Commons Sitting of 18 November 1977

Preamble
The House met at Eleven o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
PETITION

  Redbourn
  11.4 a.m.
  Mr. Victor Goodhew: With your permission, Mr. Speaker, and that of the House, I beg leave to present a petition signed by the Chairman and Secretary of the Redbourn Association, which represents some 570 housewives in Redbourn. The petition reads:
  To the Honourable the Commons of the United Kingdom of Great Britain and Northern Ireland in Parliament assembled—The humble petition of residents of Redbourn and its neighbourhood showeth that—the construction of an industrial waste treatment plant at Redbournbury will be prejudicial to the amenities of the area (to which green belt policies apply) and will lead to an unreasonable increase in traffic through Redbourn (which is already at intolerable levels). Wherefore your petitioners pray that your Honourable House will require the Department of the Environment and other authorities responsible for these matters—to prevent the building of such waste treatment plant and to institute an investigation of alternative sites on a regional basis as envisaged by the Control of Pollution Act 1974—to take steps to expedite the construction of by-passes around Redbourn.
  And your petitioners, as in duty bound, will ever pray.
  To lie upon the Table.

  STATUTORY INSTRUMENTS, &c.
  Ordered,
  That the Passenger Car Fuel Consumption Order 1977 (S.I., 1977, No. 1603 be referred to a Standing Committee on Statutory Instruments, &c—[Mr. Graham.]

ORDERS OF THE DAY

  PARTICIPATION AGREEMENTS BILL
  Order for Second Reading read.
  11.6 a.m.
  The Minister of State, Department of Energy (Dr. J. Dickson Mahon): I beg to move, That the Bill be now read a Second time.
  This short Bill removes an element of doubt concerning the relationship between the restrictive trade practices legislation and the Government's policy of majority State participation in North Sea fields.
  Before I explain the Bill's provisions, I shall set out the North Sea strategy which the Government have carried out since they assumed office. When the Government took office in 1974, a great deal of highly prospective territory on our Continental Shelf had been licensed to oil companies, and some major fields had been found. Since the issue of those licences three years earlier in 1971, the world oil scene had changed completely with the quintupling of the oil price and the assumption of greater control over oil production by OPEC countries. The Government believed that the British people wanted greater public control to be asserted over the development of our Continental Shelf resources. We moved towards this by the establishment of a new tax regime under the Oil Taxation Act 1975, and by the extension of the Government's regulatory powers under the Petroleum and Submarine Pipe-Lines Act 1975.
  Moreover, this oil business was so important that we decided that there should be a public stake in these developments going beyond the limited involvement of the British Gas Corporation and the exploration subsidiary of the National Coal Board. We decided to set up the British National Oil Corporation to run that public stake in our Continental Shelf resources and so to give the nation a say in how they were disposed of. It was simple enough to provide that BNOC should be the majority partner in future licences, but we then had to decide how to get the public sector involved in the very major finds made under existing

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  licences without breaching the contract formed by the licence and without up-setting then current development plans. We decided to try to achieve this through voluntary negotiations.
  We adopted three principles to govern the negotiations. The first was that the companies should be left financially no better and no worse off as a result of participation. The second was that BNOC should have access to 51 per cent. of petroleum produced. The third was that BNOC should have an effective voice and vote in the operating committees managing the various fields. Companies were free to suggest their own ways whereby these objectives might be achieved.
  As the House knows, participation agreements have now been agreed with 41 companies. Of these, 11 agreements, covering 17 companies, are in final form though some of them still require technical clearances. As agreements become effective, it is our intention to place in the Library an extended summary of their contents, as we did when we signed out participation agreements with British Petroleum.
  Meanwhile, it might be helpful if I were to describe in broad terms what participation agreements do. Necessarily I must use broad terms, since the agreements that we have negotiated with individual companies and groups naturally reflect the preoccupations of our negotiating partners and are by no means always identical to one another not least because of the scope which companies had to suggest routes which met our objectives in a manner acceptable to them.
  In each agreement, BNOC is accepted by the other parties as a licensee. Except where BNOC is already a licensee as an equity partner, this necessitates a formal assignment of the licence by the companies to themselves and BNOC jointly. As a participant in the field, BNOC then receives all the information about field operations relevant to its participation role and has the right to attend the meetings of the operating committees, including, where necessary, the committees running pipelines and terminal agreements. It also has a vote of its own on decisions taken in the operating committees, including, where necessary, the committees running pipeline and terminal agreements.
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  Naturally there are safeguards on the confidentiality of the information BNOC receives. The moment at which all these rights begin to take effect is a matter of negotiation in each agreement.
  BNOC does not obtain sole control through the participation agreements, but it does have a meaningful vote the percentage amount being dependent on the voting rules within the relevant operating committees and the number and strength of the other licensees. BNOC is granted a right to take at its election up to 51 per cent. of each company's share of petroleum, including crude oil and natural gas liquids, produced under the licence.
  A time period is fixed for the duration of each option election made by the BNOC, and a notice period is also fixed so that all parties have sufficient notice of BNOC's intention to take petroleum. Each agreement contains a formula for agreeing upon the market price to be paid by BNOC for its petroleum and detailed provisions about the terms and conditions of payment by BNOC.
  Because BNOC is not an equity partner but pays the full market price for its petroleum, each agreement contains an indemnity from the companies to BNOC to ensure that BNOC is not liable for any of the costs of developing the field and keeping it in production. Agreements also deal with many other points, including, in some cases, such matters as the rights of the partners in case one of them defaults and what are called "sole risk" operations.
  I mentioned earlier that agreements have been tailored to particular interests and preoccupations of the companies, subject to these being reconciled with the Government's objectives. In most cases we have been able to agree arrangements involving consultations on oil disposal and, for some of the major refining companies, supply of feedstock to them. The success of the negotiating teams of officials from my Department and colleagues from BNOC is due to the enormous good sense of the oil industry and is also, quite frankly, a recognition of the comparative fairness of our regime.
  We believe that the participation agreements are immensely valuable to the people of the United Kingdom through the knowledge which the Government are enabled to gather on the operations of

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  the oil companies on the United Kingdom Continental Shelf and through the role which BNOC will play in the development of United Kingdom petroleum. There are bound to be differences of interest between the international oil companies and the United Kingdom. Previous Administrations have worked on the assumption that the oil companies perhaps could be left to pursue their interests. But BNOC is an important element in the Government's strategy which we think will put the balance right.
  We have seen a few ill-informed suggestions from time to time that the establishment of our new regime, and in particular our decision to negotiate for majority State participation, has caused delay to North Sea development. I am happy to inform the House that there is absolutely no evidence for this. Oil production from the North Sea is a brilliant success story and continues to make progress. We are now producing at a rate equivalent to nearly half the United Kingdom's consumption of oil and are well on target for the achievement of self-sufficiency by 1980.
  Mr. Neil Macfarlane: Although the immediate future is very bright, does not the right hon. Gentleman agree that a particular aspect of concern is that the Government, by their policy, have perhaps deferred long-term investment in the North Sea to the end of the next decade or beyond? That is what greatly worries us.
  Dr. Mabon: I do not think that there is any evidence of that. I have been to a number of meetings with financial bodies, and there is no question of there being a lack of finance, even long term, for the North Sea developments. Unless one can argue the case for a fall in the price of oil, I do not think that investment is in any danger. I have never heard anybody seriously argue that there is the prospect in the next decade of a fall in the price of oil. My hon. Friend the Under-Secretary of State reminds me that, bearing in mind the immense interest shown in the fifth round applications, there is no evidence to show that the companies are not interested, not only in exploring, but in looking for finance for substantial future developments.
  Mr. Peter Viggers: Ministers are fond of talking about the success story in the North Sea and about BNOC in the same breath, but does the right hon. Gentleman agree that the success is due to private enterprise, which put up 94 per cent. of the capital?
  Dr. Mabon: The hon. Gentleman must remember that the rôle of the British Gas Corporation is quite outstanding. We must pay tribute to what has been achieved, whether it be in the nationalised sector or in the private sector. We must remember the participation of the British Gas Corporation, and of the National Coal Board, in oil developments. BNOC is operating a field of its own which it has acquired from Burmah Oil. Much work has been done by predecessors but a lot has been done by BNOC. Hon. Members should give BNOC a pat on the back and give it the chance to prove itself, as I am confident it will. I am sure that BNOC will survive and that even if, by some misfortune, there is a change of Government, it will be the bipartisan instrument of the British public's interest in the North Sea. I hope that we shall not have a doctrinaire fight about that.
  As I have said, we are now producing at a rate equivalent to nearly half the United Kingdom consumption of oil and are well on target for the achievement of self-sufficiency by 1980. The last few months have seen a fresh round of fields being declared commercial and substantial orders are being placed with the United Kingdom offshore supplies industry.
  It is against that background of success for the oil industry, with BNOC playing an increasingly important rôle, that we need to examine the Bill. The House knows of the importance which the Government attach to the protection of consumer interests and to the maintenance of fair competition, both of which are the purposes of the Restrictive Trade Practices Act. The Act is widely drawn so as to catch all sorts of restrictive agreements and arrangements made between firms. As I have explained, we decided to gain access to petroleum for BNOC by means of options to take it at market price in order to make sure that BNOC and the Government should keep the maximum possible flexibility. This

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  arrangement also suits companies in that there is no doubt about it being their oil if BNOC does not take it.
  I have been advised, however, that there is a possibility, though this is far from certain, that this method of gaining access to oil and other aspects of the agreements providing for exchanges of information could be held to be restrictions under the terms of the restrictive trade practices legislation and thus registrable with the Director General of Fair Trading. Even so, these are basically agreements to which the Crown is a party and which confer a public benefit to which the doctrine of Crown immunity may well apply, as quite distinguished advisers have argued. But there is an element of doubt about which legal opinion we should accept. Therefore, a prudent Government must erase this uncertainty in the law by this Bill.
  The Government consider that participation agreements, whether or not they are technically caught by the restrictive trade practices legislation, are necessary for the achievement of our North Sea oil participation policy. We argue—and I hope that the Opposition will endorse this—that these agreements are in the national interest. It would therefore be inappropriate for the Restrictive Practices Court to have to examine such agreements against criteria which were designed to apply to restrictions adopted by commercial enterprise for their own purposes. Primary legislation is therefore necessary to remove any doubt about the legal position of existing participation agreements. The Bill accordingly provides exemption for all participation agreements, subject to strict Government supervision to ensure that the exemption applies only to agreements entered into for the purposes of furthering the Government's oil participation policy.
  The Bill provides power for the Secretary of State to certify that if an agreement appears to him to be a participation agreement, as defined in Clause 1(3), that agreement shall be one to which the clause applies and so be exempt from the restrictive trade practices legislation. It has retrospective effect, because it is necessary to cover all participation agreements made in the past—and the House will recall that our first one was in February
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  1976—as well as those that we are making now and shall make in the future.
  The Bill goes on to define participation agreements in broad terms. The general nature of the definition, which follows Section 2(1)(e) of the Petroleum and Submarine Pipe Lines Act 1975, is necessitated by the wide variety of participation agreements that we are negotiating. Although they have common features, there is also a sufficient variety in the ambit of the agreements for there to be no single easily identifiable and definable model participation agreement. The Bill does not, however, deal with the ordinary commercial operations of BNOC, which will remain subject to the Restrictive Trade Practices Act, like those of any other oil company.
  Our participation policy is essential if we are to secure the rightful share for Britain in the exploitation of this precious national resource. Our policy, I would argue, commands the general assent of the oil industry, as witness the number of companies with which we have reached agreement. Neither the Government nor, may I stress, the companies would wish the agreements carefully worked out over months of effort to be put at risk by doubts about their status under the Restrictive Trade Practices Act. That could only be damaging to all interests. That is why we have introduced the Bill, in order to remove any shadow of doubt that participation agreements are outside the ambit of the restrictive trade practices legislation.
  Mr. Macfarlane: The Preamble to the Bill refers to the Bill's financial effects and its effect on public sector manpower. It is not clear from the Preamble whether there will be any increase in central Government expenditure or manpower. Why does it not say that there will be no increase? Will the right hon. Gentleman, who seems to be nearing the end of his speech, deal with that matter before he sits down?
  Dr. Mabon: I shall ask all parts of the House to help us in getting the Bill through as quickly as possible. Therefore, I must be obliging in every way that I can. Both of the statements in the Preamble are true. There is no need to increase manpower in the Department or anywhere else to deal with the Bill. We simply have to go through the process

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  of deciding the nature of a participation agreement and advise my right hon. Friend whether it should be so prescribed within the terms of the Bill. There is no need for the Department to seek more staff for that.
  As for central Government expenditure, since BNOC raises its money outwith the public sector borrowing requirement, there is no increase in central Government expenditure to deal with whatever consequences there may be for BNOC of the participation agreements exercised.
  Mr. Macfarlane: Why, then, does the Preamble say that the Bill
  "is not expected to result in any increase"?
  Why does it not say "The Bill will not generate any increase in public expenditure"?
  Dr. Mabon: We are a modest and accurate Government, not bent on extravagant statements, and so we do not say that that will not happen. The Bill is not expected to result in any increase in central Government expenditure. It might be different if there were massive finds outwith our present expectations and a large amount of capital expenditure had to be found. Of course, there are possibilities, and I should like that good luck to come upon us, but it is not expected that there will be any increase in central Government expenditure.
  11.25 a.m.
  Mr. Hamish Gray: I can put the fears of the Minister and his Whips at rest straight away by saying that it will certainly not be the intention of the Opposition to deny the Bill a Second Reading. We listened with great interest to what the Minister had to say about the Bill, albeit we had to wait some time because we first had to listen to the first half of a Labour Party political broadcast on participation.
  When the Minister reached the Bill, he was fairly explicit, but a considerable number of points will require clarification. We believe that the removal of doubt as to the validity of the participation agreements already made with the companies is very important. Indeed, it is as important for the companies as it is for the Government. For that reason, we shall certainly not seek in any way to try to
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  hold up the Bill. We shall be co-operative in Committee, but a number of points will require amendment, and I hope that the Minister will be sympathetic to the suggestions that we put forward.
  This is a small Bill but behind its innocent appearance there lie significant implications. There are factors which require careful probing. Many points merit explanation, and the Minister has only touched on those explanations this morning. The Bill will put great power into the hands of the Secretary of State both on licences and over industry, and the end consumer who depends on the oil companies for his supplies could also be considerably affected.
  The Bill removes all the safeguards provided by the Restrictive Trade Practices Act over the exercise of the power of the Secretary of State. Regrettably, there is little evidence so far that the present Secretary of State's interpretation of "broad national interest" will mean anything more than the imposition of doctrinaire Socialism in the guise of control of the availability of petroleum. As the Minister has rightly pointed out, participation agreements differ, but in the broad pattern there is a provision for the licensee to obtain the return of all or part of the 51 per cent. of oil to which BNOC has been given access at market price.
  Linked with this provision is a further provision for the sharing of information by which such information is made available to the Secretary of State and BNOC by the licensee. The scope of consultation may be considerable, covering the entire operations of a company in so far as they relate to North Sea oil either directly or indirectly, and as they relate to prices. Presumably, it is in the light of this consultation that the Minister will make his decision on whether the licensee will be entitled to the return of participation oil. The Government appear unwilling to spell out the criteria that will be used. They must produce something more than "the broad national interest".
  I hope that the Secretary of State will be able to assist the House by answering one or two questions at the end of this debate. First, will the right hon. Gentleman attempt to influence the export and import of petroleum and petroleum products? We must bear in wind that North Sea oil is of high quality but for many purposes it needs to be used with foreign

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  oils to achieve economic results. Will the Secretary of State be attempting economic judgments of this kind on his own? Will the Secretary of State force the oil companies to discriminate between customers, and will it be the intention of the Government and the Secretary of State to attempt to force licensees and their customers into activities and investments favoured by him which may be quite uneconomic?
  The Minister has dealt with the general policy of participation followed by the Government and he has indicated in the House and outside the general acceptance of these policies by the industry. The industry does not have much alternative but to accept these policies. If the Minister is twisting the arm of the person with whom he is negotiating by suggesting that, if he does not co-operate, he will be deprived in some other way in the future, it is hardly fair for him to say that all the negotiations have been purely voluntary and that the participation agreements have been reached without any difficulty.
  The Secretary of State for Energy (Mr. Anthony Wedgwood Benn): Before the, hon. Gentleman leaves that point, may I ask whether he can think of a precedent in the whole of human history in which people have been queueing up three-deep to have their arms twisted in the new round of licences that we have just recently launched?
  Mr. Gray: The point is that the actual agreements which are being negotiated are being negotiated by the Government using this very weapon, and in future those who are queueing up will not be accommodated unless they agree with the Government. It is as simple as that. It is not fair to say that those are all wholly voluntary agreements. There are a few more points about which the Secretary of State will not, I think, feel quite so amused.
  We could have a long debate about the effectiveness of Government policies or otherwise and the success of the BNOC, but I shall return briefly to those in a few minutes. In the meantime, I would just comment on what my hon. Friend the Member for Gosport (Mr. Viggers) said, because he really put his finger on the whole question of the North Sea development and its success. Suc-
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  cessful North Sea development has been achieved despite the BNOC—not because of it. It has been achieved by the private sector. It has been achieved by BP, by Shell and by Esso and other private companies which have pumped money into the development. That is where the success of North Sea oil has come from.
  The Minister is absolutely right in saying that it is a success story, but it is a success story for private enterprise and certainly not for Government control. If this Bill highlights anything, it highlights the total incompetence of the Secretary of State and his Department—sheer incompetence. The reason that I say "incompetence' is that it highlights, first, the lack of thought which went into the whole creation of the BNOC and, secondly, the lack of thought and the haste with which the legislation was produced. This provision should have been included, surely, in the Petroleum and Submarine Pipe-lines Act at the very beginning.
  During the Committee stage of the Petroleum and Submarine Pipe-lines Bill, the Minister at the Department of Energy gave the following assurances regarding BNOC. During the thirteenth sitting, he said, referring to the Fair Trading Act,
  "as the Act stands, it will apply fully to the activities of the British National Oil Corporation".—[Official Report, Standing Committee D, 24th June, 1975; c. 806.]
  Earlier, during the eighth sitting, he said,
  "the BNOC will not under any circumstances attract Crown privilege or immunity…these privileges do not attach to the BNOC while it acts as agent…in all respects the British National Oil Corporation will be subject to the law in the same way as any other body".— [Official Report, Standing Committee D, I7th June, 1975; c. 404.]
  It is not unusual for us to have mistakes in Government legislation or to have weak legislation presented. The Minister referred to the Oil Taxation Bill. I would ask him to have a look at the original Oil Taxation Bill and then to look at the finished article. The two hardly bear any resemblance at all, thanks to the amendments forced by the Opposition in an improvement to the Bill. The Oil Taxation Bill is an example of where a responsible Opposition have worked with the Government in an effort to improve the legislation and where we succeeded in improving it.
  Dr. J. Dickson Mabon: It is the function of a good Opposition always to seek to improve Bills. It would be an incredible situation for a Bill to be promoted by a Government and to be completely unamended. It would be most extraordinary for a Government to be so wise. Therefore, I accept the idea that there should be constructive amendment. But the hon. Gentleman must not confuse the business about Crown immunity, to which I referred in my opening remarks.
  The BNOC as the then Minister of State described it is still precisely in the same position today as when he described it. There is no suggestion in this Bill of changing the position of BNOC at all. The argument about Crown immunity which we have heard is an argument for saying that we do not need this Bill. This is part of the Government's interest on behalf of the British people as a co-signatory of these agreements. That is where the argument for Crown immunity is brought in. But we do not wish to rely on that. We wish to rely on this Bill to remove any possible doubt about the nature of the agreements.
  Mr. Gray: I am grateful to the Minister for clarifying that point. I am also interested in the fact that he has stated that he would have no objection to considering amendments, because we shall want to put down a number of amendments to this Bill. I hope that he will sympathetically consider them.
  Mr. Macfarlane: In view of what my hon. Friend has been saying about the drafting of past legislation, does he not agree that most of us who have taken great interest in energy matters in the past few years have a jaundiced view of the drafting ability of the Energy Department, because in the Energy Bill, with all those discussions on crises, and the Coal Bill and the Nuclear Industry (Finance) Act, there were frequent errors of drafting? That, I think, is the criticism that we would level at the Secretary of State and his colleages in the Department.
  Mr. Gray: I agree with my hon. Friend. I shall be coming to that very point on the drafting in this Bill, in which there are faults which I will mention in a few minutes.
  We find the Government entering into detailed and far-reaching agreements on
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  behalf of the nation, knowing that they are to some extent in default of the assurances that have been given in the House, to which I referred and with which the Minister disagrees, and unsure of whether they are even legal. It would be our hope and our intention to help with this Bill in order that any doubt about that should be removed, because we wholly accept that it would be most embarrassing, not only for the Government but for the nation, if it were found that agreements were not legal. Despite the time that the Government have had to consider this legislation and to prepare it—after all, it is only a two-clause Bill—they have still got it wrong. They have not yet been able to get it right.
  I refer to Clause 1 (3) (c). It refers to activities connected with petroleum "beneath the waters" of the United Kingdom Continental Shelf, whereas I understand that the participation agreements apply to petroleum "won and saved." This is something which obviously the Minister will want to look at. It is something which we shall have seriously to consider in Committee, But I use it just as an example of the general incompetence of the Government in these matters. The Government have had all this time to think about this, yet they still cannot get it right. But they will get it right before it leaves Committee: we shall see to that.
  On any interpretation, participation agreements between BNOC and the oil companies must be judged a restrictive practice, because, in the first instance, they reduce competition. They reduce the ability of the oil companies to market crude oil. They must ultimately affect prices if BNOC takes and markets substantial quantities. They must create a United Kingdom monopoly in North Sea crude oil for the BNOC. Therefore, it seems almost inevitable that they would infringe in one way or another.
  The Bill is designed to avoid registration under the Restrictive Trade Practices Act. Should such matters have been referred to the Registrar, it is almost certain that he would have wished to have test cases, so it may be, in fact, that the Government have been breaking their own Act already. The Government already seem to be evading the Restrictive Trade Practices Act and, of course, this

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  evasion must be legalised if we are to proceed in an orderly fashion.
  Surely restrictive trade practices or the creation of monopolies and the limitation of competition are just as much undesirable collusion if they are performed by a Government as if performed by the private sector—probably even worse if they are performed by a Government. Therefore, the effect of the Bill in exempting participation agreements from appearing on the public register may be to make these treaties between the Secretary of State and the companies secret treaties.
  Dr. J. Dickson Mabon: They are not secret.
  Mr. Gray: They are placed in the Library after they are concluded.
  Dr. J. Dickson Mabon: Yes.
  Mr. Gray: That is not good enough. They were secret at the time they were concluded. Neither Parliament nor the people have any access to the vital considerations affecting them. The Secretary of State frequently talks about disclosure of information and about open government This must surely work two ways. We shall have to rely solely on the Secretary of State in this matter.
  We believe that to give the Secretary of State completely unfettered control over the disposition of a very large part of North Sea oil is to introduce a degree of uncertainty into the industry which could actively discourage future investment. There is no confidence that the Secretary of State will not use his powers in an arbitrary and, indeed, capricious way, the only consistency being a determination to institute specifically Socialist planning. That is a fear widely held in the country at present. Indeed, it is a fear perhaps held to some extent by some Members on the Government side as well as Opposition Members.
  Under the Bill a participation agreement is basically what the Secretary of State chooses to say it is, and the definition is at his discretion. It can be sufficiently wide to catch not only participation agreements but the associated consultation agreements. This worries us, because we think this must be controlled very carefully indeed.
  Why do the Government fear the registration of agreements? Why do
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  they dislike the thought of such arrangements being made public before they are agreed? What have the Government to hide? Have the Government anything to hide? On the present showing the agreements have the appearance of being the creation of those who seek to control one of the commanding heights, if I may so describe it, on the road towards a Socialist centrally planned economy. The Government will do more or less anything they can to achieve this.
  A remedy could be to lay all participation agreements before the House. Indeed, this has already been suggested by the Public Accounts Committee. The Department of Energy has turned down that suggestion. Why should not the House have a chance of considering these agreements?
  Dr. J. Dickson Mabon: I said specifically in my earlier remarks, just in case some hon. Members did not know, that we place the agreements in the Library of the House of Commons.
  Mr. Gray: The Minister is quite right—of course he does—but that is after the agreements have been completed.
  Dr. J. Dickson Mabon: It cannot be before.
  Mr. Gray: Why not? Why should not Parliament consider what the Government are doing in these matters? The Secretary of State wants open government. He frequently talks about the necessity for everything to be available to the public and to Parliament. Why should not Parliament have a chance to discuss them? The Public Accounts Committee sees no reason why Parliament should not have a chance to discuss them.
  Dr. J. Dickson Mabon: With respect to the hon. Gentleman, agreements can only be discussed after they have been agreed.
  Mr. Gray: Surely the criteria can be discussed by Parliament. Surely the outline agreement can be placed before Parliament. There is no reason why that cannot be done. The Minister is merely presenting Parliament with a fait accompli by placing the agreements in the Library after the whole thing has been concluded. However, there will be an opportunity to discuss that aspect when—
  Mr. Bean: I am sure that the hon. Gentleman would not want to give the impression that where any Government Department engages in consultations with industry all such matters should come before the House before any conclusion is reached. As he knows very well, many Departments are engaged continually in negotiations with industry about one thing or another. It may be about industrial location or assistance under the Industry Act 1975, and so on. In no case whatever have any Government, Conservative or Labour, ever been in a position where they so broke confidentiality that they put such matters before the House prior to the decisions being reached with the industrial enterprises concerned.
  I am sure that the hon. Gentleman, in his anxiety to make a political point, would not want to give the impression that every single discussion between a Government Department and an oil company should be made public. That would utterly destroy all confidence in negotiations between Government and all industries.
  Mr. Gray: The Secretary of State is certainly not correct in what he says. I would not suggest that all these negotiations should come before the House, but I would certainly suggest that in this instance participation agreements should come before the House, because they are of a very special nature. They involve enormous sums of money and enormous questions of policy. They should come before the House so that hon. Members may have a chance to discuss them. I adhere to that view.
  I am not trying to make a political point at all. I am supporting the Secretary of State in his own wish for open government, and I see no reason why this cannot be done. I do not think that this view would have been expressed by a body such as the Public Accounts Committee unless it had carefully considered all the implications of doing such a thing.
  I reiterate that we believe that it is right that the Bill should be given a Second Reading. We believe that it is right that all doubt as to the validity of agreements which have been made should be removed. When the Bill goes into Committee we shall be constructive and
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  try to help the Secretary of State to get his legislation as quickly as possible, but he will appreciate that the Bill has far-reaching implications and that there are a considerable number of points that we shall wish to discuss in Committee.
  11.45 a.m.
  Mr. Hugh Dykes: Having had the good fortune to catch your eye early, Mr. Speaker, on compassionate grounds, I shall speak briefly in order to allow other hon. Members to make their considered speeches. I apologise in advance to Ministers and colleagues for having to leave the debate early for compassionate reasons.
  I fully endorse the remarks of my hon. Friend the Member for Ross and Cromarty (Mr. Gray), as the spokesman for the Official Opposition, in expressing anxieties about the Bill. It is very easy and tempting for Ministers to say that the Bill is all right, that it is a routine and tiny matter, that there is no need for the Opposition to be worried or fussed about anything in it, and then to look impatient when we seek to prolong the arguments. All our arguments will be shown, both on Second Reading and in Committee, to be in support of legitimate anxieties. They are not matters which ought to be brushed aside as if they are irrelevant or tedious and as if Ministers are far too busy to deal with them.
  I must declare an interest as an adviser —perhaps not a very good one—to a small, British, independent oil company.
  I echo the anxieties of my hon. Friend the Member for Ross and Cromarty about the Bill. Often it is all too easy to assume that, because a Bill is short, it is a simple one, and, like my hon. Friend, I am concerned about its fundamental nature. I am, indeed, extremely worried about Clause 1 and in particular about subsection (1).
  In the proposed certification process an enormous amount of discretion is given to the Secretary of State. It is a very substantial and extensive power, and I should have thought that the clause must be a perfect candidate for amendment, tightening up and improvement in Committee, even if the Committee stage is fairly short and realistically curtailed because of the need ultimately to get the legislation through.

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  I know that the definition of "participation agreement" is widened out to some extent in Clause 1(3). Even so, subsection (1) provides such a worryingly wide discretionary power to any Secretary of State—perhaps more than even the present Secretary of State would dream of in his wildest moments—that I should have thought that it needed to be tightened up. That is one aspect of the naturally continuing anxieties of the Opposition—by which I mean the Official Opposition and not the Liberals, who do not seem to be here today—about the British National Oil Corporation.
  I agree with the right hon. Gentleman when he says that in the course of developing commercial agreements between companies and State entities it would be difficult to give a blow by blow account of how the outline agreement was developing. But the way in which publication is handled needs to be reinforced and strengthened so that we get to know the outline agreement either at the penultimate stage or at the final stage.
  People are worried about the BNOC and its power. The industry worries about the way in which it operates in these negotiations and conversations. I had an exceedingly long Written Answer from the Minister of State on Monday about participation agreements so far concluded in the three groupings. In Group C there are still things to be negotiated and agreed, but it is much smaller in relation to the total list than the others. A lot has been done.
  The Secretary of State looked angry and irritated on Monday at Question Time when these matters were put. I do not know whether that is revealing of his attitude. But it cannot be denied that many companies and boards of directors are fed up with the excessively coercive approach of the BNOC in these negotiations. There seems to be among senior officials of BNOC the idea of empire building, and some people wonder what all the 500 staff are doing. Perhaps certain senior officials are verging on being carried away by the power of negotiating with these private companies.
  There is a dictatorial attitude in general terms. For example, so often is there the sending of messages which do not give boards enough time to make a considered
  998
  response. The Government will be doing themselves and the BNOC a disservice if they dismiss these complaints as hyperbolic. The Secretary of State in his supervision of the BNOC should ensure that such a state of affairs does not continue or develop further.
  In its news letter of 13th October, that well-known Left-wing firm of stockbrokers Wood Grundy said:
  "The great interest of BNOC relates very much to the changing UK political scene; the importance of the North Sea in British economic life. BNOC has always issued plenty of words, but now Government Ministers and the Department of Energy seem to be sustaining quite an amazing outpouring. For example great coal reserves have been 'discovered' under the Southern UK Gas Area—they have been known for 10 years. This is surely part of the energy twaddle that will fill out Labour's forthcoming General Election campaign Unfortunately, the star in Labour's crown, BNOC, adds nothing to control over or revenues from the North Sea, and therefore does with 500 people what could be done with nobody. You 'don't need nobody to do nothing'."
  Perhaps "twaddle" is an unfortunate word and some other should have been chosen. That is an exaggerated version of the truth, perhaps, but it reflects genuine anxieties in the industry and among large sectors of public opinion.
  I turn now to the European aspect of the anxieties about this kind of legislation and whether the BNOC should be exempted from the generality and provisions of the Restrictive Trade Practices Acts. The Secretary of State has a newfound enthusiasm for the EEC, based on the Culham decision, which, I remind him, was made by majority vote. I am sure, therefore, that he will accept that there is a Community point involved in, this matter. Does this legislation infringe any of the Community laws on competition policy, or the Treaty of Rome?
  I sent a message to the Commission this week asking for an opinion. The reply is an indirect quotation of the Commission's own words. It says:
  "The Commission felt that the financing of BNOC without reference to the normal market rates, its freedom to determine directly or indirectly, indirectly, selling prices, the point of delivery and refining and to purchase operating licences free from the competitive bidding of other oil companies were contrary to the rules on competition. Articles 85, 86, 90 and, 92 are apposite."

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  Those are Articles of the Treaty of Rome. The reply went on:
  "I feel that the Commission is unlikely to take action which might antagonise a Labour Government i.e. reference to the Court of Justice."
  That is an interesting and profound point to be raised at this stage.
  Mr. Benn: It is normal when quoting from a document to lay it. Perhaps the hon. Gentleman could lay the letter he has referred to so that it could be studied. It is not clear from what he said whether it is just a letter from a friend or an official letter on behalf of the EEC. Would he be so kind as to make it available for hon. Members to study the full details of that letter?
  Mr. Dykes: I shall do so with pleasure. I must emphasise again, lest the right hon. Gentleman gets the wrong impression that at this stage I am asking a question. It is a legitimate question. This is a huge issue and it is legitimate for this side of the House to ask such questions. The impression may be given by the ease with which the Bill may be passed—I am making no predictions about the future in that respect—that there is no relationship between such national legislation and anything in Community law.
  The Secretary of State, with his newfound feeling for the EEC and the way it is helping this country, in all sorts of ways, to develop the high technology frontiers that he is so keen on, must undoubtedly wish to assuage any worries in the Community and elsewhere that this kind of agreement may infringe the Treaty of Rome.
  11.56 a.m.
  Mr. Peter Viggers: This Bill is an unfortunate postcript to the Petroleum and Submarines Pipe-Lines Act. I agree with my hon. Friend the Member for Ross and Cromarty (Mr. Gray) that a compulsory—call it what you will—system which requires oil companies to give 51 per cent. participation to the Government may well be a restrictive practice. I am not sure that the Minister of State is right in feeling that the Bill might not be necessary. It seems to me that it probably is.
  The Government's participation policy has committed Britain to a high oil
  1000
  price. This was not necessary. The Government need not have committed themselves to supporting a high oil price, but they have done so by putting Government money into North Sea oil development. Many of the fields in the North Sea would not be commercial if the oil price were to fall. But, because the British taxpayers' money is committed, we are committed to keeping up the price of oil in the world because otherwise we should not be getting a proper return on our investment.
  Originally the policy of the Government was to call for voluntary participation, and I am sure that the words of the Chairman of Exxon will be burnt on the mind of the Secretary of State. He said:
  "The Government has said that the arrangement is voluntary. I am not volunteering."
  Dr. J. Dickson Mabon: He changed his mind.
  Mr. Viggers: The Government had to change their policy and to say that they would pay their share of the development costs from the outset of any development programme. It was that which caused many of the oil companies to take a different view. Indeed, I wonder whether, in the light of the facts which have emerged since, we would have had quite the arguments we had in Committee on the Petroleum and Submarine Pipe-Lines Bill. The more Leftward-inclined members of that Committee felt that they were getting what they wanted, but if they had realised that the Government would change their tune and fall into line with sanity, they would not perhaps have taken the attitude they did at that time in Committee.
  The point made by my hon. Friend the Member for Ross and Cromarty concerning participation agreements must be that, at the time of discussion on the Petroleum and Submarine Pipe-lines Bill in Committee it was thought that there would be a pattern of participation agreements into which the different oil companies would fit. There has been no such thing. That is the document we should like to see in the Library and debate in the House. But there is, of course, no such document or pattern of agreements.
  Participation is what the Government say it is. Participation agreements are the

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  result of the kind of private arm twisting between Government and the private sector which in public the Secretary of State says he so deplores. Participation agreements are different in every case. There is no pattern. It depends on what one can get away with. I leave the House to consider whether that is a proper approach for the Government to take to oil companies.
  The question of pricing is important. In the publication Coal and Energy Quarterly the Secretary of State wrote
  "In Saudi Arabia I learnt that they would have the opportunity by 1979 to vary oil production between 9 m. and 14 m. barrels a day almost at the turn of a tap. A variation of that order—the equivalent of at least two North Seas—could have a major impact on price without affecting Saudi revenue; if the taps were turned on the price would come down but the Saudis would sell more, whereas if the taps were turned off the price would go up"
  That sets out the case fairly accurately and clearly, but it is significant from the taxpayers' point of view that the Government have committed taxpayers' money to the development of the North Sea which means that the British taxpayer needs to see the price of oil kept up.
  That risk need not have been taken, It would have been perfectly possible for the Government to get the revenue they seek from the North Sea without requiring participation by British taxpayers. It is not necessary for the risk to be run.
  I have four points to advance concerning BNOC. The first is that the corporation by its existence is inflationary. When set up it needed to recruit staff. Large advertisements appeared in the heavier Sunday newspapers recruiting people. People joined BNOC only if they thought they could get better pay and conditions, and the effect in the oil industry was that a number of people were poached away by inducements to higher salaries.
  I have not yet declared my interest in an oil company—it is a theoretical rather than practical interest as yet, since the company has not found any oil in the North Sea.
  My second point is that the corporation is politically subservient. In the Petroleum and Submarine Pipe-lines Act power is given to the Secretary of State to give specific directions to BNOC, which means that instead of allowing
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  BNOC to form its policy decisions on a long-term basis, the Secretary of State can meddle.
  My third point is that BNOC is different from other oil companies in that it does not pay petroleum revenue tax, and it is not possible to compare BNOC's performance with that of other oil companies.
  The fourth point, however, is most important of all. It is that BNOC, only recently set up, will soon be one of the 10 largest oil companies in the world. No doubt the Secretary of State is proud of that, and no doubt the Government think it an admirable creation. But the Government may well be giving BNOC duties which are beyond its competence.
  How can one of the 10 largest oil companies be set up from scratch in just a few years with powers to make decisions on a wide-ranging nature of North Sea oil development when as a team it has not had the long experience of BP, Shell, Esso and the other international oil companies? Through their policy the Government have given BNOC responsibility for taking these wide-ranging decisions which may well have been better left to the experts in the oil companies than to this subservient State oil concern.
  It is quite clear that the 51 per cent. majority participation—which sweeps aside the equality and true participation of a 50 per cent. stake—is a kind of political virility symbol for the Government. I visited Norway and met people who work with Statoil, the Norwegian oil company. No one can say that the Norwegians are not good Socialists, but they were puzzled by the 51 per cent. that the British Government are seeking to acquire in the North Sea. They said that that was not participation, but domination and that if the Government had wanted genuine participation they would have gone for 50 per cent. By giving 51 per cent. control to BNOC the Government are giving it more power than it can handle.
  Mr. Macfarlane: Does my hon. Friend not agree that the long-term objective of the Secretary of State is to see the total annihilation of the private oil industry as it exists? This is the one main non-nationalised energy resource in the country. Its annihilation is the sole objective of the Labour Party's Home Affairs Committee in the long term.
  Mr. Viggers: I fear that my hon. Friend is right. If we were to approach this issue in a non-partisan spirit I think that the Government would accept that they have moved some way towards a more commercial and sane approach in their involvement with the oil companies. We on this side would similarly agree that it would be politically immature and foolish of us to sweep away BNOC by scrapping it forthwith if we came to power. We must live with what is there.
  I urge the Government, however, to reconsider this issue of the 51 per cent. As long as the emotive 1 per cent. remains, I fear that my hon. Friend is correct and that the Government are seeking to dominate and annihilate the private sector in the North Sea.
  I believe that the Bill should proceed, although I feel that there are a number of areas which need to be examined in Committee. I hope that the Committee and eventually the House will have the opportunity of giving more thought to the application of funds from the North Sea. I support the Director-General of NEDO in saying that it is a scandal that we have reached this stage without giving more thought to the application of North Sea oil revenues. Those revenues are not income at all. They are depletion of capital. We are depleting capital reserves and we should be applying the finances now to rebuilding our capital base instead of regarding the money as income.
  12.8 p.m.
  Mr. John Hannam: In this short debate we have heard some excellent and well-informed contributions. We do not intend to oppose the Second Reading, but my hon. Friends and I are all agreed that sufficient doubt and worry has been expressed in the debate to underline our concern about the method which is being chosen for dealing with this problem.
  Retrospective legislation such as this is obviously bad enough on any account, but especially so in view of the statements made by the former Minister of State for Energy to the effect that BNOC would be fully subject to the restrictive practices legislation and would not in any circumstances attract Crown privilege or immunity.
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  One would have assumed that the Government had clearly examined all the likely future operations of BNOC—oil extraction, refining, machinery for offshore technology, training and even, possibly, petrol retailing. And we would have thought that the Government would be confident that BNOC would operate under normal competitive trading rules and regulations. Presumably it was felt that Section 29 of the Restrictive Trade Practices Act, which deals with agreements made concerning the national economy, would apply to oil participation agreements. But in spite of the long debates held in Committee and the assurances given to hon. Members who were anxious about the non-competitive nature which could develop in BNOC, the Government have botched it up. There is not other word for it. The Government have brought forward retrospective legislation.
  National confidence in the Secretary of State's ability to handle our affairs has been ebbing in recent weeks, especially since his equivocation on the miners' productivity deal, followed by his lack of activity during the early days of the power workers' dispute. Many hon. Members must be surprised to see the right hon. Gentleman here today to reply to the debate on this small Bill. I was surprised at first but, on second thoughts, I realised the right hon. Gentleman's anxiety to seize on any opportunity, however small, to rebuild his reputation and possibly retain his job.
  I therefore hope that when the Secretary of State winds up the debate he will answer our questions on some of the disturbing aspects of the Bill. Not only is this retrospective legislation—which nobody likes, unless it is a repayment of tax or a rise in salary—but it is a belated and unsatisfactory rectification of an oversight. We find that, as usual with this politically motivated Minister, he is once again, quietly and surreptitiously, extending through this small Bill the powers of central State control into a hitherto successful private sector of industry. Just as the recent Coal Bill gave new powers for a State industry in the aggregate extraction industry, so this Bill, if it is not amended, will give the Secretary of State new powers to acquire confidential information about the activities

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  and contracts not only of the oil companies but the oil consumption companies.
  Additional powers will be given for the Government to determine the movement of oil and operating decisions of oil companies and consumers. The Minister will, without parliamentary scrutiny, be able to force British and international oil companies to bend to his will on such agreements.
  My hon. Friend the Member for Ross and Cromarty (Mr. Gray) referred to the illuminating reply that the Secretary of State gave to the hon. Member for Bolsover (Mr. Skinner), wo is not here today, on 17th January. The right hon. Gentleman gave the political game away with regard to the BNOC. He explained the tactics that he would use—in applying heavy pressure and leaning on oil companies to secure participation and bullying tactics, such as the threat of non-successful applications for licences. These fears have been expressed in our discussions with oil companies. It is feared that such pressure will be used to secure compliance in agreements which will not be subject to the Restrictive Trade Practices Act. Many of my hon. Friends have a wide knowledge of the oil industry and we heard excellent contributions to the debate today from my hon. Friends the Members for Gosport (Mr. Viggers) and Harrow, East (Mr. Dykes).
  We well know the sort of hidden persuaders that will be used to secure participation agreements. It will not be necessary to use rubber truncheons because there are much more effective methods of threatening the commercial prosperity and future of companies which will need licences for future exploration.
  There is a great deal of unease among BNOC's shotgun partners in these oil deals. They are worried about the increasing powers of control that the Government will have over trading activities and the information that they will have to disclose. All the general assurances that have been given by the Government that the Secretary of State's decisions will always be made in the broad national interest do not necessarily reassure those who are being asked to invest the large sums of money that are necessary to develop oil in the North Sea. Knowing of the Secretary of State's activities in other policy-
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  making areas outside the House—though not far away—one is justified in thinking that he might use his powers of direction in an arbitrary way to achieve his often-declared goal of specific Socialist planning.
  The Bill covers not only existing and new participation agreements but consultative agreements and any commercial venture with which the BNOC may be involved. Such wide and unfettered ministerial powers will mean that the Secretary of State will not be accountable to Parliament. It is strange that we hear so much from the Secretary of State about democracy and open government, and yet every piece of new legislation contains further creeping powers for central Government and less accountability.
  The original concept of the National Oil Corporation becoming a 51 per cent. operating partner has been replaced by the concept of control by acquisition of the oil itself. The Secretary of State will have discretionary powers of control over the sale-back of oil to the companies. Immensely restrictive powers will reside with the right hon. Gentleman. We want to know how he plans to apply those powers and why the existing safeguards contained in Section 29 of the Restrictive Trade Practices Act are not adequate. They deal with exemptions in the national interest.
  The oil consuming industries, because of their agreements with BNOC, will also be affected by the disclosure of information requirement and will be dependent on the Secretary of State's decisions for their oil supplies. All this, including consultation documents leading to participation, is secret and undisclosed. We know that, following pressure from the House, the final participation agreements are put in the Library, but it is the pressure that will lead to those agreements that concerns the oil companies and the oil consuming industries.
  Without doubt, this country will need vast investments in the oil sector. In the past we have seen the justifiable successes of the private sector, but in future even vaster investments will be necessary if we are to continue to release the full potential of our resources. My hon. Friend the Member for Gosport made a valid point about the way in which the creation of BNOC has affected prices. What security

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  shall we have for these future investments if wide and unfettered powers are to rest with the State?
  By being exempted from the protection that is given to consumers under the Restrictive Trade Practices Act, BNOC will also be exempted from Section 41 of the Act, which provides protection from disclosure of information. It causes great concern that the Bill is so loosely drawn. We hope that we shall be able to tighten it up in Committee. We regard the hon. Gentleman's remarks about the Opposition being encouraged to tighten and redraft Bills as a good pointer for us in Committee.
  Control over oil is the basis of most Government activity in this matter, but that can be achieved without endangering the confidentiality of companies involved in treaties with the BNOC. That is our concern. We want to set a time limit on these restrictive trade powers and to ensure that the Secretary of State will be fully accountable to Parliament for any directions that he may issue.
  Section 29 of the Act requires that any agreement for exemption must be laid before Parliament and that requirement should be included in this Bill. It should also be extended to include the condition that any such order must, in the interests of the national economy, procure for the national economy the maximum benefit from North Sea oil. Let us retain the objectives of improving the national economy and of getting the maximum benefit out of oil instead of having politically motivated objectives. Only then could we be sure that political motivation would not be used to reduce the effectiveness of the oil industry and to extend State powers.
  This short debate will not, I suppose, produce any eye-catching headlines, unless the Secretary of State announces his resignation, and that would probably cause a slight stir in the Press. Nevertheless, my hon. Friend's speeches have brought to light some important questions that must be answered if the House is to be satisfied. The Secretary of State obviously regards this legal problem with a degree of seriousness or he would not be here and he must, therefore, deal with the questions that we have put.
  This short debate will not, I suppose, been resolved in the Bill or in the answers
  1008
  that the Minister has already given to my hon. Friend the Member for Sutton and Cheam (Mr. Macfarlane). What criteria will the right hon. Gentleman use in determining how and why oil should be resold to certain companies? How will he safeguard against the disclosure of confidential information, and what degree of control will he have over the oil sales of BNOC and other companies? We should like answers from the Government on these points and we should like to know which of the safeguards contained in the Restrictive Trade Practices Act will be removed. It is not sufficient for the Government to argue that participation is in the broad national interest. That is an argument which could be used to justify any piece of legislation. But the effect of this policy on downstream oil users could destroy the investment confidence and security which might have accrued to them by virtue of the discovery of North Sea oil.
  We hope that this Bill will be amended in Committee so that some safeguards are retained from the now disappearing protection of the Restrictive Trade Practices Act. We insist especially that this Parliament should have the opportunity to check continually on the activities and decisions of any Secretary of State so that the national interest will truly be protected in a real and meaningful way.
  12.20 p.m.
  The Secretary of State for Energy (Mr. Anthony Wedgewood Benn): This has been a short debate. Some important matters have been raised, and I shall try to deal with them. I notice that the debate was not thought important enough for the Opposition spokesman to attend. However, I am grateful to those Opposition Members who have been able to be here to make their contributions.
  Mr. Gray: My hon. Friend the Member for Bridgwater (Mr. King), who is shadowing the right hon. Gentleman, is unfortunately absent today because he had a long-standing engagement which he could not cancel. He is extremely sorry not to be here. But I have no doubt that the right hon. Gentleman will hear a great deal from him in the future.
  Mr. Benn: As a matter of fact, it is his silences which amuse me most. Obviously, he has been unable to persuade

  1009
  the Shadow Cabinet to give any Opposition time for the motion which he has tabled. I thought that he might be with the Leader of the Opposition today making one last effort to persuade her to support his cause.
  This is an important Bill. It is important both for legal and for policy reasons. At least on the main point, which is concerned with the removal of doubt, I understand that the Opposition agree that it would be undesirable if the arrangements that I have reached with the oil companies were subject to uncertainty, and that Parliament should put that right. That is the only matter that the Bill is about, and I shall deal with that first.
  Because it is doubtful, I cannot answer specifically hon. Members' questions about whether the agreements would fall under the Restrictive Trade Practices Act, whether they would be registerable and, if they were registrable, what the outcome would be, and what rôle Crown immunity might play. As we have been sensitive in dealing with each company individually, there is not a standard participation agreement. The companies persuaded us very quickly that it would be sensible to take each case on its merit.
  This obviously is a lawyers' Bill. It is not a Bill which has been drafted to add anything politically to our policy. Because of that I hope that the House will feel able, after proper scrutiny in Committee, to remove that uncertainty. As I say, that is all that the Bill is about.
  However, I must deal with one or two points concerning uncertainty about the RTPA, notably the question of the EEC. The hon. Member for Harrow, East (Mr. Dykes), who I know has to leave early, alluded to a document. In accordance with the courtesies of the House, when I asked him whether he would agree that it be laid, he gave me this copy, and I have it before me. I should like to take seriously the point that he made, but I begin by reading the telegram from which he quoted. It is headed "Attention Mr. Hugh Dykes" and it is from a Mr. Biller, who I gather is an energy official in the European Conservative Group in the European Parliament in Strasbourg. It is dated 17th November 1977. So that the House may consider it, the full text is as follows—this is not from the Commission at all; it is from a
  1010
  Conservative official, presumably employed by the Conservative group—
  "Although competition policy falls within Alan Reid's competence, I visited DGIV about a year ago wearing my energy hat in order to discuss the position of BNOC. Lady Elles was one of the several Conservative peers with a special interest at that time. The Commission felt that the financing of BNOC without reference to the normal market rates, its freedom to determine directly or indirectly selling prices, the point of delivery and refining and to purchase operating licences free from the competitive bidding of other oil companies were contrary to the rules on competition. Articles 85, 86, 90 and 92 are apposite. I feel that the Commission is unlikely to take action which might antagonise a Labour Government, i.e. reference to the Court of Justice. I strongly recommend that you discuss this subject with Michael Portillo at the Conservative Research Department. I shall show your telex to Reid in case he has anything to add."
  That document is not a statement by the Commission. I want the House to appreciate that, because this is one of the most important documents to have been brought, bearing on Conservative policy. It is a statement by an official paid for by the Conservative groups in Europe which have gone as Conservatives—not representing British interests—to the Commission to seek, if they can, to mobilise the Commission against the British National Oil Corporation.
  Mr. Dykes rose—
  Mr. Benn: I will give way to the hon. Gentleman in a moment. I am now interpreting the document. A year ago, the Conservative official went to find out whether the Commission would say something about BNOC. He then reported in a political telegram—for this has no official status—the view which he attributes to the Commission. Then there is a reference to the fact that a Labour Government are the best protection for BNOC, which is interesting, and then he suggests to the hon. Member for Harrow, East that the Conservative Central Office in London might get on to the Commission in Brussels to see whether it could hamper the work of the British National Oil Corporation. That is my interpretation.
  Mr. Dykes: This is why the right hon. Gentleman is regarded with some dislike in this House. He does a disservice to the House when he is so anxious always to twist people's words.

  1011
  May I make two main points and one subsidiary point in response to what the right hon. Gentleman said? First, I gave him the message which I had, in good faith. Secondly, it mentions the names of officials who cannot defend themselves in public. They are not civil servants. None the less, they are officials of political groupings in the European Community. Next, I made it clear when I referred to that message that there was no need for the Secretary of State to create anything sinister about the preamble and the end comments. Those are just routine administrative matters. I made it clear that the central core of the message was not the Commission directly, but was an indirect quotation of what the Commission had said at that time. Finally, I ascertained on the telephone after receiving that message that it was the interpretation put in good faith by that very competent official in the European Conservative Party in the European Parliament on the Commission's feelings, opinions and attitudes about the relevant Articles in the Treaty of Rome and the effects that BNOC's operations might have on competition policy.
  It is in good faith. I ask the Secretary of State to respond to it in good faith. Why try to twist it and make it sound sinister and worse than it is?
  Mr. Benn: The hon. Gentleman has now explained absolutely why documents have to be laid when they are quoted. When I heard his words—and it may be that I misunderstood them the first time—I took it that he was paraphrasing a Commission decision on this matter. I had no idea that the message was from a Conservative official who sent him a telegram about a visit he had paid a year ago, and doing something else as well.
  The reason why this House has provided that people cannot quote from documents without laying them is so that other minds may be brought to bear on documents which may be open to different interpretations. I accept that the hon. Member for Harrow, East was hoping to help the House and to give his view. But he must also accept that, if he chooses to do that, others may interpret it for themselves.
  1012
  I reaffirm my interpretation of this telegram. I make no criticism of the hon. Member for Harrow, East. He has fulfilled one of the greatest courtesies which can be performed in the House in sharing his information with other hon. Members.
  My interpretation is that Conservative Central Office has been seeking to mobilise the European Commission against the British National Oil Corporation and that, without any message from the Commission itself, a flood of information backwards and forwards is in process and it is recommended that it be mobilised if that is possible. It is the Government's view that our policy is compatible with our obligations. The Conservatives are seeking to mobilise the Commission in order to weaken the BNOC for the benefit of the oil companies, whom they have represented from the beginning of our oil policy.
  Mr. Dykes: Therefore, the Secretary of State can presumably categorically reassure us that the European Commission or the relevant DG Departments, mainly DG4, are not worried about the monopoly or the anti-competition characteristics of BNOC?
  Mr. Benn: I have repeated the Government's position and I shall repeat it again. We are developing a policy that is compatible with BNOC's purpose and the nation's interest. What we have now got quite clear—and I hope the debate is fully and widely reported in light of what has happened—is that not a single Opposition spokesman from either the Front or the Back Benches—all of whom have candidly declared their interest—has at any stage spoken as if there could be any possible conflict between the international oil companies and the interests of the nation State.
  Everyone knows that in the history of the oil business one of the most difficult things has been for Governments to safeguard their own interests against what could be, and historically has been, an abuse of power by the oil companies. I am talking about other countries where oil has been discovered. Anyone who has studied the history of the world oil business knows that oil companies, if they are not made accountable to the people from whose territory the oil is drawn,

  1013
  are capable of developing their own interests at the expense of those of the nation State.
  Without naming them, there are certain countries in the Middle East which have far more oil than is in the North Sea—four or five times more—and populations that are far smaller than that of this country. Nevertheless the standard of living after the oil has been developed, exploited and exported is still very low per capita.
  To have a debate in the House of Commons without a single Opposition spokesman even being ready to recognise that that could happen in this country if we did not have a vigorous oil policy is an absolute disgrace. I say that without any personal discourtesy. I am making a much more serious charge here. It is a political charge against the party opposite, not a personal one.
  When the Conservatives were the custodians of our oil resources they gave licences to the oil companies without any petroleum revenue tax or any legislation to control the rate of depletion or any requirement that any gallon of the oil discovered in the North Sea would be available to the people of the United Kingdom. Of course at the next election alternative oil policies will be central. We inherited an oil policy from the Opposition that utterly ignored the interests of the Scottish people or the British people as a whole. The hon. Members for Harrow, East and Ross and Cromarty (Mr. Gray) know very well that in reality there was no provision under which the people of this country could have enjoyed the oil physically or a proper share of the revenue from it. My charge is that they have systematically represented in Parliament the interests of the oil companies at the expense of those of the British people.
  Mr. Gray: The right hon. Gentleman is determined to get the headlines one way or another but he will not get them that way. He knows perfectly well that if the terms of the licences awarded by the Conservative Government have not been attractive he would not be reaping the benefits of North Sea oil today. This is a straightforward point. When one goes back a decade or more one sees that not everyone saw the potential of North
  1014
  Sea oil. Some people had confidence in it but a great many people would not accept that it had the potential which has since been realised. We needed to attract capital, and therefore it was essential that attractive terms were given.
  The Secretary of State is making great play of a document that was quoted by my hon. Friend the Member for Harrow, East (Mr. Dykes), I had not seen this document—in fact I knew nothing of it—and Conservative Central Office had no part in it at all. My hon. Friend was perfectly entitled, as a Member of this House and with his contacts in Europe, to ask certain questions about the effects of BNOC's policies and to give a different opinion. That does not commit the Conservative Front Bench or the party in any way. The Secretary of State is always putting his own interpretation on things, and twisting them to suit his own arguments.
  Mr. Benn: The hon. Member, to whom politics are personal, does not understand a political charge when he hears one. The hon. Member for Harrow, East behaved with total propriety, and I have acknowledged that. All I am saying is that his speech and the document which he made available makes it quite clear that the Conservative group in Brussels is trying to get the Commission to say something that would damage the interests of BNOC and is suggesting that this should be taken up with Conservative Central Office in London. That is a political charge.
  What the hon. Member for Ross and Cromarty has said utterly confirms what I said earlier. These terms that the Conservatives gave to the oil companies were damaging to British interests. They were terms that were given consistently by the previous Government. After we had pursued our policy, which has been much criticised over the last two and a half years, we had 53 applications. With our deferred terms these applications involved 150 companies, and 51 blocks were applied for as well. The argument that they would not have applied under our terms is absolutely belied by what has happened. We have sought consistently to use the powers open to us by legislation in the Petroleum Revenue Tax to safeguard the national interest.

  1015
  Not only have our terms not damaged the number of applications in the fifth round, but my relations with the oil companies have not been damaged. The oil companies think that the Opposition are a pushover. The Opposition make little squeaks at us but the oil companies soon forget that. I still maintain that the Conservatives are not safe to safeguard British interests against the oil companies.
  This is a non-controversial Bill and I would not have dealt with these matters if they had not been raised by the Opposition. I had a two-minute speech prepared thanking hon. Members for their participation in the debate and their cooperation, but they have raised these other matters and I must reply.
  We have introduced PRT. The Conservative Party should have introduced it when they were in power, but they did not. We have introduced an Act which provides for depletion control and a regime for the oil companies. This entrusts to the Secretary of State certain powers for which he is accountable in the House of Commons.
  We have set up the BNOC, which operates commercially, and which is not in its commercial operations in any way exempt from the RTPA. We have negotiated participation which gives to the British Government and the British people the right to know what the oil companies are doing in certain important areas. It gives us the right to know about the policy which they pursue. This is done on a clear principle, which the House knows is the principle of "financially no better and no worse".
  The reason why our relations with the oil companies are better than the Opposition think is that we have been open with the companies. We are not seeking to use participation to increase the tax. That is done through PRT, the licensing arrangements, royalties, and so on.
  What we are doing is trying to put the Government of the day—whoever the Government happen to be—in a position to know the crucial decisions being made by the oil companies, and giving the Government of the day, with the assistance and authority of Parliament, some bargaining power in the matter. We are doing this without having broken with any of the companies with which we are
  1016
  dealing. This is because of long days of discussion and detailed examination of the problems. This brings absolute openness. The companies know our interests, and they would think us foolish if we did not defend the national interest, because nobody believes that the national interest and that of the major oil companies automatically coincide.
  That is the basis on which we work, but anyone listening to the debate would think that the oil companies find their relationship with us in some way disreputable. There is this hard debate, but the agreements that have been reached have been concluded after dealing with every point that the oil companies have raised, and any Government who failed to do that would be guilty of a serious derogation of duty.
  Mr. Hannam: Will the right hon. Gentleman accept that the powers that are increasingly residing in him personally as Secretary of State will allow him to discriminate in allocating the sales of oil, and the movement of oil, and that he, personally, can secretly use that power in the future without reference to the RTPA? That power will allow him, without coming to Parliament, to favour BNOC as against the private oil companies. It is therefore legitimate for us, as parliamentarians, to try to ensure that, in the national interest, development and research takes place before the right hon. Gentleman starts meddling in the affairs of these companies.
  Mr. Benn: I say to the House what I say to the oil companies. I am on this side of the table to safeguard, as best I can, the national interest in terms of jobs, the balance of payments, the utilisation of oil and investment, and the companies know that. If I were to sit at the table and not say what I have said to the House, the oil companies would think that I was a fool, or that I had something up my sleeve.
  I hope that the House has read the history of the oil industry. I hope that they have read the discussions between the Shah, the Saudis, the sheikhs and the American Government. What do Conservative Members think President Carter is doing now, but seeking, according to his lights, to get the oil companies to pursue a policy that he thinks is more in the interests of the American people?

  1017
  These discussions are open. What we have said is that this will be done on a no better and no worse financial basis. The basis of our revenue is the PRT, the royalty arrangements and the share investment where there is a 51 per cent. holding. The shareholding was a matter of tough bargaining, and anyone who says that we should sit back and leave it to what is called private enterprise—and any relationship between the oil companies and laissez-faire in the history of oil is entirely accidental—is wrong.
  There are enormously powerful forces at work in the world. The oil companies have large interests, large investments, large employing capacity and a large capacity to transfer money from one part of the world to another. If anyone thinks that that is not the reality of the international oil business, he is making a mistake. The only way in which a Minister can do what is necessary—I hope that it does not happen, but if by any chance the hon. Member for Ross and Cromarty has the responsibility for this task I hope that he will follow this practice—is to sit down and argue with the oil companies about safeguarding our interests. I do not object to the oil companies arguing about the interests of their shareholders, but when setting out an oil policy one has to ensure that the British interest is upheld.
  The hon. Member for Bridgwater said a short time ago that BNOC was a regulatory body. Had he telephoned my office he would have been told that it is not. It is a State oil company, of which there are many all over the world. The Americans have even been considering
  1018
  the idea. BNOC operates commercially in an advisory capacity to me and exercises no regulatory powers.
  There are no planning agreements. There are participation agreements to which BNOC is a signatory, but it exercises no regulatory powers.
  One thing that emerges from all the speeches made from the Conservative Benches on the subject of energy is their ignorance. The speech of the hon. Member for Bridgwater showed that. Had he attended the debates, read the Bill, and heard the arguments he would not have said that BNOC was a regulatory body. It is not. It is a State oil company operating commercially as a company. It acts in an advisory capacity to me, and I am answerable to Parliament. BNOC is also a partner, by equity investment or through participation arrangements, with a seat, voice and vote.
  If we are to devise an oil policy, the first thing that it is reasonable to do is to ask the Opposition to study the facts. The second reasonable thing to do is to ask that they show some sign of being aware of the national interest, instead of just being spokesmen for the oil companies, because that is wrong. Thirdly, it is reasonable to ask that they should help us in removing doubt.
  Question put and agreed to.
  Bill accordingly read a Second time.
  Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).

  EUROPEAN COMMISSION (RAILWAYS)
  12.47 p.m.
  The Under-Secretary of State for Transport (Mr. John Horam): I beg to move,
  That this House takes note of EEC Documents R/1568/77, on uniform costing principles for railway undertakings, and R/669/77, on the necessary measures to achieve comparability between the accounting systems and annual accounts of railway undertakings, and of the Department of Transport's Explanatory Memoranda dated 18th July 1977 and 9th May 1977, and Supplementary Memorandum dated 11th November 1977.
  The House will be aware from the statement of my right hon. Friend the Secretary of State for Transport on 4th November that an amended version of the accounting proposals on the lines described in the supplementary memorandum was adopted by the EEC Council of Ministers on 27th October. I shall be explaining in a few moments why it was that my right hon. Friend agreed to the adoption of the regulation before it had been considered by the House as your Committee recommended, Mr. Speaker—a most important point.
  I think that it might be helpful, first, to put the matter into perspective. Community policy towards the railways has three basic objectives: First, the removal of disparities arising from the imposition of burdens or the granting of benefits by the State which could distort fair competition: secondly, the removal of direct control of railways from the State, giving railway management greater responsibilty and independence; thirdly, assisting the railways to achieve a balanced financial position, by encouraging the development of their commercial role, and by requiring the State to compensate for all social burdens imposed, including the continuation of certain defined public service obligations.
  If disparities arising from financial burdens imposed or assistance given by Governments are to be removed, it is essential that they first be identified. Railway undertakings are already required, under EEC legislation, to publish in their annual accounts the sums granted to them by way of financial assistance or compensation under various EEC regulations. The new regulation agreed last month is designed to make the
  1020
  accounting systems and annual accounts of the EEC railways more comparable than they are today so that a clearer view of the assistance given by each Government to the railways is available to member States and the Commission, which can then report to the EEC Council of Ministers on the progress achieved in removing disparities.
  It is the case that in some countries certain personnel are employed by the Department of Transport, while in others they are employed by railway companies. In our case it is British Rail, and therefore the personnel are included in the BR account in this country, and in another they are included in the Department of Transport account. It is that disparity that one wants to iron out.
  As my right hon. Friend explained in his two memoranda of 9th May 1977 and 11th November 1977, the Commission's original proposals for an accounting regulation, published as R/669/77, raised difficulties for the British Railways Board and for the Northern Ireland Railways because they required the railways to draw up their accounts according to a prescribed Community format set out in the annexes to the draft regulation. The proposed regulations envisage that the railway undertakings will continue to publish annual accounts in their present format, but additionally they will transpose their annual results as far as possible into a common Community format to facilitate comparisons between undertakings. There will be separate documents, which they will complete. This requirement is broadly similar to the first stage of the Commission's original two-part proposals.
  The requirement recognises that information is not necessarily recorded by each railway under the same headings. The railways will however have to explain any divergencies from the Community format and the reasons for them. The earlier proposal for a binding Community accounting system, as a second stage, has been dropped. The working of the system of transposed accounts will be evaluated with a view to the Commission submitting, before 1983, proposals for any changes needed to improve comparability.
  Having heard the views of my Department and of the railways themselves, the Scrutiny Committee recommended on 21st

  1021
  June that the proposals be further considered by the House. For a number of reasons, however, it was decided that a debate would not be held during the remainder of the parliamentary Session. First, it appeared to the Government that the proposals were likely to be subjected to considerable criticism by the group of experts and following informal talks with the Commission, there seemed little sense in taking up the valuable time of the House to discuss a draft regulation that was about to be almost completely redrafted.
  A further consideration was that the draft regulation on common costing principles had been circulated by the Commission and was sent to the Scrutiny Committee on 18th July with an explanatory memorandum. The Committee recommended on 20th July that it should also be debated in view of its connection with the accounting proposals. By that time it was too late to arrange for the House to discuss the proposals before the recess.
  As we had anticipated, the accounting proposals were significantly amended in working group discussions during August and September along lines proposed by the United Kingdom. The effects of these changes were outlined in a letter sent to the Chairman of the Scrutiny Committee on 25th October and are amplified in our supplementary memorandum of 11th November 1977. Briefly, by requiring the railways simply to transpose into a common format the accounts already prepared under current accounting practice and by allowing deviations from the Community format, provided these were explained, the new proposals make it possible for the railways to comply with Community requirements without any significant changes in their existing procedures.
  Mr. Norman Fowler (Sutton Cold-field): The first request for a debate upon the issues came on 21st June 1977. Will the Minister explain why a debate could not have been arranged between that time and the recess?
  Mr. Horam: We realised that there were such objections to this draft regulation that we felt that it was neither right nor sensible for the House to discuss it in its original form. We thought that it was worth while waiting until we
  1022
  had something more concrete. In the event, that came quickly in September.
  Mr. Fowler: Does the Minister agree that the total effect was that we had no debate at all?
  Mr. Horam: Exactly.
  Mr. John Roper: The Scrutiny Committee has considered the letter which my right hon. Friend sent to the right hon. Member for Bournemouth, West (Sir J. Eden) on 25th October. The Committee was given only two days' notice of the Council meeting on 27th October at which the decision was to be made. It is important that the Minister explains to the House why the Government said of the decision on 27th October
  "Our national interests would be best served if the United Kingdom agreed to its adoption without further delay".
  Mr. Horam: I am grateful to my hon. Friend. I shall explain the situation in further detail. The House is entitled to know why the events occurred as they did after the recess. The actual resolution of the problems did not take place in the working group until the end of September.
  I agree that to allow nearly four weeks to elapse between that resolution and writing to the Scrutiny Committee indicating that we were going to accept the changed proposals was too long. I hope that in the future we shall cut down that time by half and give the Scrutiny Committee much more than two days in which to consider what is happening. I accept that the time should have been longer.
  There are three reasons why we felt that it would be in the United Kingdom's interests to accept the proposals. First, the draft regulations had been revised in line with our proposals in toto. Secondly, our revised proposals ensured that there were no changes in existing procedures. British Rail is being asked to do nothing about its accounting methods other than to provide another set of forms to the Community. It seemed rather churlish, when all the other countries were willing to accept the proposals at that meeting, to hold back when we had achieved what we wanted.
  Thirdly—and the House may not be aware of this—the next item on the

  1023
  agenda dealt with drivers' hours regulations. We were so anxious to get this agreed, in the way that we did, that we thought that it would be wrong to put a reservation on the previous item, although I accept that in deference to the House that might have been the wiser course.
  Mr. Roper: I am grateful for that explanation. It appears that this item forms part of a package deal. The House met on 26th October. It appears to us that it would have been possible for the Minister to arrange a debate on the subject on that day.
  Mr. Horam: I am sorry that that opportunity was missed. Since that day was the day between the note to the Scrutiny Committee and the Council meeting a debate would have caused some practical difficulties. I recognise that my hon. Friend the Member for Farnworth (Mr. Roper) has a valid point. I shall try to ensure that this situation is handled more sensitively and appropriately in the future.
  I turn to the proposals for uniform costing contained in the Community Document R1568/77. The Council is required by its decision of 20th May 1975 to lay down uniform costing principles for the railways. That is the reason for the document that we are considering today.
  The railways of the Nine have been concerned for some time about the difficulty of ensuring that rates charged for international rail freight transport are sufficient to cover the costs of all railway undertakings involved, that traffic is accepted or refused according to comparable criteria in all member countries, and that the revenue received for the carriage of international rail freight is distributed among the railways in a fair and equitable manner. Having failed to find a solution amongst themselves the railway administrations made strong representations that the Council decision should contain relevant provisions to help to improve co-operation by laying down costing principles that all the railways could use to solve the problems that they had had for a long time relating to international traffic.
  Mr. Nigel Spearing: I am grateful for what the Minister has
  1024
  said. Can he confirm that there have been no further supplementary changes to Document R1568/77 as there have been on the document on accounts? Does he agree that although this comparable method of costing applies only to international traffic, the whole purport of the regulation is that as soon as it is practicable it should also apply to internal traffic?
  Mr. Horam: I confirm that. The first meeting of the working group will be on 7th December. We are having a debate today so that we can hear the opinion of hon. Members. There have been no changes. The draft regulation and explanatory memorandum remain on the table unchanged.
  Secondly, it is a matter for negotiation whether the regulations then go on to deal with national as opposed to international traffic. The regulation deals with international traffic, and that is the point to which we are objecting. As I have indicated, the rules of the Nine provided for some costing principles to be worked out by the EEC to deal with the problem of allocating revenues from international traffic, but the Commission went further in its remit and put forward a set of proposals which would apply to national as well as international traffic.
  The problem is that the costing principles in the different countries are so variable and different one from another that to do this now is a case of the Commission trying to run before it has started to walk. The difficulty that we foresee is the simple practical difficulty that we think that in this regulation the EEC is trying to bite off more than it can chew. My hon. Friend was entirely right in making his point.
  Therefore, we seek the agreement of the House to our basic view that we should try to limit the regulation simply to international freight traffic for the immediate purposes I have described and not to allow it to go wider. Ultimately, we may have to deal with the question whether we should allow it to go wider, but at present we are trying to get the draft regulation limited to the issue of international traffic, and I seek the agreement of the House to proceed in this manner. The next meeting to discuss the draft regulation will be on 7th December. I shall be interested to know the views of hon. Members on the subject.
  Mr. Spearing: On a point of order, Mr. Deputy Speaker. I apologise to the House for raising this matter now. I should have raised it before my hon. Friend the Under-Secretary of State began his speech, but his alacrity was too great for me.
  The point of order concerns the form of motion and the question whether it is in order. The motion asks us to take note of EEC documents and the contents of the explanatory memoranda to which my hon. Friend the Under-Secretary has referred. The motion could ask us to approve or disapprove of the documents. The regulations of the EEC are public documents and notionally are available to the public, whatever the practical difficulties, but I believe I am right in saying that the explanatory memoranda are issued for the convenience of hon. Members and are not public documents, nor necessarily should they be so.
  Therefore, if the House on this occasion takes note or on a future occasion approves or disapproves of the contents of explanatory memoranda, the citizens of this country will have no immediate access to the views of hon. Members. Therefore, I ask, Mr. Deputy Speaker, whether it is in order for the House to discuss a motion of this sort, whether there are precedents for it, and whether, even if the debate should continue, it will be in order to have further debates using this form of motion.
  Mr. Deputy Speaker (Sir Myer Galpern): The motion undoubtedly is in order. It is for the House to approve or disapprove it. The hon. Gentleman has raised the question of the non-availability to the public of the explanatory memoranda of the Department of Transport. They are available in the Vote Office to hon. Members. There are many precedents for such memoranda not being made available to the public.
  The matter which the hon. Gentleman has raised is not one for the Chair. If he has any criticism, it must be a criticism of the Department for not providing what the hon. Gentleman thinks should have been provided.
  1.4 p.m.
  Mr. Norman Fowler (Sutton Cold-field): The Department of Transport has a habit of getting slightly lost when it is
  1026
  dealing with EEC regulations, as we have had cause to point out before.
  Let me go back to the original form of the draft regulation which the Under-Secretary of State has put before the House. It laid down that the EEC railway undertakings should, from the accounting year 1978, draw up annual accounts on the lines which were prescribed. They were to be forwarded to the Commission within 10 months of the end of the accounting year and the Commission would send a summary of its observations to members of the EEC within eight months of receipt. For a transitional period until 1984, undertakings' published accounts could continue to be presented in their existing form and an advisory committee would be set up to assist in the examination of the annual accounts and to keep under review the problems associated with the standardisation of accounting systems.
  In its 26th report of 21st June 1977, the Committee on European Legislation reported this Instrument as raising questions of legal and political importance and recommended that the House should give further consideration to it. The Committee drew attention to the evidence which it had received from the British Railways Board. It indicated a number of the areas which British Rail said would cause difficulty—for example, changes in the accounting systems at present in use would be required, and there could be conflicts with the requirements of the Companies Acts and standard United Kingdom accounting practice; the comparability of accounts could be secured only if accounting practises were standardised; the information required for operating accounts for the diverse activities of the British Railways Board could not be obtained from accounts as they were at the moment.
  Therefore, the first point that I raise—and it has been touched on before—is why there was no debate before the adoption of the 26th report. We were not exactly overworked last Session and yet no debate was accorded to the regulation before its acceptance. I gather from what the Under-Secretary has said that the Government's view is that if they had delayed, it would not have been in the interests of the United Kingdom. But how are we to define the interests of the

  1027
  United Kingdom unless these matters are debated in the House before decisions of this kind are taken?
  It is clear from the memoranda of July of the Department of Transport that the Department and the British Railways Board envisage a number of practical difficulties in applying the requirements of the draft regulation as the Board's costing methods differ from those used by Continental railways. As the Under-Secretary said in July, it is difficult to assess the financial implications for British Rail. The use of either of the principles of costing in Article 8 would conflict with the present support system for the British Railways Board. The two principles which were laid down were the utilisation principle—allocation of cost—in proportion to the use of resources made by each category of operation—and the casualty principle—allocation of cost between categories of operations in proportions showing that certain costs could be avoided in the absence of certain categories.
  Clearly the British Railways Board found that that presented it with certain difficulties. But I am not sure that the House should accept, and certainly not without question and debate, that the view of the British Railways Board is necessarily the view which the Government should put forward. The British Railways Board has an interest which it has every right to put, but it is only one of a number of interests which the House should consider. There are the interests of passengers, and the customers with freight to carry to consider.
  Surely that is the whole purpose of having debates in the House. While we may disagree on the answers to those questions—I think that there would be disagreement between myself and the Under-Secretary and his hon. Friend the Member for Newham, South (Mr. Spearing)—there would be agreement between us that these are important issues which merit discussion and debate before decisions are taken.
  One fact that is not always taken on board in this county is that railway costing is one of the most crucial areas in the railway debate. It is also one of the most contentious. I do not claim that
  1028
  there is agreement on the way forward here, but in many ways everything depends on railway costing. If it is wrong, or the costings are inadequately presented, the public accountability of the railway undertaking, whether in Britain, France or any other EEC country, is substantially reduced. The public are left in the dark about the railway system which they themselves finance as passengers and taxpayers.
  I suggest that this is very much the point that we have reached in this country today. New fares have just been announced equivalent to an overall national increase of 14½ per cent. We have been told in a Press release from British Rail that they will be on a selective basis. Increases generally are in line with the rate of inflation but there will be higher increases for inter-city and for commuter services.
  At no point does British Rail provide information on the costs of these services and the justification for increasing fares on the commuter services as opposed to the rest of the railway system. That is the kind of principle which is at the heart of what we are debating. Unless we have that kind of financial information, the public will always be left in the dark and will always be given the impression that they are regarded by the railway undertakings—in this case British Rail—as a captive market and that they are simply being charged on the basis of what the market will bear.
  Mr. Spearing: That is good Tory policy.
  Mr. Roger Moate: We are anti-monopoly.
  Mr. Fowler: Therefore, although we may not agree on the solutions to this problem, I hope that the Under-Secretary will accept that this is a crucial area of railway policy which deserves to be debated in the House, and I regret very much that no debate on it was arranged earlier.
  I understand the case that the Under-Secretary is putting, and the case that the British Railways Board is putting. Many of us would find ourselves in sympathy with parts of the draft regulation and the Explanatory Memorandum. For example,

  1029
  the Explanatory Memorandum says that the aim of this harmonisation is
  "to promote adequate autonomy for railway undertakings and the running of railway undertakings on economic principles, and ensure transparency of financial intervention by the State".
  It is this transparency of financial information, making the financial information clear to the public, which is crucial. This is also something that we should have considered in the House before the Under-Secretary and his colleague went to the Council of Ministers. This is an important area.
  Any decision to support specific rail services brings us up against a major difficulty, the necessary information about the costs of the different services. The concept of the Government's entering into a contract with a railway undertaking—this is the term now used by the current Chairman of British Rail, Mr. Parker—to provide services which cannot be totally financed by fares, is acceptable only provided that that contract is as specific as possible. It is also important that British Rail should be made publicly accountable.
  It seems to me that the rail passenger and the taxpayer have an interest in seeing that the maximum amount of information is published. No one would pretend for a moment that that is the case now with British Rail's accounts. The accounts conceal as much as they reveal. One could claim that they conceal rather more than they reveal. Separate information is not published on the cost of the main passenger business, let alone on the major services. There is no breakdown in the freight business between general freight and the cost of the parcels business. This is a basic defect. My criticism is that some of these points could have been aired in a debate on the regulations that the House is now belatedly considering.
  There are sensible ways of dividing the costs in the activities of railway companies. For example, it is possible to divide British Rail's services into different components: inter-city, commuter, country passenger, passenger transport executive, freight and parcels. In my view there is no overwhelming difficulty in reaching a fair and reasonably accurate apportionment and attribution of costs in the railway system. It is possible to
  1030
  achieve this. One point made in the Explanatory Memorandum and the documents before us is that it is possible to do what British Rail says is not possible—to attribute and apportion cost fairly.
  In a way this debate comes after the event. In a way it is academic now. I only regret that we did not have the opportunity to debate these questions earlier, because I sincerely believe that railway costing could not be more important to British Rail and to the way in which this House decides exactly what we want to see in the accounts of British Rail, because we are the representatives of the public.
  I do not believe that it is enough for British Rail simply to say that this is its view. We shall take account of Britsh Rail's view, but that view is not paramount. The paramount interest is that of the passenger and the customer with goods to move.
  1.18 p.m.
  Mr. Nigel Spearing: To the last sentence of the hon. Member for Sutton Coldfield (Mr. Fowler) I would add "the good of the nation as a whole" as a paramount factor. I agree very much that the controversy about costing is central to the whole debate on railways and on an integrated national policy for transport. But I cannot agree with many other points raised by the hon. Gentleman which arise from that.
  It is on the basis of costing that one accepts new traffic, either for commercial reasons or for reasons of policy, or rejects it. It is the results of the costing which set railway strategy for the future. The approach of the hon. Gentleman and the Conservative Party would not make the best use of our railway system in the whole transport network, as an integrated approach would. Some of us have criticised British Rail for doing arbitrary costing exercises and saying that certain traffic would not be profitable or pay its way. Whatever the arguments to the contrary the suggestion is not then taken up.
  If by chance one uses the wrong costing criteria, the effect on the railway network is felt over a period of years. The marginal or optional traffic goes down, putting a much greater cost on those essential travellers, the commuters, letting them bear a higher and higher proportion of the costs of the network.

  1031
  The opposite view, held by me and my hon. Friends, is that the more marginal traffic one can obtain and the more the costs are shared, the lower will be the costs to everybody. The economic costs to the nation will be less, and probably with an integrated transport scene, better use will be made of the railways.
  Indeed, we know that the railways are already not pursuing this method in respect of the transport of bicycles. That has been shown. It is a very good example of the negative attitude to the costing of British Railways traffic. I have a letter telling me that it would not pay British Railways to transport bicycles. Yet now the scheme is a great success. This is the danger of doing the wrong costing, and in the approach that we see in the EEC documents there may be the seeds of a similar mistake. That is the great danger.
  I am very glad to see the hon. Member for Sutton Coldfield nodding agreement. That is why this debate is of such great importance. I am glad that he agrees with that, too.
  People outside the House are getting very hot under the collar about railway costs. Yet apparently Parliament does not have that attraction for some of our colleagues today to discuss the question, perhaps because the form in which the issues are put before us is obscure.
  I wish now to refer to my point of order. Earlier, Mr. Speaker, your deputy ruled that we were in order in dealing with this because the documents which indeed contain the nub of our discussion—the Explanatory Memoranda—are available to Members although they are not available to the general public. I want to make it quite clear that I am not necessarily advocating that these Explanatory Memoranda should be available to the general public, and I am not in any way blaming my hon. Friend or the Department for not making them so available. I am not sure that it would be right to do so. But I am saying that it is wrong for Parliament to be discussing an approach, a policy or a reaction to the policy of the Commission when nobody other than those who have access to these documents knows what we have taken note of or what we have approved.
  1032
  Again I am glad to see that the hon. Member for Sutton Coldfield is in agreement.
  I do not think that this is necessarily the Government's fault, any more than the timetable of which the hon. Gentleman has made complaint is their fault. This has been forced on us by the operations of the Commission and by the nature of the EEC. These doubtful procedures of lack of immediate information to the public arise in part from the lack of notice, for the motion was made available only yesterday. Again, I make no complaint about that to my hon. Friend, because he had to wait for the Scrutiny Committee on Wednesday, but the very way in which the Scrutiny Committee is set up and operates means that it begins to inhibit the operation of democracy. Indeed, it begins to creep in and force us into parliamentary procedures and methods which in other ways we would discount as being undemocratic.
  It may be that in future years historians will look at this debate and the exchanges that took place between my hon. Friend the Under-Secretary and my hon. Friend the Member for Farnworth (Mr. Roper) as a textbook example of the way in which it is virtually impossible for the House to grapple with these matters. The paperwork alone is extraordinary. We have two regulations, three Explanatory Memoranda, three reports of the Select Committee, one debate in the European Consultative Assembly, and two memoranda from British Railways. Those are the documents which one must read if one is to participate in the debate in a meaningful way. That is another example of the intangibility of the issues which confront us.
  Now to the documents themselves. I accept what my hon. Friend said about Document R/669/77. This is at present satisfactory whereby British Railways carry on their existing practice, irrespective of its merits, which I will not debate now, and, as it were, have a translation in EEC terms into another set of accounts which are available to the EEC. So far, so good. But any future requirement of the Commission or any suggestion by the Commission that would make EEC demands, requirements or suggestions alter the way in which British Railways at present issue their accounts

  1033
  or the way in which any British Government or British Parliament require them to set out their accounts would, I think, be resisted—certainly by this side of the House and I sincerely hope by the other side also.
  It would be intolerable if an organisation such as British Railways, which is responsible to this House and to this House alone ultimately, should be forced by an overseas commitment to produce their accounts in any other way than that authorised and required by this House to which they are accountable.
  I therefore hope that my hon. Friend the Under-Secretary will assure us that any future moves by the Commission or the EEC in that direction will be wholeheartedly opposed.
  I turn for most of what I have to say—fortunately there is not a great pressure on time in this debate—to the second document, R/1568/77, which I believe is the much more important document in this debate and which relates to costing. I refer first to what my hon. Friend the Under-Secretary said in reply to my intervention. It appears that the Commission has gone well beyond the initial request. As I understand it from what my hon. Friend said, there was a request—not an unreasonable one—from the railway undertakings in the Community for some means whereby they could come to a common agreement in relation to international traffic. That is reasonable. I suppose that if it was not done by the Commission it might be done by the UIC or some other handy railway organisation. However, the Commission was handy, the matter comes within its competence, and so the matter was done.
  The Commission produced the proposals—that was fair enough—but then went on to make them applicable to the internal traffic of each member State. In other words, the Commission is doing something for which it was not asked, though I have no doubt that we shall be told—perhaps my hon. Friend will, tell us in winding up the debate—whether it is within the Commission's competence under the Treaty to go on to that second stage.
  My hon. Friend said that the Commission is to be resisted, that he at least will say—"International traffic, yes. Internal traffic, no." That, I take it, is
  1034
  the Government's attitude. I do not know whether my hon. Friend will be able to say what the position of the Governments of other member States is, because if we find ourselves in a minority, perhaps a minority of one, my hon. Friend might be placed in a dilemma, particularly if the next agenda concerns tachographs. The package-dealing aspect then would loom large and the much-vaunted veto of which we heard so much some years ago would then be there in theory only—but in practice we would have to say that it would be very difficult.
  So the scheme might conceivably be extended. Indeed, I think that my hon. Friend did not close the door to some long-term extension, anyway. I am sorry that he was not as firm as I should have liked. I hope that in winding up the debate he will confirm that the Government are against any move at any time in the future towards the extension of this costing principle to internal traffic if only because the Labour Party and the Labour Government have said that this country must have powers over our own economic future, particularly in relation to economic and regional policy. Indeed, even my indefatigible hon. Friend the Member for West Lothian (Mr. Dalyell), in defending Livingston New Town and its development, in the European Assembly, quoted the need for railway access to developing areas. I see that he is rapidly becoming converted to another point of view. This is vital for our own regional policy in this country, of which rail access certainly plays a part.
  As the hon. Member for Sutton Cold-field said, costing has been at the heart of railway controversies for the past 10 or 15 years. That was what Beeching was about. That was what the various formulae that we have had about railway costing in the past have been about. That is what the balance of road and rail traffic is about. That is why the hon. Member for Sutton Coldfield is particularly interested in this matter.
  Paragraph 4 of the Government's Explanatory Memorandum states:
  "Section II of the Regulation would apply the 'particular costing' principle to specific goods traffic in full train loads. The aim would be to provide data to assist the railways in deciding whether to accept new traffic and

  1035
  in costing existing traffic which they were considering terminating. In the case of international traffic the data is intended to assist in apportioning revenue between the railways involved."
  Therefore, as we see, it is not merely a matter of commercial co-operation. Although my hon. Friend the Minister has reservations, the proposal would go much further than that. If it did, as I have said, it could have considerable impact on the use of our own railways.
  Already there is controversy, as the hon. Member for Sutton Coldfield said, about freight and passenger goods—which carries the cost? That is an internal controversy in this country. If we had that controversy settled by an edict of the EEC, that would have enormous consequences not only for freight but for passenger traffic, particularly in the rural areas where we are always having complaints about lack of transport facilities and arguments about the closure of branch lines. Therefore, any move further than international traffic could be of considerable significance.
  That is borne out by paragraph 14 of the Government's memorandum, which says,
  "It is difficult to assess the financial implications for British Rail".
  If that is so, that is a very considerable warning and backs up the Government's doubts about this matter.
  I turn, almost in conclusion, to the regulation itself. EEC regulations are not always quoted in these debates. Perhaps it is desirable that they should be quoted so that those interested in these matters who do not find it easy to get hold of EEC documents can hear some of the things that they say.
  Document R/1568 /77, after outlining the objective, says, in paragraph 6,
  "To meet these objectives, it is proposed that, from 1st January 1979, the railway undertakings should use the principle of particular costing for two purposes, i.e. the determination of the costs of a specific goods traffic and the allocation of costs to categories of operations."
  It then goes on in great detail to say what they should be. In Annex 2 there are no fewer than 23 standard factors to be taken into consideration in calculating particular costs for goods traffic.
  1036
  I think that we can say, in summing up, "so far, so good" on the question of accounting. On the matter of costing, the Commission has already gone too far, and what we read is not good. We hope— many of my hon. Friends agree with me—that the view which is taken by Her Majesty's Government, welcome though it is, is also shared by many others. Unless it is, we may be up against the package factor and may find that our internal accounting and costing of our own railways, carrying our own people with our own traffic, like many other things in this country, is increasingly dictated from Brussels.
  1.34 p.m.
  Mr. Roger Moate: I regret that I missed the opening exchanges in this debate, which I understand were largely concerned with a procedural matter. I wish to add one further procedural point.
  I believe that this debate, in theory, is exempted business that could be taken after 4 o'clock for an hour and a half. It so happens that matters have worked out presumably as the usual channels expected, and it has been taken at a very civilised hour. But I think that it is worth giving the warning to the House that it is a very dubious practice to put on exempted business after 4 o'clock on EEC regulations.
  It is just conceivable that the earlier debate, the Second Reading of a Bill, could have gone on all day. These things happen unexpectedly in the House. To take EEC regulations at 4 o'clock on a Friday night, particularly at this point in the Session, would be quite absurd. I hope that it will not be taken as a precedent by the usual channels.
  The hon. Member for Newham, South (Mr. Spearing) made a number of points to some of which I shall refer later. I noted one of his phrases. He said that outside this place people were getting very hot under the collar about railway fares. Indeed they are. I believe that they would be even hotter under the collar if they could hear the nature of the debate that we are having today. I believe that these documents and this discussion on railway costings and railway accounting systems are totally irrelevant to the real crisis that is facing hundreds of thousands of people who are

  1037
  facing massive fare increases a few weeks from now.
  Indeed, those hundreds of thousands of people are very much concerned with railway accounting. They would dearly love to have more facts and figures from British Rail so that they can assess whether the fares that they are being charged are right or wrong. Frankly, the documents that we are talking about today will not help them in the slightest. Indeed, these documents are totally irrelevant to the problems facing British Rail. I suspect that the Minister would not dissent much from that suggestion. They are totally irrelevant to the needs of the freight users of this country and the rail passengers.
  Had these documents never seen the light of day, all that would have happened is that we should have been spared a great deal of the sort of bureaucratic work to which the hon. Member for Newham, South referred. All the papers that have been touched upon would have been consigned to the wastepaper basket, and we should have been none the worse for it. This is an indication of the time-wasting exercises that occur as a result of some of the decisions taken in Brussels. That is not a remark to be interpreted as making me against the Common Market. Indeed, I suggest that the Common Market would be stronger if it did not indulge in some of these activities.
  As I was leaving home in Westminster this morning someone said "Do not forget to put out the dustbin. Today is dustbin day." I think that very often in the House of Commons Friday is dustbin day, and I think that these documents quite literally should be consigned to the dustbin. None of us would be the worse for it.
  I turn to the question of the public need for better accounting principles, but I emphasise again that these particular documents do not help in any way, shape, or form. Certainly we want to see British Rail accounts presented in a different form. We want more information. I am sure that there would be greater acceptance by the public of the facts of life, of the need for fare increases, if they were given the chance to share in the problems of British Rail, if they were given the facts and figures and were presented with the problems facing British Rail account-
  1038
  ing. But those matters are disguised from them. I think that this is most unfortunate.
  If the Common Market were saying that it wanted to see British Rail accounts opened up to the public, perhaps our arguments today would be rather different, But it is certainly not saying that. Looking at this regulation on the accounting systems, I find the solution that has been adopted very odd, because it is stated now—one welcomes this—that there will no longer be any move towards a binding Community railway accounting system. That is good. But the supplementary explanatory memorandum goes on to say that additionally British Rail will have to transpose its annual results into a common Community format to facilitate comparisons between the two undertakings.
  Therefore, we are now to have two sets of books, one for the Common Market and one for British Railways. Most of us have understood for a long time that in certain Community countries the maintenance of several sets of books was fairly common practice. In Italy, I understand, two sets of books are fairly standard, sometimes even three sets. I did not understand that we were to be harmonised in that particular matter, but I wonder whether we should not now have three sets of books, one for the Community, one for British Rail—and how about being really revolutionary and having one for the British public? That would really be helpful. But I am afraid that nothing like that is suggested in these documents.
  I emphasise again the importance of this matter to the public. On 1st January British Rail passengers, certainly in the South-East, will be paying up to 16 per cent. more in rail fares. I say 16 per cent. because that was the way in which the increase was presented in the Press. No doubt the Under-Secretary had some hand in that. But fares will be going up by about 20 per cent., and many people see this as a crisis in their personal budget.
  Those people are entitled to know the costings factors which have gone into that fare increase, why they are paying very much more than other rail travellers in other parts of the country, and why they are paying so much more than the freight users. But those facts and figures are concealed from them.
  Mr. Douglas Jay: Will not one extra cost falling on the railways now be the cost of producing this extra series of accounts, which will be useless except for showing to someone unknown in the Brussels machine?
  Mr. Moate: I am sure that must be right. There must be some additional cost here, and these accounts can be of no conceivable benefit to the rail passenger.
  We now know that the Price Commission is to be privy to rather more information than is available to the public, and that it will be examining the efficiency of British Rail's passenger services and trying to discover why these increases are weighted against the commuter. It is a bit late, because the process has been going on for some years. It would be more helpful if the Price Commission took action in relation to the new fare increase, but that is not happening and we are denied this information.
  There is nothing whatsoever in the regulation dealing with accounting principles that will help the commuter, the railway passenger, or the rail user in any shape or form. It is utterly irrelevant and we would be better off without it.
  Mr. Spearing: Will the hon. Gentleman not agree that if this goes to a second stage of costings, which may be forced on this country, it could well be against the interest of the commuter, because it could conceivably reduce the total traffic carried by rail, and therefore put even greater burdens on the commuter who is using essential routes in order to get to work in centres such as London?
  Mr. Moate: It could lead to that, but I only hope that the Under-Secretary will be able to carry out his general intent to keep these things within commonsense limits in the future and that all Ministers will adopt the same commonsense approach. My point is that we would be better off without it.
  I feel that there should be more criticism of our acceptance of the decision, presumably, in the Council of Ministers' meeting of 20th May 1975. Why on earth did we accept it? We accepted the decision that we should adopt the necessary measures to achieve comparability between accounting systems and annual accounts of all railway undertakings. We
  1040
  did not then say that it should be limited to international traffic only, because the decision referred to in the Minister's own memorandum clearly applies to all traffic, international and national. Why did we accept that decision in May 1975? The Minister ought to be criticised for that.
  Again on this issue, we ought to have the courage to say that it is nonsense and will not benefit anyone. All this could have been stopped had we used our power to say "No", and we have that power.
  As to the other regulation, which concerns uniform costing principles, it has already been emphasised that how we apply our costing is of crucial importance to the commuter. The argument is essentially about who bears the cost of track and signalling. Should it be borne by the freight user or by the passenger? I think that most of us would apply the commonsense principle and say that each section should bear its fair share of the cost.
  The hon. Member for Newham, South denied that, but let us look at this in relation to the revenue accounts of British Rail for 1975. In that year freight and parcels earned a total of £405 million of revenue. The total earnings from passenger fares, leaving aside subsidies, was £505 million. In revenue terms, therefore, about 45 per cent. of the earned revenue came from the freight and parcels side.
  When we look at the track and signalling costs and at the administrative costs which are specified as being relevant to track and signalling, we find that the total costs came to £329 million, but only £64 million of that £329 million was apportioned to freight. We have, therefore, about 45 per cent. of earned revenue coming from freight, but freight is only bearing some 20 per cent. of the track costs.
  I am sure that freight requires much less sophisticated track and signalling than is required for passenger traffic, but certainly that is not reflected in the proportions to which I have referred. It is probable that the passenger side of the business is carrying anything between £50 million and £100 million of costs which, under a different accounting system, could properly be apportioned to freight.

  1041
  In their consultation document the Government referred to this as a favourable accounting system in relation to the freight business. There is no dispute about that, but I think that the passenger is entitled to know that he is paying now to support the freight business of the railways.
  The hon. Member for Newham, South said that it is quite right that these costs should be borne by the passenger, because by that means the freight charges to the freight user can be reduced. That means that British Rail can take on more marginal business and that the revenues of the railways can be expanded. I find it strange and a little unconvincing that we should tell the passenger that he must pay higher fares so that we can have lower freight rates, so that we can encourage the railways to take on more uneconomic freight business, so that the railways can lose more money.
  Mr. Spearing: I shall read my speech with great care on Monday. But does not the hon. Gentleman agree that where, for the good of the community, the Government agree that it is right and proper for railway passenger services to be provided—and there is a good deal of revenue support to those services from the Government—it would be quite stupid to say that freight should not also he carried, if the line is there and is already maintained for passenger services?
  Will the hon. Gentleman agree that when we attempt to allocate costs on lines which carry both freight and passengers, it becomes an almost impossible task? It is a very arbitrary exercise.
  Mr. Moate: I do not think that I agree with the hon. Gentleman's second point, because all businesses manage to apportion their shared costs with considerable accuracy. It is only British Rail which seems to find it difficult to do—at least, so it says. It could do it if it wished.
  If British Rail finds the avoidable costs concept a sensible and useful management tool, that is fine. Let it use it as an internal matter. If it wishes to make commercial judgments about taking on marginal freight traffic, that is a matter for it and it will be reflected in its results at the end of the year.
  1042
  But let us not confuse that with what we charge the taxpayer, the fare payer or the rail user in terms of calling it "passenger operation". What is happening at the moment is that the accounts are being fudged. The passenger is shown in the accounts through the fares he pays, but he is bearing costs which should properly be borne by freight. That is the argument about the avoidable costs concept, and it is desirable to clarify the position in that respect.
  The Minister, in the explanatory memorandum of 18th July 1977, suggests that the avoidable costs concept might not be permissible if these regulations were carried out with regard to internal traffic. He says that, but paragraph 3 says:
  "Article 3 of the draft regulation proposes the adoption of the principle of 'particular costing'. This is a novel expression capable of varied interpretation by the railways, and so may overcome the difficulties in reconciling the use of terms such as 'direct', 'marginal' or 'avoidable' costing, which have accepted meanings."
  I rather get the impression that if it were adopted we should still carry on with our present costing simply on the basis that the document is capable of various meanings. If that is the case, it emphasises the point I made about its total irrelevance.
  Paragraph 10 of the explanatory memorandum of 18th July says:
  "The first need is to establish some mutually acceptable criteria for such traffic which would assist the railways—

  (a) in deciding whether to accept or reject new traffic, and to cost existing traffic…".

  Are we really telling British Rail that it needs to have new criteria recommended by Brussels before it can decide whether to accept or reject commercial traffic? That would be a most patronising and extraordinary thing to do. It again emphasises that it has very little to do with the success or failure of our own railway system.
  This is a critical time for railway operations. No one underestimates the difficulties, either at home or throughout the world, of managing railways. It is a major problem. Whoever runs British Rail, or whichever party is in power, the problem is not easy of solution, but this sort of approach imposes burdens on the House and on the taxpayer to a certain extent, and it does no good to

  1043
  British Rail and the British people. I do not think that it will do any good to the Community, either, and we are better without it.
  1.52 p.m.
  Mr. Tony Durant: I support my hon. Friend the Member for Faversham (Mr. Moate) on the question of commuter fares and costing. It is time British Rail allowed much more scrutiny of its costing so that the ordinary travellers, commuters in particular, could see whether these prices were justified.
  Reading has a fair number of commuters to London, and the latest increase will mean on average £100 extra on an annual season ticket—a lot of money by anyone's standards. It is not just directors who travel to London from Reading, but a lot of ordinary citizens, trainees, apprentices, and others doing special work that can only be found in London. The rail fare is an enormous burden. It is a serious situation.
  The last time the fares rose I met many constituents who were considering whether to move to London or look for work locally. That is not a good situation for a place like Reading. If they remain, there is not enough work for them all, and if they move out we lose population that we do not want to lose. It is a serious trend.
  The Minister said that there was some argument about compatibility regarding freight, and he felt that this was perhaps as far as we should go in this matter. I ask him also to consider the question of passenger traffic. I had the idea of taking my family on the Rome Express. We thought that it would be exciting, because children nowadays like going on trains, because they spend so much time in cars. But when I went into the cost of going from London to Rome by rail, I found that it was nearly double the air travel cost for the family.
  British Rail told me that it had no control over costs beyond Dover because there was no compatibility with the other countries in the Community, that there were no cheap fares across the board. If we are part of the Community, surely this is an aspect which might help all the railways of the EEC. There is some
  1044
  argument for getting a cheap fare arrangement among the member States.
  Mr. Spearing: I follow the hon. Gentleman's argument, but supposing there were to be harmonisation, is it not equally likely that we would have to increase our fares even more? Surely the risks of harmonisation are much too great in that respect.
  Mr. Durant: I do not agree. On that argument, air fares would never have got on their present basis. There are agreements on air fares among the countries. There is nothing wrong with getting a European basis for rail fares. I can see no argument for not doing so. It would increase passenger travel. But at this time the only thing to do is to go by air, because rail travel is too expensive.
  Mr. Moate: I agree with my hon. Friend about the costs of European travel. Is not what we want a Freddie Laker to do to European travel what he has done to transatlantic travel?
  Mr. Durant: It would be rather difficult. I see the point, but, unfortunately, Mr. Laker could not set up a completely new railway system; one can buy an aircraft. Nevertheless, let us have a Freddie Laker in British Rail to push this aspect, but I do not think that he could set out separately on his own.
  There is an element of compatibility which could be introduced and which would help passenger traffic as well as freight, but in the way this document is presented we have virtually a fait accompli. There are many more arguments which could have come out if we had had fuller debate. This is not the way to treat the House in a matter affecting so many of our citizens. I support the criticisms by my hon. Friends of the way it has been done.
  I repeat that the latest fare increase to commuters in the Berkshire area is a very serious matter and therefore we should have more information upon which we can judge whether such increases are worth while or even profitable. People are now resisting travel. The latest idea is to go by car at 100 miles per hour to Slough, park in the streets there—to the annoyance of local residents—and rush to the railway to London. That is not a good thing in general for society, and

  1045
  it is certainly not profitable for British Rail.
  1.57 p.m.
  Mr. Horam: My hon. Friend the Member for Newham, South (Mr. Spearing) raised a point about the memorandum being available to the public. I take the point, but perhaps, as it is not my responsibility, it should be pursued with my right hon. Friend the Leader of the House. It related not to the memoranda in this case but to discussion of Community documents in general. It is the responsibility of my right hon. Friend the Leader of the House to decide what to do about that.
  Mr. hon. Friend asked whether the Commission had a locus to deal with national as well as international traffic. In this respect, we are bound by the terms of the 1975 decision on railways, to which the hon. Member for Faversham (Mr. Moate) referred. This said that uniform costing principles should be laid down. Therefore, the Commisison can go into the area of national traffic. We could at some future date draw up regulations, if we were so minded, to deal with national as well as international traffic. We have disputed whether that is the right thing to do. As far as I am concerned, while I remain in my present post I shall continue to dispute it in the circumstances that we have, but I cannot bind any future Government, so my hon. Friend's concern must remain undiminished.
  Mr. Spearing: It is.
  Mr. Horam: I can give my hon. Friend no comfort in this respect, other than to say that what we are doing today is to agree to "take note" of a regulation which we have amended in total to suit our own railway interests, and that we hope in the working group on 7th December similarly to limit a Commission proposal which goes, in our view as well as in my hon. Friend's, far beyond what is required.
  Mr. Spearing: I am grateful to my hon. Friend for making it clear that the powers and locus of the Commission to deal with the costing of internal goods traffic are within its competence. Could it now go into the costing of internal passenger traffic? If that were the case, would it not be possible for the fare
  1046
  increases that we have heard so much about today to be dictated, like goods costs, from outside this country? Could not passenger fares also be decided, in effect, by the Common Market? Is that a possibility?
  Mr. Horam: I do not think that we are talking about decisions on fares. We are discussing comparable principles for accounts or costing. That is a far cry from saying at what level fares should be set. Fares for national transport are matters for national Governments. I cannot envisage a situation in which any Government would give up the right to decide their fare levels. We are discussing here accounting costing principles upon which Governments will decide those levels, and that is a completely different thing. My hon. Friend, however, is right in suggesting that if comparable costing principles are devised it is within the remit of the Commission to devise them for both national traffic and internatinal traffic, and, within national traffic, for passengers as well as freight.
  Mr. Julius Silverman: Is the position then that the Commission can put forward proposals to increase fares, although whether those proposals are accepted by the Council of Ministers is a different matter?
  Mr. Horam: No, that is not so. The Commission cannot do that and I do not envisage any situation arising in which they could do it. We are talking about drawing up costing principles and accounts—
  Mr. Spearing: We are halfway there.
  Mr. Horam: That is a long way from talking about the methodology of individual decisions about fares and costs, and that is way into the future. That sort of thing may be within the remit of the 1975 decision, which talks simply about uniform costing principles being laid down and refers in no way to decisions about fares. If we are talking about future decisions, they are a long way into the future.
  Other countries, too, were as opposed as we were to the common approach to accounting principles. So there was a general opposition, and if one looks at the realities of the situation it seems that the sort of approach adopted by the EEC

  1047
  is meeting with no support in any of the major countries. That factor should be borne in mind. Ultimately these matters will be decided by the politics of the matter, and the politics of the matter appear favourable to my hon. Friend the Member for Newham, South as things stand.
  Mr. Durant: I am confused. If everyone was reluctant and unhappy and disagreed with the proposals, why are we here now?
  Mr. Horam: A lot of people were unhappy with the original proposals, but we are here precisely because they have been changed to take account of that unhappiness. The actual cost of preparing these additional accounts to be shown to the EEC is the princely sum of £200. I think that the charges advanced by the hon. Member for Faversham have some degree of substance in that this is not exactly a leap forward for mankind in terms of comparable accounting systems. We have gone a very small way indeed because we were not satisfied that the EEC approach and method were right in this respect.
  It was not only a matter of believing that the Commission was wrong in trying to bring forward proposals which would get comparable treatment between many diverse systems. We also took the view that the approach it adopted, and the system for accounting and costing which it was suggested were simply out of date. Its proposals were based on the UIC proposals of 1948. There have been considerable advances in accounting and costing methods since then, and we believe that the EEC, if it is to have a comparable approach, should use the most modern methods.
  We also contend—though I accept that this is subject to legitimate differences of opinion—that British Railways have developed a system of accounting which is sensible as a management tool. We may differ about whether this is right for the purposes or whether it is the right method for the objective which has been set out. There can be no disagreement, however, with the fact that British Railways, by comparison with some of the Continental railways systems, have developed a fairly sophisticated system of
  1048
  accounting—that is, on an avoidable cost basis.
  As the hon. Member for Faversham rightly said, that is a management tool, and in examining the principles of accounting or costing the objective should be considered. The objective in this case is certainly efficiency in British Railways' business. The question is, are we taking decisions on the right basis, and as such, an avoidable costing system, in the opinion of British Railways, is the right system for them and in many respects is in advance of what other railway systems are doing. If we had agreed to the original form of the regulation British Railways would have had to go over to this old-fashioned system of accounting and would not have been able to use any other system.
  In that case the argument advanced by the hon. Member for Sutton Coldfield (Mr. Fowler), who was fairly saying that the interests not only of British Railways but of the House should be considered by obtaining as much accountability and openness as possible, would not have been served either. They would have been using a system of accounting which was a fundamental management tool but which was out of date.
  Mr. Norman Fowler: The Minister is making potentially a most important statement. He seems to have suggested that the Government are now committed to the avoidable cost concept developed by British Railways and at present in use only on its freight operations. The Opposition have pressed the need for British Railways to be made more publicly accountable. We have also pressed that there must be some way in which, for example, we can find the costs of commuter services. With the avoidable cost concept this is simply not possible and it could not be after three, four or perhaps even five years. Will the hon. Gentleman therefore confirm that the Government are committed to the avoidable cost concept, and does he therefore accept that there is no prospect in the next few years of providing the kind of information to the public and the House that the Opposition have been seeking?
  Mr. Horam: We have been into this subject at great length. We did so in Committee on the Transport (Financial Provisions) Bill. The hon. Member for

  1049
  Sutton Coldfield has failed to understand the whole nature of the argument. I am sorry that it is taking such a long time to educate the Opposition in the simplest approach to this matter. We are talking about two different factors. One is the system of accounts which shows what the public and this House have a right to know. There is no difference between us about that right to know.
  We pointed out in the White Paper how we wished all nationalised industries to go further than they do in this matter. I should like to draw the attention of the House to the point that was made by the Select Committee on Nationalised Industries. I am sure that the Opposition spokesman knows exactly what I am talking about here. The Committee went, at considerable length, into the need for a more open approach by British Rail so that people could know exactly the breakdown of costs in different parts of the railway system. We support that and, although we have not yet given a reply to the report, we shall indicate that we have great sympathy with that approach. I have placed in the Library documents that have not been made available by any previous Government and they refer to the PSO grants system. The documents show exactly how all the money—the £300 million or so—that we give to the railways in the form of support for the passenger system is worked out and how the final figures are arrived at.
  We are anxious to reveal as much as it is sensible for us to do, and to give the House and public the figures that they require. Let there be no doubt about that. Much can be revealed that is not revealed now, and we shall do that. It will not be impossible to reconcile that object with a different system—the avoidable costing system that British Rail is using as a management tool.
  The object of the avoidable costing system is that the costs should be revealed in such a way that sensible management decisions are possible. That is quite separate from giving the public the breakdown on particular commuter services or a generalised indication of costs in London and the South-East services network. These are separate objectives that must be approached in different ways, but ways that are not incompatible.
  1050
  I should like to point out to the hon. Member for Faversham that the EEC approach is intended to help us to reveal more in this general way—forgetting for the moment the use of accounts as a general tool. Indeed, that is virtually what was said by the Opposition spokesman in his opening remarks. If the EEC is saying that we should be more open, then I agree, but there are two different objectives and two different methods of accounting. That is what the Opposition have not grasped.
  Mr. Norman Fowler: I do not want to be too aggressive, but the Minister has not understood the point at issue. He has generalised about accountability but I advise the Minister, before he makes any charges, to take account of what British Rail is doing. Perhaps he should even visit British Rail to find out. The British Railways Board now uses the avoidable cost concept for its freight operations. It is possible for the Board to develop that concept for all the other areas of its operations. We are asking whether it is possible to go along that road and so get a breakdown of accounts. I hope that the Minister will now give a frank answer and tell us whether that is what the Government are committed to. That is a fairly simple question. Perhaps we could now have an answer.
  Mr. Horam: Of course the Government are committed to that. That is quite obvious and I am surprised at the hon. Gentleman for making such a fuss about it. For some years British Rail has been developing an approach to accounting for its own management purposes, and that is the avoidable costing system. That is the right approach for British Rail as a railway business. However, the Opposition have failed to understand that that is a quite separate point, if they are debating what the public or the House have a right to know about the basic British Railways accounts, costs and breakdowns of parts of its services. That is a separate question.
  Mr. Moate: Perhaps that point can be pursued at another time. If the totals of the avoidable costs of all sections of the business do not add up to the total cost, who will pay the basic facility costs that are left?
  Mr. Horam: One might say "the taxpayers"—in the sense that we are subsiding British Rail to the tune of £300 million a year. Indeed, the Opposition are putting themselves in a curious position. They are trying to alter that which British Railways has developed as a sensible management tool in order to find out more, quite legitimately, about the costs of particular passenger services, But the Opposition need not do that. The two objectives are quite different and we can and should approach them in different ways. It is absolutely foolish that the Opposition spokesman should suggest that British Railways should abandon the approach to costing and accounting that it has developed over the years, simply to reach the position referred to by the hon. Member for Faversham, where it would be allocating its costs in an extraordinary naive way according to the amount of revenue recived by each side.
  I can give an example of the Opposition's nonsensical position. The hon. Member for Faversham said that British Rail should allocate costs according to revenue and indicated that revenue on the freight side was about 45 per cent. of the total. Yet there is a much higher weighting of the costs on the passenger side. However, as the hon. Member for Faversham has agreed, that is only one method of allocating the costs. It could be done, as I suggested during the Committee stage of the Transport (Financial Provision) Bill, according to miles and use of track, which would be a much more relevant criterion.
  If one also takes into account the fact that the railways system is basically determined by the needs of the passenger system, one can see that the totally different figures showing a weighting for freight costs are quite fair in comparison with passenger costs. That shows that the Opposition simply have not understood the sophistication of the system that they are dealing with. They have found an objective as a way out of their problems on commuter fares and are pursuing it to the detriment of the efficiency of British Rail. In the end, it is all about efficiency. I am sure that we are all agreed that we are anxious to make the railway system as efficient as possible. If we achieve productivity and greater efficiency we shall be able to hold down fares—and commuter fares is a matter
  1052
  that was quite rightly raised by the hon. Member for Reading, North (Mr. Durrant).
  British Rail has now developed a management tool in the shape of an accounting system which allows it to achieve its objectives, and which the Opposition now want to break up. That would mean losing years of progress, and I can assure the House that the fares increases that we are to have in January would be a bagatelle in comparison with what the increases would be if we abandoned the progress that British Rail has made over the years. The Opposition's naive and simplistic ideas about cost allocations are not in the interests of passengers. An efficient system is in the interests of passengers, and that is what British Rail is seeking through these accounting principles.
  I agree with the Opposition that as much information as possible should be provided. We are committed to that in our White Paper, and we shall be saying more on that in response to the report of the Select Committee. We have given the basic principles behind the PSO grant to the House.
  Mr. Norman Fowler: During the past year I have taken part in many debates with the Minister and this is by far the worst reply that even he has ever given. It is quite clear that he is merely flouncing around, desperately not understanding what he is saying and seeking to charge the Opposition with doing the same thing.
  Mr. Speaker: Order. Is this an intervention?
  Mr. Norman Fowler: It is an intervention.
  Mr. Speaker: Order. I was still on my feet. The hon. Gentleman has addressed the House once already.
  Mr. Norman Fowler: Perhaps I can put this point in an interrogative form. I am sure that the House would agree that the Minister has been seeking, however inadequately, to respond to the point I have made. My point was that he clearly does not understand the avoidable costing concept to which he has now irrevocably committed the Government. Neither did the Minister understand the point that was put by my hon.

  1053
  Friend the Member for Faversham (Mr. Moate) about the rump cost that would be left. The Minister blandly said that that would be given to the taxpayer to finance. It surely ill becomes a Minister, having made such an extraordinary comment, to accuse us of advocating a system that would push up fares. The approach that the hon. Gentleman is adopting will not only push up fares. It will also push up the cost to the taxpayer.
  What I should like to ask the Minister—
  Mr. Speaker: Order. I am breaking all the rules. I think that honour was satisfied about two minutes ago. But I shall allow the hon. Member for Sutton Coldfield (Mr. Fowler) another 30 seconds to finish making his point.
  Mr. Fowler: Is the Minister now saying that there will be two systems—an avoidable costing system on one side, and an attribution cost system on the other which gives the public information which we seek?
  I apologise, Mr. Speaker, for the length of my intervention. This is a most important point, and it is not one which the Government yet understand.
  Mr. Horam: That is exactly the point. At long last, light is beginning to dawn on the hon. Member for Sutton Coldfield. That is precisely the point that I have been making all along. If we are looking at accounting systems, we have to look at the basic objectives. If we are trying to achieve more information for the public and the House, we shall try to do it one way, by a system of opportioning the accounts. If we are trying to run British Railways efficiently, we shall do it another way, and British Railways have chosen another way. We have finally got that understood by the Opposition. We are making progress.
  Mr. Durant: May I make a short intervention? If the object is efficiency, which I do not belittle, and if it is to the exclusion of everything, the net result will be very efficient trains with no one in them.
  Mr. Horam: I think that we are pursuing logic to an absurd length in this debate. The tendency with an efficiently run system is to increase the number of
  1054
  people who travel by it and to keep down costs.
  The Opposition have raised this point about the differences in British Railways accounting and their desire to have a more open system of government in this respect. However, they have addled the egg, as a result of which there is more confusion than light. However, I think that I have established the basic point, which is that if the objectives are different, different methods will arise. The fact is that the British Railways' system of accounting is a sensible management tool which has already improved the efficiency of British Railways. We are anxious that they should develop that and not be sidetracked by what we regard as out-of-date EEC regulations.
  If that is agreed, we can finally bring this debate to an end.
  Question put and agreed to.
  Resolved,
  That this House takes note of EEC Documents R/1568/77, on uniform costing principles for railway undertakings, and R/669/77, on the necessary measures to achieve comparability between the accounting systems and annual accounts of railway undertakings, and of the Department of Transport's Explanatory Memoranda dated 18th July 1977 and 9th May 1977, and Supplementary Memorandum dated 11th November 1977.

  STATUTORY INSTRUMENTS, &c.
  Motion made, and Question put forthwith pursuant to Standing Order No. 73A (Standing Committee on Statutory Instruments, &c.),
  IMPORT DUTIES
  That the Import Duties (Quota and Other Reliefs) (Amendment) Order 1977, a copy of which was laid before this House on 25th October, in the last Session of Parliament, be approved.—[Mr. Thomas Cox.]

  LEGAL AID AND ADVICE
  That the Legal Advice and Assistance (Financial Conditions) (No. 4) Regulations 1977, a copy of which was laid before this House on 26th October, in the last Session of Parliament, be approved.—[Mr. Thomas Cox.]
  That the Legal Aid (Financial Conditions) Regulations 1977, a copy of which was laid before this House on 26th October, in the last Session of Parliament, be approved.— [Mr. Thomas Cox.]

  LEGAL AID AND ADVICE (SCOTLAND)
  That the Legal Aid (Scotland) (Financial Conditions) Regulations, which were laid before this House on 26th October, in the last Session of Parliament, be approved.—[Mr. Thomas Cox.]
  That the Legal Advice and Assistance (Scotland) (Financial Conditions) (No. 4) Regulations, which were laid before this House on 26th October, in the last Session of Parliament, be approved.—[Mr. Thomas Cox.]

  CONSUMER PROTECTION
  That the draft Business Advertisements (Disclosure) Order 1977, which was laid before this House on 28th July, in the last Session of Parliament, be approved.—[Mr. Thomas Cox.]
  Question agreed to.

  ESSEX (GOVERNMENT EXPENDITURE)
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Thomas Cox.]
  2.23 p.m.
  Mr. Julian Ridsdale: When I requested this debate on the priorities of Government expenditure policies and their effects, especially in North-East Essex, I had in mind the fact that over the past 10 years the population of North-East Essex had almost doubled but that Government expenditure for the maintenance of necessary services had not increased by anything like that increase in population.
  Last year we had a severe cut-back in the rate support grant costing £15·6 million. This year the Secretary of State for the Environment had threatened Essex with a further cut of £13 million in the year 1978–79. Essex Members of Parliament protested against such a cutback, which, in our view, on top of the cut of £15·6 million last year, would have been catastrophic. We hear today that the cut-back will be £5 million, which still means an additional 2p on the rates.
  From the rate support grant announced today it is clear that the cash limits will be very tight. It will be very difficult with the money granted in the new settlement to meet a 10 per cent. pay award without a further increase in rates. It is this which makes one concerned
  1056
  about the Government's attitude towards expenditure in Essex.
  It appears that the Government are not willing to face the reality of how much Essex, especially North-East Essex, has grown in the past 10 years and of what is needed to maintain standards in the face of a population increase, without regard to inflation. As a consequence, we face grave problems in respect of unemployment, fares, care for the elderly and a shortage of hospitals in North-East Essex, to say nothing of the tourist trade, and industry which other areas with similar rates of unemployment are getting.
  There has been a 2 per cent. growth in the gross national product since 1973 despite a 192 per cent. increase in the average wage. The consequence of severe inflation has meant a diminishing national cake. In this situation I do not wish to press unfairly for increased expenditure, but I wish to see Essex, especially North-East Essex, get what is a fair share of a diminishing national cake until, once again, we get incentive and expansion, though I have no doubt that we shall have to wait for a Conservative Government to get them.
  In a reply to a Question in July I learnt that there were only 16 areas in England with levels of unemployment in excess of the 10·6 per cent. in the Clacton area. Today, we in the Clacton-on-Sea area have the highest rate of unemployment that we have ever had. It is now 13 per cent. How many areas are there with worse rates? Yet, whereas development areas get special help, we get none at all. In fact, industry has been enticed away from the area. My anxiety now is that other industries may be enticed away. Why cannot the Government see to it that areas with 13 per cent. of their working populations unemployed, such as Clacton-on-Sea, get the same help with industries as the development areas?
  As for tourism, why have the Government given £2·5 million to £3·5 million over three or four years to the High Pennines, Scarborough and Bude, and nothing to Clacton-on-Sea? We have a traditional tourist industry and we are close to the Continent. We should be given help equal to that of other areas which are getting help to cater for Continental tourists, especially bearing in

  1057
  mind the extremely high rate of unemployment which our area faces. We ask at least for a fair share of the assets being given so that our extremely high rate of unemployment can be eased.
  Before I deal with the severe shortage of funds for the health services and hospitals I wish to mention our concessionary fares problem. I say at once that I am convinced that there should be a national scheme and not, as at present, schemes which have grown up piecemeal and which are now being operated differently in many parts of the country.
  Areas with large numbers of pensioners, especially rural areas, simply cannot afford the kind of free travel schemes which have been adopted in such places as London, Merseyside, Liverpool, Leicester and Nottingham, to name just a few areas where pensioners get free travel. Is it fair that some 70 per cent. of total expenditure on concessionary fare schemes should be in Greater London and the metropolitan counties, which have only 38 per cent. of the elderly population?
  I have 3,300 retirement pensioners in my constituency, and to give them all free travel would cost £1 million on the rates. If we adopted such a policy it would mean that the burden of travel costs would be switched from those who cannot afford to pay to those who can hardly afford to Day. To say that areas such as mine which have not adopted concessionary fares are mean—as the Minister said during the recess—is not facing up to the obvious problems.
  The Minister implies that help is available to local authorities for this purpose under the rate support grant. With the cut-back in the grant in the last two years how much does he estimate is left for such schemes as concessionary fares? Our cut-back in the last two years has been £20 million, which is equivalent to an 8p rate.
  Let me examine the budget of the Tendring District Council. In all fairness the council can go no further on the matter of concessionary fares. The scheme that it has brought forward is only a proposal and it needs Government approval. When will Government restrictions on the introduction of new concessionary fare schemes, such as Tendring has introduced, be lifted? I
  1058
  hope that the Minister will say at once what he means when he says that global public expenditure for concessionary fares should increase by about £25 million over current levels by the end of the decade. Where does that £25 million come from—the taxpayer or the ratepayer?
  It would be far fairer and cheaper to run a national scheme. The Government are trying to blind the public with science and all this mumbo jumbo about councils receiving help through the rate support grant. It is even more dangerous than that. It is double talk. On the one hand, the Government are saying that something can be done, and, on the other hand, they are saying that the funds are not available for local government to do it. This is causing a great deal of resentment, particularly in my constituency. Let us have a national scheme so that all people can understand it. Let us not hide the necessary costing and statistics, which any reasonable person will want to examine and follow. This is the way in which value for money can be obtained.
  Surely the Minister can understand the resentment felt by pensioners who come from areas that are not operating free travel schemes and who are travelling alongside those who are helped by such schemes. Very often those pensioners who do not get help are from rural areas where the need is greatest. A national scheme would mean giving help to those who need it most—a half-way house between free fares for all pensioners, which would cost £200 million annually, and naturally we all want to be careful about public expenditure, and a scheme for helping pensioners like those in rural areas, which are so typical of retirement areas. Such a modified national scheme could work and help would be given to those who needed it. Also it would not mean expenditure of the kind that the Minister has spoken of. Within the limits of the money available the Government could work out a perfectly feasible national scheme that would be far fairer.
  One of the most serious problems of Government spending priorities is the funding of the National Health Service in Essex over a period of many years during which the county's population has been growing steadily. The under-funding of the Health Service has become more

  1059
  and more serious. In the past 10 years the number of people in my constituency has doubled and the number of retirement pensioners has reached 33,000. However, the hospital services available to them have not increased by anything like that proportion. The Colchester Military Hospital, despite the good work of my hon. Friend the Member for Colchester (Mr. Buck) and protests from me, is to be closed down and the Middlesex Convalescent Home is threatened with closure.
  Essex is becoming the Cinderella medical area and North-East Essex is following suit quickly. Something must be done to arrest this. The Government must see that Essex gets a fairer share of existing resources and that these are allocated properly within the North-East Thames Regional Area. North-East Essex has a population that is increasing quickly in contrast to that of the London part of the North-East Thames area where steady depopulation has been continuing for a long time. The increase of 15,300 in the last year in Essex has been marked by a large movement of elderly people backed by the GLC which is offloading part of its responsibility for the elderly on to Essex, particularly North-East Essex.
  Translated into financial terms this means that we have a shortfall of at least £20 million in Essex on a budget of £100 million. This figure of £20 million deficit is a crisis figure by any standards. As the population increase continues and pressures become heavier, this discrepancy will grow even more. It is a matter of serious concern that the area, one of the three largest in the country, is suffering a hand-to-mouth existence with the unavoidable deterioration in the level of patient-care services. Hospitals are closing down or are threatened with closures and, because of severe financial cash limits, hospital wards are now being threatened also.
  I am concerned with the Colchester area which covers my constituency. We have a huge retired population. Do the Government want to see the closing down of more patient services? Will the Government see whether redistribution of resources to Essex can be made as soon as possible, and that the national Resources Allocation Working Party begins work at an early date and reports annually? I
  1060
  pressed the Government on this in July but I have not heard any results yet.
  Urgent and immediate action is imperative in order to avert a serious crisis. I trust that the Government realise that it is not an exaggeration to say that the Health Service is reaching crisis point. Those who are closely affected are already disturbed and alarmed. When can we expect improvements in our hospital services instead of continual closures? When will better facilities be provided for geriatric services in Tendering, for example, where there are 26,500 pensioners over 65 and 9,000 over 75.
  We are desperately short of Part III accommodation. Under the DHSS guidelines, by 1983 there should be 22 places per thousand of the elderly population. At present there are only 312 altogether, which makes us 46 per cent. below the 1983 planned target. In 1972 the plan was for 10 residences for elderly pensioners with 48 beds in each. No start has been made on this yet and the position is deteriorating quickly.
  It is strange to look at the Labour Party manifesto of 1974 and compare it with what is happening. A pledge was given then to defend the NHS.
  Against this background we must witness the threatened closure of the Middlesex Convalescent Home. What is the latest news that the Minister can give me on this? In the autumn I received a petition that was signed by 7,000 people who are most anxious to hear the results. This is a matter of great importance to the health and medical resources of North-East Essex. I urge the Government to ensure that even if the money is not available in the budget for the present financial year, they will consider the plea that has been put forward by responsible Clacton doctors to maintain the fabric of the Middlesex building and grounds until money is available.
  We have a precedent in the Passmore Edwards, which closed as a TB sanatorium to be redeveloped as a rehabilitation centre. Will the Minister realise that the number of people needing care for varying lengths of time is bound to increase? It is in the very nature of an ageing population. I wish to avert a crisis. I only hope that the Government understand the gravity of the situation, not only for North-East Essex, but for Essex as a whole.

  1061
  I must pay tribute to the doctors and nurses who are working under such difficult conditions and under great strain. Home helps, too, play a special part in keeping people in their own homes for as long as possible. Voluntary services and, indeed, social workers are doing all that they can, as well as the families themselves, but the whole system is under great strain.
  I cannot emphasise too strongly the danger of a breakdown and crisis because of a lack of funds. I want to see that we get our fair place in the queue for Government funds. I do not believe that we are getting it at the moment, either with help towards industry and tourism, or to help us with our high rate of unemployment and over concessionary fares.
  I underline particularly the difficulties that we are facing over the Health Service, and I trust that the Minister will be able to promise at least some reasonable hope of hell for North-East Essex.
  2.41 p.m.
  The Under-Secretary of State for the Environment (Mr. Guy Barnett): The hon. Member for Harwich (Mr. Ridsdale) has chosen a very broad subject for debate today—priorities of Government expenditure policies and their particular effects in North-East Essex. In the short time available I cannot hope to do more than pick up some of the interesting points that he made.
  I am sure that the hon. Gentleman is right to stress in particular the large number of older people in his constituency. In a way he points his finger at one of the shortcomings of Government, in that the problems he raises, whilst all arising from such similar causes, fall to so many different Government Departments to tackle. As such, I shall inevitably not be able to deal with some of the points as fully as I should like to be able to do, but that does not imply a lack of sympathy with the sort of problem that the hon. Gentleman has outlined to the House—far from it. I am very grateful to him for the clear and understanding way in which he introduced his subject.
  The hon. Gentleman mentioned the rate support grant and the effects of the 1977–78 settlement on the county of Essex. My right hon. Friend the Secretary of State for the Environment has
  1062
  today announced the Government's proposals for 1978–79 to the statutory meeting of the local authority associations, and the hon. Gentleman referred to that announcement. These proposals have also been set out in a Written Answer to my hon. Friend the Member for Chester-le-Street (Mr. Radice). I do not want to go into great detail about these proposals today, because the House will have an opportunity for a full debate on them before Christmas when the Statutory Instruments giving effect are laid before the House.
  In addition to that debate, I understand that my right hon. Friend the Secretary of State for the Environment has offered to see all Essex MPs to have a detailed discussion on the effects of the 1978–79 rate support grant settlement on the county as a whole, so this short debate will certainly not be the only chance to consider the effect on Essex of our proposals for next year.
  One aspect of our proposals which will particularly interest the hon. Gentleman is the arrangement to limit the extent of redistribution of needs element in 1978–79. We propose to do this, first, by "damping" our needs assessment over four years—that is, combining the needs assessments for 1975–76, 1976–77 and 1977–78 with that for 1978–79—and, secondly, by making special arrangements to ensure that no authority will lose a greater amount in needs element as a result of the 1978–79 RSG arrangements than the equivalent of a 2p rate poundage.
  Essex will be one of the dozen or so authorities to be protected by this safety net. I am not sure from where the hon. Gentleman got his figures of £13 million and then £5 million. Final figures are not yet available, but on the best figures currently available we estimate that in money terms the 1978–79 needs element entitlement will be £1·2 million less than in 1977–78. I hope that that goes some way to reduce the hon. Gentleman's fears.
  Mr. Ridsdale: My figures were obtained before lunch from the treasurer of the Essex County Council.
  Mr. Barnett: Perhaps that ought to be examined later at the meeting that the hon. Gentleman will be having with my right hon. Friend.
  I should say that had it not been for this safety net the country's losses would

  1063
  have been greater. Indeed, in making this proposal we have had in mind the position of those authorities—such as Essex—on which the 1977–78 RSG arrangements bore heavily. We were particularly impressed with the candour and lucidity of the deputations from these authorities in explaining their problems.
  We have no wish whatever to see the provision of local authority services reduced to unacceptable levels. The 2p safety net has been specifically introduced to ensure that the 1978–79 grant distribution will not lead to such reductions.
  The hon. Gentleman recognised the need for restraint in the totality of the grant and levels of public expenditure generally. It follows that to meet the expenditure needs of the urban authorities, with their pressing social and economic problems, the total of grant to less-hard-pressed counties must be reduced. I have no doubt that our policies to concentrate resources in the areas with the highest needs must be the right ones. This has been the aim of successive RSG settlements.
  The 1978–79 settlement necessarily has to strike a balance, between recognising problems of the authorities for whom the 1977–78 settlement presented particular difficulties, and the expenditure needs of the harder-pressed authorities. When the hon. Gentleman has had a chance to assess the settlement in detail, I hope he will agree that we have indeed struck the right balance.
  The cuts in services that Essex had to impose in 1977–78 were serious. It was a difficult year, but it is not my business, nor that of the Government, to comment on the difficult choice that many authorities had to face between sharp increases in rates and cuts in services. That is an uncomfortable freedom of local authorities, but one that they rightly and properly guard jealously.
  I turn to one point that the hon. Gentleman raised, and one that is often raised in this connection—that of population. The population of Essex is growing, and the hon. Gentleman suggested that the grant should have grown correspondingly. I must point out that the RSG needs element aims to compensate for differences in spending needs per head. I think that that point needs to
  1064
  be brought out sometimes, because it is too easily assumed that the job of the needs element is to cater for large population increases, and that is not so.
  One of the topics to which the hon. Gentleman referred was concessionary bus fares for elderly people. I know he recognises that this a matter for my right hon. Friend the Secretary of State for Transport, while the provision and financing of concessions are the statutory responsibility of local authorities. Where local authorities have discretion, there will inevitably be variation of provision. While elderly people in most areas enjoy some concession, and a substantial number travel free, there are still areas, including Tendring, where there are no concessionary fare arrangements.
  While some variation is inevitable, the Government consider that the present range of variation is too large. My right hon. Friend therefore undertook to review the whole question of concessions, and his conclusions were contained in the White Paper on Transport Policy. In the White Paper my right hon. Friend explained that one possibility would be a national scheme which would ensure that the money currently spent on concessions would be spread more evenly over the country, but that would mean reducing considerably the benefits that people get from the more general schemes. I should add that this is also one of the objections to the hon. Gentleman's suggestion of a means-tested scheme. Moreover, the need for help with transport cannot be measured by a means test alone. For example, a poor person who lives within walking distance of essential services may be less in need of a concession than someone better off living further away.
  Another possibility that was considered by my right hon. Friend was a national minimum standard, but, unless the minimum were comparatively low, even that could be costly. Concessionary fares on bus services are in many areas the main way of giving elderly, blind and disabled people greater mobility, but they are not the only way. In some places some other form of help may be appropriate.
  My right hon. Friend therefore concluded that it made most sense to leave responsibility with local authorities, but to work for more equitable and consistent arrangements.

  1065
  As a first step my right hon. Friend will withdraw at the earliest practicable date the advice, given in the past few years in the context of the rate support grant settlement, that economic circumstances did not allow for the introduction of new or improved arrangements.
  Secondly, the transport White Paper announced that provision would be made for local authorities to be spending an extra £25 million by the end of the decade on improved schemes in areas where the present scale of provision is too low. The additional expenditure on concessions which results will, of course, be included in the total expenditure on which rate support grant is paid.
  Thirdly, my right hon. Friend proposes to give some positive advice to local authorities on the provision of concessions and he is at present consulting on its terms. This advice will not tell authorities how to run their concessionary fare schemes. Its aim will be to indicate very broadly the level of benefit which the Government consider to be appropriate.
  In the Government's view, while it is for each authority to decide, generally it will be appropriate for an authority which is introducing new or improved arrangements to aim to meet about half the cost of the local bus fares that would otherwise be paid by concessionaires. My right hon. Friend hopes to be able to issue the circular, which will also announce the withdrawal of the earlier inhibiting advice, fairly soon.
  These measures will have the effect of encouraging authorities like Tendring to introduce sensible arrangements. I understand, indeed, that Tendring is considering the introduction of a concessionary fares scheme when the advisory circular is issued. I am sure that my right hon. Friend will be pleased about that. I shall, of course, draw his attention to the hon. Gentleman's remarks today.
  The hon. Member referred to tourist policy and tourist development areas, and he said how wrong it is to try to encourage tourism development in industrial development areas at the expense of his area. The areas are development areas, designated because of their innate economic weakness, and whilst they do of course include a good deal of industry they also comprise a very great deal of Britain's scenic beauty. Yet in many cases they are relatively unknown to tourists, despite their great tourism potential. It
  1066
  is that potential the Government wants to unlock, without, of course, harming the local environment.
  For example, my right hon. Friend the Secretary of State for Trade announced on 20th May an important experiment involving three proposals to establish new tourism growth points in the High Pennines, Scarborough and district, North Devon and North Cornwall. The proposals are designed to try to bring employment to areas that have had longstanding economic difficulties and weaknesses.
  It has been suggested that special tourism development areas should be set up. But in the present economic climate, Government assistance for tourism projects cannot be increased in real terms. The protagonists of tourism development areas are in effect asking us to halt the present tourism growth points initiative in order to provide project money for other parts of the country. I understand and sympathise with the problems of certain traditional resorts such as Clacton, but the Government are far from convinced that assistance with bricks and mortar development is the sole or, indeed, the most useful course in all cases.
  Marketing and self-help by resorts themselves and local industry to make the locality more attractive to visitors are equally important. This is as much a question of techniques as of money and, indeed, for appropriate projects which would not otherwise get done it may sometimes be practicable to make use of the job creation programme.
  Before I leave this question I want to emphasise that, although a good deal is said about tourism project aid, by far the largest proportion of the Government tourism budget is spent in ways which benefit the whole country, on tourism research and development, promotion and marketing at home and abroad, on help for information services and the work of regional tourist boards, and, of course, on training.
  The hon. Member spoke of the unemployment figure of 13 per cent. in his area. He suggested that this pointed to the need for equivalent help to North-East Essex as is given to other depressed regions in England. But I am afraid I cannot accept that. The Government's regional policy, broadly speaking, is aimed at reducing unemployment in those

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  areas where, due to deep-seated longterm structural problems associated with declining basic industry, the problems are at their worst. Unemployment in areas such as Clacton and North-East Essex, whilst regrettably high, is not of this type. It tends to be seasonal, but it has been sadly exacerbated by the recession. The best chance of improving the situation there does not seem to lie in special Government grants, but in the success of the Government's economic policies as a whole.
  I turn now to the hon. Member's remarks about health services. The Government have agreed that the broad principles recommended by the Resource Allocation Working Party in its second report published last September should be followed. We are committed, as is well known, to closing the gap between the rich and poor regions and the rich and poor areas within them. However, how quickly we can move towards the working party's targets must depend on the money available to the National Health Service.
  The North-East Thames Region recognises that Essex is one of its needier areas and that revenues available to that area should be increased, perhaps, in the order of 20 per cent. to be achieved over a period of years. In 1976–77 the regional health authority began a movement of revenue resources in that direction.
  For this year, however, the region considers that redistribution cannot be continued at the same pace. Movement of resources away from the centre of London must allow time for the effects of rationalisations that have been made already to take place. I have been told, therefore, that the region considers that it must plan for 1977–78 to be a year of consolidation rather than development. The regional health authority has, however, selected five major hospital starts for beginning in the next decade. Two of these are at Colchester and Chelmsford. I should stress that the planning of health services locally is for local decision by the local health authorities responsible, and within the guidelines and resources provided for them.
  Let me take up the points made by the hon. Gentleman about the Colchester
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  Military Hospital and the Middlesex Convalescent Home. The decision by the health authorities not to take over the Military Hospital was not taken lightly. Lengthy consideration was given to its acquisition, but the health authorities concluded that better value for money could be obtained by improving the local services pending the building of the nucleus hospital.
  The hon. Gentleman suggests that the area health authority should acquire for geriatric use the Middlesex Convalescent Home. The use of the home has been considered very carefully by the area health authority, but it considers that better value for money will be obtained from the planned extension to the Clacton Hospital. The use of the home as a halfway house has also been considered by the Essex County Council social services committee, which, I understand, is unable to find the money to provide such accommodation even on a joint-financing basis. The proposal to close the home is, I understand, at present before my right hon. Friend the Secretary of State for Social Services.
  I want to re-emphasise that the Government have provided an increased share of national resources to the health and personal social services, and a fairer distribution of those resources is being pursued as rapidly as the practicalities of growth and the economy will allow. I assure the hon. Gentleman that within these constraints both the regional health authority and the area health authority are working to achieve an increase in the share of the available resources devoted to North-East Essex.
  The hon. Gentleman has raised a wide variety of topics, all related and all important. Because he covered such a wide range of Departments, I am sorry that I may not have been able to give as satisfactory an answer as lie would wish, but I assure him, first, that the points he has raised will be presented to the Departments directly responsible. Secondly, his speech emphasises the need for close working together by Government Departments on the various topics that he has raised and an understanding of the special problems of the constituency and area that he represents.
  Question put and agreed to.
  Adjourned accordingly at Three o'clock.