been discussing had the Government gone to the electorate and won a majority. It is particularly relevant in the context of this debate to look at the effects of the potential Queen's Speech on industry and commerce, on employees in industry and

  543
  commerce, and on opportunities for school leavers looking for jobs.
  I should like to see everyone in this country carefully read the document "Labour Programme 1976 "and to read the policy commitments made by the Labour Party at its 1976 and 1977 conferences. They include, of course, a cascade of nationalisation proposals for the four leading banks, the seven leading insurance companies, and parts of the pharmaceutical, building and building materials industries. There is a sentence which says that nationalisation would extend to one successful company in every sector of industry and commerce, but it does not specify which companies. It therefore holds a threat over every successful company in industry and commerce and leads to multiplication of that uncertainty about the future which is one of the enemies of planning.
  Of course, it is not only a matter or nationalisation. The public expenditure proposals in that document add up to frightening figures. The document contains a whole list of proposed new boards and commissions for industry, for a stronger National Enterprise Board and for new State holding companies and so on. Some people, including some of my moderate hon. Friends opposite, have said to me that not all of this will go into the Labour Party manifesto. It will not, but anyone who has studied the record over recent years or who undertakes the painful duty of reading Clause 5 of the Labour party Constitution will recognise that a lot of it will, and that once it is there, a future Labour Government will feel bound to carry it out.
  If our industry and commerce are to survive, let alone prosper, it is vital that these extra burdens are not laid on their backs. Instead, it is vital that Governments, of whichever party, should try to create an atmosphere in which hard work, initiative and innovation are encouraged and in which people feel that it is worth while to earn productivity bonuses, acquire extra skills and apply for promotion. Only in such an atmosphere can our people prosper. Only in such an atmosphere can we give a better deal to the less privileged members of our society, pay retirement pensions that are consistent with dignity and put
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  much-needed resources into our health and education services.
  Unless we create that atmosphere, the new opportunities offered by North Sea oil and the other opportunities of the 1980s will be wasted. I beg and plead with hon. Members to consider these matters deeply and to vote for the amendment and against the increasing trend towards doctrinaire Socialism on the Government Benches.
  6.11 p.m.
  Mr. Arthur Palmer: It is by an accident of fate and by your choice, Mr. Speaker, that my speech follows that of the right hon. Member for Newham, North-East (Mr.Prentice). I have only this to say to him : those of us who have helped and encouraged him in his career and whose devotion to our country is as great as his find it painful to see him in his present position. I leave it at that.
  I wish to speak on a subject that might have been debated yesterday if Mr. Speaker had allowed the application for an emergency debate on the situation in the electricity supply industry. Since the House is now discussing industry, I feel it appropriate to say a few words on the situation and I declare my interest in the industry and my close connection with my union, that of the power engineers, in their new guise of the engineers' and managers' association.
  Recent events have once again demonstrated how fundamental electricity supply is to the life of a modern industrial society. Electricity is a utility, as are gas and water, but there is an important physical difference. Storage capacity for gas and water is limited, but there is practically no storage capacity for electricity. The product must be available at the moment it is demanded, and this factor makes nonsense of newspaper headlines that talk of the public being at the mercy of those who have the opportunity to throw a switch. Indeed, it is not technically accurate to talk in this 1895 way about the operation of modern high-voltage circuit breakers. Those who "throw the switches" are not the minority of power station attendants and industrial staff, who are engaged in industrial action against the advice of their unions, but the transmission, distribution and control staffs;

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  engineers who have a heavy responsibility for maintaining the stability of the nationally interconnected grid system as a whole. Like a man in a balloon, they must sometimes throw off some ballast in order to allow the voyage to continue.
  The output of some of the major power stations, mainly in the Midlands and the North, has been considerably reduced by the go-slow by a small minority of industrial staff. Similar counter-action would have had to be taken by the technical staff of the industry if the fault at the power stations had been mechanical or electrical. Failure to do so successfully would have produced for London the appalling experience recently suffered by New York, when that great city was blacked out for many hours.
  This brings me to my criticism of the Government, and 1 hope that it will be conveyed to the Secretary of State for Energy. I told his office that I proposed to say something on this matter in the debate today.
  Ministers have not said nearly enough by way of thanks and encouragement to the majority of electricity supply employees who are carrying on with their jobs and providing the 80 per cent. to 90 per cent. of electricity supply that we now have. It should be understood by the House and by the public that this has not been done without a massive effort, much of it by the supervisory and technical staff, who are also members of a trade union that is affiliated to the TUC, working all hours in difficult conditions to keep things going.
  I do not want to go into the internal politics of the electricity supply trade unions, except to say that the position of the technical staff in the industry is well understood by their fellow trade unionists. Indeed, Mr. Lyons, the general secretary of my union, also acts as secretary of the Employees' National Committee, on which all unions in the industry are represented.
  The position of the technical staff in case of a labour dispute has remained unchanged for 40 years. If a dispute is official, they stick to their own jobs. If a dispute is unofficial and against legitimate trade union authority, the maintenance of electricity supply is the primary part of their obligation to the public. I know that the industrial unions
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  would take precisely the same view if the technical staff initiated industrial action.
  I do not want to go into the merits of the claims of those employees who have been taking action, except to say that the claims are not unreasonable in themselves. We all hope that a solution will be found speedily, and the news tonight is good.
  The right to withdraw labour or services is fundamental to a free society. That right has existed throughout the 80-or 90-year life of the electricity supply industry—the first Electricity Acts were passed between 1882 and 1888—but it has hardly ever been exercised. That is why the public regard electricity as something that flows automatically through the mains and into the receiving systems, whether industrial, commercial or domestic. People regard it in the same way as they regard air: it is bound to be there—in this case at the touch of a switch.
  In a modern industrial society we have to find a solution to the problem of reconciling the right to withdraw labour with the vast difficulties that that right can cause in an economy that is becoming increasingly technically interdependent and interconnected. That is for the future. For the present, I suggest to the House that it is important that the whole weight of Government authority should be behind those who have grievances but who are still prepared to settle them by constitutional and peaceful means.
  6.20 p.m.
  Mr. Michael Marshall: I am grateful for the opportunity of speaking in this debate, and I particularly welcome the fact that we are going to talk about industry and commerce today.
  I want to turn to the problems of the British Steel Corporation and to look at those problems from the standpoint of the Departments of Industry and Trade. One is always a little hesitant about taking up the time of me Hove in speaking about a particular industry rather than taking the wide-ranging view which the debate affords, but I am sure that all hon. Members agree that the problems besetting the Corporation are so massive as to affect the whole course of our industrial future, in terms riot just of the way that the Government handle the

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  problems in the short term, but of the financial stability of the country.
  If we look at the situation from the trade angle—I am glad that the Secretary of State is in his place, because some of these matters were referred to during Question Time yesterday—the facts are simple and stark.
  There are three protagonists: the United States, Japan and the EEC, within which I include the United Kingdom. I want to sum up their general attitudes. The United States is taking a very tough anti-dumping line, but I believe that its views are so arbitrary as to be indefensible on logical grounds. For example, the imposition of a 32 per cent. duty on Japanese steel based on a notional domestic price assessed by American Government departments would not find support among anyone who looks at these matters seriously.
  Similarly, attempts to bring antidumping charges against this country have shown a certain wildness, so that, in addition to the charges brought against the BSC by National Steel, an independent steel company is being charged with dumping carbon steel sheets, although that company, which is very small, does not produce carbon steel sheets. These are some of the problems involved in an all-out anti-dumping war.
  The Japanese have shown some willingness in establishing voluntary quotas, but those have related principally to about a half-dozen leading Japanese companies, and there has been grave concern on all sides, which I think is understood, about the way in which smaller companies have been able to avoid those voluntary quotas. There is also evidence that larger companies have been able to get round the system by shipping hot rolled coil to Spain, which then finds its way as cold reduced sheet throughout Europe, including the United Kingdom.
  Within the EEC, the approach of the Industry Commissioner, M. Davignon, is highlighted this week, because he is in Washington attempting to persuade the Americans to go for the voluntary quotas approach rather than an anti-dumping war. I think that it is pertinent to mention that all those who met the United States steel workers' delegation, which visited the House last week, were
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  impressed by the fact that their union was clear that anti-dumping was essentially short-term, but felt that voluntary quotas was the best answer in the long term and that international agreement was a necessary pre-requisite for bringing some stability to international steel trade.
  What is the United Kingdom's stance? I do not think that there is any doubt that many people regard as very mild our anti-dumping attitude on steel. I think that some criticism must be accepted as well founded. I recognise that the Secretary of State and the Under-Secretary have been helpful in trying to keep informed some of those who take an interest in these matters, but progress has been limited. I am bound to agree with the Master Cutler in Sheffield, who recently said that when any market, such as tool steel, is reduced to 50 per cent. of its normal sales by 50 per cent. import penetration, that industry is in grave danger.
  The evidence that some of us have looked at shows very strongly that antidumping charges should have been brought much earlier than they have been. I accept that there has been some attempt by the Department to widen the categories of steel from non-EEC sources that are kept under review, but my first basic point is that we have to recognise that the Department of Trade should be applying anti-dumping charges as part of a clear-cut negotiating position leading to a longer-term agreement on voluntary quotas. In the sense of helping in the short term, it would be the most efficacious course to follow.
  In the longer term, the voluntary quota approach would benefit the British Steel Corporation but in the short and long term everything else pales into insignificance in the face of the appalling financial situation facing the Corporation.
  Here, again, the facts are stark and simple. There is massive over-capacity in world steel making, and even in Japan people are talking in terms of 40 million tons over-capacity, which is massively in excess of our total national output. In this country it is clear that there is overcapacity in steel rods and steel sheets. Right across the range, the British Steel Corporation is embarking on an investment programme of £6,000 million, which perhaps has increasingly little relevance

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  to the world steel pattern that we face. This is an appalling bind for the Corporation, the country, the Department of Industry, the Treasury and everyone involved in these decisions. To have a major corporation, either public or private, which is estimated to be losing money at the rate of £23 per ton is a disastrous course. Indeed, the Chairman of the British Steel Corporation has freely admitted that if it were a private concern it would either be with the liquidator or in the hands of a receiver.
  Yet the Coporation's problems are severely aggravated by the Government's actions. There is the Beswick plant situation—a compromise that has brought about the worst of all worlds. It has caused deep resentment among many in the industry. Only today the National Steelworks Action Committee visited the House. One of its members put forward an entirely sensible and moderate view about some of the problems facing the industry. The burden of the Committee's argument was not that it wanted to preserve existing plant and jobs, but that it wanted clear understandings about future investment. Attempting simply to carry on as before and to slow-time everything, which has been the hallmark of this Government's attitudes and policies, smacks of the worst kind of political compromise.
  If one looks at what is happening more widely in the Corporation, one is immediately impressed by the fact that the only way out of the difficulties must lie in radically rethinking the BSC's investment programme. We know of the round of talks going on between the Secretary of State, the British Steel Corporation and the TUC Steel Committee, and we know that the Lord President has been brought into the act. It is clear that the Secretary of State will soon have to make a statement to the House, because there is great unease, not only in the industry but outside.
  I hope that when the right hon. Gentleman replies to the debate tonight, he will seek advice and give a little more information than the passing reference we have had so far. It is very worrying that the Government did not see fit to make any reference to these problems in the Queen's Speech.
  Looking at the basic considerations that seem to be facing the Government
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  and the British Steel Corporation, it is right for some of us to try to steer through these alternatives and see what, if anything, can be done to reach some common ground.
  I suppose that the alternatives are generally conceded to be four in number. The first is to cut back the labour force to 208,000, something which, following the Finniston proposals—the agreement of January last year to reach international levels of manning—has run into the sands. We all understand why this is so. With the Government's record on unemployment it is extremely difficult for the trade unions and the BSC to reach agreement. The fact is that those manning levels are very high and present an enormous problem in terms of the operating costs of the Corporation.
  The second alternative is to close the Beswick plants, which at the moment are under a postponed threat of death. That may cost 20,000 jobs. The third alternative is to abandon the current investment programme, and the fourth alternative concerns capital reconstruction, writing off all losses, which in itself would be a complete admission of the failure of nationalisation over the past decade.
  Whatever may be said about the merits of those proposals, in terms of the cash bind on the Corporation they all have the same major disadvantage that they would provide no immediate relief. Certainly with the writing-off of losses the BSC would simply be further exposed to charges of subsidy, which is one of the main points of attack by the present American Administration.
  I turn to the three principles which ought to guide the Government in reaching decisions now, in the short term, because it is short-term relief that has to be applied at this point. The haemorrhage is too severe, too fast. Beyond that there is long-term planning to be done. My first suggestion is that the BSC and the TUC Steel Committee should make their main efforts in de-manning so as to raise productivity at the best plants rather than talk about the Beswick plants. In some sense that is an irrelevant argument. Cost is not a crucial factor here. The de-manning should be concentrated on those plants that have the best track

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  record and, apparently, the best market potential. This could include re- consideration of the whole philosophy of large plants versus small plants.
  It is no accident that at this time the mini-mill in this country is doing well whereas the large plant strategy, world- wide, is being increasingly questioned. It is said in the United States now that 20 per cent. of its capacity comes from the mini-mill. This is a trend of which BSC and the Government ought to take serious account. Equally, when we look at each of the Beswick plants threatened with closure it ought to be possible to consider its track record in good industrial relations. This is an entirely valid argument which was put to us earlier today. It is one which certainly ought to be applied on any reasonably sophisticated view of what is an operating cost and therefore what is the contribution to the Corporation's profitability.
  Further, when we are considering the question where the capital will come from, it should not be beyond the wit of this Government to look to the joint ventures that already exist within the Corporation—companies such as Round Oak, with a 50–50 split of public and private capital. The Government ought to seek to go into the market to get into joint ventures with individual steel companies here and on the Continent.
  I suggest that the Corporation's divisional track record has to be used as part of the criteria if further investment is agreed. Surely it is not unreasonable— I have heard hon. Members on all sides argue this—to take the view that the Sheffield division of the Corporation, which has been running at a profit while the rest of the Corporation is showing a loss, should have some account given to its success. I am told that in the past few years, on an investment of £300 million, accumulated profits of £140 million have been shown. That is the kind of success that ought to be reinforced.
  I do not believe that we are interested in root-and-branch condemnation of the Corporation. We are trying to identify those parts which can be made successful and aiming to see that that happens. If the Secretary of State continues to impose a social cost obligation, whether on the Beswick plants or whatever—and this is
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  the nub of my criticism of the Government—he should specify by written directives precisely what is required and he should seek, through the Treasury, to make reimbursement to the Corporation for these social decisions. Otherwise, how will the Corporation ever be in a position to be judged in a proper commercial sense? How will it ever be possible to remove the natural alibis that spring to everyone's lips when it can be said "We are having to carry out so many things for which the Government do not pay."?
  If he does this the Secretary of State should also remember, above all, that in imposing these tasks, in providing the social cost, there is a price to be paid in lost jobs elsewhere. My right hon. Friend the Member for Leeds. North-East (Sir K. Joseph) pointed this out in his opening speech. That point must come into this argument.
  There is the question of a decision on the Statement, when we hear it. What we want more than anything else is to he confident that we are not once more facing the smell of political compromise the kind of political compromise that will make the Beswick plant closures a sacrificial offering, with a few token sackings in management and a slow-down in the investment programme. If that comes forward we shall know that the Government are simply playing for time, hoping that North Sea oil will make things look better. This is an urgently crucial problem, to which the Government must address themselves. In doing so they must finally decide, in the context of international manufacturing, both public and private, whether they believe in a vigorous, alert and profitable industry or whether they continue with actions that make those objectives impossible.
  6.36 p.m.
  Mr. Harry Lamborn: I wish to speak with special reference to the need to bring industry back to our inner city areas. In doing so, I welcome the statement made in the Gracious Speech concerning the Government's intention to introduce a Bill to renew our inner urban areas and the statement by the Secretary of State on this subject this afternoon.
  There is no doubt that many of the problems in inner cities today arise from the imbalance which the policies of successive Governments and planning

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  authorities have created. The result has been that we have lost far too much of our industry from the inner cities and far too many of our young people who have left to seek employment elsewhere. In the years after the war it was necessary, in building to higher standards and lower densities, to move not only people but industry and jobs to the new and expanding towns. Industry flowed out of our inner city areas. Tragically, having started this progress, the wheels having been set in motion, it seems to have been beyond the wit of any Government or city authority since to stop the process.
  I speak with special reference to the problems of inner London. In my own borough of Southwark we have lost many of our large industries, and the problem has been accelerated as a result of the development of large container ships which cannot get up the Thames to the Pool of London. As a result we have lost our docks industry and my right hon. Friend the Member for Bermondsey (Mr. Mellish), for years known as the "dockers' MP ", is today almost a Member of Parliament without a docker. This is what has occurred in inner London boroughs such as Southwark.
  This has left us without industrial opportunities for our young people, while large industrial sites in vast areas of London's dockland stand empty. These could create employment opportunities for our young people. In Southwark the council has taken, on its own initiative, far-reaching steps to tackle the problem. To bring these steps to a successful conclusion it is essential to have the backing and support not only of the Government but of the Greater London Council.
  The London borough of Southwark is developing one of the major comprehensive commercial and industrial revitalisation schemes in Britain. It has created the largest land bank in inner London, owning over 400 acres of land with development sites available at the focal point of Britain's marketing area in South-East London. To tackle this task the council urgently requires the powers the Government's new measures and those contained in the Greater London Council (General Powers) Bill have to offer. The major development in this area is the new international trade mart and industrial estate in the Surrey Docks area. Essential to getting this project under way are the
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  guarantee powers contained in Clause 14 in the Greater London Council (General Powers) Bill. This is a measure which both the Greater London Council and the Southwark Council, in agreement, regard as essential in order to commence this scheme—a scheme which can make a tremendous impact on the London dockland area and, indeed, provide the basis for the revitalisation of inner London.
  I must confess that it has been suggested to me that there are, within the Government, forces which are averse to giving to the London local authorities the powers contained in Clause 14. I must warn the Secretary of State that this clause, which will enable London authorities to guarantee loans issued to owners and lessees of land to enable them to erect industrial and commercial buildings, is essential if these projects are to get off the ground. Certainly, all my inquiries indicate that without these essential guarantee powers the area of Surrey Docks, which has already been vacant for far too long, will stagnate for a further period. Londoners would certainly be gravely concened if, at a time when the Government were introducing legislation to transfer wide areas of responsibility to other regions of the country, London local authorities were to be denied the essential powers needed to commence the projects which are at present getting under way in dockland.
  Southwark and the inner London boroughs need all the powers contained in the Greater London Council (General Powers) Bill. We in Southwark are concerned at suggestions that the new administration in control of the Greater London Council intends to withdraw Clauses 8, 10 and 11 from the Bill, because we feel that these are all essential elements in the gigantic task which lies ahead in redevelopment of Inner London.
  Southwark Council has recently established a fund of £3 million to assist the development of industry and commerce, and the uses to which this fund could be put would be greatly enhanced if the powers contained in Clauses 8, 10 and 11 were retained in the General Powers Bill or introduced by the Government in their own Bill. Clause 8(1) would give to London local authorities a general power to make grants to owners or lessees of individual pieces of land in their area for the purpose of extension, alteration or

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  improvement of individual buildings or the improvement of facilities, supplies or services. There are a number of existing firms in the London area whose continued operation is jeopardised by their inability to obtain financial support for the purposes outlined in the clause.
  Evidence given to the Wilson Committee by both the CBI and the TUC has indicated the need for such powers, which would allow boroughs, where appropriate, to play an active role in improving industrial and commercial premises within their boundaries.
  The provisions contained in Clause 8(2) could play a vital role in assisting the inner London boroughs to tackle the tremendous problems with which they are confronted, whether such powers are obtained through the General Powers Bill or through Government legislation. This clause would be a vital weapon in assisting the inner London boroughs to tackle the problem with which they are confronted in bringing industry to the inner areas. It would provide boroughs with the opportunity of building advance industrial buildings for the purpose of attracting industry to the area or encouraging existing industry to remain. This would represent a valuable complement to existing powers, which are unduly circumscribed.
  Clause 10 is another weapon which is badly needed by inner London boroughs, and one which, I trust, the Secretary of State will ensure that they obtain through one avenue or another. This power would enable local authorities to guarantee rents of individual buildings and to guarantee payments to statutory undertakings for the provision of infrastructure and facilities. It is apparent that many developers are only prepared to trade with small firms if they can provide a guarantor or surety for the purpose of their leasehold covenants. With the provision of this clause it would be possible for Southwark and other London boroughs to use a fund such as Southwark has established to assist in establishing these small firms within the borough.
  Clause 11 concerns a limited power. It would enable local authorities to acquire securities in a company. The need for this power arises in connection
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  with a payment or loan made by a local authority to a company to enable it to perform a contract with the local authority. This power would give a measure of financial security to boroughs where they are using their purchasing power to support local firms by enabling them to advance money to a company to enable it to carry out the work.
  As I said in my opening remarks, I welcome the legislation which has been promised in connection with the problems of our inner cities. The problems of inner London are particularly acute. Many of them should have been tackled long ago. I trust that, at a time when this House will be actively seeking to devolve powers to other regions of the country, the Government will ensure that London boroughs have the powers and the weapons essential to enable them to tackle effectively the tremendous task ahead of them.
  6.50 p.m.
  Mr. Michael Spicer: I want briefly to return from the very important problems of Southwark constituency to the general question of the interventionist industrial strategy of the Government. The problem with intervention on behalf of someone is that, by definition, one intervenes against someone else, either because one is taxing him or because one is setting up State-supported competitor. I suppose that one could justify that strategy in the short term in the context of a casualty clearing operation—a phrase used by my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph).
  But, considering the likely long-term course of events over the next 10 years, for example, in the industrialised countries, that is a very dangerous strategy to pursue. The pace at which the requirement for labour in manufacturing industry is now declining is not yet generally recognised. I was recently on a trip to Japan. Whereas we, when talking of a productivity increase, speak, more in hope than in anticipation, of machines which use five people now but will use three, in Japan entire factories of people are being replaced by machines, by automation-control methods operated by two or three people in white coats. This poses the most horrific problems in terms of employment and of our competitive

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  position, and any Government must be extremely concerned about it.
  My problem in trying to assess the situation is that it seems to me that, if one is simply to counteract that kind of inevitable trend, one will either opt out of continuing to be a major industrialised country or one will simply be building sandcastles against the tide, wasting an enormous amount of money in the process. Therefore, certainly in the long term, if there is concern, as there is, in all quarters of the political argument about unemployment, with the threat of a magnitude of unemployment that we have not yet experienced, we must consider the situation in a manner totally different from the strategy of the Government.
  One must in the short term consider the sort of policies for encouraging investment which were mentioned by my right hon. Friend. Much more important than industrial strategy, in my belief, is education policy. We currently do not provide enough people for the skills which are still very much in demand. There is a great unsatisfied demand for skilled people. There is a shortage of skilled builders and skilled mechanics. There is a whole range of computer skills for which we are not providing in our education system.
  Again, one would like to see a much more flexible private sector housing policy, but in the absence of that we should be considering trying to make the public sector more flexible. I have many constituency examples of people wishing to take jobs in other parts of the country but being prevented from doing so by the inflexibility of the housing system. We should have some kind of national clearing house for people wishing to move from one area to another and who are renting public housing.
  Another example of what could be done was put perfectly by my right hon. Friend the Member for Newham, North-East (Mr. Prentice)—the reduction, or indeed the cessation, of the pace of the legislative burden on industry, which seems guaranteed to increase unemployment. There is a whole range of short-term remedies which are not being taken and for which the Government's industrial strategy is no substitute. In the long term, even these remedies are unlikely to be wholly successful, and I
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  believe that, if we are right in saying that the real problem lies in the long-term decline in requirement of labour for the manufacturing sector, we have to look for future employment to other sectors, particularly the service industries.
  In that context, the Government's interventionist policy is ridiculous. It is particularly absurd that where we have thriving industry in the services we should be discriminating and actually intervening against it in many cases through subsidies given to manufacturing industry and through taxation policy. In this way, we are intervening against one sector of our economy which in future will provide jobs.
  One of the ironies which I discovered in Japan is that, contrary to myth, it looks this year as if the British will be in trade balance with the Japanese. The trade balance is rather peculiar. This year, apparently, the Japanese will have exported to us £1 billion worth of manufactured goods and we shall have exported £½ billion worth of manufactured goods to them. But we shall have earned another £½billion through the services sector—insurance, for example.
  Mr. Dell: I am glad that the hon. Gentleman has been to Japan, but he should not believe everything that the Japanese statistics suggest about our net earnings on invisible account. It is nothing like the figures that they state, and. although there is a significant net surplus on invisible account, it still leaves us with a substantial current account deficit.
  Mr. Spicer: I do not know whether it would be in order to say that I got these figures from the British Embassy in Tokyo.
  There are two facets to services. First, they are heavy employers. Every service that one can imagine is labour-intensive. The second aspect about services is that this country is rather good at them.
  In both the short term and the long term, it is disastrous to embark upon a strategy of intervening to support all the industries which are going into decline. As I have said, there may be short-term reasons for trying to bail out particular casualties on humane, social and political grounds—one accepts that—but as a strategy it is a very foolish way of going about it. It would be much better to set

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  about it in the way suggested by my right hon. Friend the Member for Leeds, North-East, and that is one of my reasons for supporting the Opposition amendment.
  6.53 p.m.
  Mr. Stan Crowther: The hon. Member for Worcestershire, South (Mr. Spicer) appears to be opposing intervention in industry but to be in favour of intervention in housing, education and elsewhere. That is illogical. I suggest that the problem of declining manpower in manufacturing industry will be solved eventually by reducing the working week. But that is a subject for another debate.
  I was sorry that my right hon. Friend the Secretary of State for Industry was not able to be a little more specific about the Government's attitude to the future of the steel industry, which is a matter of very great concern to my constituency. I appreciate the support that the Government and the House have given to the British Steel Corporation in its capital investment programme—I remember that we sat up all one night during the last Session to put the necessary Bill through.
  However, I am unconvinced that the Government have yet fully grasped the desperate seriousness of the crisis through which the steel industry is passing—I use the word "passing" in a rather loose sense, because there is no evidence yet that the industry is coming out of the crisis. It appears to be stuck in the middle of it, and it is the worst crisis since the 1930s. It is not, as the right hon. Member for Leeds, North-East (Sir K. Joseph) appears to think, just a financial crisis.
  I suppose it would be easy for the BSC to get out of its financial difficulties by sacking 60,000 to 70,000 people and reducing its production targets to perhaps 15 million or 16 million tons a year, but that is not the real crisis. The real crisis is an industrial one, and not so much a financial one. I accept that the loss of £10 million a week is serious, but let us not forget that nearly half of it is due to interest charges that have necessarily been incurred because of the enormous amount of new investment that is needed just to catch up with our foreign competitors.
  What worries me most is that the Government are not implementing any
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  policies that are positively and directly aimed at stimulating demand for steel in the home market. There are many areas within which Government policy could have a considerable influence on steel demand. If we do not see an upturn in the home market in the fairly near future, we shall be in danger of finishing up with a large number of modern plants working half time or less.
  It is not part of my duty to anticipate the discussions that are to take place between the BSC and the trade unions on the future manpower requirements of the industry. I, as a Socialist and a trade unionist, do not want to see any plants closed, or any men made redundant anywhere in the country. But it is my duty to represent the interests of my constituency, and we have lost 8,000 jobs in the steel industry in the Rotherham area over the past 16 years—the great majority of them from two plants which now form the Rotherham works of the BSC.
  That was part of the cost of making the Rotherham works one of the most productive and profitable in the country. It was not easy for the trade unions or the community to accept sacrifices of that magnitude, but they were accepted because that was in the long-term interests of the industry and the country. The effect on the social fabric of the area has been serious. It is one of the main reasons why the level of employment that now applies to the country as a whole has been afflicting the Rotherham area for nearly 10 years.
  Even now we have not stopped the process. Another bar mill is to close in February, and my constituents are saying "Enough is enough. We have made all the sacrifices that we can stand." There is a widespread suspicion that BSC is deliberately shunting less profitable contracts to the more efficient works, such as Rotherham, and giving the more profitable work to less economic plants in order to spread the load and to disguise to some extent the difference in performance.
  I do not know whether that is true, but many of my constituents believe it to be so, and my advice to the Government and to the BSC—though I do not for a moment suppose that they will accept it—is "Put your money on the

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  record breakers ". The steel workers in my area have shown every possible cooperation in creating an efficient and profitable works. They have never yet let the industry or the country town, in peace or in war, and they are entitled to rather more support than the BSC sometimes appears to be giving them.
  I now turn briefly to another matter that is of some concern in my constituency, although the problem is of a very much wider nature. I was pleased to see in the Gracious Speech that it is intended to introduce legislation to amend the Companies Act. The Gracious Speech did not say what kind of amendment is proposed, but I hope that there will be a measure to prevent a recurrence of disgraceful recent events in Rotherham. I mention this, not because it is special, but because it is all too typical.
  A small firm known as Gummers Ltd. had operated in Rotherham for well over 100 years. It had a world-wide reputation for the excellence of its products It had a number of items, but it specialised in manufacturing valves for the water industry, and for other industries, too. One can find Gummers valves all over the world. It was a profitable firm until about two and a half years ago when it was taken over by a conglomerate group called Pentos Ltd., and it has now been closed down.
  The announcement of the closure was made without any consultation with the trade union concerned. A couple of weeks before that happened a notice had been put on the company notice board saying:
  " No decision has been made regarding the future of Gummers Ltd.",
  and it added
  " No preparations are in hand for the transfer of any of the Gummers products elsewhere."
  About a fortnight later the employees were handed a notice saying that the works would close on 23rd December and that part of the work would be transferred to another Pentos subsidiary in Birmingham.
  The works were closed eight weeks prematurely. That occurred on 28th October, which happened to be just five days before my hon. Friend the Member for Rother Valley (Mr. Hardy)—who also has constituents working at these works
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  —and I saw my right hon. Friend the Minister of State to discuss the possibilities, if any, of saving some of these jobs. The meeting had been publicised, but the works were closed, with those concerned being given 24 hours' notice.
  The group claims that Gummers Ltd., although it had been profitable up to 1975, had been making losses in 1976 and 1977. I am assured by the former managing director, who is one of seven senior executives of Gummers Ltd. who have been sacked or forced out by Pentos since it took over, that the company was forced to sell some of its products to another subsidiary of the same group at up to 40 per cent. below the proper market value. If that happens, it is not surprising that losses appear on paper.
  A lot has been said recently, including during today's debate, about the importance of small firms to our economy. I agree with all that has been said, but the greatest danger to small firms arises, not from policies followed by the Government, by local authorities or by trade unions, but from the activities of bigger firms which gobble up small firms, squeeze them and then toss them callously away. That is what happened to Gummers Ltd.
  When the right hon. Member for Leeds, North-East talks about companies being milked, he should understand that the most efficient and expert milkmaids in the world are big companies. This once proud and profitable company which carried the name of Rotherham all over the world has been thrown into the dustbin of history.
  I mentioned earlier that Rotherham has lost thousands of jobs in the steel industry. We lost them because that was part of the price of technological advance. The tragedy of Gummers Ltd. is a different matter altogether.
  The Under-Secretary of State for Industry (Mr. Bob Cryer): Will my hon. Friend accept that Gummers Ltd. is a sad case but, alas, is not the only example of what is happening? The Opposition complain about a fear of massive intervention, but the fact is that when such cases occur we often have not only Labour but Conservative Members asking the Government to intervene to try to save jobs and companies. Very often these are viable concerns, but because

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  they are involved in a wider financial group that is not viable they find themselves sinking with the whole group.
  Mr. Crowther: I am glad that my hon. Friend has made that point. I said that I mentioned this case, not because it was special, but because it is all too typical. The powers of intervention should be greater to enable the Government to prevent such things from happening. We have lost 230 jobs, not because technological progress has made the workers redundant, not because the workers' products are no longer needed, not because they could no longer operate economically, but because it suits the pockets of somebody who has probably never been near the firm that the works should be closed so that he can squeeze the last ounce of profit from it.
  Such an event must surely come into the category of what the right hon. Member for Sidcup (Mr. Heath) described as "the unacceptable face of capitalism ". There is a great need for legislation stipulating that any company which has taken over the works of another company and intends to close down those works and make the workers redundant, thus involving the taxpayer in the expense of contributing to the redundancy payments, should be required to justify its proposal to an independent tribunal on technological or economic grounds.
  The concept of unfair dismissal is now firmly established as part of our employment system. Yet nothing could be more unfair than throwing 230 people on to the scrap heap. They had no protection. I hope that the Government will give this matter serious attention—if not this Session, then next Session.
  7.11 p.m.
  Mrs. Winifred Ewing: I am sure it will not surprise the House if I start by referring to that part of the Gracious Speech which refers to the Bill to establish a directly elected Assembly for Scotland. This is part of a long story for the Labour Party. It may not be known to all hon. Members, but those who study history will not mind my reminding the House that for almost all of its existence the Labour Party has been committed to a Scottish Parliament. As late as 1957, when my late brother-in-law was the Labour candidate for Edin-
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  burgh, South, even he, as an official Labour by-election candidate, had that firm commitment on his election address. Transport House told him to remove the commitment, but he gave Transport House a choice—" Either allow me to leave it in my election address, or I will not stand as a candidate. "So in 1957 it was dropped.
  Ten years ago almost to the day I won the Hamilton by-election. The Labour Party is perhaps learning from its own history. It took the Labour Party 50 years to get one Member of Parliament into the House. When he lost his seat, the Press and other media said—so presumably did many hon. Members—" That is the end of that. "
  In the same way there has been a lack of understanding of the aspirations lying behind the success of my party in gaining over 30 per cent. of the vote in the October 1974 election—5 per cent. more than the Conservative Party. It is not worth quoting the figure for the Liberals because in Scotland they have virtually been written off.
  I congratulate the Government on proposing to introduce the Scotland Bill. I hope that it is not just one of a series of broken promises. There have been times when every Scottish Member has voted for such a Bill. The famous Tom Johnston, the most respected Secretary of State for Scotland of all time, was firmly committed to the concept of a directly elected Scottish Parliament with far more powers than will be contained in the Scotland Bill.
  I urge those on the Labour Front Bench to tell the Prime Minister that I congratulate him on bringing the Scotland Bill forward, but I have one or two cynical thoughts about the Prime Minister's sincerity and the sincerity of his colleagues.
  My first cynical thought arises from what happened last Session, when the Prime Minister failed to make the passing of the Scotland and Wales Bill an issue of confidence. We never received an explanation why, if this is such an important radical constitutional step—perhaps the most important constitutional step for two centuries—the Prime Minister did not get the Bill through when we know that he can get Bills through despite his present political situation.

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  Secondly, assuming that the Prime Minister and his colleagues are as sincere as they claim, what are we to think about the timing of the measure? We know that even if this House passes the Scotland Bill and the Wales Bill the House of Lords could delay them. It may be that the Prime Minister already realises that. With the power of the Prime Minister in the United Kingdom being far too great, with his enormous power to decide on the timing of an election, it may be that he could fulfil his sincere pledge to get the Bill through this House knowing full well that the Bill would not reach the statute book because he could time the election to coincide with the delay in the Lords.
  I seek assurances on this matter, because to me and my colleagues this is a serious proposition. Many hon. Members evince a great lack of understanding of my party and what it stands for. The best thing that could happen to secure my party's electoral success at the next election would be the Labour Party's failure to get the Bill through. We should be laughing all the way to the next election if that happened.
  My party has taken a constructive attitude, saying that a step in the right direction is a step in the right direction, that any improvement is any improvement. We have made a commitment to secure a directly elected Assembly at some time, although it is not quite what we want. We want this as a step in the direction leading to the dignity of self-government and international status. However, we are democrats we have said that we will work with the Government on the Bill and will table amendments thereto and hope that they will be selected for debate. We will accept the verdict of the people of Scotland. If after they have got their mini-Parliament without muscle, they are satisfied with that mini-Parliament—
  Mr. Deputy Speaker (Mr. Bryant Godman Irvine): Order. I ask the hon. Lady to look at the amendment which has been selected and which we are supposed to be debating.
  Mrs. EwingI understand that it is a tradition of the House that in the debate on the Gracious Speech it is permissible to speak generally. Industry and commerce and employment are also funda-
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  mentally affected by a step in the direction of devolution. I believe that my remarks must be regarded as relevant.
  The Liberal Party's attitude to the Bill is, with respect to the hon. Member for Cardigan (Mr. Howells), for whom I have a great personal regard, contemptible. When this great party of Home Rule has the chance of a Bill to secure a directly elected Assembly, it starts nit-picking and saying that, if it cannot get such-and-such concession here and a bit of PR there, it will not support the possibility of getting something as important as this on the statute book. So much for Liberal Home Rule-ism. The pact the Liberals have entered into has probably made it certain that they will disappear without trace in Scotland, so there is not much point in wasting breath on them, because why jump on to a dead body?
  We do not know what the attitude of the Tory Party is to the Scotland Bill. The right hon. Lady the Leader of the Opposition quickly skated over the matter last week and would not even allow an intervention in her speech, so little importance did she attach to this matter. Nine years after the declaration of Perth of the right hon. Member for Sidcup (Mr. Heath), the Conservatives are regurgitating and rehashing, deciding whether to abolish any commitment to devolution.
  It may interest hon. Members to know that I have learned what the Conservative policy is. I was on a television programme with the hon. Member for Aberdeen, South (Mr. Sproat). He categorically committed the Conservative Party to opposing the Bill every inch of the way. That is one clear-cut statement which we have had, though admittedly not in this House but on television, and I shall be interested to learn whether that is the policy of the Conservative Party, about which the Opposition are remarkably silent.
  After the next General Election, whenever it is, we shall find either that my party will have won a mandate for self-government by taking 36 seats and a majority of the votes or that it has not quite done that but still got a sizeable number of Members in this House.
  Mr. Deputy Speaker: I was under the impression that the hon. Lady was coming round to the amendment in due course. Although it may be that at some

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  stages in the debate on the Gracious Speech it is in order to discuss other matters, we are in fact concerned with an amendment dealing with industry.
  Mrs. Ewing: I shall sum up quickly on this point and then move on to other matters affecting industry.
  I warn the House that we shall hold the balance of power, if we are here at all, and that this should be taken seriously because it is obvious that the electorate will not give either of the parties a clear mandate.
  Mr. Tim Renton: Can it be that the hon. Lady is suffering from hubris, which is otherwise known as counting one's chickens before they are hatched? Is it not true that recent opinion polls in Scotland have shown that Scottish support for devolution is waning considerably? Recent figures that I have seen showed that, whereas 55 per cent. previously supported devolution, the figure is now down to 35 per cent. and that many people in Scotland have been put off by the Scottish National Party and its demands for independence?
  Mrs. Ewing: If the hon. Gentleman intends to take me on about opinion polls, he should do his homework. I am rather well up on opinion polls.
  Mr. Deputy Speaker: May I seek the hon. Lady's assistance and urge her to come to the amendment?
  Mrs. Ewing: Having given way to the hon. Member for Mid-Sussex (Mr. Renton), I think that I must be allowed to answer his question. If he refers to recent opinion polls conducted by The Economist and Systems Three, he will see that my party is comfortably positioned at 33 per cent. These figures are based on a larger type of sample from the ones which he has quoted. In any event, perhaps he should direct himself to a rather more interesting statistic which shows that, of the under-35 age group, we have 46 per cent. whereas the Tories have only 18 per cent. The message is there for the Conservative Party that the Tories in Scotland are dying off and that there will be only two parties left. They should think that over very carefully.
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  I turn now to one aspect of industry—the very important fishing industry. I welcome the statement in the Queen's Speech, so far as it goes—which is not very far—that new initiatives will be taken by the Government in regard to the reform of the common fisheries policy. I welcome this, but I should like some further information.
  What on earth can the Government do in the way of taking initiatives? Fishing is a vital industry and 65 per cent. of the European pond is provided by the United Kingdom, most of it in Scottish waters. We have a total inability to get justice for the industry because the United Kingdom has no right of veto left. That was given away in the Conservative Government's negotiations for entry. They made fishermen pawns in the game that they played, and they sold our fishermen down the European river. We have no right of veto. I cannot congratulate the Labour Government. When they renegotiated the treaty, they did not see fit to put fishing on the agenda.
  In my constituency, the fishing industry is vital. It is one of the most important industries in Scotland. It is an important one to the United Kingdom as a whole in that it provides fish mostly for human consumption, which is one of the most important sources of protein.
  We know that a 50-mile limit is necessary. Everyone now agrees about it, and I am one of those who go to Europe to try by persuasion, without any rights in the matter, to explain our position to the Germans, Dutch, Danes and the other members of the EEC. I try to put to them the social necessity of preserving the rights of the inshore fishing industry. In most cases, there is no alternative employment. It is a way of life in addition to being just a job. It creates a cultural way of life.
  The industry must have new initiatives, and they must be that the Government say to our EEC partners, "We insist on 50 miles exclusive control." That does not mean that no one else can fish within the 50 miles. The control must be by the coastal State. The Law of the Sea Conference has always agreed that only coastal States properly conserve fishing stocks.
  Unemployment in Scotland is running at about 180,000. Recently the Fraser of Allander Institute forecast that shortly

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  this would rise to the shocking figure of 200,000 out of a population of 500,000. What a non-achievement! I remember the right hon. Member for Kilmarnock (Mr. Ross) saying, when he was Shadow Secretary of State, that if unemployment in Scotland ever rose to 100,000 and he were Secretary of State for Scotland he would resign. I wonder whether he and his colleagues remember that boast.
  Scotland is one of the most socially deprived areas in Western Europe. People are living in houses which are unfit for human habitation to a most alarming degree. According to a Labour Government report, the Cullingworth Report, even if we build beyond the present rate of building, the slums will be with us until after the end of the century.
  I have some sympathy with the hon. Member for Rotherham (Mr. Crowther) about the state of the steel industry. I can remember just after the Hamilton by-election having a promise from the Government that there would be a tinplate mill and a galvanising plant in Scotland. Had that been done, we in Scotland could have had an integrated steel industry. We would not now be in the ludicrous situation of having unnecessarily to import steels which we could produce ourselves. That was another broken promise. I sympathise with some of the fears which the hon. Gentleman expressed on behalf of the steel industry.
  I now wish to say a word about the oil industry, which will not surprise the House. The policy of this Government—and from my reading I believe that the same would have applied had the Conservatives won the last General Election —is to make a mad grab to get this liquid gold out of the sea regardless of the cost to nearby areas. Apparently, it does not matter what social consequences are left behind. Again I have a certain constituency interest in this, in that I am what might be described as an oil Member, with a platform-building site in the constituency called Ardersier.
  We can contrast the policy of this Government with that of the Norwegians, who have a similar quantity of oil. The Norwegians are not grabbing to get it out quickly. They impose stringent conditions on the oil companies. They take a much bigger share from the oil companies. They make sure that there is
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  preference for jobs for Norwegian firms when contracts are given.
  The way that we are extracting oil at any cost and as quickly as possible is quite ridiculous. Many juicy contracts are given to anyone at all as long as the oil can be won. My party warned this House of the extent of the oil. It was laughed at by both the Labour and Conservative Parties, and our predictions were almost modest. No one ever admits that my party was right. We warned them not to build too many platform sites. We pointed out that this would mean only temporary jobs. There was no planning. There was no attempt to create proper infrastructure, housing and schools. In many cases, men were away from their families. Once again we have been proved right, fortunately, because in many cases these are short-term jobs.
  I pay tribute to the company in my constituency which adopted a different policy, using local firms and local labour as far as possible, setting up a fairly permanent work force. The majority of the shop stewards in the yard are members of my party, and the yard does not go in very much for industrial action. The people simply want to get on with the job. The record is such a good one that there is no problem about filling the order book. Nevertheless, the problem remains for other sectors of this very important industry.
  On the subject of small firms, I have a certain constituency interest, because 60 per cent. of the people in my constituency are self-employed. That is a very high proportion—quite different from the situation in many other parts of the country. In Scotland we have six times as many self-employed people as there are in England, and because of the imbalance of our population we find that the self-employed person is of extreme importance to rural areas. The self-employed clergyman, the shopkeeper and the small post office are absolutely vital to the survival of these areas. Unfortunately, too many burdens have been placed on the small firms.
  I disagree that the main problem is the big firm. This is not true in the situation that I am describing to the House. We do not have multiples making much inroad, because the small firms are the popular ones which give the good service. What is needed urgently is a simplified

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  system of value added tax. The 8 per cent. levy must be ended. The Conservatives introduced it at 5 per cent., and it was then raised by the Labour Government to 8 per cent. That must go. Similarly, the capital transfer tax must be reformed in order to protect the family firm, which is a very good stable unit on which to base society.
  I am glad that the Government have indicated in the Gracious Speech that they will introduce measures to assist small firms. They are certainly needed because of the bankruptcy rate in Scotland. Although much of the legislation is excellent from the social point of view, it has added up to a very crippling burden on small firms, many of which cannot employ a specific accountant of their own to deal with them. I ask that further details may be given on this aspect.
  I identify myself with the remarks of the hon. Member for Cardigan about reform of the common agricultural policy. That policy is nonsense. If the Community is enlarged, as seems likely, the CAP will become absolutely unworkable. Scottish farmers have always been highly efficient, producing as much as possible. Indeed, that is true throughout Scotland and England. But now we are suffering, and we are having to help inefficient farmers on the Continent to compete more effectively with our own farmers. That, in effect, is what we are doing. The agriculture industry must receive some benefit soon, because the pig farmers and hill farmers are suffering hugely. When I say that quickly, it does not lessen the importance of the hill farmer to the whole of the economy. It is from that source that our future cattle will be derived.
  There is no reference in the Gracious Speech to reform of the land law. As my party's view is that the agriculture industry should be based on small farms, it would be nice if we could see some indication occasionally from the Labour Government that they have come radical views on the fact that in Scotland we have some of the largest tracts of land owned by individuals or companies. Among them arc to be found some of the most wicked landlords, stepping right out of the pages of medieval history.
  The state of affairs persists, and the Forestry Commission is not encouraged by either Labour or Conservative Govern-
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  ments to use its existing powers of compulsory purchase in order to make sense of the forestry industry, which is largely undeveloped. The industry could have millions of acres added to it that are not suitable for farming but are suitable for forest. We should not have to import certain types of timber, because the type of timber we grow in Scotland grows faster than timber in Scandinavia. It grows at an ideal rate for the requirements of the Forestry Commission in Scotland. This is an area of total neglect, and I do not see anything very encouraging in the Gracious Speech about it.
  Many hon. Members who do not come from my side of the border have an almost persistent ostrich-like attitude to what is, after all, a national movement National movements do not go away because people might like them to do so. They will not go away just because many hon. Members have chosen to be ostriches. The national movement wishes to see self-government. It wishes to see powers of the purse.
  I counsel the Government, if they have a hand in framing the referendum question, to consider the following point. If the question is "Do you wish Scotland to run its own affairs?", or "Do you wish Scotland to have power of the purse?", there will be about a 90 per cent. "Yes ". If the emotional type of question is asked, there may be a different answer. Obviously, the framer of the question will have a great deal of influence.
  I reiterate that the national movement of Scotland will not go away. If the people of Scotland are satisfied with a mini-Parliament, that is what they will have. Although we shall go on protesting that they want more, if the Scottish people do not want more we shall not win elections after that. It is a simple matter of democracy. When the devolution Bill comes before the House, I urge the House to pass it, and to pass it quickly, so that there can be no question of the Lords delaying it.
  7.37 p.m.
  Mr. Tom Ellis: I do not intend to follow the speech of the hon. Member for Moray and Nairn (Mrs. Ewing). I think we shall have plenty of time during the debates on the two devolution Bills to talk to each other and

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  debate with each other across the House. I shall forgo that pleasure until that time.
  I thought that the hon. Member for Arundel (Mr. Marshall) made a thoughtful speech. Although I could not agree with all of it, I agreed with large parts of it. I agreed also with the analysis of my hon. Friend the Member for Rotherham (Mr. Crowther), except that, having made the same analysis as the hon. Member for Arundel, I felt that my hon. Friend then failed to grasp the nettle that had appeared following his analysis. I should like to emphasise some of the points that both hon. Members made, in particular concerning the steel industry.
  The track record of British industry since the war is not good. It is unsatisfactory and disappointing. If I were asked to name the biggest hindrance to our achieving a really competitive position in relation to other countries, I would say that it has been our inability, since the war, to overcome the problems of change. I find this particularly galling in the light of the slogans that were current in the 1960s. There were slogans about the technological revolution, and about dragging us kicking and screaming into the 21st century. Unfortunately, there has been a failure in this respect. It is very disappointing, and it is reflected in our industrial situation.
  As many people have pointed out, one obvious criterion is productivity. Our productivity in a vast range of industries does not compare with that of many of our competitors. But there have also been failures in other areas. There have been failures in regard to the location of industry, and in this respect I quote from the report of a Committee of the House which was published in 1975. It is the Report on Regional Development Incentives, Cmnd. 6058.
  The report says:
  " Had Scotland, Wales and Northern England secured 42 per cent."—
  that is to say, their proper share—
  " of national employment growth during the 1960s, they would have experienced a growth of 270,000; in fact their employment fell by 100,000. Of the deficiency of 370,000, 180,000 was attributed to developments within the services sector; 120,000 was attributable to the primary sector, largely arising from the disproportionate dependence on coal mining; and only 70,000 to the manufacturing sector. "
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  This loss of jobs was matched during the same period by an increase of 6 per cent. in employment in the South and Midlands of England.
  I make that point, along with productivity, as two examples of our failure in terms of industrial policy since the war. I do so in order to try to underline a general proposition which one or two hon. Members have hinted at during the debate, namely that when one approaches the whole question of industry and its problems one can go along two broad paths. There is the market economy approach, espoused by most Opposition Members—that the market itself will assess the efficiency of companies and that if a firm's productivity does not come up to a certain level, in due course that firm will go bankrupt.
  The other approach, favoured by many Labour Members, is that of central planning of the economy with the central decisions being made by Government in order to develop industry, and so forth. Those are the two purist views in practice, although I do not think that anyone would take a rigid purist position.
  Indeed, as we know, a great deal of planning goes on in private industry. The whole Galbraithian philosophy spells out the amount of planning that does go on in private industry.
  But a very important point that we must get clear in our own minds that if we fudge the whole thing in an attempt to come together from the two extremes we shall have the worst of all possible worlds.
  I believe that in many respects what has gone on in this country during the last 30 years has been a fudging of the question whether we are a free enterprise economy or a really determined planned economy, with all the determination and ruthlessness associated with that position.
  I should like to give one or two examples in order to make clear exactly what I am saying. I take the example of steel. A number of hon. Members, including my right hon. Friend the Member for Rotherham (Mr. Crowther) said that many people did not really appreciate what a desperately serious position the steel industry was in. The situation is desperately serious. If we were to produce steel at maximum capacity—about 27 million tons—we should be producing

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  at about 140 tons per man per year. But many of our competitors are producing 500 or more tons per man per year. That is a rock-hard fact. It has been known for a long time, although it was to some extent concealed in the 1950s and 1960s, when we were all dragged along by the great American engine. It was only when America went protectionist in 1971 and when the oil crisis came along that one began to appreciate the weakness of our steel industry.
  In 1972, when money was made available for the steel industry, the management of the British Steel Corporation was allocated £3.000 million to get on with the job of putting the industry right. I am reminded of the Chief of the Imperial General Staff who, during the course of a battle in Northern Africa during the war, said to Churchill: "Mr. Prime Minister, you must either trust your general or you must sack him. You cannot run his battle for him." What we have done in the steel industry is to try to half-run the battle and at the same time try to let the BSC run the battle.
  The nub of the problem was spelt out by the BSC in 1973. It was then said that there were 40,000 jobs to go, over the whole of Britain, over a period of 10 years. That was the problem. I would have thought that the Government could have tackled that problem. We had to tackle the problem in the coal industry, because that was forced upon us.
  However, the problem has not been tackled and the position remains today largely as it was in 1972. I am thinking of the big issues, such as competition between various steel plants, and so forth, which are largely unresolved. In the meantime the whole economic situation has become that much worse and the problem has become much more difficult to resolve.
  By not tackling the problem we are just building up more and more problems, and one can say, in a dramatic way, that inevitably Nemesis will come knocking at the door.
  The basic problem has been our failure intelligently to know precisely what we are doing. Do we have a planned economy, with all the consequences flowing from that, or do we have a free market economy?
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  I am glad to see that my right hon. Friend the Secretary of State is present. I would say to the Government that the nettle must be grasped, however difficult. What I am saying about steel applies to all sorts of other industries. I give another example, which does not come from Britain. I take an example from Mr. Stuart Holland's recent book in which he says that the richest area of France is the Paris region. It covers 2 per cent. of the land mass, has 19 per cent. of the population and 54 per cent. of the meso-economic capital.
  That situation has not come about because the French Government willed it or because of some maladministration; it has come about because of the French Government's impotence, in the same way that Henry Ford has gone to Bridgend not because the British Government wanted him to go there but because, as a multinational concern, Ford was able to choose for himself where to go. With regard to the location of that multinational branch factory the British Government and, indeed, any Government in Europe, were impotent. That is an important point to make.
  Ford came up with a number of reasons for the move. There were skills in South Wales, although I agree with several speakers that at the moment some of those skills are in short supply. Ford has moved to South Wales because, by and large, it is a low-wage economy. We must be intellectually honest with ourselves.
  The point I am making is that if the British Government, or for that matter the French, German or Italian Governments, wish to have a meaningful say in the destinies of their own peoples, the time has come when they can do it only in concert with other Governments in a particular community. The only practical Community on the horizon is the European Community. It is not, as yet, a real community but it is an embryonic community. I say that to many of my hon. Friends who pride themselves on their Socialism.
  Mr. Ronald Brown: My hon. Friend is not describing history; he is making it. The Ford plant was going to Dagenham, but for some mysterious reason it was taken

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  from Dagenham and put in Bridgend. We are still waiting to hear how that happened. By all means let my hon. Friend repeat history, but do not let him make it.
  Mr. Ellis: The rumour is that the Prime Minister had a chat with Henry Ford. I am not saying whether that is correct. But I shall not argue with my hon. Friend.
  The point I was making is that it is the meso-economic sector which is the price-setter and the other industries are the price takers. That is the crucial thing, and in this sector the national Governments in Europe are impotent. It is said that the history of the nineteenth century can be summed up as the forces of the Right outflanking the forces of the Left. The classic nineteenth century European nation State was set up to develop the capitalist system. As we come to the end of the twentieth century we risk once more saying that the forces of the Right have outflanked the forces of the Left. The development of industry has left the nation State behind, and it is now able to do things on an international scale and dictate to the nineteenth-century nation-State Government what it wants to do.
  I hope that where decisiveness is required, as it is on particular issues, it will be forthcoming. Anybody can decide to nationalise or denationalise an industry; that is an easy decision to make. But decisiveness is required to know when a practical and immedate problem arises and to know what to do about it—to know whether to tackle the problem or to fudge it. It seems that in far too many aspects of our industrial life we have fudged it.
  Take the aeronautics idustry. Eighty per cent. of the aeroplanes flying over Europe are made in the United States. The most successful European aeroplane is the Caravelle, of which 359 have been made. No Boeing aircraft has numbered fewer than 1,500. The lobbies have come to this House about the crisis in the steel industry. The time for the lobbies from Hawker Siddeley, near my constituency, is now, because the crisis will hit that organisation within 10 or 15 years unless we do something now.
  Because of our rigid approach we are failing to tackle the problems which are clearly appearing on the horizon for
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  industries such as aeronautics and computers. The Government must therefore abandon their role of trying to be sovereign in the economy and instead try to find some way by which they can become sovereign in partnership with the Community.
  Mr. Deputy Speaker (Sir Myer Galpern): I remind hon. Members that the winding-up speeches are to begin at 9 o'clock. There are roughly 70 minutes left, and at least 10 hon. Members are anxious to speak. My arithmetic is poor, so I shall leave it to hon. Members to work it out for themselves so that they may help each other.
  7.52 p.m.
  Mr. Kenneth Baker: I agree with much of the comments of the hon. Member for Wrexham (Mr. Ellis) about industry but I find his comments on recent history quaint. To say that in the history of the twentieth century there has been an out-flanking of the Left by the Right requires a certain suspension of belief in which I cannot indulge.
  It is interesting that in the debate the last person to use the phrase "industrial strategy" was the Secretary of State, and he used it about three hours ago. Hon. Members on both sides of the House have not used it because they have no clear understanding of the term. If one asked most Cabinet Ministers what they meant by "industrial strategy" a sort of dazed and witless glance would pass across their faces and they would say "I am rather late for my next appointment. Ask Eric." The right hon. Gentleman apparently keeps this secret to himself.
  I suspect that in practice the term means simply this: when exports go up the Government claim the credit for it, but when investment remains sluggish the Government blame the private sector.
  The debate gives us an opportunity to talk about the industrial strategy that Britain should be trying to follow over the next few years. It is generally recognised that the benefits of North Sea oil are only temporary. They give us a chance to run a bit faster but the objective remains the same—the creation of a strong economy.
  No one can possibly foresee which companies will be making what and to

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  whom they will be selling in 30 or 40 years' time after North Sea oil reserves have been depleted. One thing is certain, however. The industrial pattern then will be very different from that which exists today. We shall therefore pass through a period of major industrial change.
  I warn the House against the deceptive argument that somehow the development of the service sector will see an end to all our troubles. Personally I do not believe that. I am heavily involved in the service sector. I advise two companies in the fastest growing area of the service sector—the application of computer services. I know how quickly employment can be put on in these industries. But I do not believe that we should follow a strategy which proposes that we should contain and reduce the manufacturing sector and hope that the slack can be taken up by the service sector.
  Such an option is open to small economies such as those of Switzerland and, before the troubles, the Lebanon. But it is an unrealistic strategy for an economy with 7.5 million people employed in manufacturing industry. Perhaps I am rather biased in that direction because before I came to the House I was an industrial manager. I used to run and manage factories which made goods.
  I accept that we have the best retailers in the world, the best insurance salesmen in the world, the best banks in the world and the best people dealing with computer applications in the world. But all these categories have behind them a huge manufacturing base. The insurance companies need office equipment, which is manufactured. The goods in the stores have to be manufactured somewhere. The accounting equipment in the banks has to be manufactured, as does the hardware in the computer industry. I hope therefore that no one will harbour the illusion that a service-based economy will be able to take up the slack which would be created by an industrial change of that nature.
  There was an interesting article in The Times yesterday by the editor of the National Institute Economic Review.The final sentence in that article was as follows:
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  " the basic strategy of expanding domestic and foreign demand for British industrial products represents the ony hope of maintaining, let alone regenerating, British industry during the North Sea oil era."
  That is an unfashionable view, but it is one that I share.
  To a large extent our nation is based upon merchant converters. We do not have the raw materials. We have had to buy them in and convert them, by our wit and engineering skill, into goods that the world wants to buy.
  I turn, then, to the manufacturing sector in the United Kingdom. We should avoid the simpliste answers. The TUC believes that the basic answer is more investment. It believes that if money is thrown at industry somehow it will pull round. The Tribune Group believes that the manufacturing sector can be saved by import controls. I believe that it is now also supporting a low and a fixed exchange rate. I believe that that would be a disastrous policy. It would create an illusion of competitiveness which does not exist. British industry should not have to depend upon a low and false value of sterling in order to compete in the world, and if we are to compete in the world our success will depend on our productivity—the productivity of basic British industry not just on the factory floor but on the office floor, too.
  Profitability, productivity and investment are three totally interrelated factors. They are all part of the same chain, and if one is emphasised at the expense of the others, the chain will break. In my experience in industry, if a product were profitable, management would eventually invest in new plant and machinery. This would increase productivity, which would increase profitability, and that would lead to new investment. Most of British industry operates in that cycle and it would not be helpful to throw a great deal of money on to the investment side. From my own industrial experience I found that the sure way of knowing when a company was going downhill was when the team of managers came forward and stated that all that was needed was £100,000, £150,000, or a quarter of a million for new machinery and everything would be all right. Unless the business can make a return on the investment it will not, in my experience, be sufficiently profitable to survive in the long term.

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  The Government should show some understanding of the fact that that cycle exists and promote the cycle.
  The Government should try to remove the factors that are inhibiting productivity. I believe that there are three such factors. The first is restrictive practices. Do the Government have any view on these? We had the Donovan Report 10 years ago which said a great deal about restrictive practices and in an appendix to that report it suggested how these should be dealt with. But the Governmetn do not want to get involved. In this respect this Government out-Levites the Levites and pass by on the other side. They legislate for workers' rights, but when it comes to workers' responsibilities they leave that to industry. No Government can be totally blind to restrictive practices in industry. Nor should the Trades Union Congress on the union side.
  Again, one thing that I found very difficult in introducing productivity schemes was the multiplicity of unions with which one had to deal. It is physically exhausting to try to negotiate with 10 or 15 unions in order to get a productivity scheme through. That sort of thing wears down the enthusiasm of even the most enthusiastic managers.
  The second factor inhibiting productivity is the lack of personal rewards. One cannot introduce productivity schemes unless one can show the workers that they will earn a great deal more. The Government must concentrate on tax reductions—[Hon. MEMBERS: "Rubbish."] Hon. Members may say it is rubbish but we do need a reduction in the standard rate of income tax, which is the major disincentive. One can go into a factory and ask the workers if they will do overtime on a Friday night or Saturday. Very often they will say that of course they will come in if the employer will look after the tax. That is their way of saying that the standard rate of income tax is too high. I would like to see the standard rate fixed not at the present 34 per cent., nor at the rate of 30 per cent. which the Chancellor inherited, but at something more like 25 per cent. or even 20 per cent.
  The third inhibition to productivity is the fear that many people have of the effects of productivity—namely, unemployment and redundancy.
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  One thing that I welcome in the Queen's Speech is the Government's intention to introduce a special redundancy scheme for shipbuilding workers. I do not know the details, but it seems to me a sensible way of dealing with an industry that is going into a long period of decline, not only in this country but in the whole of Western Europe.
  However, that is no substitute for having a policy for shipbuilding. If the Government believe that they can deal with the problems of the shipbuilding industry by making a few workers redundant without giving any thought to closing yards, they are living in a deluded world.
  The hon. Member for Wrexham talked about the essential thing that must be done in the British economy in the next few years—namely, increasing productivity. Without that we shall never increase our competitiveness. The Government should invest both ministerial authority and political capital in trying to persuade both sides of industry that productivity is the essence of the regeneration of British industry and showing that they want that to come about. Productivity should not be looked at as an ingenious way of getting around the incomes policy or a means of driving a coach and horses through that policy when they cannot get a 10 per cent. settlement.
  We must have a regeneration of British industry and we must increase our competitiveness. I hope that the Secretary of State can be more convincing in replying than he was in his opening remarks.
  8.3 p.m.
  Mr. R. B. Cant: There was a very great deal in what the hon. Member for St. Marylebone (Mr. Baker) said. It is important for us to accept that in future—the next 20 years—the pattern of British industry will be totally different from what it is today. It is only the Japanese who know what sectors of the market they will exploit with expertise and cunning up to the end of the 1980s.
  I want to address my few remarks to an aspect of policy with which we do not deal enough in this House, regional policy. This will become more important in future because of devolution. In the

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  course of the devolution debates we shall have a great deal of information thrown up about the differences in living standards, about unemployment and money being made available in different areas, and, to some extent, this will be something of an eye-opener.
  This is an important debate because it is fairly obvious that there is growing up slowly and surely a grand debate about the oil revenues. Already sides are being formed between those who believe that the oil revenues in part should be dedicated to the reduction of income tax and a consumer boom, and those who believe that they should be devoted to increasing public expenditure and giving more money to industry through the National Enterprise Board. I have no doubt that a suitable coin-promise will be reached as time passes.
  Inevitably if we provide more and more revenue for, to coin a phrase, the regeneration of British industry, it must be decided which industries in which areas will get the money. These questions are looming on the horizon.
  I shall confine my remarks to considering how regional policy has worked in the past. We have reached a point where, without really thinking about it, we have a regional policy in which the procedures adopted and the methods of distribution are becoming damaging and, to some extent, almost totally ineffective.
  A House of Commons Trade and Industry Sub-Committee report four years ago voiced many criticisms of our regional policy. It outlined 10 areas of uncertainty. However, in the four Years since very little has been done. A lot has been done in detail, but far too little has been done to give point and purpose to our regional policy.
  I do not live in one of the assisted areas and I am sceptical because I doubt whether our regional policies are tied to job creation. Certain firms have received considerable amounts in grant. Pilkingtons received about £70 million for reducing 700 jobs. In my constituency a firm that is closing down has been given a grant of £2,250,000 out of £11 million investment and we shall lose 45 jobs. The number who will get jobs in the development area just up the road is only 25. That works out at £100,000 a
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  job, and clearly indicates that job creation is no longer an objective of regional policy but is, as it were, value added. I do not think that that was the original purpose.
  To take the matter from a different point of view, it is fairly obvious from the statistics that the Government favour highly capital-intensive job investments and grants. The statistics show that 40 per cent. of all the grants were for projects of over £1 million and that 40 per cent. of all the grants went to the nationalised industries—steel was one—and two large chemical firms. Neither firm increased it s manpower; indeed, both reduced it. My point is that when thinking of the future of industry in respect of regional policy, especially as we have abolished the regional employment premium, I believe that the Government should adopt a yardstick which might impose a limit on grants in terms of the number of jobs created.
  I go further and say that if resources are released by the adoption of this sort of policy, we should move to a much more flexible, selective, tailor-made type of regional policy which extends much more comprehensively over the whole country. This would involve a serious reconsideraton of the system of industrial development certificates. What we have as a consequence is a gross interference with the development and history of individual firms, but the situation is mixed up. On the one hand, industrial control is imposed by the Department of Industry through IDCs, and, on the other hand, control is imposed through planning controls, which is the responsibility of the Department of the Environment and local authorities. My personal view is that in many important areas IDCs are strangling economic growth. I live in an area which, despite the fact that it is one of the old industrial areas which was ravaged by capitalism, still has the pottery industry, which enjoys excellent employment prospects. However, we still have some serious problems, and yet we have a reserve of industrial land amounting to 0.7 per cent. of total stock. That is a ridiculous situation.
  We must carefully examine the question of employment in the context of regional policy. What exactly are we aiming at? Are we to develop the whole of our resources and to do something

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  about relatively backward industries which are in decline and which, relatively speaking, have no significant future? On the other hand, are we to consider this matter from the angle that we now have a surge in the labour force because of the large number of children leaving school and the low level of retirements—a distant echo of events as far back as the 1914–18 war?
  I conclude by giving a little commercial for my part of the world. It is time the Government stopped devoting large amounts of money to providing a future for those industries, which perhaps have only a modified future. It is time the Government began to do what we set out as an aim in our manifesto—if I may refer to that sacred document—namely, to start backing some of the winners. I refer, for example, to the pottery industry in my constituency, which has a massive export potential. The Government must not penalise areas because they manage, through their successes, to have a level of only 4 per cent. unemployment. Equally, if the Government are to lay more responsibility on local authorities and are to encourage them to do more to help industrial development, they should provide the money for infrastructure of various kinds.
  I should like to make a special plea to the Government—and this may not please some of my colleagues. I believe that the Government should declassify Cheshire, one of the most prosperous counties in the country. Cheshire finds itself cheek by jowl with Staffordshire, a county of only modest wealth. It is ridiculous that Cheshire, which became an intermediate area only because it was represented by three influential Tory Members of Parliament, should continue to derive this financial assistance.
  Finally, I ask the Government to think in terms of a West Midlands agency to look after the economic future of this important area. Do not let the people with all the muscle from the North-West and North-East get everything they want because their votes will be needed on the devolution measures. Do not forget the areas which have made a massive contribution in the past and which will do so in the future.
  8.17 p.m.
  Mr. Terence Higgins: My right hon. Friend the Leader of the Opposition at he opening of this debate last week said:
  " This year I have a feeling that I think must be shared by many, namely, that whether we look at the background or the remarks in the Gracious Speech, somehow we have been here before and we are going round the same course again."—[Official Report, 3rd November 1977; Vol. 938, c. 20]
  Only a few days earlier I had an almost overwhelming sense of déjà vu when I heard the Chancellor of the Exchequer say in his preamble to the mini-Budget:
  " The Government have made it clear that they aim at a steady and sustained expansion and are determined to avoid the risk of overheating the economy with the damaging consequences for growth, inflation and the balance of payments which we saw four years ago."— [Official Report, 26th October 1977; Vol. 936, c. 1437.]
  I think it is true that those precise words could equally have been used by Lord Barber when he was Chancellor of the Exchequer.
  Mr. Arthur Lewis: They were probably written by the same person.
  Mr. Higgins: That is probably true. In any event, those remarks require careful analysis. Since in many ways we are going round the same course again, it is important that at this stage, in the context of the Gracious Speech, we should consider what lessons should be learned from our experiences in 1970 and 1974. That period has not yet been adequately analysed—except perhaps by the Secretary of State for Trade.
  I felt it necessary to intervene in the speech of the Secretary of State for Industry to point out the difference in record in regard to the performance of the two parties, comparing the period when the Conservatives were in office and a similar period of time when the Labour Party was in power. Under the previous Conservative Government rates of inflation were almost half the figure reached by the Labour Government. We also know that the rate of unemployment since Labour reached office has risen by more than 50 per cent. We certainly know that the difference in our nation's standard of living is enormous. When the

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  Conservatives were in power, our people's standard of living rose faster than ever before, and under Labour it has dropped.
  The right hon. Gentleman the Secretary of State for Industry did not refute any of those figures, and indeed he could not do so, but he referred to the increase in money supply which took place in the period 1970–74 and suggested that that was responsible for the subsequent inflation which has taken place. But the House will remember that in the October the Chancellor said that everything was under control and that inflation would be down to 8·4 per cent. Therefore, let us look at these matters not in partisan terms but in terms of the record of both parties and what we were seeking to achieve.
  I believe that we were seeking the right objective and that it would be the right one now. The objective was a sustained rate of economic growth. We sought initially to take up the slack in the economy, and then, by a gradually increasing rate of demand, to increase output, productivity and investments until we had reached the limits of productive capacity and thereafter to increase demand only in line with productive potential. That was then, and is now, the right objective.
  My right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) stressed the need for profits and a greater return on capital, but there are severe limits on how far one can achieve that without achieving economic growth and increases in markets, demand and profits. Therefore the objective that I have outlined is the right one. However, we must face the fact that there are grave difficulties in achieving it with regard to the effects on the balance of payments and in determining the limit of productive capacity. I wish to concentrate on those points.
  I refer first to the problem of determining the limit of capacity and the extent to which one should extend demand before easing it off in line with increased productive potential. There are a couple of points that need to be made. The previous Government and Treasury Minister did not take the view that the money supply was unimportant. On the contrary, it is of great importance. It was, none the less, true that money supply
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  increased too fast because of structural changes that were taking place. Credit control made it difficult because of arbitrage, and so it was difficult to know what the figures meant and what the money supply was doing. The official Treasury forecasts, which were on a Keynesian model, and the monetary models diverged widely because it was extremely difficult to know what was happening.
  There are always political restraints against the use of the rate of interest and the right course of action would be to isolate the mortgage rate from the rate of interest so as to ensure that the Government would have flexibility. In that context it is important to stress that the dangers of increased public expenditure would be less than the benefits that one would derive from such increased flexibility.
  We did not go off on a dash for growth. We intended to obtain sustained economic growth. If one looks at the figures at the end of 1973, taking into account the substantial cuts that were made in June and December of that year, it is clear that our objective was being achieved and that the rate of increase in demand was coming down into line with the rate of increase in productive potential. The composition of demand was on the right lines while the rate of increase in consumption and public expenditure was coming down. At long last, investment was going up. Both the aggregate and the composition of demand were moving in the right direction. It would be a serious mistake to suppose—and damaging to any Government that might be in power to perpetuate the view—that at the end of 1973 and the beginning of 1974 a stop of the traditional sort was inevitable. That was not the case. The measures that we had taken to correct any overshoot were adequate and economic growth could have been sustained had it not been for the miners' strike and the oil crisis.
  The danger is now that industry generally is still of the view that stop-go is inevitable and that, therefore, it ought not to invest. That is one of the problems that the Chancellor and the next Conservative Government will face if we try to achieve sustainable economic growth.
  It is extremely important to analyse the money supply problem correctly

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  partly because of the counter-inflation policy and partly because of the structural changes in the monetary institutions of this country. It was as a result of those two factors that the excessive increase in money supply was siphoned off into the secondary banking market and the property market. I fully accept that that had serious effects in terms of aggregate demand and that the effect of the increase in the money supply was effectively sterilised. Therefore, although the money supply was excessive, that does not mean that we had aggregate demand in excess at the time we left office. That is a crucial point that needs to be analysed carefully if we are not to fall into the same trap again. It is not necessary that we should do so because many of our difficulties then stemmed from problems that arose from the indicators for reasons that I have already mentioned.
  I turn to the balance of payments. Here we must recognise that the position has changed substantially since we left office, and I wish to comment on events that have occurred within the past few weeks. It is clear that the Government were pushed off their original policy of stabilising the exchange rate. I can well understand the reasons the Government pursued that policy. They wanted to avoid a sudden upsurge in the rate followed by a corresponding fall and a repetition of the crisis of a year ago. That inhibition is understandable. On the other hand, the Government were clearly concerned to avoid an increase in the exchange rate that would make exports less competitive and produce a corresponding increase in unemployment and lack of investment in industry.
  There is a point about which I am not clear and the Government have not said anything on this. Perhaps the Minister would enlighten us tonight whether the Government intend, after the exchange rate has settled, to maintain their policy of seeking a degree of stability in exchange markets. It might be useful for industry to know what the Government have in mind, and that point arises in the context of the amendment.
  We now have a difficult situation. There are still those who think that the exchange rate should be allowed to rise because that would have a beneficial effect on the cost of imports and on the rate of
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  inflation, and because that might be favourable in a pre-election period. However, others feel that the needs of industry, particularly export industries, are paramount, and that the rate should be allowed to fall to make industry more competitive even though domestic costs may rise. Others feel that the rate should be left roughly where it is.
  I am worried that there is a fundamental conflict between what the effect of North sea oil may be on the exchange rate and what the rate ought to be as far as the rest of industry is concerned. I do not believe that we have given sufficient attention to this problem—and I am glad to see that the Secretary of State for Trade is nodding his head —because if we find that the dominant factor is the flow of money across the exchanges, including North Sea oil, the exchange rate will appreciate and that will affect the profitability of our export industries, against a background in which industrial costs are rising twice as fast as those of our competitors. It will no longer be profitable to invest in export industries and to continue exporting. As long as that situation continues, we shall find that the non-oil sector will invest less and will become less productive in world markets. In the long term, that could be very serious.
  I am not suggesting that Ministers should make speeches trying to shake confidence despite the oil surplus and therefore reduce the exchange rate, but we should consider what steps ought to be taken to achieve an appropriate exchange rate, given the basic dilemma that I have outlined.
  I was astonished at the reply I received from the Chief Secretary yesterday to a question I asked about our obligations to the EEC in connection with outward exchange controls. He replied that he would let me have an answer as soon as possible. After the events of the last few weeks, I find it incredible that he does not know the position on this matter.
  Given the dilemma that I have posed, I think that the right course is to liberalise exchange controls. That will help to resolve the dilemma, but we must also consider what to do about oil. We could resolve this problem by leaving it in the North Sea, although that course has nothing else to recommend it. There is a

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  balance to be struck, and the proposition that we should invest the proceeds of North Sea oil abroad is one that perhaps ought not to be positively deterred. We might benefit from creating conditions in which this was not inhibited. We could, perhaps, repay our overseas debts more rapidly. The difficulty is whether we should make provision that would result in increased imports of consumer or capital goods.
  The suggestion made a few weeks ago by Mr. Sam Brittan that shares in North Sea oil should be issued to the public and that the dividends should be distributed much more and that the shares should be negotiable might do more to encourage a property-owning democracy than anything that has been done in the past 50 years. Of course, such a scheme would increase our import bill considerably, as would tax reductions, and that would create problems. However, I hope that the suggestion will receive more serious consideration than it has so far.
  It is important to use available resources to do all we can to encourage investment in British industry. It would be wrong to go on a wild public expenditure spree, because that would create the worst of all worlds.
  In a limited time, I have sought to cover a complex range of issues. I hope that what I have said will be construed constructively and will enable us to manage our economy better in future. There is a danger that we may get into something of a semantic snarl-up over the word "reflation". Some say that reflation and inflation are the same thing. I do not agree. If we are to raise the standard of living in this country and create a climate in which investment and initiative can be encouraged, we must be careful, at the level of economic management, in sorting out the lessons to be learned from past years and the immediate lessons of our experience in the past few weeks.
  8.33 p.m.
  Mr. Frank Tomney: I shall not comment in detail on the speech of the hon. Member for Worthing (Mr. Higgins), but I agree with what he said about the Government's not having outlined a strategic position or strategic policies for the future. The simply reason for this is that they cannot
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  do so The conditions do not exist to enable them to do any such thing.
  It is often said that there is nothing new under the sun, and the advantage of reaching my age is that although one cannot look forward very far, one can look back a long way. Ever since the time of Cripps I have heard arguments similar to those used today. The hon. Member for Worthing made a tactical economic speech, but he was not able to refer to any economic strategy, because he does not have one either.
  There was a time in British economic history when men shaped events. Now. events shape men. The hon. Member for Worthing mentioned two factors that occurred in 1974—the upsurge in Arab oil prices and the miners' strike. Neither was under the control of any politician or statesman. Governments could not have planned to avoid either event. Both confronted the Government of the day with the choice of total surrender or acceptance.
  One could not do much about the oil situation, but it turned the whole economic world topsy-turvy. Those who suffered the greatest penalty had the largest populations to sustain. That is why, when we start talking about strategy, we have to remember what my hon. Friend the Member for St. Marylebone (Mr. Baker) said a few moments ago—that our industry is based on 7 million industrial workers. It is not enough for the job we have to do. We virtually have to restructure the capital goods producing side of British industry. Anyone who has been employed in industry or knows anything about it knows that.
  I shall give one or two instances. There is now and will continue to be fierce international competition. We have passed the immediate post-war phase and have now reached the stage of capital retrenchment with nothing to retrench. except North Sea oil, as distinct from countries such as Romania, East Germany and the Soviet Union. If the Soviet Union decides that it can subsidise its economic effort in Africa to the extent of supplying arms, the Western economy is really in a spin.
  We must look at some of the factors involved. We cannot look at them alone. We have to look at them in the context of Europe. We put a banker in to restructure, refurbish and regenerate the

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  British steel industry, but there is a world slump in steel. Every steel-producing country in the world is over-producing steel, which is a prime commodity in manufacturing industry. A British consortium, which went after a large South American job, was told at what price to buy. It came back with some analyses—I do some cost analyses myself in what spare time I get—having made inquiries all round Europe to find the lowest possible steel price in order to win this contract. Eventually, it went to Mitsubishi and said that it was prepared to take Mitsubishi into the contract if it could obtain it. and the Mitsubishi company reduced the steel price by £18 million on a £300 million contract. That really begins to make one think of what we—not so much the Germans or the French—and, to a large extent, Italy are up against in this country in terms of productive power.
  The United States will now become a fiercer competitor for available capital industry throughout the world than it has been hitherto, because the Americans are suffering from the same problems as we are. In places such Algiers, Tunis, the Oman territories and Saudi Arabia, large international contracts are being contracted for, and Iron Curtain countries are in with national subsidies. They will obtain a contract and then try to buy the plans from the London companies which did not win the contract, and then engage multilingual labour to get the job done. This is going on all over the world.
  We have to restructure the strategy for British capital industry on that basis. That is a fearsome job. I am not as optimistic as some hon. Members who have spoken today. I think that the job is almost beyond us if we look at the pressure of resources on our economy. I have said before and fundamentally believe that this country will be overpopulated by 15 million people by the end of this century. Every innovation and new development of scientific technique in industry adds to that problem, and we cannot do anything about it.
  We cannot generate sufficient capacity to replace what we are losing. Our strategy cannot begin to apply until we can reach agreement where it is most urgently needed, with the trade unions and the investment market. I took the point of the hon. Member for Worthing
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  about investment and profits. It is true. There will not be investment without a reasonable return on capital. The exchange rate can be moved against us at any time by outside pressures—despite all the checks and balances—if people are so determined. There was a revaluation of 5 per cent. or so a week ago. We would have liked to hold the pound steady. I believe that it will rise further, We cannot stop it rising. I believe that those who were moaning about this, especially the CBI, need not have done so. There is still enough slack in productive industry to deal with this, if it is properly geared and organised.
  How do we organise? I probably know as much as anyone in this House about the trade union movement. I have long pondered on these problems. There is the difficulty of dealing with countless unions in wage bargaining procedures. How are we to restructure this? Every trade union leader, no matter how small his union, thinks himself the crown prince of his union. He will not be willing to surrender his job unless he is put in the top echelons of another union. The places are not always available.
  I beg the Minister not to disregard what I am about to say. When there is an amalgamation in industry and executives become redundant, they receive what are known as silver or golden handshakes. If we could get British industry organised on the basis of 20 unions it would be worth the Government's while to involve themselves and compensate the leaders of the unions which go under on the basis of industrial compensation. Without such a front there is little chance for us.
  At British Leyland, as one strike ends another begins. The same is true of Fleet Street. I have been a union official for a long time. I have come to the conclusion that if the country is to recover—and it will take a sustained effort, over 10 years at least, if we are to rebuild industrial jobs and uplift our present base of 7 million industrial workers to at least 10 million—we shall have to adopt policies of that nature.
  As I go about this new city, what do I find? Endless numbers of people on the streets. They are in the professions, law or medicine or whatever. All are gaffers. Very few are productive workers. Every one of those people is living on

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  the productive efforts of others. This is what gives rise to wage claims. Everything rests on the industrial workers. This is true of local government. I did not object to the cuts there. I took an objective view, although at Hammersmith we employed two town clerks at one time because we had not the heart to dismiss one of them. I could multiply that example 1,000 times. What is at stake is the restructuring of our whole financial and industrial life. The taxman can always take care of excess profits. That is his job.
  I believe that unemployment will rise to 2 million. If the figures goes beyond that, we shall not be able to control the situation in this country. It will be impossible to control it. Therefore, whatever we do, we had better form a strategic plan as quickly as possible. That must be done in conjunction with the interests of like nations, if possible.
  That brings me to my final point. I was dismayed when we offered the Soviet Union low-interest credit, at 5¼per cent. As a consequence of that, we now have to decide where to put the major effort of Great Britain's capital industry. There is really only one place where we can put it—China. There is nothing for us in India or Africa at present, but there will be in China. That is where the economic strategy plan should be pointed.
  We must consider the kind of things that we are up against, including West German industry. Volkswagen has set up a new plant in Philadelphia to manufacture 200,000 cars per annum, and we are thinking of restructuring our car industry to compete with that. We must have a long look at what we are to do at British Leyland. We must get some firm guarantees from the union people and shop stewards, and the fewer unions with which we have to deal the better it will be for the workpeople of British Leyland.
  That is the kind of strategic plan that I have in mind when I say that we have not even started to tackle the job that we have to tackle.
  8.47 p.m.
  Mr. Tim Renton: What a dreary fifth-rate speech we had this afternoon from the Secretary of State for Industry. As the hon. Member for Ham-
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  mersmith, North (Mr. Tomney) said, the Secretary of State certainly produced no new ideas about industrial strategy in this country in the years ahead. In view of the failure of Socialist industrial strategies in recent years, perhaps we should be grateful for that. However, at a moment when, thanks to the International Monetary Fund and the weakness of the dollar, we have a relatively strong currency, and in a year in which public expenditure is for once below expectations, and when thanks to North Sea oil we have prospects for a continuing balance of payments surplus, it is opportune to state some central needs for our economy in the years ahead.
  I judge that the first need is to encourage sustained growth of demand for British products both at home and abroad. How is that to be done? The second need is how to create that expansion of confidence from which an increase in industrial investment in Britain will emerge but which is not emerging at present. For both of these, I believe that a reduction in personal taxation is the key element.
  Thirdly, how do we achieve that reform in the wage bargaining process that events of this week and of last week must make seem essential? We cannot go on with the present process, in which major unions in private industry and in the public sector leapfrog each other in their wage claims. We must seek to reach a state in which major wage bargaining is done and in which settlements are reached with the major powers in industry on the same day in the year.
  Fourthly—a matter that many hon. Members have touched upon—how can we increase productivity? Fifthly, how do we maintain, as a trading nation, our commitment to free trade at a time when gross national product is growing at a much slower rate throughout the world, and when we are seeing increasing competition in manufactured products from many developing nations? How do we avoid the so-called Dutch disease in that, as a result of North Sea oil, we could fall into the same trap as the Dutch in having a relatively strong currency, a high rate of inflation at home and yet no increase in industrial investment? These are the things about which I should like to have heard more from the Secretary of State for Industry. We heard nothing about them.

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  The right hon. Gentleman told us, in relation to the crises in British Leyland and the British Steel Corporation, that he welcomed the commitment in the Gracious Speech to increased industrial democracy in the nationalised industries. So do I. But I assure him—I am sure that he knows it well—that having Bill Sirs or any other good trade union leader as a non-executive director of the board of the British Steel Corporation will not make a pennyworth of difference to the crisis which British steel faces.
  I remember the debate in July when the House passed the order to increase the borrowing limit of the BSC from £3 billion to £4 billion. I spoke then of the Corporation drifting to disaster. I was reprimanded by the Minister of State for Industry for using those words. Of course I was proved wrong. It was not drifting to disaster—it was, sadly, plunging to disaster, speeded on its way by the world recession in steel products.
  As my hon. Friend the Member for Arundel (Mr. Marshall) and the hon. Member for Rotherham (Mr. Crowther) have said, there is no easy solution to the problem which centres round too much capacity, too many people involved in the industry, and too much debt. The BSC, to my eyes, is a classic example of what happens to a nationalised industry when it is in competition with other nationalised or private industries throughout the world, where it is not in a monopoly position and when Governments of all hues dare not take the really difficult political decisions.
  I hope that now the Government, with the BSC management, will grasp the nettle and close down Shotton, Shelton and all the other uneconomic plants that have been kept open as a result of the Beswick review, that they will persuade one union to emerge to speak with strength for the whole of the industry rather than the existing 18 unions within the Corporation, that they will massively help retraining and mobility in order to assist workers, in, for example, North Wales to find other jobs, and that at the same time they will go ahead with the investment in major new plants, because it is only through that investment that, in the end, we may have a modern steel industry.
  The Secretary of State for Trade must explain how the Corporation, if it is to go ahead with its commitment, for
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  example, to the Port Talbot expansion, can keep within its cash limit of £950 million for this year. From the figures in the Financial Statement and Budget Report of last March, it is clear that at that time the BSC was planning to spend £900 million on its additions to assets and other capital requirements and was expecting a loss of only £50 million, hence the borrowing limit of £950 million. Now we read that its loss is expected to be not £50 million but between £500 million and £600 million. If that is so, and the capital requirements programme is to be maintained, the cash limit will have to be increased to about £1,300 million.
  One of the few other points of detail that the Secretary of State for Industry talked about was the addition of regional boards to the National Enterprise Board. I was interested in the comments of the hon. Member for Stoke-on-Trent, Central (Mr. Cant) when he cast some doubt on the efficacy of regional aids. I agree with him. We are spending about £500 million a year on regional policies, and yet there is very little evidence that this public money has gone any way towards diminishing regional disparities in this country.
  There is nothing unusual about that. Studies in Canada and Italy, where they have great regional problems, show the same, namely, that, in general, no matter how much money the Government disburse, it does not level out the differences between regions because there are so many other factors—notably human ones—that are not swayed by the public purse.
  I wonder, therefore, why the Secretary of State now suddenly attaches such importance, not only to regional policies and regional grants, but to creating these little Nebbies, these regional boards of the National Enterprise Board. As the hon. Member for Stoke-on-Trent, Central said, there is only one reason for it. It is a carrot to persuade Labour MPs from the North-West and North-East to vote for the devolution Bill for Scotland.
  Devolution is an irrelevancy. The only argument that I can see in its favour is that we shall have to listen somewhat less to the hon. Member for Moray and Nairn (Mrs. Ewing) if there is a Scottish Assembly. I am sorry that the hon. Lady is not here to answer that,

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  but that seems to be a specific advantage. There is no other clear advantage. Devolution is not relevant to the needs of Scotland. What Scotland needs is a housing policy, an employment policy and an industrial policy. There is no sign of any of those from the Government.
  What the Government offer the Scots is not jobs but an Assembly, saying "We do not know how you will create new jobs to take the place of the shipbuilders on the Clyde who will be phased out, or the steel workers who will lose their jobs, or the fact that Hunterston, the big new steelworks in Scotland, is not to be built ". The Government have no policy on those matters, but we have the promise of an Assembly. The Government are saying "Let the Assembly meet, and let it argue these problems out ". All that this Assembly will do will be to put Edinburgh in constant conflict with London. I can see no benefit from it.
  It is sad that at a time when there is promise ahead for this country, when North Sea oil can be of benefit to us, the Government are not coming forward with any ideas about how this new-found financial strength can be used. Instead, we have in the Queen's Speech a reference to a lasting improvement in industrial performance. What we do not know, and what we have not heard from the Secretary of State this afternoon, is how that lasting improvement is to take place. Instead, we see that the first item in the Queen's Speech is legislation on devolution.
  That is simple humbuggery. It is political chicanery on the part of the Government to ensure that they do not lose these vital Scottish seats, that they are not caught with their pants down north of the border when the election comes. It is for that reason that tonight I shall vote for the Opposition amendment.
  The Under-Secretary of State for Trade (Mr. Clinton Davis): Surprise, surprise.
  Mr. Renton: The hon. Gentleman says "Surprise, surprise ", but I am a man of great independence in these things. It is a matter of great regret to me that, at a time when North Sea oil holds out promise for us, the Secretary of State did
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  not seek to build on the words in the Gracious Speech about seeking to ensure
  " a lasting improvement in our industrial performance ".
  We should all like to see that lasting improvement come, but it will not come from commitments entered into by the Government to establish regional boards of the National Enterprise Board simply to persuade Labour Members from the North-West and the North-East that they should now support the devolution Bills. That is political chicanery of the worst possible order, and the Secretary of State for Industry, in committing himself to that, damns the credibility of his Government.
  9 p.m.
  Mr. John Nott: Earlier this afternoon my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) concentrated his remarks on the competitiveness of British industry, our productivity, and what might generally be called our problem industries.
  The Secretary of State's reply, particularly on steel, was cursory, if not totally obscure. On steel my hon. Friend the Member for Arundel (Mr. Marshall) made an outstanding speech, as I think many hon. Members will agree, and I am sorry that the Secretary of State was not here to hear it.
  My hon. Friend was followed later in the debate by the hon. Member for Rotherham (Mr. Crowther), who said that he did not believe that the desperate crisis facing the steel industry, to which my hon. Friend the Member for Mid-Sussex (Mr. Renton) also referred, was fully appreciated by the Government. The hon. Member for Rotherham represents an area which has one of the most profitable divisions in the British Steel Corporation. I believe that the mill there is known as the Thryver bar mill, and is without exception the very best that we have. The hon. Gentleman pleaded that we should devote more money to the record breakers and suggested—I do not know whether this is accurate—that the Corporation is passing some of the less profitable work to the most efficient mills and sending some of the more profitable work to the inefficient mills. We were disappointed that we heard virtually nothing about steel from the Secretary of State.

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  Since the opportunity of commenting on trade affairs rarely arises in the House, and as the Secretary of State for Trade is to wind up the debate, I wish to make a few comments on the wider issues of the world economy and the prospects for trade, because for all the difficulties that we have in our steel, coal and shipbuilding industries, arid in British Leyland, it is the world economy that is likely to have an equally telling impact on prospects here, not least through the competition that our industries will face at home and overseas.
  The industrial strategy about which The Secretary of State waxed so eloquent was mentioned only once in the whole debate, and that was by the hon. Member for Hammersmith (Mr. Tomney). I do not think that any hon. Member knows what the industrial strategy is. May we one day have a debate? Clearly nobody on the Conservative Benches knows what the industrial strategy is all about. At one stage I was under the impression that it had something to do with backing success, but, as understand it,£500 million has either been committed to British Leyland or is promised to Chrysler. Neither of those firms, whatever might be said about their future, can he described as successful industries at present.
  On the trade issue, since the Downing Street Summit and its relatively optimistic tone I do not think that anything has arisen to give us any comfort. Inflation in the OECD countries has shown very little general improvement over 1976. Resistance to wage restraint is gaining force, not just in Britain, but in many other Western countries.
  Growth is likely to be in the 2 per cent. to 4 per cent. range, and that is well below the rate of 5 per cent. expansion which OECD itself considers to be necessary to reduce unemployment. Only the other day, the London Business School pointed out that industrial production in the OECD countries was running at 9 per cent. in 1976 and 4·8 per cent. in 1977, and it estimated that it would be 2·6 per cent. in 1978. Industrial production seems to be going down towards near-stagnation in the OECD. Investment, even where demand arises, does not seem to be responding to higher demand.
  The cause for that malaise almost certainly lies in the very large fall in the
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  rate of return on capital when measured after tax and when adjusted for inflation. It is happening not just in this country but in all OECD countries. This is compounded by the dramatic change in relative prices caused by the oil crisis.
  The conclusion has to be that, even if the Chancellor of the Exchequer pursues optimum policies—and we know the likelihood of that—the outlook for inflation, growth and investment is poor in the OECD countries generally and certainly not as good as is sometimes indicated by Government spokesmen.
  What is worse, the prospects for growing world protectionism are substantial. There is no doubt that tariffs and non-tariff barriers appear to be going up rapidly against our exports all over the world.
  Given the likely gain to our overseas payments position from North Sea oil—to which my hon. Friend the Member for Worthing (Mr. Higgins) referred—which amounts to between £4 billion and £6 billion on our current balance, it is probable that the exchange rate will be acting to reduce further still the profitability of British industry both from increased competition in the domestic market from imports and also more competitive prices and protectionism overseas.
  This gives ground for no small cause for concern, given the figures which my right hon. Friend the Member for Leeds, North-East mentioned that we have now a rate of return in British industry, when adjusted for inflation and depreciation at replacement cost, of about 2·5 per cent. In many industries the rate of return, adjusted for inflation, is nil.
  My hon. Friend the Member for Worthing talked about exchange rate policy. There is a range of options open to the Government, but virtually the only one which is not open to them is the one that they took. There is no way in which the parity of sterling can be held at a level that denies the existence of North Sea oil, simply because the capital inflows would wreak havoc with the money supply and domestic inflation. Anyhow, our allies would not allow us to build up massive reserves of the kind for which the Secretary of State for Trade is constantly criticising the Japanese.

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  Should sterling be held at a level which enables our payments to balance by the repatriation of foreign funds and the reduced competitiveness of our industry, or should we allow sterling to float cleanly with our payments balancing mainly by the investment overseas of our own domestic funds? That was the point made by my hon. Friend the Member for Worthing. This would tend to reduce the parity to a lower level than it would otherwise be and would ensure that our manufacturing industries were kept more competitive.
  I ask the proponents of exchange controls and greater public investment in our industry—a policy promoted by many in the Labour Party—to think through the proposition. First, the Exchequer proceeds of North Sea oil will not be very large. They will be between £2 billion and £3 billion only. Even if the Whitehall bureaucracy were able to pick winners—we have seen its attempts at that one has only to look at the oil platform saga, which was a perfect example of Whitehall picking winners—it is not the winners who will have any problem in finding capital in the market, as the Wilson Committee will surely say; it is the losers.
  If confidence is to return—as I believe it will in due course, when the Labour Government have departed the scene—there will be very real problems when bank advances start to move forward again, because private industry—and the Government want private industry to invest—will be squeezed out if we have a borrowing requirement of £8 billion.
  The Exchequer proceeds of North Sea oil should be deployed in reducing the borrowing requirement so that interest rates for the private sector generally would be lower than they would otherwise be. That was, I think, much of the burden of what my hon. Friend the Member for Worthing was saying.
  I do not believe that capital outflows would be very great if we reduced exchange controls. Many major firms are already investing overseas, but smaller companies would be encouraged to develop overseas markets. Those in the trade union movement who are concerned about the loss of jobs in the United Kingdom
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  were we to lower exchange controls—and I can understand how they arrive at that view—should look at the example of American industry, which has benefited dramatically from overseas investments. British subsidiaries operating overseas in faster growing markets than the United Kingdom tend to be captive customers for British exports, and all the lessons of American investment overseas show that investment overseas and exports go hand in hand. I also believe in the abandonment of exchange controls on portfolio investment, but that is a wider issue, and I leave it there.
  I do not think that the Government have any option about the floating of sterling. My own belief—I hope I am wrong—is that we are moving into another period of monetary instability in the world, caused by the American demand for oil and to some extent by the increasing difficulty of the less-developed countries in meeting their debt obligations. The former is the major influence, but the combination of the two is likely to lead to the sort of instability which occurred in 1972 and led up to the Smithsonian settlement.
  There are now$350 billion held overseas, according to the Bank of International Settlements. This is three times the amount of overseas dollars that were swanning around in the world in 1972, and there are a further$100 billion held in American Treasury bills. I believe that there is every possibility of a resurrection of monetary instability, and then the Government will have no option. The exchange rate will have to float freely, since it will be the only way of accommodating capital movements. Stability for British exporters and British industry will be best maintained by a cleanly floating rate rather than one manipulated by the Bank of England.
  The Secretary of State might well agree with the point that I wish to make about protectionism. It is that tariffs and quotas are not the cause of protectionism but a symptom of it, in spite of all the invective about the evils of tariff protection and the desirability of consumer choice within domestic markets, and the need to provide the stimulus of competition. Some of us are even told by our wives that they want to buy cheap Eastern skirts that fall to pieces in three weeks, rather than good British textiles. We

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  hear all these arguments against tariffs and quotas, but none of them actually goes to the root of the problem.
  Those who constructed the post-war world order at Bretton Woods always realised that international monetary affairs, international investment and trade were all one, and could not be separated. If one leg is knocked out of this three-legged stood, as has happened in the international monetary field, in the end the whole structure will collapse and crumble.
  The crucial issue that faces the world today is to recognise that it is not bilateral trade agreements—of which the Multi-Fibre Arrangement is a very good example— that are leading to protectionism in the world. What we have to look at is the massive surpluses on the part of the surplus countries, and the instability in our international monetary system.
  In my view the principle causes of protectionism are, first, an inability to create a new, sensible international monetary order—following its collapse in 1972 —and, second, the whole proliferation of State subsidies, political pricing, discriminatory taxation and the regulation of internal markets which is practised in every country but, in particular, by COMECON.
  I believe that we should have taken a much more vigorous line on the Tokyo round. The Americans should have taken a more vigorous line on the Tokyo round. The Tokyo round however would only be of transitory significance if the most powerful economic nations persistently refuse, or are unable, to impose upon themselves a sounder and more disciplined international monetary order. That means either cleanly floating or fixed parities with agreement before they are changed.
  I leave that aside. No doubt the House will be glad to hear that, but we seldom have the opportunity of debating these matters in the House.
  I now come on more closely to what has arisen in the debate, which has been a bit of a knockabout, but not too much so. It is understandable that Parliament should always be concentrating on our problem industries and that we should always be looking inward on our own domestic problems. We have had such
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  a debate on steel today, but the fact is that we also have many industries, partly but not wholly in the commercial sector, which are equipped to benefit from a regime of real freedom and greater convertability on the exchange rate of the kind which my hon. Friends are recommending.
  In the manufacturing sector, food manufacturers and the chemical, soap and detergents, electrical, mechanical engineering and aerospace industries have all increased their exports as a proportion of total production. Most of them have pushed down import penetration levels, although our average share of world markets for manufactured goods has diminished and import penetration has increased.
  Of course, there are many of our manufacturing industries that have made substantial progress and that would benefit from a greater regime of freedom with regard to the exchange rate and less bureaucracy in the manner in which they operate overseas.
  Mr. Dan Jones: Does not the hon. Gentleman have some sympathy with the textile industry, which has suffered so much at the expense of imports?
  Mr. Nott: I happen to believe—this is a controversial view—that in a year or two the British textile industry will show itself to be among the most competitive in the world. The fact is that Courtaulds is the world's largest textile exporter at present. The textile industry has been through an extremely difficult period, but my belief is that within a year or two it will emerge as one of our most profitable and successful industries.
  The most prominent successes in our country have been the service industries. That cannot be denied. I am thinking of banking, insurance, shipping, professional services and agriculture. I wish to say a few words about agriculture, since the subject was raised earlier. All the facts suggest that if these industries were given greater freedom to compete in the world they have the capacity, the talent and the will to do so. The fact is that the gross exports of our service industries today—shipping is one—now amount to £14,000 million against gross exports of goods of £25,000 million. There is not that much difference with regard to our

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  balance of payments. The record of these industries is outstanding.
  My hon. Friend the Member for St. Marylebone (Mr. Baker) rightly said that it is no use imagining that the service industries will take up all the slack provided by greater productivity in manufacturing industry. I agree with him. I do not think anyone disputes that fact. As my hon. Friend the Member for Worcestershire, South (Mr. Spicer) said, however, in a very good speech, we always seem to be interfering in manufacturing industry and very often that intervention acts contrary to the interests of the service industries, which have had a magnificent record and have done as well in the world markets as manufacturing industry, on aggregate, has done badly. That is an area to which we should pay more attention.
  The debate has touched on the question of agriculture, and that gives me an introduction to a number of points that I wish to make. I had not intended originally to refer to the subject, but since the hon. Member for Birmingham, Selly Oak (Mr. Litterick) mentioned it I include it in my speech with pleasure.
  At a fringe meeting at the Labour Party conference the Under-Secretary of State for the Environment, according to a report in the Farmers Guardian—I do not know whether the Prime Minister takes that paper; I take the Farmer's Weekly, but this is a very good newspaper—said:
  " I don't think you can trust individual farmers to maintain the long-term fertility of the land. "
  So this is what social democracy is all about. If farmers cannot be relied upon by the Labour Party and social democrats to maintain the long-term fertility of the land, who will do it? Will it be civil servants in bowler hats? The Prime Minister has more experience of shovelling muck on his farm than has any civil servant in Whitehall. That, then, was the authentic voice of the social democrats, and that is why, with a Labour Government, we shall never have an efficient economy in this country.
  We then had an argument about farm workers' wages. It is interesting that the Chancellor and the Cabinet have been busy until last week holding down the price of sterling to enable our unsuccess-
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  ful manufacturing industries to compete in world markets while the same Cabinet is maintaining the green pound at an artificially high level so that the German and French farmers are heavily subsidised to compete with our most efficient industry. That is a perfect example of Labour Party policy.
  The Secretary of State for Industry said that farmers received interest-free loans. Will he tell us what they are? He also said that farmers were heavily subsidised. I can tell him, in his total ignorance of this matter, one of which I have a limited part-time experience, that the farmers would be only too delighted if the Government would abolish every food subsidy and if they could then receive the same prices as their counterparts in Germany and France.
  Why are farm workers' wages low? It is because the other costs to British farmers are the same as those faced by the Germans and the French, but the British prices are up to 30 per cent. lower. If that is the case—and it is the Government's responsibility—how are we to pay farm workers more money?
  Take the question of the nationalisation of the banks and insurance companies. The clearing banks are too centralised and are becoming bureaucratic. They may already have the feeling of creeping nationalisation about them. But how are we to make them less centralised and give more discretion to local bank managers, which is what is needed? Do we nationalise them? The Prime Minister does not endeavour to argue this point; he simply says that the nationalisation of banks and insurance would be an electoral albatross. He does not attempt to argue that it would be a disaster for the country, because he knows that three-quarters of his party are in favour of it.
  I refer to the admirable speech of my right hon. Friend the Member for Newham, North-East (Mr. Prentice), who had some very interesting things to say about the little book setting out the Labour programme. In that book one sees every kind of nationalisation, not just in a few industries.
  If the truth be known the Prime Minister is engaged in a tewt. The term may not be familiar to the teachers, university lecturers and polytechnic instructors on

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  the other side of the House, one of whom shortly will follow me in this debate, but to military men—and we have a few of them on this side of the House—the word "tewt" is familiar. A tewt is not a twit; a twit is a Liberal who prefers his parliamentary salary to his principles. A "tewt" is a tactical exercise without troops, and that is much practised these days by the Chiefs of Staff.
  We owe it to the Leader of the Opposition for reminding us that it has taken 50 years of Socialism to replace the Board of the Admiralty with the Board of the Inland Revenue as the most powerful institution in modem Britain.
  The symbol that this Government should hold aloft is that of tax collector holding high the hammer and sickle. That is what Socialism, as we have it, is all about. This symbol should be captioned by the phrase "Back to work with Labour ".
  If we talk about troops, the Prime Minister certainly has them, in a political sense. I do not think that the Foreign Secretary has many—he arrived by pat-patronage, and will depart hastily into oblivion. Some politicians have troops and some do not. Those who do not, have to demonstrate outside the gates of Grunwick in order to gather troops from the working classes. Those without troops go to Grunwick, and those who have them do not need to do so.
  The Prime Minister has troops, and he has been engaged in a lifetime of manoeuvres. Where have they gone, all his troops? The troops have been sent on leave. When the Government want to be popular rather than politically committed they bring the Chancellor of the Duchy of Lancaster out of his cupboard in Eaton Square, dust him down and stand him on parade, where, in a mechanical fashion, he announces as Government policy the amendments tabled by Conservatives to capital transfer tax in 1974. This is Government policy for small businesses. Yet we tabled 40 amendments to the 1974 Finance Bill on capital transfer tax, so why do the Government not publish these as their policy for small businesses?
  If the Leader of the Liberal Party believes that he is holding back the hordes of advancing Socialism he misunderstands his role. To the rest of us
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  he is simply the caretaker engaged on a temporary basis by the Prime Minister to keep the barracks clean until the drunken rabble arrive back from their leave to plunder our liberty and prosperity—and every liberal principle—should they win the next election. That is how we see it.
  The Prime Minister, skilled in manoeuvres as he is, will have to increase and speed up the repayment of money taken out of the pockets of the British people, speed up the transfer from productive employment to temporary employment which goes with it, and cut inflation much faster from its peak of 25 per cent., although these are all heralded as triumphs of Socialism.
  When I watched television last night I felt that the British people well knew that Government Ministers and supporters were outside the gates of Grunwick with the rabble. If Labour wants to win the next election, they should do something about those Ministers and supporters in this House who are joining with that lot there.
  I refer finally—in the 30 seconds or so that are at my disposal—to our amendment. It was drafted by my right hon. Friend the Member for Leeds, North-East and by the Chief Whip. Therefore, I can recommend it wholeheartedly to the House. Whatever it may purport to say, I think that our amendment makes one thing absolutely clear. After several months away from this Chamber, whatever the amendment may say, we are voting tonight for the first time for a considerable period—and voting to demonstrate that we have no confidence in Her Majesty's Government. It is on that basis that I ask my right hon. and hon. Friends to join me in the Division Lobby.
  9.31 p.m.
  The Secretary of State for Trade (Mr. Edmund Dell): No doubt the final few minutes of the speech of the hon. Member for St. Ives (Mr. Nott) sought to conceal, but failed to conceal, the total lack of Opposition policy on the subject matter which they tabled for debate.
  The hon. Gentleman ended by saying that the amendment was tabled to show that the Opposition had no confidence in the Government. It might have been tabled to enable the Opposition to reveal

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  their policy on industrial and commercial matters. The fact is that they have failed in that respect. I shall come shortly to the attempt made by the right hon. Member for Leeds, North-East (Sir K. Joseph) to state the Opposition's policy on this subject, but certainly the hon. Member for St. Ives made no contribution to that end. I shall deal with his remarks about trade—and I agree with him that we have too few opportunities in this House to discuss that subject.
  The right hon. Member for Leeds, North-East began by saying that there was a need to find some common ground on industrial and commercial policy, and indeed there is. Complaint has been made time and again about changes in policy by one Government after another involving the repeal of legislation, the introduction of new methods within a given time scale, with not enough industrial development being devoted to building up this nation's productivity. That complaint has been made on many occasions, but on this occasion the right hon. Gentleman said that he was seeking common ground. However, his speech today revealed no attempt to establish such common ground.
  Undoubtedly we can agree with certain things said by the right hon. Gentleman. We tried to establish some common ground by building on some of the things which the Conservative Government did when they were in power—things which they now perhaps regret, such as the Industry Act 1972. We agree with the right hon. Gentleman on the need for higher profitability and on the need for incentives, innovation, lower direct taxation and competitiveness. [HON. MEMBERS: "Oh."] Yes, we agree with those things. But the question is whether that constitutes a policy for this country's industrial and commercial affairs. Is it credible as a policy?
  The right hon. Gentleman admits that productivity in this country has lagged compared with our major competitors for 100 years—going back to a period when there was no question of any lack of profitability or of incentive. The right hon. Gentleman made that kind of speech when he was trade spokesman in the late 1960s, but when he was faced with the responsibilities of office from 1972 to 1974 he departed entirely from the philo-
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  sophy which he argued in the House today and which he has dealt with on many occasions outside the House.
  We have never forgotten the way in which the Tory Government argued that philosophy during the late 1960s and then came into office and, faced with the problems that any Government might face at a time of crisis, reversed every word of the industrial policy on which they had obtained office. We remember how investment grants went out and regional development grants came in, how the Industrial Relations Corporation was abolished and the Industrial Development Unit established.
  We need some common ground on industrial and commercial policy, but we shall not find it on the basis of the oversimplification which the right hon. Member for Leeds, North-East provided by way of a Conservative industrial policy. The right hon. Gentleman rebuked us this afternoon, following the statement of the Secretary of State for the Environment, saying that we should not throw money at problems, but he should be the last person to tell us not to throw money at problems. I remember the way he came to the House time and again to throw money at one problem after another within his responsibility.
  It has been barely referred to during the debate, but the amendment refers to the standard of living in this country. It makes the extraordinary claim that the Government's policies will not maintain, let alone improve, the standards of living and social services in this country. Accepting, as the House must if it has any regard to the realities of the industrial policy and the emptiness of the right hon. Gentleman's statements, absolutely nothing has been provided by the Opposition today by way of explanation of what they would do to maintain or improve the standard of living.
  Are the Opposition proposing a reflation such as that which they engaged in between 1972 and 1974? Could they do more in government to promote world trade expansion? The hon. Member for St. Ives referred to the importance of demand from overseas. Would the Opposition really be in a position to do more than we have done to help world trade expansion and the level of industrial profits? Could they reverse rapidly

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  the secular decline in industrial profits? The right hon. Member for Leeds, North-East has made a great deal of this point, but little was done when the Tory Party was in government in 1970 to 1974 to reverse the secular decline in the rate of industrial profits in this country, and the Conservative Government did not face the sort of economic depression that it has been the fate of this Government to confront throughout our period of office.
  We have assisted industrial profits. For example, we introduced the stock appreciation scheme which has had the effect over the past three years of reducing taxes that would otherwise have been paid by companies by about £3 billion over three years. We have reduced interest rates. Interest rates are now lower than when the Opposition left office. We have continued the system of depreciation allowances, and the incomes and pay policy that has operated during the two previous pay rounds has given industry greater certainty about pricing policy than it could otherwise have had.
  We now hope that there will be an increase in the rate of industrial profits. In any case, it will be an increase assisted by the fact that we expect to experience in 1978, for once, a rather faster rate of economic growth than that which most of our European competitors will probably enjoy in that year.
  Industrial profits are not the whole story. There is no lack of finance for investment and no crowding out. Investment will be influenced by the expectation of sustained and profitable demand. Likely profitability on new investment, rather than existing rates of profits, will lead to investment.
  A number of hon. Members have asked what assistance North Sea oil will provide for industrial expansion. Its main assistance will come from the provision of a buffer for our balance of payments to enable us to experience, for once, a steady rate of expansion that will encourage investment and profitability and will lead to an increase in our standard of life.
  No one on this side of the House can deny that there has been a fall in the standard of life in this country. This has been due to the oil price increases which were more difficult for us to deal with because of the situation that existed when we took office—with a balance of pay
  614
  ments deficit, rising inflation and the money supply problems to which the hon. Member for Worthing (Mr. Higgins) referred.
  The standard of living fell in 1976 and the beginning of 1977. It has now stabilised, and I believe that it should begin to rise.
  Mr. Higgins: Does not the right hon. Gentleman accept that the fall that has taken place has been much larger than it would have been if we had not experienced the wage explosion under the present Leader of the House which created such diabolical inflation?
  Mr. Dell: Inflation was rising very fast when we took office. I do not believe that cuts in the standard of living have been greater because of the reasons that the hon. Gentleman suggests. The cut in the standard of living has ceased; indeed, the standard of living is probably once again beginning to rise.
  Mr. Peter Tapsell: Can the right hon. Gentleman explain how it is that he is talking about a cut in the standard of living when the Prime Minister assured us just the other day—and again today—that the average family had not suffered any cut in its standard of living?
  Mr. Dell: The hon. Gentleman should read exactly what the Prime Minister said.
  We should now be able to increase the standard of living of the people of this country, first, because of the economic growth that we expect to achieve—and I can give a number of reasons why that should be possible. The first is North Sea oil and the assistance that it will give to our balance of payments and the additional resources that it will provide. However, those additional resources are not adequate in themselves to provide anything but a relatively small increase in our standard of living. The major increase must come from industrial production and productivity.
  We must not waste these resources. I was surprised to hear the right hon. Member for Leeds, North-East accuse us of wasting North Sea gas and the resources that accrued to this country from that gas. They were wasted under the last Conservative Government. By the time they came into power, 88 per cent. of

  615
  households were supplied with North Sea gas. Yet we still had a crippling balance of payments deficit before the oil crisis. The Conservative Government wasted the North Sea gas resources.
  The second reason why we can now expect an increase in our standard of living is the expansion of our overseas earnings from the export of goods and services. The volume of our exports is and has been increasing rapidly. The hon. Member for St. Ives said that we have many excellent industries in this country. Indeed, these excellent industries are contributing to a substantial expansion in the volume of our exports—about 9½ per cent. in the volume of exports in the first nine months of this year compared with the same period in 1976.
  Mrs. Winifred Ewing: Is the right hon. Gentleman satisfied with his Government's policy in regard to the speedy extraction of oil and the way in which they have dealt with the oil companies, which is in direct contrast with the skilful, stricter way in which the Norwegian Government have dealt with the oil companies and are having a much slower rate of extraction, for the benefit of all the people living in Norway?
  Mr. Dell: Yes, I am satisfied with the way that the Government are dealing with the exploitation of the oil reserves Our volume of world trade in manufactured goods has increased during 1977. We have moved into current account surplus. Our gross income from invisibles is substantially up. In banking, consultancy and tourism, evidently we have provided the right environment to encourage an expansion in the volume of our exports and in our invisible income. This, again, is a reason why we can now expect an increase in the standard of living in this country.
  The hon. Member for St. Ives said that overseas investment provides a captive market for British goods. I wish that were always true. Unfortunately, it sometimes provides an alternative source of supply for British customers overseas. Therefore, it is not the unrelieved benefit that he suggests.
  I wish to turn now to the international dimension, just as the hon. Member for St. Ives turned to it. This is especially relevant to this debate, because of the
  616
  contribution that international trade can make to demand in this country. We have tried to encourage co-operation in dealing with world economic problems. We have tried to avoid a contraction in trade through protectionism. That is why we agreed with the OECD trade pledge. That is why we attempted at summit meetings to agree targets for economic expansion which countries would adopt and adhere to collaboratively. In this way we hope to encourage demand at home and abroad, which would take the world and this country out of the recession.
  It has to be accepted that the cooperation that has been experienced is a good deal less than perfect, which is perhaps inevitable when all nations are in difficulties, as they are at the moment. We have tried to keep trade channels open, although we have provided protection to specific industries to meet problems created by imports, as have all nations faced with the sort of problems that we have been facing during the last few years.
  I must say to the right hon. Member for Leeds, North-East that in present circumstances a purist attitude to international trade would lead to a collapse of the whole trading system. The right hon. Gentleman said that we are backing losers and protecting jobs that will have to go. Indeed, he compares us in this respect with certain market economies with which he drew favourable comparisons as against ourselves. Those market economies of which the right hon. Gentle- man spoke are doing exactly the same as us. They are protecting jobs in view of the great difficulties which they face in their countries. The hon. Member for St. Ives said something interesting which confirms—this is evidently true in his judgment as well—that Governments are as bad at selecting yesterday's industries as they are at selecting tomorrow's industries.
  I was interested to hear what the hon. Member for St. Ives said about the textile industry. On the principles of the right hon. Member for Leeds, North-East, it seems that we should abandon protection of the textile industry, abandon what we are doing for the steel industry and abandon the restraint agreements we have with Japan. On his argument we should leave it to the open market to determine

  617
  which jobs must go. I ask the Opposition—after all, we have had repeated encouragement from many Conservative Members to take a hard line with the Multi-Fibre Arrangement—do they disapprove of the hard line we are taking? Are they willing to open markets in the course of the multilateral trade negotiations? In present circumstances, certain industries will be preserved only by our interfering with the market.
  Mr. Dan Jones: Will my right hon. Friend give me one second to ask him a question about textiles? Is it a fact, in relation to that important industry which has been almost desolated in North-East Lancashire, that we are determined to follow burden-sharing to its logical conclusion and to the benefit of Lancashire?
  Mr. Dell: There is within the current Multi-Fibre Arrangement a burden-sharing system which will be continued in principle. The details may change within the new arrangements which we hope now to make. We hope to do more than that and to provide our textile industry with a rather more satisfactory level of protection than it has had until now.
  My right hon. Friend the Member for Dartford (Mr. Irving) referred to our membership of the EEC. We have been using that membership constructively in trade policy terms to ensure success for our industries in areas where we are currently under attack. Our membership has provided us with the ability to achieve a better balance in the formulation of trade policies as against the United States, certainly better than any individual country of the Community could achieve.
  Because of the co-ordinated policies of the Community, we have been able to take, within the Multi-Fibre Arrangement, a strong lire, of which my hon. Friend the Member for Burnley (Mr. Jones) evidently approves. We have helped the European Community to agree a mandate which provides for a tough position against disruptive low-cost textile imports. We have taken this line because we have found that the present restraints under the agreement, as it currently operates, have not been adequate during the time of recession.
  This tough line in the bilateral negotiations now proceeding has been reinforced by the Commission's emphasis, which I welcome, on the need for unilateral action
  618
  by the Community if these bilateral negotiations do not succeed in achieving the Community's objectives. That is an essential element in our negotiating position, without which we would not be prepared to go along with the mandate.
  The hon. Member for St. Ives referred to the Tokyo Round and accused us of not having taken a sufficiently vigorous line during the negotiations. It was impossible, until the Carter Administration came in. to take any line on the Tokyo Round other than to deal with technical preliminaries. Since then these negotiations have been going ahead. They have been going ahead in a different world situation from that which existed in 1973 when the Tokyo Round was first launched. They have gone ahead in an atmosphere in which the outlook for the open trading system is very much worse. Nevertheless, we want to see a successful outcome to the Tokyo Round.
  The United States Government have insisted in the importance to the United States, in resisting protectionist pressures in the country, of a successful outcome to the round. We have, therefore, not ruled out the agreement that has been informally and tentatively arrived at between the Community and the United States negotiators for a 40 per cent. reduction in tariffs in two stages. However, this would be acceptable to us only on certain conditions, which must be clearly stated. First, there is a need for major reductions in high American and Japanese tariffs. In other words, we want harmonisation of tariffs and not just reduction of tariffs. We shall want conditionality in the second stage in the proposed 10-year period of tariff reductions—in other words, the kind of link to world economic conditions for which we asked but did not secure as a result of the OECD trade pledge.
  Above all, however, we need the adequate safeguard—not just Article XIX—to be used to protect this country's industry, if necessary, against aggressive attack. It is pointless, if, in order to take action against one source that is creating difficulties for our industry, it should be necessary to take action against all sources. Also, we shall want to see the United States come into line on dumping and countervailing provisions of the existing GATT code, because the United States must understand that, although we recognise that they have political and economic

  619
  problems and we are ready to assist in that respect, we, too, have political and economic problems which they must recognise.
  That brings me to the question of steel, which I want to mention in its international context. This matter was raised by my hon. Friend the Member for Hammersmith, North (Mr. Tomney) and by the hon. Member for Arundel (Mr. Marshall). There is, of course, a very deep recession in world steel because of excess capacity. We have taken considerable steps to protect the steel industry of this country. The hon. Member for Arundel criticised us for lack of action. Perhaps I may quote to him the director of the British Independent Steel Producers Association, who said earlier this year of action taken by the Government:
  " The catalogue of action is not unimpressive. "
  Again I quote,
  " The Government is fully engaged in applying available remedies where justified. "
  So we have taken action to protect this country's steel industry in the difficulties that it would face.
  But we now face a specific problem in the United States, and it is necessary, particularly if they wish for a successful outcome from the multilateral trade negotiations, that the United States should now avoid precipitate action which would damage the prospect for a successful MTN. It would have a major effect on other suppliers—for example, the United Kingdom, which has a deficit with the United States
  I do not think that either I or the Government would regard a policy of aggressive anti-dumping action as an adequate or appropriate response to present problems in the steel industry,
  particularly as the United States does not at present adhere to GATT provisions on anti-dumping and countervailing codes. The United States took such precipitate action in the matter of special steels, and I hope that it will be avoided this time. Discussions are currently taking place. This is a problem which needs to he tackled with understanding. We look to the United States for a sensible and statesmanlike approach to this problem, just as no doubt they would expect us to adopt such an approach in the matter of the Multi-Fibre Arrangement.
  I turn finally to the amendment once again. The right hon. Member for Leeds, North-East suggests in the amendment that the policies that we are conducting will not serve to maintain, let alone to improve, the standard of living in this country. In the conduct of economic policy in this country we have advantages which are possibly denied to the Opposition. First, there are our relations with the trade union movement. [HON. MEMBERS: "Oh."] Secondly, there is the fact that much industrial management and much financial management in this country does not want to exchange the current Government, despite our Socialist horns, to which reference has been made, for the theological irrelevancies and nostrums of the Tories. Finally, we have the advantage of having before us the example of Toryism in office between 1970 and 1974 of how not to conduct economic policy.
  I hope that the House will reject the amendment.
  Question put, That the amendment be made:—
  The House divided: Ayes 270, Noes 302.

  Division No. 1]

  AYES

  [10.00 p.m.

  Adley, Robert

  Body, Richard

  Carlisle, Mark

  Aitken, Jonathan

  Boscawen, Hon Robert

  Chalker, Mrs Lynda

  Alison, Michael

  Bowden, A. (Brighton, Kemptown)

  Channon, Paul

  Amery, Rt Hon Julian

  Boyson, Dr Rhodes (Brent)

  Churchill, W. S.

  Arnold, Tom

  Braine, Sir Bernard

  Clark, Alan (Plymouth, Sutton)

  Atkins, Rt Hon H. (Spelthorne)

  Brittan, Leon

  Clark, William (Croydon S)

  Awdry, Daniel

  Brocklebank-Fowler, C.

  Clarke, Kenneth (Rushcliffe)

  Bain, Mrs. Margaret

  Brooke, Peter

  Cockroft, John

  Baker, Kenneth

  Brotherton, Michael

  Cooke, Robert (Bristol W)

  Banks, Robert

  Brown, Sir Edward (Bath)

  Cope, John

  Bell, Ronald

  Bryan, Sir Paul

  Cormack, Patrick

  Bennett, Sir Frederic (Torbay)

  Buchanan-Smith, Alick

  Corrie, John

  Bennett, Dr Reginald (Fareham)

  Buck, Antony

  Costain, A. P.

  Benyon, W.

  Budgen, Nick

  Critchley, Julian

  Berry, Hon Anthony

  Bulmer, Esmond

  Crouch, David

  Biggs-Davison, John

  Burden, F. A.

  Davies, Rt Hon J. (Knutsford)

  Blaker, Peter

  Butler, Adam (Bosworth)

  Dean, Paul (N Somerset)

  Dodsworth, Geoffrey

  Johnson Smith, G. (E Grinstead)

  Raison, Timothy

  Douglas-Hamilton, Lord James

  Jones, Arthur (Daventry)

  Rathbone, Tim

  Drayson, Burnaby

  Jopling, Michael

  Rees, Peter (Dover & Deal)

  du Cann, Rt Hon Edward

  Joseph, Rt Hon. Sir Keith

  Rees-Davies, W. R.

  Durant, Tony

  Kaberry, Sir Donald

  Renton, Rt Hon Sir D. (Hunts)

  Dykes, Hugh

  Kershaw, Anthony

  Renton, Tim (Mid-Sussex)

  Eden, Rt Hon Sir John

  Kilfedder, James

  Rhodes James, R.

  Edwards, Nicholas (Pembroke)

  Kimball, Marcus

  Rhys Williams, Sir Brandon

  Elliott, Sir William

  King, Evelyn (South Dorset)

  Ridley, Hon Nicholas

  Emery, Peter

  King, Tom (Bridgwater)

  Ridsdale, Julian

  Evans,Gwynfor (Carmarthen)

  Kitson, Sir Timothy

  Rifkind, Malcolm

  Ewing, Mrs Winifred (Moray)

  Knight, Mrs Jill

  Roberts, Wyn (Conway)

  Eyre, Reginald

  Knox, David

  Rossi, Hugh (Hornsey)

  Fairbairn, Nicholas

  Lamont, Norman

  Rost, Peter (SE Derbyshire)

  Fairgrieve, Russell

  Langford-Holt, Sir John

  Royle, Sir Anthony

  Farr, John

  Latham, Michael (Melton)

  Sainsbury, Tim

  Fell, Anthony

  Lawrence, Ivan

  St. John-Stevas, Norman

  Finsberg, Geoffrey

  Lawson, Nigel

  Scott, Nicholas

  Fisher, Sir Nigel

  Lester, Jim (Beeston)

  Scott-Hopkins, James

  Fletcher, Alex (Edinburgh N)

  Lewis, Kenneth (Rutland)

  Shelton, William (Streatham)

  Fletcher-Cooke, Charles

  Lloyd, Ian

  Shepherd, Colin

  Fookes, Miss Janet

  Loveridge, John

  Shersby, Michael

  Forman, Nigel

  Luce, Richard

  Silvester, Fred

  Fowler, Norman (Sutton C'f'd)

  McAdden, Sir Stephen

  Sims, Roger

  Fox, Marcus

  MacCormick, Iain

  Sinclair, Sir George

  Fraser, Rt Hon H. (Stafford & St)

  McCrindle, Robert

  Skeet, T. H. H.

  Fry, Peter

  Macfarlane, Neil

  Smith, Dudley (Warwick)

  Galbraith, Hon T. G. D.

  MacGregor, John

  Smith, Timothy John (Ashfield)

  Gardiner, George (Reigate)

  MacKay, Andrew (Stechford)

  Speed, Keith

  Gardner, Edward (S Fylde)

  McNair-Wilson, M. (Newbury)

  Spence, John

  Gilmour, Rt Hon Ian (Chesham)

  McNair-Wilson, P. (New Forest)

  Spicer, Jim (W Dorset)

  Gilmour, Sir John (East Fife)

  Madel, David

  Spicer, Michael (S Worcester)

  Glyn, Dr Alan

  Marshall, Michael (Arundel)

  Sproat, Iain

  Godber, Rt Hon Joseph

  Marten, Neil

  Stainton, Keith

  Goodhart, Philip

  Mates, Michael

  Stanbrook, Ivor

  Goodhew, Victor

  Mather, Carol

  Stanley, John

  Goodlad, Alastair

  Maude, Angus

  Steen, Anthony (Wavertree)

  Gorst, John

  Maudiing, Rt Hon Reginald

  Stewart, Ian (Hitchin)

  Gow, Ian (Eastbourne)

  Mawby, Ray

  Stokes, John

  Gower, Sir Raymond (Barry)

  Maxwell-Hyslop, Robin

  Stradling Thomas, J.

  Grant, Anthony (Harrow C)

  Mayhew, Patrick

  Tapsell, Peter

  Gray, Hamish

  Meyer, Sir Anthony

  Taylor, Teddy (Cathcart)

  Grieve, Percy

  Miller, Hal (Bromsgrove)

  Tebbit, Norman

  Griffiths, Eldon

  Mills, Peter

  Temple-Morris, Peter

  Grist, Ian

  Miscampbell, Norman

  Thatcher, Rt Hon Margaret

  Grylls, Michael

  Mitchell, David (Basingstoke)

  Thomas, Rt Hon P. (Hendon S)

  Hall, Sir John

  Moate, Roger

  Thompson, George

  Hall-Davis, A. G. F.

  Monro, Hector

  Townsend, Cyril D.

  Hamilton, Michael (Salisbury)

  Montgomery, Fergus

  Trotter, Neville

  Hampson, Dr Keith

  Moore, John (Croydon C)

  van Straubenzee, W. R.

  Hannam, John

  More, Jasper (Ludlow)

  Vaughan, Dr Gerald

  Harvie Anderson, Rt Hon Miss

  Morgan, Geraint

  Viggers, Peter

  Haselhurst, Alan

  Morgan-Giles, Rear-Admiral

  Wakeham, John

  Hastings, Stephen

  Morris, Michael (Northampton S)

  Walder, David (Clitheroe)

  Havers, Rt Hon Sir Michael

  Morrison, Charles (Devizes)

  Walker, Rt Hon P. (Worcester)

  Hawkins, Paul

  Morrison, Hon Peter (Chester)

  Walker-Smith, Rt Hon Sir Derek

  Hayhoe, Barney

  Mudd, David

  Wall, Patrick

  Heath, Rt Hon Edward

  Neave, Airey

  Walters, Dennis

  Heseltine, Michael

  Neubert, Michael

  Warren, Kenneth

  Hicks, Robert

  Newton, Tony

  Weatherill, Bernard

  Higgins, Terrence L.

  Nott, John

  Wells, John

  Hodgson, Robin

  Onslow, Cranley

  Welsh, Andrew

  Holland, Philip

  Oppenheim, Mrs Sally

  Whitelaw, Rt Hon William

  Hordern, Peter

  Page, John (Harrow West)

  Wiggin, Jerry

  Howe, Rt Hon Sir Geoffrey

  Page, Richard (Workington)

  Wigley, Dafydd

  Howell, David (Guildford)

  Parkinson, Cecil

  Wilson, Gordon (Dundee E)

  Howell, Ralph (North Norfolk)

  Pattie, Geoffrey

  Winterton, Nicholas

  Hunt, David (Wirral)

  Percival, Ian

  Wood, Rt Hon Richard

  Hunt, John (Ravensbourne)

  Peyton, Rt Hon John

  Young, Sir G. (Ealing, Acton)

  Hurd. Douglas

  Pink, R. Bonner

  Younger, Hon George

  Hutchison, Michael Clark

  Prentice, Rt Hon Reg

  Irving, Charles (Cheltenham)

  Price, David (Eastleigh)

  TELLERS FOR THE AYES:

  James, David

  Prior, Rt Hon James

  Mr. Spencer Le Marchant and

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

  Pym, Rt Hon Francis

  Mr. Michael Roberts.

  Jessel, Toby

  NOES

  Abse, Leo

  Atkinson, Norman

  Bennett, Andrew (Stockport N)

  Allaun, Frank

  Bagier, Gordon A. T.

  Bidwell, Sydney

  Anderson, Donald

  Barnett, Guy (Greenwich)

  Bishop, Rt Hon Edward

  Archer, Rt Hon Peter

  Barnett, Rt Hon Joel (Heywood)

  Blenkinsop, Arthur

  Armstrong, Ernest

  Bates, Alf

  Boardman, H.

  Ashley, Jack

  Bean, R. E.

  Booth, Rt Hon Albert

  Ashton, Joe

  Beith, A. J.

  Boothroyd, Miss Betty

  Atkins, Ronald (Preston N)

  Benn, Rt Hon Anthony Wedgwood

  Bottomley, Rt Hon Arthur

  622

  623

  Boyden, James (Bish Auck)

  Grimond, Rt Hon J.

  Morris, Alfred (Wythenshawe)

  Bradley, Tom

  Grocott, Bruce

  Morris, Charles R. (Openshaw)

  Bray, Dr Jeremy

  Hardy, Peter

  Morris, Rt Hon J. (Aberavon)

  Brown, Hugh D. (Provan)

  Harrison, Rt Hon Walter

  Moyle, Roland

  Brown, Robert C. (Newcastle W)

  Hart, Rt Hon Judith

  Mulley, Rt Hon Frederick

  Brown, Ronald (Hackney S)

  Hattersley, Rt Hon Roy

  Murray, Rt Hon Ronald King

  Buchan, Norman

  Hatton, Frank

  Newens, Stanley

  Buchanan, Richard

  Hayman, Mrs Helene

  Noble, Mike

  Butler, Mrs Joyce (Wood Green)

  Healey, Rt Hon Denis

  Oakes, Gordon

  Callaghan, Rt Hon J. (Cardiff SE)

  Heffer, Eric S.

  Ogden, Eric

  Callaghan, Jim (Middleton & P)

  Hooson, Emlyn

  O'Halloran, Michael

  Campbell, Ian

  Horam, John

  Orbach, Maurice

  Canavan, Dennis

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

  Orme, Rt Hon Stanley

  Cant, R. B.

  Howells, Geraint (Cardigan)

  Ovenden, John

  Carmichael, Neil

  Hoyle, Doug (Neison)

  Owen, Rt Hon.Dr David

  Carter, Ray

  Huckfield, Les

  Padley, Walter

  Carter-Jones, Lewis

  Hughes, Rt Hon C. (Anglesey)

  Palmer, Arthur

  Cartwright, John

  Hughes, Mark (Durham)

  Pardoe, John

  Castle, Rt Hon Barbara

  Hughes, Robert (Aberdeen N)

  Park, George

  Clemitson, Ivor

  Hughes, Roy (Newport)

  Parker, John

  Cocks, Rt Hon Michael (Bristol S)

  Hunter, Adam

  Parry, Robert

  Cohen, Stanley

  Irvine, Rt Hon Sir A. (Edge Hill)

  Pavitt, Laurie

  Coleman, Donald

  Irving, Rt Hon S. (Dartford)

  Pendry, Tom

  Colquhoun, Ms Maureen

  Jackson, Colin (Brighouse)

  Penhaligon, David

  Concannon, J. D.

  Jackson, Miss Margaret (Lincoln)

  Perry, Ernest

  Cook, Robin F. (Edin C)

  Janner, Greville

  Phipps, Dr Colin

  Corbett, Robin

  Jay, Rt Hon Douglas

  Price, C. (Lewisham W)

  Cowans, Harry

  Jeger, Mrs Lena

  Radice, Giles

  Cox, Thomas (Tooting)

  Jenkins, Hugh (Putney)

  Rees, Rt Hon Merlyn (Leeds S)

  Craigen, Jim (Maryhill)

  John, Brynmor

  Richardson, Miss Jo

  Crawshaw, Richard

  Johnson, James (Hull West)

  Roberts, Albert (Normanton)

  Cronin, John

  Johnson, Walter (Derby S)

  Roberts, Gwilym (Cannock)

  Crowther, Stan (Rotherham)

  Johnston, Russell (Inverness)

  Robinson, Geoffrey

  Cryer, Bob

  Jones, Alec (Rhondda)

  Roderick, Caerwyn

  Cunningham, G. (Islington S)

  Jones, Barry (East Flint)

  Rodgers, George (Chorley)

  Cunningham, Dr J. (Whiteh)

  Jones, Dan (Burnley)

  Rodgers, Rt Hon William (Stockton)

  Davidson, Arthur

  Judd, Frank

  Rooker, J. W.

  Davies, Bryan (Enfield N)

  Kaufman, Gerald

  Roper, John

  Davies, Denzil (Llanelli)

  Kerr, Russell

  Rose, Paul B.

  Davis, Clinton (Hackney C)

  Kilroy-Silk, Robert

  Ross, Stephen (Isle of Wight)

  Deakins, Eric

  Kinnock, Neil

  Ross, Rt Hon W. (Kilmarnock)

  Dean, Joseph (Leeds West)

  Lambie, David

  Rowlands, Ted

  de Freitas, Rt Hon Sir Geoffrey

  Lamborn, Harry

  Ryman, John

  Dell, Rt Hon Edmund

  Lamond, James

  Sandelson, Neville

  Dempsey, James

  Latham, Arthur (Paddington)

  Sedgemoro, Brian

  Doig, Peter

  Leadbitter, Ted

  Selby, Harry

  Dormand, J. D.

  Lee, John

  Sever, J.

  Douglas-Mann, Bruce

  Lestor, Miss Joan (Eton & Slough)

  Shaw, Arnold (llford South)

  Duffy, A. E. P.

  Lever, Rt Hon Harold

  Sheldon, Rt Hon Robert

  Dunn, James A.

  Lewis, Arthur (Newham N)

  Shore, Rt Hon Peter

  Dunnett, Jack

  Lewis, Ron (Carlisle)

  Silkin, Rt Hon S. C. (Dulwich)

  Dunwoody, Mrs Gwyneth

  Lipton, Marcus

  Sillars, James

  Eadie, Alex

  Litterick, Tom

  Silverman, Julius

  Edge, Geoff

  Lomas, Kenneth

  Skinner, Dennis

  Edwards, Robert (Wolv SE)

  Loyden, Eddie

  Small, William

  Ellis, John (Brigg & Scun)

  Luard, Evan

  Smith, Cyril (Rochdale)

  Ellis, Tom (Wrexham)

  Lyon, Alexander (York)

  Smith, John (N Lanarkshire)

  English, Michael

  McCartney, Hugh

  Snape, Peter

  Ennals, Rt Hon David

  McDonald, Dr Oonagh

  Spearing, Nigel

  Evans, Fred (Caerphilly)

  McElhone, Frank

  Spriggs, Leslie

  Evans, loan (Aberdare)

  MacFarquhar, Roderick

  Stallard, A. W.

  Evans, John (Newton)

  McGuire, Michael (Ince)

  Steel, Rt Hon David

  Ewing, Harry (Stirling)

  MacKenzie, Rt Hon Gregor

  Stewart, Rt Hon M. (Fulham)

  Faulds, Andrew

  Mackintosh, John P.

  Stoddart, David

  Fernyhough, Rt Hon E.

  Maclennan, Robert

  Stott, Roger

  Fitch, Alan (Wigan)

  Macmillan, Rt Hon M. (Farnham)

  Strang, Gavin

  Flannery, Martin

  McMillan, Tom (Glasgow C)

  Strauss, Rt Hon G. R.

  Fletcher, Ted (Darlington)

  McNamara, Kevin Madden, Max

  Summerskill, Hon Dr Shirley

  Foot, Rt Hon Michael

  Swain, Thomas

  Ford, Ben

  Magee, Bryan

  Taylor, Mrs Ann (Bolton W)

  Forrester, John

  Mahon, Simon

  Thomas, Jeffrey (Abertillery)

  Fowler, Gerald (The Wrekin)

  Mallalieu, J. P. W.

  Thomas, Mike (Newcastle E)

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

  Marks, Kenneth

  Thomas, Ron (Bristol NW)

  Freeson, Rt Hon Reginald

  Marshall, Dr Edmund (Goole)

  Thorno, Stan (Preston South)

  Freud, Clement

  Marshall, Jim (Leicester S)

  Thorpe, Rt Hon Jeremy (N Devon)

  Garrett, John (Norwich S)

  Maynard, Miss Joan

  Tierney, Sydney

  Garrett, W. E. (Wallsend)

  Meacher, Michael

  Tinn, James

  George, Bruce

  Mellish, Rt Hon Robert

  Tomlinson, John

  Gilbert, Dr John

  Mendelson, John

  Tomney, Frank

  Ginsburg, David

  Mikardo, Ian

  Torney, Tom

  Golding, John

  Milian, Rt Hon Bruce

  Tuck, Raphael

  Gould, Bryan

  Miller, Dr M. S. (E Kilbride)

  Urwin, T. W.

  Gourlay, Harry

  Mitchell, Austin

  Varley, Rt Hon Eric G.

  Graham, Ted

  Molloy, William

  Wainwright, Edwin (Dearne V)

  Grant, John (Isington C)

  Moonman, Eric

  Wainwright, Richard (Colne V)

  624

  625

  Walker, Harold (Doncaster)

  Whitehead, Phillip

  Wise, Mrs Audrey

  Walker, perry (Kingswood)

  Whitlock, William

  Woodall, Alec

  Ward, Michael

  Willey, Rt Hon Frederick

  Wool, Robert

  Watkins, David

  Williams, Rt Hon Alan (Swansea W)

  Wrigglesworth, Ian

  Watkinson, John

  Williams, Alan Lee (Hornch'ch)

  Young, David (Bolton E)

  Weetch, Ken

  Williams, Rt Hon Shirley (Hertford)

  Weitzman, David

  Wilson, Alexander (Hamilton)

  TELLERS FOR THE NOES

  Wellbeloved, James

  Wilson, Rt Hon Sir Harold (Huyton)

  Mr. James Hamilton and

  White, Frank R. (Bury)

  Wilson, William (Coventry SE)

  Mr. Joseph Harper.

  While, James (Pollok)

  Question accordingly negatived.
  Main Question again proposed.
  It being after Ten o'clock, the debate stood adjourned.
  Debate to be resumed tomorrow.

  WOOLTON VALE ASSESSMENT CENTRE
  Motion made and Question proposed, That this House do now adjourn.—[Mr. Snape
  10.20 p.m.
  Mr. Eddie Loyden: It is with some sadness and, indeed, anger that I ask the House tonight to listen to an Adjournment debate. The events which have taken place over the last six or seven weeks—and even in in many instances prior to that—are, indeed, a reflection of the fact that notice was not taken of the demand which had been made for an inquiry into the affairs at the Woolton Vale Assessment Centre. I believe that if that request had been conceded and an inquiry had been accepted at that time, much of what has followed at the centre could well have been avoided. Certainly much of the bad publicity that the centre has attracted could also have been avoided.
  The effect of the publicity upon Woolton Vale Assessment Centre at this stage is immeasurable and I believe that it will be some time before any degree of confidence returns to the centre. I am mindful of the damage that could continue to be done if the matter is not the subject of close investigation and inquiry into all the allegations which have been made about Wootton Vale.
  I think that we all recognise the sensitive and sometimes difficult task facing those who have the responsibility for young people at these centres. There is not always the provision of facilities to deal adequately with the task with which they are confronted. Indeed, it has been said by the Director and Chairman of the Liverpool Social Services that the Woolton Vale Assessment Centre is inadequate in terms of buildings and facilities to meet the needs of care assessment and demand. It is only fair to say that steps have been taken to build a new centre in some 12 months to two years. This centre will, I understand, replace Woolton Vale.
  I consider those arguments to be quite valid and justified. I cannot accept, however, that the building of a centre in one to two years' time should be used as an excuse to ignore the many complaints and
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  allegations which have been made about Woolton Vale.
  I have a letter from a former placement at Woolton Vale which indicates quite clearly that this is not a matter which has been in existence only for the last weeks or months. The letter was written in April 1976 by a former employee who had a brief placement at Woolton Vale at that time. He said in his letter to me:
  " It would be an understatement for me to say that I find my brief experience working at Wootton Vale is disturbing. Clearly the building is outdated. More suitable facilities would have to be sought, and I believe that a purpose built establishment is being provided long after the need arose. Notwithstanding this, young and disturbed children continued to be victims of the conditions and the regime within this establishment, and this would be for the next two years. Perhaps I could draw your attention to the regime which still operates within the terms of the Home Office rules applicable to remand centres, and of course Wootton Vale was a remand centre in the past. For instance, official visiting is similar to that of detention centres or prison and all children are searched by staff after visiting. I believe it was the practice that all incoming and outgoing letters be read. During my placement I felt like a gaoler and spent most of the day locking and unlocking doors."
  That gives some indication of the inadequacies of the building. What is of more concern is that 12 or 18 months later a number of complaints arose from parents, and others, about other practices at Woolton Vale.
  As my hon. Friend will know, a submission has been made by four Liverpool city councillors, and members of the social services committee, to the Ombudsman about examining allegations of cruelty and maladministration by members of the staff. In spite of the pressures that have been placed upon those responsible for the running of this centre there has been a constant resistance to any form of inquiry. Indeed, it is my view that had this Adjournment debate not taken place this evening, the last meeting of the social services committee would have continued to adopt that attitude towards the question of an inquiry.
  I am somewhat disturbed by the fact that notice about this Adjournment debate was transmitted to the city of Liverpool, and its officers, before I myself knew that the debate was taking place.
  I do not accept that all of the allegations which have been made—some probably exaggerated—are to be accepted on

  629
  face value. That is one of the reasons why an inquiry was seen as the only answer to the problems that face those who occupied and those who ran the Woolton Vale Centre.
  I could go into detail on a number of cases, but time does not permit me to do so, nor would I want in any way to cut across the decision that has been taken about an inquiry. I want to come back to that in a moment. I understand that at this point in time the social services committee has decided to refer the matter to the Ombudsman. It is, however, my view that the terms of reference of this inquiry ought to be spelled out. I hope that my hon. Friend will be able to tell us more about the form which this inquiry will take.
  Mr. Anthony Steen Mr. Anthony Steen (Liverpool, Wavertree)rose—
  Mr. Loyden: I believe that unless the inquiry is a full-scale inquiry there will remain upon this place a stain that will make it ineffective as a centre for the period that lies ahead.
  I do not accept that the question of a new centre should be used as an excuse for not acting now, because there is a mixture of boys at the school ranging from what could be described as young criminal elements to those who in all probability have committed the one crime of absconding or absenting themselves from school, or being abroad at night, or any of those minor offences and misdemeanours. It is the degree of control that is required for the former which imposes a great deal of strain and stress on the latter.
  I believe that the Government's object in setting up assessment centres was to give an opportunity to those responsible for children in care to make an assessment of their problems and to make some provision for their future on a longterm and more permanent basis. It appears to me that the present position in Woolton Vale simply does not allow for that to take place.
  I do not believe that the provisions at the moment are sufficient to carry out, for instance, education of those children who need it and the care which is referred to in the statutory instrument as being the basis on which a. relationship in these homes should be built.
  Mr. Steen: I support the hon. Gentleman's request for an inquiry. Is he aware that a constituent of mine has been subjected to acts of violence and herself has complained about violence in this home? Is he aware, further, that I, too have been asking for an inquiry in this case?
  Mr. Loyden: I am aware of the individual case which the hon. Gentleman raises, and I am sure that he will be pursuing it with his customary vigour. However, my concern at this stage is not with individual cases. My concern is about the circumstances as a whole at the Woolton Vale Centre.
  I believe that this House should be disturbed to learn that, under legislation passed by this House, children are placed in a situation of the kind prevailing at Woolton Vale. When we in this place pass Acts of Parliament, we should ensure that the provisions necessary to implement the intentions of the legislation are available to those in local government and so on who are supposed to run these places in accordance with those Acts.
  However, the main question here is that of the allegations which have been made about the violence which allegedly was endemic in the place over some considerable time. I believe that there has been a great deal of stress and strain placed on members of the staff, but again that does not remove the responsibility for dealing with the problem as expeditiously as possible.
  The complaints which have been enumerated are of a very serious nature. Allegations of violence by the head against children have been made. I agree that there is conflicting evidence about the seriousness of those actions. Nevertheless, there is sufficient doubt in the minds of people that conduct of this kind is going on at Woolton Vale.
  As for the staff, at the beginning of all the publicity they played a somewhat low-level role. Since then, however, they have recognised that the only way in which this could be cleared up to the satisfaction of all concerned is by an inquiry, and they have themselves drafted a petition, signed by 25 or 26 of them, calling for such an inquiry. In my view, it is a pity that the same sort of response was not there when the saga of Woolton Vale began.

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  It is my view that, if the Woolton Vale Centre continues in being without the necessary inquiry to which I have referred, not only will the Centre be undermined but ultimately it will undermine the entire concept of centres throughout the country. As each of these places is exposed in the way that this one has been, assuming that there are other similar cases, the concept of child care and assessment as a whole will be undermined. I am sure that that is not the Government's intention.
  Is the present position satisfactory? We have been told that the local authority has now referred the matter to the Ombudsman. But it is not certain that the Ombudsman will want to carry out the inquiry, and therefore the situation may remain unresolved.
  I believe that responsibility lies with the Secretary of State in these circumstances and that the evidence must be collated. I accept the valid criticism that much of the evidence which has been drafted and collated has been fragmented by the various groups gathering it, but I believe that it is not an impossible task to gather evidence of specific incidents of maladministration. From that would come a formidable report to compel the Secretary of State to investigate the affairs of Woolton Vale.
  The matter reached a peak over the publicity given to the use of a cell in Woolton Vale. I visited the Centre shortly after the Press publicity had drawn attention to the matter. Some of the Press statements made about the cell were exaggerated, and were a misrepresentation, to some extent, of the true position.
  However, I was appalled to see the sort of arrangements that had been made for separating children for various reasons, and as part of the general control plans. There was a room, absolutely bare and sparse, with the exception of a mattress on the floor and a toilet in another corner. Even the flushing mechanism for the toilet was outside the room. Apart from these two items there was no other piece of furniture or equipment in the room, which had a cell-like door through which observation could be kept, as in prisons.
  The lights were operated from outside the cell, and I understand that this is also
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  for observation purposes. There were two lights, one red and one white, and during the night the red light was used so as not to disturb the sleeping boy or youth. When the boy wanted to use the toilet he rang a bell for the officers to come around and flush it. I doubt whether an officer can be found to dash around and flush the toilet every time the bell rings. This sort of thing creates an environment which is, in many ways, worse than in an adult prison.
  This cell is used not only for isolation—there may be occasions when headstrong boys need control—but also for punishment. The reason given for this is that it has the privacy required to carry out punishment. It was one such incident that brought the matter to light and caught the attention of the Press. One of the boys concerned in such an incident was the cause of the beginning of the whole investigation. He complained to his parents that he had been punished in this way. There is evidence that parents' complaints are disregarded, and that when boys are found with marks or weals on them, some reason is given about falling in a football match or fighting with other boys. I am not saying that every word uttered in criticism of Woolton Vale is factual and cannot be challenged, but I say that there is sufficient disturbing evidence that cannot be disregarded by the local authority, the social services committee or the Secretary of State.
  I could go on for a long time giving chapter and verse of the cases I have heard about and of reports and statements by parents in regard to acts of violence and maltreatment in this remand home. In one case a boy was locked up in isolation, and it was alleged he had been a brain-damaged child at the age of six. I hope that the Minister will not suggest that that is the right way for young child offenders to be dealt with. If that kind of practice continues, I believe that it will make hardened criminals out of the children in these centres.
  I believe that there is a responsibility on the Secretary of State to carry out a full inquiry into Woolton Vale and that he should not shrug off responsibility by saying that in two years' time there is to be a new centre. How many boys in that period will be damaged, perhaps irreparably? How many others will be set on the course of a hardened criminal

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  in that period? The responsibility is ours, and the Secretary of State should grasp the opportunity to carry out an inquiry and see to it that whatever new building follows the present building is equipped to serve the purpose for which it is designed—namely, to deal with young child offenders in Liverpool.
  10.42 p.m.
  The Minister of State, Department of Health and Social Security (Mr. Roland Moyle): I am pleased that my hon. Friend the Member for Liverpool, Garston (Mr. Loyden) has raised this matter on the Floor of the House because he has been following it assiduously with my right hon. Friend the Secretary of State and has discussed the matter with my Department. I apologise for the fact that the Liverpool Corporation knew before my hon. Friend that he had been granted an Adjournment debate. I do not know the facts, but I assume that once my Department was informed that my hon. Friend had the Adjournment debate, it thought that he knew that, too, and, out of professional courtesy, it informed the Liverpool Corporation.
  The matter my hon. Friend raises is of special concern to everybody who is concerned with young people, particularly when they are away from their parents and in the care of local authorities. I am happy to see that the Liverpool City Council has made its concern apparent. It is a concern which my right hon. Friend the Secretary of State and I share.
  It looks as though the allegations will be subject to another inquiry of an external nature. Therefore, I shall not go into the allegations in detail, although, if time permits, I shall try to outline them.
  Woolton Vale is an observation and assessment centre, with 53 places, and concentrates on boys of the more difficult type in the age group 12 to 18. Other boys are held in less, onerous conditions because they are more amenable to treatment.
  The building is inadequate and is one of Mr. Gladstone's old, converted residences. It makes it difficult to carry out adequate supervision, and therefore a replacement is being built at Fazakerley to take 88 boys. There will be a secure unit, for which the Department has
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  approved a grant of £97,500, and it will open in November 1978.
  The inadequacy of the centre, however, is no excuse for ill treatment or inadequate care of boys. The allegations that have given rise to the present demands for an inquiry concern chiefly one youngster of 15, who was in the centre following appearances in court for offences, who was caned in the separation room of the unit and about whom it is alleged that he was seized by the throat by staff and on another occasion frightened by tales of haunting. There is another allegation that two other boys were set upon and assaulted by boys in the presence of and with the active concurrence of staff, and there are also allegations of ill treatment and assault by staff on other boys.
  In addition there has been one incident concerning members of staff. Police were called in after a complaint made by one of the women on the staff. According to the Press, she had been assaulted by one of the male members of staff. A case against him was brought to court on 18th October, but it was not proceeded with. The man agreed to be bound over and the judge agreed that the case should be allowed to lie upon the file. He described the incident as having been horse-play which had got out of hand and, although it was a humiliating experience for the woman concerned, he thought that it would be quite wrong to allow the full panoply of the jury proceedings to be instigated in the case.
  The allegations were considered at meetings of the adoption and special services sub-committee of the city council's social services committee and came before the committee at its meeting on 2nd November. The committee decided to recommend to the council that a further independent inquiry should be set up. My information differs from that of my hon. Friend. I understand that the proposal that will come before the full council on 9th November reads:
  " That the Committee considers it desirable that an inquiry, completely independent of the City Council,"
  —that is important—
  " should be held as soon as possible into the various allegations made about the conduct of Woolton Vale; and accordingly, as complaints of maladministration have already been referred to the Local Government Commissioner, urges him, in the event that no statutory inquiry is ordered by the Secretary of

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  State, to accept those complaints and undertake an investigation into them and into any other matters which might come to his notice during the course of the investigation and which seem to him proper to be enquired into in the context of the allegations made."
  I see no cause for the Secretary of State to intervene in the case, at least at this stage. The council is clearly concerned to get at the facts and it will entrust the matter to the Local Government Commissioner. The Commissioner has powers under Section 26 of the Local Government Act 1974 to investigate any such complaint of injustice in consequence of maladministration in connection with action taken by or on behalf of a local authority.
  It is entirely for the Commissioner to decide whether he can act and how far he can extend his inquiries. He has not yet taken that decision. Matters that he could look into include, among many other things, a failure to observe rules, and malice towards the person concerned. Several local authorities have themselves endorsed the referral of complaints to the Local Government Commissioner. I understand that the city council will be considering this proposal tomorrow and the Commissioner has still to decide whether or not to accept the reference. As the hon. Member knows, we have of course been in close touch with Liverpool over this case and my regional social work service officers have visited Woolton Vale and are aware of the difficulties experienced in running the centre.
  The Secretary of State has powers to institute an inquiry under the Local Government Act 1972 and the Children Act 1975. These are, however, very much last-resort powers.
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  If the Commissioner did not exercise his discretion in favour of an inquiry, it would be possible for the city council to set up an independent inquiry, and our experience is that reports from such inquiries have generally commanded full acceptance from the responsible bodies concerned. I think it best that these matters should be dealt with locally by the responsible authority, if at all possible.
  Mr. Loyden: Does my hon. Friend accept that an ultimate decision by the Secretary of State cannot be ruled out at this stage?
  Mr. Moyle: We shall have to see how the dispute goes, but I cannot rule out anything at this stage.
  In the unlikely event of the Commissioner not agreeing to the request of the city council, the best conclusion would be for the council to set up an independent inquiry. The Secretary of State and I would have to be satisfied that the inquiry was truly independent and was capable of making an independent assessment of the problem.
  My hon. Friend asked in his first letter, which we received on 24th August, whether we would consider closing Wool-ton Vale. I must confess that this is a course of action that—
  The Question having been proposed after Ten o'clock and the debate having continued for half an hour, Mr. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
  Adjourned at ten minutes to Eleven o'clock.